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EXHIBIT 99.1
CYTOVIA, INC.
1998 EQUITY INCENTIVE PLAN
ADOPTED MARCH 24, 1998
APPROVED BY SHAREHOLDERS APRIL 14, 1998
AMENDED BY BOARD OF DIRECTORS JULY 28, 1998
APPROVED BY SHAREHOLDERS OCTOBER 30, 1998
AMENDED BY BOARD OF DIRECTORS SEPTEMBER 7, 1999
APPROVED BY SHAREHOLDERS OCTOBER 5, 1999
AMENDED BY BOARD OF DIRECTORS NOVEMBER 4, 1999
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
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) of the Plan.
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(e) "COMPANY" means Cytovia, Inc., a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS SERVICE" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows (and in each case prior to the
Listing Date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations).
(i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or The Nasdaq SmallCap Market,
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 Company's 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.
(m) "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.
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(n) "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 Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
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.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means (i) prior to the Listing Date, any person
designated by the Company as an officer and (ii) from 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.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the 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 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.
(v) "PLAN" means this 1998 Equity Incentive Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.
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(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "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.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) 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; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; 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 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 13.
(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) The Board may delegate administration of the Plan to a committee of
the Board composed of two (2) or more members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. 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 of two (2) or more Outside Directors 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 such a
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. Additionally, prior to the Listing Date, and
notwithstanding
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anything to the contrary contained herein, the Board may delegate administration
of the Plan to a committee 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. In addition, notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(x) are not then subject to Section 16 of the Exchange Act and/or (y) are either
(i) 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 (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.
(d) Notwithstanding anything herein to the contrary, no member of
the Board or the Committee shall be liable for any good faith determination,
act or failure to act in connection with the Plan or any Option granted
hereunder.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate one hundred seventy-eight
thousand eight hundred forty-four (178,844) shares of the Company's common
stock. If any Stock Award shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the stock not
acquired under such Stock Award shall revert to and again become available
for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Stock Awards other than Incentive Stock Options may be granted only to
Employees, Directors or Consultants.
(b) Prior to the Listing Date, no person shall be eligible for the
grant of an Option or an award to purchase restricted stock if, at the time
of grant, such person 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 unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant, or in the case of a restricted stock purchase
award, the purchase price is at least one hundred percent (100%) of the Fair
Market Value of such stock at the date of grant. From and after the Listing
Date this provision shall apply only to Incentive Stock Options.
(c) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options covering more than thirty-five thousand (35,000) shares of the
Company's common stock in any calendar year. This subsection 5(c) shall not
apply prior to the Listing Date and, following the Listing Date, shall not
apply until (i) the earliest of: (A) the first material modification of the
Plan (including any increase to the number of shares reserved for issuance
under the Plan in accordance with Section 4); (B) the
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issuance of all of the shares of common stock reserved for issuance under the
Plan; (C) the expiration of the Plan; or (D) the first meeting of shareholders
at which directors 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. 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. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(b) PRICE. 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 Incentive Stock Option on the date of grant; the
exercise price of each Nonstatutory Stock Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of the stock subject to
the Nonstatutory Stock Option on the date of grant. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or 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.
(c) 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 or the Committee, at the time of the
grant of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment arrangement or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other common stock of the Company) with the person to
whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) 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. In addition, to
the extent required by law, the "par value" of the stock (if any) will be
paid in cash at the time the Option is exercised.
(d) TRANSFERABILITY. 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 person to whom the Option is
granted only by such person. Prior to the Listing Date, a 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 person to
whom the Option is granted only by such person. From and after the Listing
Date, a Nonstatutory Stock Option may
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be transferable to the extent provided in the Option Agreement; provided,
however, that if the Option Agreement does not specifically provide for
transferability, then such Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution. Notwithstanding the
foregoing, the person to whom the Option is granted 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 Optionee, shall thereafter be
entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the Option became
vested but was not fully exercised. 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.
Prior to the Listing Date, the vesting provisions of individual Options may
vary but in each case will provide for vesting of at least twenty percent
(20%) per year of the total number of shares subject to the Option.
Notwithstanding the foregoing, an Option granted to an Officer, Director or
Consultant may become fully exercisable, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company or of any of its Affiliates. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of
shares as to which an Option may be exercised.
