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AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN OF
NANOGEN, INC.
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TABLE OF CONTENTS
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ARTICLE 1. INTRODUCTION.............................................................................1
ARTICLE 2. ADMINISTRATION...........................................................................1
2.1 Committee Composition....................................................................1
2.2 Committee Responsibilities...............................................................1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS..............................................................2
3.1 Basic Limitation.........................................................................2
3.2 Additional Shares........................................................................2
3.3 Dividend Equivalents.....................................................................2
ARTICLE 4. ELIGIBILITY..............................................................................2
4.1 General Rules............................................................................2
4.2 Outside Directors........................................................................2
4.3 Incentive Stock Options..................................................................2
ARTICLE 5. OPTIONS..................................................................................2
5.1 Stock Option Agreement...................................................................2
5.2 Number of Shares.........................................................................3
5.3 Exercise Price...........................................................................3
5.4 Exercisability and Term..................................................................3
5.5 Effect of Change in Control..............................................................3
5.6 Modification or Assumption of Options....................................................3
5.7 Other Requirements Prior to Company's Initial Public Offering............................3
ARTICLE 6. PAYMENT FOR OPTION SHARES................................................................4
6.1 General Rule.............................................................................4
6.2 Surrender of Stock.......................................................................4
6.3 Exercise/Sale............................................................................4
6.4 Exercise/Pledge..........................................................................4
6.5 Promissory Note..........................................................................4
6.6 Other Forms of Payment...................................................................4
ARTICLE 7. STOCK APPRECIATION RIGHTS................................................................4
7.1 SAR Agreement............................................................................4
7.2 Number of Shares.........................................................................4
7.3 Exercise Price...........................................................................5
7.4 Exercisability and Term..................................................................5
7.5 Effect of Change in Control..............................................................5
7.6 Exercise of SARs.........................................................................5
7.7 Modification or Assumption of SARs.......................................................5
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS........................................................5
8.1 Time, Amount and Form of Awards..........................................................5
8.2 Payment for Awards.......................................................................5
8.3 Vesting Conditions.......................................................................6
8.4 Form and Time of Settlement of Stock Units...............................................6
8.5 Death of Recipient.......................................................................6
8.6 Creditors'Rights.........................................................................6
ARTICLE 9. VOTING AND DIVIDEND RIGHTS...............................................................6
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9.1 Restricted Shares........................................................................6
9.2 Stock Units..............................................................................6
ARTICLE 10. PROTECTION AGAINST DILUTION..............................................................7
10.1 Adjustments..............................................................................7
10.2 Reorganizations..........................................................................7
ARTICLE 11. AWARDS UNDER OTHER PLANS.................................................................7
ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.................................................7
12.1 Effective Date...........................................................................7
12.2 Elections to Receive NSOs, Restricted Shares or Stock Units..............................7
12.3 Number and Terms of NSOs, Restricted Shares or Stock Units...............................7
ARTICLE 13. LIMITATION ON RIGHTS.....................................................................8
13.1 Retention Rights.........................................................................8
13.2 Stockholders'Rights......................................................................8
13.3 Regulatory Requirements..................................................................8
ARTICLE 14. LIMITATION ON PAYMENTS...................................................................8
14.1 Gross-Up Payment.........................................................................8
14.2 Determination by Accountant..............................................................8
14.3 Underpayments and Overpayments...........................................................9
14.4 Related Corporations.....................................................................9
ARTICLE 15. WITHHOLDING TAXES........................................................................9
15.1 General..................................................................................9
15.2 Share Withholding........................................................................9
ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS.........................................................9
16.1 General..................................................................................9
16.2 Trusts...................................................................................9
ARTICLE 17. FUTURE OF THE PLAN......................................................................10
17.1 Term of the Plan........................................................................10
17.2 Amendment or Termination................................................................10
ARTICLE 18. DEFINITIONS.............................................................................10
ARTICLE 19. EXECUTION...............................................................................13
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AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN OF
NANOGEN, INC.
