Exhibit 10.1
DIGIRAD CORPORATION
2005 INDUCEMENT STOCK INCENTIVE PLAN
1) Purposes of the Plan. The purposes of this Plan are to induce the best
available Employees to enter into employment with the Company, to thereafter
retain such Employees and to otherwise promote the success of the Company's
business.
2) Definitions. The following definitions shall apply as used herein and
in the individual Award Agreements except as defined otherwise in an individual
Award Agreement. In the event a term is separately defined in an individual
Award Agreement, such definition shall supercede the definition contained in
this Section 2.
a) "Administrator" means the Committee.
b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
c) "Applicable Laws" means the legal requirements relating to the
Plan and the Awards under applicable provisions of federal securities laws,
state corporate and securities laws, the Code, the rules of any applicable
stock exchange or national market system, and the rules of any non-U.S.
jurisdiction applicable to Awards granted to residents therein.
d) "Assumed" means that pursuant to a Corporate Transaction either
(i) the Award is expressly affirmed by the Company or (ii) the contractual
obligations represented by the Award are expressly assumed (and not simply
by operation of law) by the successor entity or its Parent in connection
with the Corporate Transaction with appropriate adjustments to the number
and type of securities of the successor entity or its Parent subject to the
Award and the exercise or purchase price thereof which at least preserves
the compensation element of the Award existing at the time of the Corporate
Transaction as determined in accordance with the instruments evidencing the
agreement to assume the Award.
e) "Award" means the grant of an Option, SAR, Dividend Equivalent
Right, Restricted Stock, Restricted Stock Unit or other right or benefit
under the Plan.
f) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
g) "Board" means the Board of Directors of the Company.
h) "Cause" means, with respect to the termination by the Company or
a Related Entity of the Grantee's Continuous Service, that such termination
is for "Cause" as such term is expressly defined in a then-effective
written agreement between the Grantee and the Company or such Related
Entity, or in the absence of such then-effective written agreement and
definition, is based on, in the determination of the Administrator, the
Grantee's commission of a serious crime involving dishonesty, breach of
trust, or physical or emotional harm to any person.
1
i) "Change in Control" means a change in ownership or control of the
Company after the Registration Date effected through either of the
following transactions:
i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or
by a Company-sponsored employee benefit plan or by a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange
offer made directly to the Company's stockholders which a majority of
the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
ii) a change in the composition of the Board over a period of
twenty-four (24) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one
or more contested elections for Board membership, to be comprised of
individuals who are Continuing Directors.
j) "Code" means the Internal Revenue Code of 1986, as amended.
k) "Committee" means the compensation committee of the Board.
l) "Common Stock" means the common stock of the Company.
m) "Company" means Digirad Corporation, a Delaware corporation.
n) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's
capacity as a Director) who is engaged by the Company or any Related Entity
to render consulting or advisory services to the Company or such Related
Entity.
o) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least twenty-four
(24) months or (ii) have been Board members for less than twenty-four (24)
months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were
still in office at the time such election or nomination was approved by the
Board.
p) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or
Consultant is not interrupted or terminated. In jurisdictions requiring
notice in advance of an effective termination as an Employee, Director or
Consultant, Continuous Service shall be deemed terminated upon the actual
cessation of providing services to the Company or a Related Entity
notwithstanding any required notice period that must be fulfilled before a
termination as an Employee, Director or Consultant can be effective under
Applicable Laws. A Grantee's Continuous Service shall be deemed to have
terminated either upon an actual termination of Continuous Service or upon
the entity for which the Grantee provides services ceasing to be a Related
Entity. Continuous Service shall not be considered interrupted in the case
of (i) any approved leave of absence, (ii) transfers among the Company, any
Related Entity, or any successor, in any capacity of Employee, Director or
Consultant, or (iii) any change in status as long as the individual remains
in the service of the Company or a Related Entity in any capacity of
Employee, Director or Consultant (except as otherwise provided in the Award
Agreement). An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave.