(f) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise the Option (to the extent that the
Optionee 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 Optionee's Continuous Service (or
such longer or shorter period, which shall in no event be less than thirty
(30) days, specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement; provided, however,
if the Optionee is terminated for cause, then the Option shall terminate on
the date Optionee's Continuous Service ceases. If, at the date of
termination, the Optionee is not entitled to exercise the entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise the Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
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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 the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of three
(3) months after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise the Option (to the extent that the Optionee 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, which prior to the Listing Date shall not
be less than six (6) months, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.
If, at the date of termination, the Optionee is not entitled to exercise the
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise the Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option Agreement after the
termination of, the Optionee's Continuous Service, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option as
of the date of death) by the Optionee'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 Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date twelve (12) months following the date of death (or such longer or
shorter period, which prior to the Listing Date shall not be less than six
(6) months, specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, at the time of
death, the Optionee was not entitled to exercise the entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
Director or Consultant 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. Any
unvested shares so purchased may be subject to a repurchase right in favor of
the Company or to any other restriction the Board determines to be
appropriate. Prior to the Listing Date, however, any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company,
with the repurchase price to be equal to the original purchase price of the
stock, or to any other restriction the Board determines to be appropriate;
PROVIDED, HOWEVER, that (i) the right to repurchase at the original purchase
price shall lapse at a minimum rate of twenty percent (20%) per year over
five (5) years from the date the Option was granted, and (ii) such right
shall be exercisable only within (A) the ninety (90)-day period following the
termination of employment or the relationship as a Director or Consultant, or
(B) such longer period as may be agreed to by the Company and the Optionee
(for example, for purposes of satisfying the
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requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Notwithstanding the
foregoing, shares received on exercise of an Option by an Officer, Director or
Consultant may be subject to additional or greater restrictions.
(j) RIGHT OF REPURCHASE. 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 exercised pursuant to the
Option; PROVIDED, HOWEVER, that (i) such repurchase right shall be
exercisable only within (A) the ninety (90)-day period following the
termination of employment or the relationship as a Director or Consultant (or
in the case of a post-termination exercise of the Option, the ninety (90)-day
period following such post-termination exercise), or (B) such longer period
as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), (ii) such repurchase right
shall be exercisable for less than all of the vested shares only with the
Optionee's consent, and (iii) such right shall be exercisable only for cash
or cancellation of purchase money indebtedness for the shares at a repurchase
price equal to the stock's Fair Market Value at the time of such termination.
Notwithstanding the foregoing, shares received on exercise of an Option by an
Officer, Director or Consultant may be subject to additional or greater
restrictions specified in the Option Agreement.
(k) 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
Optionee of the intent to transfer all or any part of the shares exercised
pursuant to the Option. Such right of first refusal shall be exercised by the
Company no more than sixty (60) days following receipt of notice of the
Optionee's intent to transfer shares and must be exercised as to all the
shares the Optionee intends to transfer unless the Optionee consents to
exercise for less than all the shares offered. The purchase of the shares
following exercise shall be completed within thirty (30) days of the
Company's receipt of notice of the Optionee's intent to transfer shares, or
such longer period of time as has been offered by the person to whom the
Optionee intends to transfer the shares, or as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock").
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or 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 as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall
the purchase price be less than eighty-five percent (85%) of the stock's Fair
Market Value on the date such Stock Award is made, except as
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otherwise provided in Section 5(b) of the Plan. Notwithstanding the foregoing,
the Board or the Committee may determine that eligible participants in the Plan
may be awarded stock pursuant to a stock bonus agreement in consideration for
past services actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted
stock purchase agreement shall be transferable only by will or the laws of
descent and distribution, so long as stock awarded under such Stock Award
Agreement remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant
to a stock purchase agreement shall be paid either: (i) in cash at the time
of purchase; (ii) at the discretion of the Board or the Committee, according
to a deferred payment or other arrangement with the person to whom the stock
is sold; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in its discretion. In addition, to
the extent required by law, the "par value" of the stock (if any) will be
paid in cash at the time the Option is exercised. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee. Prior to the Listing Date, the applicable agreement shall provide
(i) that the right to repurchase at the original purchase price shall lapse
at a minimum rate of twenty percent (20%) per year over five (5) years from
the date the Stock Award was granted (except that a Stock Award granted to an
Officer, Director or Consultant may become fully vested, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company or of any of its Affiliates), and (ii) such
right shall be exercisable only (A) within the ninety (90)-day period
following the termination of employment or the relationship as a Director or
Consultant, or (B) such longer period as may be agreed to by the Company and
the holder of the Stock Award (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares.