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board effective as of August 1, 1997,
and was approved by the Company's stockholders as of August 1, 1997. The Plan
is effective as of August 1, 1997. However, Articles 7, 8 and 9 shall not
apply prior to the Company's initial public offering on April 14, 1998. The
Plan was subsequently (a) amended and restated on June 30, 1999 to increase
the number of shares available for issuance under the Plan in Section 3.1 ;
(b) amended on April 14, 2000 for options issued on and after that date, to
increase thereafter the period during which options may be exercised after
the death or disability of a Plan Participant to twelve months in Section
5.4; and (c) amended and restated on June 6, 2000 to increase the number of
shares available for issuance under the Plan in Section 3.1 to its current
number.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Key
Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Key Employees with exceptional qualifications and
(c) linking Key Employees directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, Options (which may
constitute incentive stock options or nonstatutory stock options) or stock
appreciation rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of California.
ARTICLE 2. ADMINISTRATION
2.1 Committee Composition. The Plan shall be administered by the
Committee. Except as provided below, the Committee shall consist exclusively
of directors of the Company, who shall be appointed by the Board. In
addition, the composition of the Committee shall satisfy:
(a) Such requirements, if any, as the Securities and Exchange
Commission may establish for administrators acting under plans intended
to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and
(b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify
for exemption under section 162(m)(4)(C) of the Code.
The Board may act on its own behalf with respect to Outside Directors and may
also appoint one or more separate committees composed of one or more officers
of the Company who need not be directors of the Company and who need not
satisfy the foregoing requirements, who may administer the Plan with respect
to Key Employees who are not "covered employees" under section 162(m)(3) of
the Code and who are not required to report pursuant to Section 16(a) of the
Exchange Act.
2.2 Committee Responsibilities. The Committee shall (a) select the
Key Employees who are to receive Awards under the Plan, (b) determine the
type, number, vesting requirements and other features and conditions of such
Awards, (c) interpret the Plan and (d) make all other decisions relating to
the operation of the Plan. The Committee may adopt such rules or guidelines
as it deems appropriate to implement the Plan. The Committee's determinations
under the Plan shall be final and binding on all persons.
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ARTICLE 3. SHARES AVAILABLE FOR GRANTS
3.1 Basic Limitation. Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number of
Common Shares available for Restricted Shares, Stock Units, Options and SARs
awarded under the Plan shall not exceed 4,508,760. Of the Common Shares
available hereunder, no more than 25% in aggregate shall be available with
respect to Outside Directors. The limitation of this Section 3.1 shall be
subject to adjustment pursuant to Article 10. The number of Common Shares
available under this Plan shall be increased by unexercised or forfeited
Common Shares under the Company's 1993 and 1995 Stock Plans.
3.2 Additional Shares. If Stock Units, Options or SARs are forfeited
or if Options or SARs terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Restricted Shares are forfeited before any dividends have
been paid with respect to such Shares, then such Shares shall again become
available for Awards under the Plan. If Stock Units are settled, then only
the number of Common Shares (if any) actually issued in settlement of such
Stock Units shall reduce the number available under Section 3.1 and the
balance shall again become available for Awards under the Plan. If SARs are
exercised, then only the number of Common Shares (if any) actually issued in
settlement of such SARs shall reduce the number available under Section 3.1
and the balance shall again become available for Awards under the Plan.
3.3 Dividend Equivalents. Any dividend equivalents distributed under
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY
4.1 General Rules. Only Key Employees (including, without
limitation, independent contractors who are not members of the Board) shall
be eligible for designation as Participants by the Committee.
4.2 Outside Directors. The Committee may provide that the NSOs that
otherwise would be granted to an Outside Director under this Plan shall
instead be granted to an affiliate of such Outside Director. Such affiliate
shall then be deemed to be an Outside Director for purposes of the Plan,
provided that the service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the service of the
Outside Director.
4.3 Incentive Stock Options. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who owns more than 10% of the
total combined voting power of all classes of outstanding stock of the
Company or any of its Parents or Subsidiaries shall not be eligible for the
grant of an ISO unless the requirements set forth in section 422(c)(6) of the
Code are satisfied.
ARTICLE 5. OPTIONS
5.1 Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan.
The Stock Option Agreement shall specify whether the Option is an ISO or an
NSO. The provisions of the various Stock Option Agreements entered into under
the Plan need not be identical. Options shall be granted in consideration of
services rendered to the Company or a Subsidiary. A Stock Option Agreement
may provide that a new Option will be granted automatically to the Optionee
when he or she exercises a prior Option and pays the Exercise Price in the
form described in Section 6.2.