2
q) "Corporate Transaction" means any of the following transactions,
provided, however, that the Administrator shall determine under parts (iv)
and (v) whether multiple transactions are related, and its determination
shall be final, binding and conclusive:
i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company;
iii) the complete liquidation or dissolution of the Company;
iv) any reverse merger or series of related transactions
culminating in a reverse merger (including, but not limited to, a
tender offer followed by a reverse merger) in which the Company is the
surviving entity but (A) the shares of Common Stock outstanding
immediately prior to such merger are converted or exchanged by virtue
of the merger into other property, whether in the form of securities,
cash or otherwise, or (B) in which securities possessing more than
forty percent (40%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately
prior to such merger or the initial transaction culminating in such
merger, but excluding any such transaction or series of related
transactions that the Administrator determines shall not be a
Corporate Transaction; or
v) acquisition in a single or series of related transactions by
any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities but excluding any such
transaction or series of related transactions that the Administrator
determines shall not be a Corporate Transaction.
r) "Director" means a member of the Board or the board of directors
of any Related Entity.
s) "Disability" means as defined under the long-term disability
policy of the Company or the Related Entity to which the Grantee provides
services regardless of whether the Grantee is covered by such policy. If
the Company or the Related Entity to which the Grantee provides service
does not have a long-term disability plan in place, "Disability" means that
a Grantee is unable to carry out the responsibilities and functions of the
position held by the Grantee by reason of any medically determinable
physical or mental impairment for a period of not less than ninety (90)
consecutive days. A Grantee will not be considered to have incurred a
Disability unless he or she furnishes proof of such impairment sufficient
to satisfy the Administrator in its discretion.
t) "Dividend Equivalent Right" means a right entitling the Grantee
to compensation measured by dividends paid with respect to Common Stock.
u) "Employee" means any person, including an Officer or Director,
who is in the employ of the Company or any Related Entity, subject to the
control and direction of the Company or any Related Entity as to both the
work to be performed and the manner and method of performance. The payment
of a director's fee by the Company or a Related Entity shall not be
sufficient to constitute "employment" by the Company.
3
v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
w) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
i) If the Common Stock is listed on one or more established
stock exchanges or national market systems, including without
limitation The Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on the principal exchange or system on which the
Common Stock is listed (as determined by the Administrator) on the
date of determination (or, if no closing sales price or closing bid
was reported on that date, as applicable, on the last trading date
such closing sales price or closing bid was reported), as reported in
The Wall Street Journal or such other source as the Administrator
deems reliable;
ii) If the Common Stock is regularly quoted on an automated
quotation system (including the OTC Bulletin Board) or by a recognized
securities dealer, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of
determination, but if selling prices are not reported, the Fair Market
Value of a share of Common Stock shall be the mean between the high
bid and low asked prices for the Common Stock on the date of
determination (or, if no such prices were reported on that date, on
the last date such prices were reported), as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable; or
iii) In the absence of an established market for the Common Stock
of the type described in (i) and (ii), above, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
x) "Grantee" means an Employee who receives an Award under the Plan
and who at the time of the grant of such Award satisfied the requirements
of Section 5 of the Plan.
y) "Officer" means a person who is an officer of the Company or a
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
z) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan. An Option under this Plan shall only be a
non-qualified stock option that is not intended to be a stock option which
qualifies as an incentive stock option within the meaning of Section 422 of
the Code.
aa) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
bb) "Plan" means this 2005 Inducement Stock Incentive Plan.
cc) "Related Entity" means any Parent or Subsidiary of the Company
and any business, corporation, partnership, limited liability company or
other entity in which the Company or a Parent or a Subsidiary of the
Company holds a substantial ownership interest, directly or indirectly.
4
dd) "Replaced" means that pursuant to a Corporate Transaction the
Award is replaced with a comparable stock award or a cash incentive program
of the Company, the successor entity (if applicable) or Parent of either of
them which preserves the compensation element of such Award existing at the
time of the Corporate Transaction and provides for subsequent payout in
accordance with the same (or a more favorable) vesting schedule applicable
to such Award. The determination of Award comparability shall be made by
the Administrator and its determination shall be final, binding and
conclusive.
ee) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture
provisions, and other terms and conditions as established by the
Administrator.
ff) "Restricted Stock Units" means an Award which may be earned in
whole or in part upon the passage of time or the attainment of performance
criteria established by the Administrator and which may be settled for
cash, Shares or other securities or a combination of cash, Shares or other
securities as established by the Administrator.
gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.
hh) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator, measured
by appreciation in the value of Common Stock.
ii) "Share" means a share of the Common Stock.
jj) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3) Stock Subject to the Plan.
