EXHIBIT 10.1
DYNECO CORPORATION
2001 EQUITY INCENTIVE PLAN
Adopted October 25, 2001
Termination Date: December 31, 2010
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means DynEco Corporation, a Minnesota corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.
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(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the five
(5) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National
Market, Nasdaq SmallCap Market, Nasdaq Bulletin Board
or the Pink Sheets, the Fair Market Value of a share
of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of
trading in the Common Stock) on the last market
trading day prior to the day of determination, as
reported in THE WALL STREET JOURNAL or such other
source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good
faith by the Board.
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(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of the Exchange Act.
(q) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either
(i) is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "OUTSIDE DIRECTOR" means a Director of the Company who either (i)
is not a current employee of the Company or an "affiliated corporation" (within
the meaning of Treasury Regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time and is not currently receiving direct or indirect
remuneration from the
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Company or an "affiliated corporation" for services in any capacity other than
as a Director or (ii) is otherwise considered an "outside director" for purposes
of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this DynEco Corporation 2001 Equity Incentive Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT STOCKHOLDER" means a person who 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 all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock
Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock
Award granted (which need not be identical),
including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award;
and the number of shares with respect to which a
Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke
rules and regulations for its administration. The
Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in
any Stock Award Agreement, in a
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manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient
to promote the best interests of the Company which
are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall
apply to any person or persons to whom such authority
has been delegated. If administration is delegated to
a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers
theretofore possessed by the Board, including the
power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board
shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as
may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly
traded, in the discretion of the Board, a Committee
may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the
Board who are not Outside Directors the authority to
grant Stock Awards to eligible persons who are either
(1) not then Covered Employees and are not expected
to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not
persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the
Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the
Exchange Act.
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4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate one million (1,000,000) shares of
Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. If any Common Stock acquired pursuant to
the exercise of an Option shall for any reason be repurchased by the Company
under an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for the grant of a Nonstatutory Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for a restricted stock award unless the purchase price of the restricted stock
is at least one hundred percent (100%) of the Fair Market Value of the Common
Stock at the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options covering more than one hundred thousand (100,000) shares of
the Common Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this subsection 5(c)
shall not apply until (i) the earliest of: (1) the first material modification
of the Plan
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(including any increase in the number of shares reserved for issuance under the
Plan in accordance with Section 4); (2) the issuance of all of the shares of
Common Stock reserved for issuance under the Plan; (3) the expiration of the
Plan; or (4) the first meeting of stockholders at which Directors of the Company
are to be elected that occurs after the close of the third calendar year
following the calendar year in which occurred the first registration of an
equity security under Section 12 of the Exchange Act; or (ii) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of
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the Option (or subsequently in the case of a Nonstatutory Stock Option) by (1)
delivery to the Company of other Common Stock, (2) according to a deferred
payment or other arrangement (which may include, without limiting the generality
of the foregoing, the use of other Common Stock) with the Participant or (3) in
any other form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. A Nonstatutory
Stock Option granted on or after the Listing Date shall be transferable to the
extent provided in the Option Agreement. If the Nonstatutory Stock Option does
not provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants,
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the Option may become fully exercisable, subject to reasonable conditions such
as continued employment, at any time or during any period established by the
Company; for example, the vesting provision of the Option may provide for
vesting of less than twenty percent (20%) per year of the total number of shares
subject to the Option.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than thirty (30)
days, unless such termination is for cause), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date
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eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement, which, for Options granted prior to
the Listing Date, shall not be less than six (6) months) or (2) the expiration
of the term of such Option as set forth in the Option Agreement. If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in subsection 10(h), any unvested shares
so purchased may be subject to an unvested share repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
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shall be subject to the availability of sufficient shares under subsection 4(a)
and the "Section 162(m) Limitation" on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to
the Company for its benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded
under the stock bonus agreement may, but need not, be
subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be
determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE.