(e) TERMINATION OF CONTINUOUS SERVICE. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire, subject to the limitations described in subsection 7(d),
any or all of the shares of stock held by that person which have not vested
as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect,
at any time and from time to time, (i) the repricing of any outstanding
Options under the Plan and/or (ii) with the consent of the affected holders
of Options, the cancellation of any outstanding Options under the Plan and
the grant in substitution therefor of new Options under the Plan covering the
same or
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different numbers of shares of stock, but having an exercise price per share not
less than eighty-five percent (85%) of the Fair Market Value (one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock
Option) or, in the case of a 10% shareholder (as described in subsection 5(b))
receiving a new grant of an Incentive Stock Option (any Option if the
cancellation or repricing takes place prior to the Listing Date), not less than
one hundred ten percent (110%) of the Fair Market Value) per share of stock on
the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which section 424(a) of the
Code applies.
(b) Shares subject to an Option canceled under this Section 8
shall continue to be counted against the maximum award of Options permitted
to be granted pursuant to subsection 5(c) of the Plan. The repricing of an
Option under this Section 8, resulting in a reduction of the exercise price,
shall be deemed to be a cancellation of the original Option and the grant of
a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum awards of
Options permitted to be granted pursuant to subsection 5(c) of the Plan. The
provisions of this subsection 8(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may
be required to issue and sell shares of stock upon exercise of the Stock
Award; provided, however, that this undertaking shall not require the Company
to register under the Securities Act either 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.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) 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 pursuant to subsection 6(e) or 7(d),
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) Neither an Employee, Director or Consultant nor any person to
whom a Stock Award is transferred under subsection 6(d) or 7(b) shall be
deemed to be the holder of, or to have
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any of the rights of a holder with respect to, any shares subject to such Stock
Award unless and until such person has satisfied all requirements for exercise
of the Stock Award pursuant to its terms.
(c) Throughout the term of any Stock Award, the Company shall
deliver to the holder of such Stock Award, not later than one hundred twenty
(120) days after the close of each of the Company's fiscal years during the
term of such Stock Award, a balance sheet and an income statement. This
subsection shall not apply (i) after the Listing Date, or (ii) when issuance
is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue serving as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without cause, the right of the Company's
Board of Directors and/or the Company's shareholders to remove any Director
as provided in the Company's Bylaws and the provisions of the applicable laws
of the Company's state of incorporation, or the right to terminate the
relationship of any Consultant subject to the terms of such Consultant's
agreement with the Company or any Affiliate.
(e) 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 Optionee during any calendar year
under the Plan and all other stock 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.
(f) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person'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 (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Stock Award for such person'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 (i) 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 (ii) 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.
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(g) To the extent provided by the terms of a Stock Award
Agreement, the person to whom a Stock Award is granted 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 or
by a combination of such means: (1) tendering a cash payment; (2) 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 (3) delivering to the Company owned and
unencumbered shares of Company common stock.
12. 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 (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 type(s) 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 during
any calendar year pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the type(s) and number of securities
and price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a "transaction
not involving the receipt of consideration by the Company.")
(b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) ASSET SALE, MERGER, CONSOLIDATION OR REVERSE MERGER. In the
event of (i) a sale of all or substantially all of the assets of the Company,
(ii) a merger or consolidation in which the Company is not the surviving
corporation or (iii) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise, 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 12(c) for those outstanding under the Plan). In the event
any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding
under the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and,
if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full, and the Stock Awards shall terminate if not
exercised (if applicable) at or prior to such event. With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised (if applicable) prior to such event.
(d) SPECIAL ACCELERATION PROVISIONS. Notwithstanding any other
provisions of this Plan to the contrary, in the event of a Change in Control
(as such term is defined below), then the vesting and exercisability of one
half (1/2) of the unvested Stock Awards held by such Participant
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shall be accelerated and any reacquisition or repurchase rights held by the
Company with respect to a Stock Award shall lapse in full; PROVIDED, HOWEVER,
that if such potential acceleration of the vesting and exercisability of Stock
Awards (or lapse of reacquisition or repurchase rights held by the Company with
respect to Stock Awards) would cause a contemplated Change in Control
transaction that would otherwise be eligible to be accounted for as a
"pooling-of-interests" transaction to become ineligible for such accounting
treatment under generally accepted accounting principles as determined by the
Accountants prior to the Change of Control, such acceleration shall not occur.