-------------------------
a) Subject to the provisions of Section 0, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is
Five Hundred Thousand Shares (500,000). The Shares to be issued pursuant to
Awards may be authorized, but unissued, or reacquired Common Stock.
b) Any Shares covered by an Award (or portion of an Award) which is
forfeited, canceled or expires (whether voluntarily or involuntarily) shall
be deemed not to have been issued for purposes of determining the maximum
aggregate number of Shares which may be issued under the Plan. Shares that
actually have been issued under the Plan pursuant to an Award shall not be
returned to the Plan and shall not become available for future issuance
under the Plan, except that if unvested Shares are forfeited, or
repurchased by the Company at the lower of their original purchase price or
their Fair Market Value at the time of repurchase, such Shares shall become
available for future grant under the Plan. To the extent not prohibited by
the listing requirements of The Nasdaq National Market (or other
established stock exchange or national market system on which the Common
Stock is traded) and Applicable Law, any Shares covered by an Award which
are surrendered (i) in payment of the Award exercise or purchase price or
(ii) in satisfaction of tax withholding obligations incident to the
exercise of an Award shall be deemed not to have been issued for purposes
of determining the maximum number of Shares which may be issued pursuant to
all Awards under the Plan, unless otherwise determined by the
Administrator.
5
4) Administration of the Plan.
--------------------------
a) Plan Administrator. The Plan shall be administered by the
Committee, which Committee shall be constituted in such a manner as to
satisfy the Applicable Laws and to permit such grants and related
transactions under the Plan to be exempt from Section 16(b) of the Exchange
Act in accordance with Rule 16b-3 and to not require shareholder approval
under the listing requirements of The Nasdaq National Market.
b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board,
the Administrator shall have the authority, in its discretion:
i) to select the Employees to whom Awards may be granted from
time to time hereunder;
ii) to determine whether and to what extent Awards are granted
hereunder;
iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
iv) to approve forms of Award Agreements for use under the Plan;
v) to determine the terms and conditions of any Award granted
hereunder;
vi) to amend the terms of any outstanding Award granted under
the Plan, provided that (A) any amendment that would adversely affect
the Grantee's rights under an outstanding Award shall not be made
without the Grantee's written consent, (B) the reduction of the
exercise price of any Option awarded under the Plan shall be subject
to stockholder approval and (C) canceling an Option at a time when its
exercise price exceeds the Fair Market Value of the underlying Shares,
in exchange for another Option, Restricted Stock, or other Award shall
be subject to stockholder approval, unless the cancellation and
exchange occurs in connection with a Corporate Transaction;
vii) to construe and interpret the terms of the Plan and Awards,
including without limitation, any notice of award or Award Agreement,
granted pursuant to the Plan;
viii) to grant Awards to Employees employed outside the United
States on such terms and conditions different from those specified in
the Plan as may, in the judgment of the Administrator, be necessary or
desirable to further the purpose of the Plan;
ix) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
c) Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or as Officers or
Employees of the Company or a Related Entity, members of the Board and any
Officers or Employees of the Company or a Related Entity to whom authority
to act for the Board, the Administrator or the Company is delegated shall
be defended and indemnified by the Company to the extent permitted by law
on an after-tax basis against all reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense of
any claim, investigation, action, suit or proceeding, or in connection with
any appeal therein, 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 Award granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Company) or
paid by them in satisfaction of a judgment in any such claim,
investigation, action, suit or proceeding, except in relation to matters as
to which it shall be adjudged in such claim, investigation, action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct; provided, however, that within thirty (30) days
after the institution of such claim, investigation, action, suit or
proceeding, such person shall offer to the Company, in writing, the
opportunity at the Company's expense to defend the same.
6
5) Eligibility. Awards may be granted to Employees so long as the
following requirements are met: (a) the Employee was not previously an Employee
or Director, or the Employee is returning to the employment of the Company
following a bona-fide period of non-employment; and (b) the grant of an Award
under the Plan is a material inducement to the Employee's decision to enter into
the employment of the Company.
6) Terms and Conditions of Awards.
------------------------------
a) Types of Awards. The Administrator is authorized under the Plan
to award any type of arrangement to an Employee that is not inconsistent
with the provisions of the Plan and that by its terms involves or might
involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or
similar right with a fixed or variable price related to the Fair Market
Value of the Shares and with an exercise or conversion privilege related to
the passage of time, the occurrence of one or more events, or the
satisfaction of performance criteria or other conditions. Such awards
include, without limitation, Options, SARs, sales or bonuses of Restricted
Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award
may consist of one such security or benefit, or two (2) or more of them in
any combination or alternative.
b) Designation of Award. Each Award shall be designated in the Award
Agreement.
c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award,
payment contingencies, and satisfaction of any performance criteria. The
performance criteria established by the Administrator may be based on any
one of, or combination of, the following: (i) increase in share price, (ii)
earnings per share, (iii) total stockholder return, (iv) operating margin,
(v) gross margin, (vi) return on equity, (vii) return on assets, (viii)
return on investment, (ix) operating income, (x) net operating income, (xi)
pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv)
earnings before interest, taxes and depreciation, (xvi) economic value
added, (xvii) market share and (xviii) personal management objectives. The
performance criteria may be applicable to the Company, Related Entities
and/or any individual business units of the Company or any Related Entity.