Subject to the "Repurchase Limitation" in subsection
10(h), in the event a Participant's Continuous
Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the
Participant which have not vested as of the date of
termination under the terms of the stock bonus
agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before
the Listing Date, rights to acquire shares under the
stock bonus agreement shall not be transferable
except by will or by the laws of descent and
distribution and shall be exercisable during the
lifetime of the Participant only by the Participant.
For a stock bonus award made on or after the Listing
Date, rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth
in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded
under the stock bonus agreement remains subject to
the terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements
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need not be identical, but each restricted stock purchase agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of
subsection 5(b) regarding Ten Percent Stockholders,
the purchase price under each restricted stock
purchase agreement shall be such amount as the Board
shall determine and designate in such restricted
stock purchase agreement. For restricted stock awards
made prior to the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award
is made or at the time the purchase is consummated.
For restricted stock awards made on or after the
Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the stock's Fair
Market Value on the date such award is made or at the
time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement
shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board,
according to a deferred payment or other arrangement
with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the
Board in its discretion.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired
under the restricted stock purchase agreement may,
but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting
schedule to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE.
Subject to the "Repurchase Limitation" in subsection
10(h), in the event a Participant's Continuous
Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of
Common Stock held by the Participant which have not
vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made
before the Listing Date, rights to acquire shares
under the restricted stock purchase agreement shall
not be transferable except by will or by the laws of
descent and distribution and shall be exercisable
during the lifetime of the Participant only by the
Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares
under the restricted stock purchase agreement shall
be transferable by the Participant only upon such
terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board
shall determine in its discretion, so long as stock
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awarded under the restricted stock purchase agreement
remains subject to the terms of the restricted stock
purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the
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Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by the Minnesota Securities Act and regulations promulgated thereunder,
the Company shall deliver financial statements to Participants at least
annually. This subsection 10(g) shall not apply to key Employees whose duties in
connection with the Company assure them access to equivalent information.
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(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. Any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares upon
termination of employment at not less than the Fair
Market Value of the shares to be purchased on the
date of termination of Continuous Service, then (i)
the right to repurchase shall be exercised for cash
or cancellation of purchase money indebtedness for
the shares within ninety (90) days of termination of
Continuous Service (or in the case of shares issued
upon exercise of Stock Awards after such date of
termination, within ninety (90) days after the date
of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for
example, for purposes of satisfying the requirements
of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right
terminates when the shares become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option
gives the Company the right to repurchase the shares
upon termination of Continuous Service at the
original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse
at the rate of at least twenty percent (20%) of the
shares per year over five (5) years from the date the
Stock Award is granted (without respect to the date
the Stock Award was exercised or became exercisable)
and (ii) the right to repurchase shall be exercised
for cash or cancellation of purchase money
indebtedness for the shares within ninety (90) days
of termination of Continuous Service (or in the case
of shares issued upon exercise of Options after such
date of termination, within ninety (90) days after
the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant
(for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code
regarding "qualified small business stock").
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of
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securities and price per share of stock subject to such outstanding Stock
Awards. The Board, the determination of which shall be final, binding and
conclusive, shall make such adjustments. (The conversion of any convertible
securities of the Company shall not be treated as a transaction "without receipt
of consideration" by the Company.)
(b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company other than in an Acquisition (as defined below), then
such Stock Awards shall be terminated if not exercised (if applicable) prior to
such event, unless such outstanding Stock Awards are assumed by a subsequent
purchaser.
(c) CHANGE IN CONTROL.
(i) For the purposes of this Section 119(c),
"Acquisition" shall mean (1) any consolidation or
merger of the Company with or into any other
corporation or other entity or person in which the
stockholders of the Company prior to such
consolidation or merger own less than fifty percent
(50%) of the Company's voting power immediately after
such consolidation or merger, excluding any
consolidation or merger effected exclusively to
change the domicile of the Company; or (2) a sale of
all or substantially all of the assets of the
Company.