For purposes of this subsection 12(d) only, Change in Control means:
(i) a sale of all or substantially all of the assets of the Company; (ii) a
merger or consolidation in which the Company is not the surviving corporation
and in which beneficial ownership of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled to vote in the
election of Directors has changed; (iii) a reverse merger in which the Company
is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, and in
which beneficial ownership of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of Directors has changed; (iv) an acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or subsidiary of the Company or
other entity controlled by the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Directors; or (v) in the event that the individuals who, as of the date of
adoption of the Plan, are members of the Company's Board (the "Incumbent
Board"), cease for any reason to constitute at least fifty percent (50%) of the
Board. (If the election, or nomination for election by the Company's
stockholders, of any new Director is approved by a vote of at least fifty
percent (50%) of the Incumbent Board, such new Director shall be considered to
be a member of the Incumbent Board in the future.)
(e) PARACHUTE PAYMENTS. In the event that the acceleration of the
vesting and exercisability of the Stock Awards and/or the lapse of
reacquisition or repurchase rights with respect to Stock Awards provided for
in subsection 12(d) and benefits otherwise payable to a Participant (i)
constitute "parachute payments" within the meaning of Section 280G of the
Code, or any comparable successor provisions, and (ii) but for this
subsection would be subject to the excise tax imposed by Section 4999 of the
Code, or any comparable successor provisions (the "Excise Tax"), then such
Participant's benefits hereunder shall be either
(i) provided to such Participant in full, or
(ii) provided to such Participant as to such
lesser extent which would result in no
portion of such benefits being subject to
the Excise Tax,
whichever of the foregoing amounts, when taking into account applicable federal,
state, local and foreign income and employment taxes, the Excise Tax, and any
other applicable taxes, results in
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the receipt by such Participant, on an after-tax basis, of the greatest amount
of benefits, notwithstanding that all or some portion of such benefits may be
taxable under the Excise Tax. Unless the Company and such Participant otherwise
agree in writing, any determination required under this subsection shall be made
in writing in good faith by the Accountants. In the event of a reduction of
benefits hereunder, the Participant shall be given the choice of which benefits
to reduce. For purposes of making the calculations required by this subsection,
the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of the Code, and other applicable legal authority.
The Company and the Participant shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this subsection. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this subsection.
If, notwithstanding any reduction described in this
subsection, the IRS determines that the Participant is liable for the Excise Tax
as a result of the receipt of the payment of benefits as described above, then
the Participant shall be obligated to pay back to the Company, within thirty
(30) days after a final IRS determination or in the event that the Participant
challenges the final IRS determination, a final judicial determination, a
portion of the payment equal to the "Repayment Amount." The Repayment Amount
with respect to the payment of benefits shall be the smallest such amount, if
any, as shall be required to be paid to the Company so that the Participant's
net after-tax proceeds with respect to any payment of benefits (after taking
into account the payment of the Excise Tax and all other applicable taxes
imposed on such payment) shall be maximized. The Repayment Amount with respect
to the payment of benefits shall be zero if a Repayment Amount of more than zero
would not result in the Participant's net after-tax proceeds with respect to the
payment of such benefits being maximized. If the Excise Tax is not eliminated
pursuant to this paragraph, the Participant shall pay the Excise Tax.
Notwithstanding any other provision of this subsection 12(e),
if (i) there is a reduction in the payment of benefits as described in this
subsection, (ii) the IRS later determines that the Participant is liable for the
Excise Tax, the payment of which would result in the maximization of the
Participant's net after-tax proceeds (calculated as if the Participant's
benefits had not previously been reduced), and (iii) the Participant pays the
Excise Tax, then the Company shall pay to the Participant those benefits which
were reduced pursuant to this subsection contemporaneously or as soon as
administratively possible after the Participant pays the Excise Tax so that the
Participant's net after-tax proceeds with respect to the payment of benefits is
maximized.
If the Participant either (i) brings any action to
enforce rights pursuant to this subsection 12(e), or (ii) defend any legal
challenge to his or her rights hereunder, the Participant shall be entitled to
recover attorneys' fees and costs incurred in connection with such action,
regardless of the outcome of such action; provided, however, that in the event
such action is commenced by the Participant, the court finds the claim was
brought in good faith.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 12 relating to adjustments upon
changes in stock, no amendment
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shall be effective unless approved by the shareholders of the Company to the
extent shareholder approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 under the Exchange Act or
any Nasdaq or securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for shareholder 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 promulgated thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) 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) Rights and obligations 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 person to whom the Stock
Award was granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on March 23, 2008, which
is the day prior to the tenth anniversary of the date the Plan was adopted by
the Board or approved by the shareholders 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) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the written consent of the person to whom the Stock Award
was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the shareholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, the Stock Awards have been qualified or exempted from
qualification under the laws of the State of California.
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