Partial achievement of the specified criteria may result in a payment or
vesting corresponding to the degree of achievement as specified in the
Award Agreement.
d) Deferral of Award Payment. The Administrator may establish one or
more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the
election would entitle the Grantee to payment or receipt of Shares or other
consideration under an Award. The Administrator may establish the election
procedures, the timing of such elections, the mechanisms for payments of,
and accrual of interest or other earnings, if any, on amounts, Shares or
other consideration so deferred, and such other terms, conditions, rules
and procedures that the Administrator deems advisable for the
administration of any such deferral program.
7
e) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee to
exercise any part or all of the Award prior to full vesting of the Award.
Any unvested Shares received pursuant to such exercise may be subject to a
repurchase right in favor of the Company or a Related Entity or to any
other restriction the Administrator determines to be appropriate.
f) Term of Award. The term of each Award shall be the term stated in
the Award Agreement, provided, however, that the term of an Option shall be
no more than ten (10) years from the date of grant thereof. Notwithstanding
the foregoing, the specified term of any Award shall not include any period
for which the Grantee has elected to defer the receipt of the Shares or
cash issuable pursuant to the Award.
g) Transferability of Awards. Awards shall be transferable (i) by
will and by the laws of descent and distribution and (ii) during the
lifetime of the Grantee, to the extent and in the manner authorized by the
Administrator. Notwithstanding the foregoing, the Grantee may designate one
or more beneficiaries of the Grantee's Award in the event of the Grantee's
death on a beneficiary designation form provided by the Administrator.
h) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the
Administrator.
7) Award Exercise or Purchase Price, Consideration and Taxes.
---------------------------------------------------------
a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Award shall be as follows:
i) In the case of an Option or SAR granted to any Employee, the
per Share exercise price shall be not less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.
ii) In the case of other Awards, such price as is determined by
the Administrator.
b) Consideration. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator.
In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for
Shares issued under the Plan the following, provided that the portion of
the consideration equal to the par value of the Shares must be paid in cash
or other legal consideration permitted by the Delaware General Corporation
Law:
i) cash;
ii) check;
iii) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require
which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said
Award shall be exercised, provided, however, that Shares acquired
under the Plan or any other equity compensation plan or agreement of
the Company must have been held by the Grantee for a period of more
than six (6) months (and not used for another Award exercise by
attestation during such period);
8
iv) with respect to Options, payment through a broker-dealer
sale and remittance procedure pursuant to which the Grantee (A) shall
provide written instructions to a Company designated brokerage firm to
effect the immediate sale of some or all of the purchased Shares and
remit to the Company sufficient funds to cover the aggregate exercise
price payable for the purchased Shares and (B) shall provide written
directives to the Company to deliver the certificates for the
purchased Shares directly to such brokerage firm in order to complete
the sale transaction; or
v) any combination of the foregoing methods of payment.
vi) The Administrator may at any time or from time to time, by
adoption of or by amendment to the standard forms of Award Agreement
described in Section 4(b)(iv), or by other means, grant Awards which
do not permit all of the foregoing forms of consideration to be used
in payment for the Shares or which otherwise restrict one or more
forms of consideration.
c) Taxes. No Shares shall be delivered under the Plan to any Grantee
or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any non-U.S.,
federal, state, or local income and employment tax withholding obligations,
including, without limitation, obligations incident to the receipt of
Shares. Upon exercise of an Award the Company shall withhold or collect
from Grantee an amount sufficient to satisfy such tax obligations.
8) Exercise of Award.
-----------------
a) Procedure for Exercise; Rights as a Stockholder.
-----------------------------------------------
i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the
Administrator under the terms of the Plan and specified in the
Award Agreement.
ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and
full payment for the Shares with respect to which the Award is
exercised, including, to the extent selected, use of the broker-dealer
sale and remittance procedure to pay the purchase price as provided in
Section 0.
b) Exercise of Award Following Termination of Continuous Service.
-------------------------------------------------------------
i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be exercised
following the termination of a Grantee's Continuous Service only to
the extent provided in the Award Agreement.
ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Service
for a specified period, the Award shall terminate to the extent not
exercised on the last day of the specified period or the last day of
the original term of the Award, whichever occurs first.
9
9) Conditions Upon Issuance of Shares.
----------------------------------
a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any Applicable Laws.
10) Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Awards may
be granted to any Grantee in any fiscal year of the Company, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock, separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11) Corporate Transactions and Changes in Control.