(ii) In the event the Company undergoes an Acquisition;
then: any surviving corporation or acquiring
corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock
awards (including an award to acquire the same
consideration paid to the stockholders in the
transaction described in this subsection 11(c)) for
those outstanding under the Plan.
(iii) In the event any surviving corporation or acquiring
corporation in an Acquisition refuses to assume such
Stock Awards or to substitute similar stock awards
for those outstanding under the Plan, then with
respect to (1) Stock Awards held by Participants
whose Continuous Service has not terminated prior to
such event, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards
may be exercised) shall be accelerated and made fully
exercisable at least thirty (30) days prior to the
closing of the Acquisition (and the Stock Awards
terminated if not exercised prior to the closing of
such acquisition), and (2) any other Stock Awards
outstanding under the Plan, such Stock Awards shall
be terminated if not exercised prior to the closing
of the Acquisition.
(iv) In the event the Company undergoes an Acquisition and
the surviving corporation or acquiring corporation
does assume such Stock Awards (or substitutes similar
stock awards for those outstanding under the Plan),
then, with respect to each Stock Award held by
persons then performing services as Employees or
Directors, the vesting of each such Stock Award
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(and, if applicable, the time during which such Stock
Award may be exercised) shall be accelerated and such
Stock Award shall become fully vested and
exercisable, if any of the following events occurs
within one (1) month before or eighteen (18) months
after the effective date of the Acquisition: (1) the
service to the Company or an Affiliate of the
Employee or Director holding such Stock Award is
terminated without Cause (as defined below); (2) the
Employee holding such Stock Award terminates his or
her service to the Company or an Affiliate due to the
fact that the principal place of the performance of
the responsibilities and duties of the Employee is
changed to a location more than fifty (50) miles from
such Employee's existing work location without the
Employee's express consent (not applicable to
Directors); or (3) the Employee holding such Stock
Award terminates his or her service to the Company or
Affiliate due to the fact that there is a material
reduction in such Employee's responsibilities and
duties without the Employee's express consent (not
applicable to Directors).
(v) For the purposes of this Section 11(c), "Cause" means
an individual's misconduct, including but not limited
to: (1) conviction of any felony or any crime
involving moral turpitude or dishonesty, (2)
participation in a fraud or act of dishonesty against
the Company, (3) conduct that, based upon a good
faith and reasonable factual investigation and
determination by the Board, demonstrates your gross
unfitness to serve, or (4) intentional, material
violation of any contract with the Company or any
statutory duty to the Company that is not corrected
within thirty (30) days after written notice thereof.
Physical or mental disability shall not constitute
"Cause."
(vi) The acceleration of vesting provided for under this
Section 11(c) may be limited in certain circumstances
as follows: If any such acceleration (the "Benefit")
would (i) constitute a "parachute payment" within the
meaning of Section 280G of the Code and (ii) but for
such acceleration, be subject to the excise tax
imposed by Section 4999 of the Code, then such
Benefit shall be reduced to the extent necessary so
that no portion of the Benefit would be subject to
such excise tax, as determined in good faith by the
Company; provided, however, that if, in the absence
of any such reduction (or after such reduction), such
Employee believes that the Benefit or any portion
thereof (as reduced, if applicable) would be subject
to such excise tax, the Benefit shall be reduced (or
further reduced) to the extent determined by such
Employee in his or her discretion so that the excise
tax would not apply. If, notwithstanding any such
reduction (or in the absence of such reduction), the
Internal Revenue Service ("IRS") determines that such
Employee is liable for the excise tax as a result of
the Benefit, then such Employee shall be obligated to
return to the Company, within thirty (30) days of
such determination by the IRS, a portion of the
Benefit sufficient
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such that none of the Benefit retained by such
Employee constitutes a "parachute payment" within the
meaning of Section 280G of the Code that is subject
to the excise tax.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
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