---------------------------------------------
a) Termination of Award to Extent Not Assumed in Corporate
Transaction. Effective upon the consummation of a Corporate Transaction,
all outstanding Awards under the Plan shall terminate. However, all such
Awards shall not terminate to the extent they are Assumed in connection
with the Corporate Transaction.
b) Acceleration of Award Upon Corporate Transaction or Change in
Control.
i) Corporate Transaction. Except as provided otherwise in an
individual Award Agreement, in the event of a Corporate Transaction
and:
(1) for the portion of each Award that is Assumed or
Replaced, then such Award (if Assumed), the replacement Award (if
Replaced), or the cash incentive (if Replaced) program automatically
shall become fully vested, exercisable and payable and be released
10
from any repurchase or forfeiture rights (other than repurchase rights
exercisable at fair market value) for all of the Shares at the time
represented by such Assumed or Replaced portion of the Award,
immediately upon termination of the Grantee's Continuous Service if
such Continuous Service is terminated by the successor company or the
Company without Cause within twelve (12) months after the Corporate
Transaction; and
(2) for the portion of each Award that is neither Assumed
nor Replaced, such portion of the Award shall automatically become
fully vested and exercisable and be released from any repurchase or
forfeiture rights (other than repurchase rights exercisable at fair
market value) for all of the Shares at the time represented by such
portion of the Award, immediately prior to the specified effective
date of such Corporate Transaction, provided that the Grantee's
Continuous Service has not terminated prior to such date. The portion
of the Award that is not Assumed shall terminate under subsection (a)
of this Section 11 to the extent not exercised prior to the
consummation of such Corporate Transaction.
ii) Change in Control. Except as provided otherwise in an
individual Award Agreement, in the event of a Change in Control (other
than a Change in Control which also is a Corporate Transaction), each
Award which is at the time outstanding under the Plan automatically
shall become fully vested and exercisable and be released from any
repurchase or forfeiture rights (other than repurchase rights
exercisable at Fair Market Value), immediately prior to the specified
effective date of such Change in Control, for all of the Shares at the
time represented by such Award, provided that the Grantee's Continuous
Service has not terminated prior to such date.
12) Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 0, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13) Amendment, Suspension or Termination of the Plan.
------------------------------------------------
a) The Board may at any time amend, suspend or terminate the Plan;
provided, however, that no such amendment shall be made without the
approval of the Company's stockholders to the extent such approval is
required by Applicable Laws, or if such amendment would change any of the
provisions of Section 4(b)(vi) or this Section 13(a).
b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
c) No suspension or termination of the Plan (including termination
of the Plan under Section 0, above) shall adversely affect any rights under
Awards already granted to a Grantee.
14) Reservation of Shares.
---------------------
a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
11
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
15) No Effect on Terms of Employment Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee's Continuous
Service, nor shall it interfere in any way with his or her right or the right of
the Company or any Related Entity to terminate the Grantee's Continuous Service
at any time, with or without Cause, and with or without notice. The ability of
the Company or any Related Entity to terminate the employment of a Grantee who
is employed at will is in no way affected by its determination that the
Grantee's Continuous Service has been terminated for Cause for the purposes of
this Plan.
16) No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
17) Stockholder Approval. Stockholder approval of the adoption of the Plan
is not required, and has not been obtained, pursuant to the requirements of
Applicable Laws, which specifically provide that stockholder approval is not
required (a) since the Plan does not authorize the granting of incentive stock
options under Section 422 of the Code and (b) the Plan satisfies an applicable
stockholder approval exemption for inducement grants under the applicable Nasdaq
National Market listing standards. The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
18) Effect of Section 162(m) of the Code. No Award hereunder shall qualify
as compensation qualifying as "performance-based compensation" under Section
162(m) of the Code until such time as the Company obtains the stockholder
approval required under Section 162(m) of the Code.
19) Unfunded Obligation. Grantees shall have the status of general
unsecured creditors of the Company. Any amounts payable to Grantees pursuant to
the Plan shall be unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974, as amended. Neither the Company nor any Related Entity
shall be required to segregate any monies from its general funds, or to create
any trusts, or establish any special accounts with respect to such obligations.
The Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any
trust or any Grantee account shall not create or constitute a trust or fiduciary
relationship between the Administrator, the Company or any Related Entity and a
Grantee, or otherwise create any vested or beneficial interest in any Grantee or
the Grantee's creditors in any assets of the Company or a Related Entity. The
Grantees shall have no claim against the Company or any Related Entity for any
changes in the value of any assets that may be invested or reinvested by the
Company with respect to the Plan.
20) Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term "or" is
not intended to be exclusive, unless the context clearly requires otherwise.
12