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5.2 Number of Shares. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. Options granted to
any Optionee in a single calendar year shall in no event cover more than
750,000 Common Shares, subject to adjustment in accordance with Article 10.
5.3 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no
event be less than 100% of the Fair Market Value of a Common Share on the
date of grant and the Exercise Price under an NSO shall in no event be less
than the par value of the Common Shares subject to such NSO. In the case of
an NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding,
provided that prior to the Company's initial public offering, the NSO
Exercise Price shall be at least 85% (110% for 10% shareholders) of the Fair
Market Value of a Common Share of Stock on the date of grant.
5.4 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable, provided that prior to the Company's initial public offering,
Options shall become exercisable pursuant to a schedule providing for at
least 20% vesting per year over a five-year period (or, in the case of
performance options, to the extent permitted under applicable regulations of
the California Department of Corporations). The Stock Option Agreement shall
also specify the term of the Option; provided that the term of an ISO shall
in no event exceed 10 years from the date of grant. A Stock Option Agreement
may provide for accelerated exercisability in the event of the Optionee's
death, disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of
the Optionee's service.
Options may be awarded in combination with SARs, and such an Award
may provide that the Options will not be exercisable unless the related SARs
are forfeited. NSOs may also be awarded in combination with Restricted Shares
or Stock Units, and such an Award may provide that the NSOs will not be
exercisable unless the related Restricted Shares or Stock Units are forfeited.
Options must be exercised within 90 days of the termination of
employment (twelve months for termination on account of death or disability).
5.5 Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that
a Change in Control occurs with respect to the Company.
5.6 Modification or Assumption of Options. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or
may accept the cancellation of outstanding options (whether granted by the
Company or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.
5.7 Other Requirements Prior to Company's Initial Public Offering.
Prior to the Company's initial public offering, Optionees shall receive
Company financial statements at least annually.
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ARTICLE 6. PAYMENT FOR OPTION SHARES
6.1 General Rule. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such
Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the applicable
Stock Option Agreement. The Stock Option Agreement may specify that
payment may be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time
accept payment in any form(s) described in this Article 6.
6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made
with Common Shares which have already been owned by the Optionee for more
than six months. Such Common Shares shall be valued at their Fair Market
Value on the date when the new Common Shares are purchased under the Plan.
6.3 Exercise/Sale. To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Common Shares and to deliver all or part of the sales
proceeds to the Company in payment of all or part of the Exercise Price and
any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company, as security for a loan, and to
deliver all or part of the loan proceeds to the Company in payment of all or
part of the Exercise Price and any withholding taxes.
6.5 Promissory Note. To the extent that this Section 6.5 is
applicable, payment may be made with a full-recourse promissory note;
provided that the par value of the Common Shares shall be paid in cash.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 SAR Agreement. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to
any other terms that are not inconsistent with the Plan. The provisions of
the various SAR Agreements entered into under the Plan need not be identical.
SARs may be granted in consideration of a reduction in the Optionee's other
compensation.
7.2 Number of Shares. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Article 10. SARs granted to any Optionee in
a single calendar year shall in no event pertain to more than 300,000 Common
Shares, subject to adjustment in accordance with Article 10.
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7.3 Exercise Price. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the SAR is outstanding.
7.4 Exercisability and Term. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability or retirement or other events and may provide for expiration prior
to the end of its term in the event of the termination of the Optionee's
service. SARs may also be awarded in combination with Options, Restricted
Shares or Stock Units, and such an Award may provide that the SARs will not
be exercisable unless the related Options, Restricted Shares or Stock Units
are forfeited. An SAR may be included in an ISO only at the time of grant but
may be included in an NSO at the time of grant or thereafter. An SAR granted
under the Plan may provide that it will be exercisable only in the event of a
Change in Control.
7.5 Effect of Change in Control. The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.
7.6 Exercise of SARs. The exercise of an SAR shall be subject to the
restrictions imposed by Rule 16b-3 (or its successor) under the Exchange Act,
if applicable. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of
such SAR has not been exercised or surrendered, then such SAR shall
automatically be deemed to be exercised as of such date with respect to such
portion. Upon exercise of an SAR, the Optionee (or any person having the
right to exercise the SAR after his or her death) shall receive from the
Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date
of surrender) of the Common Shares subject to the SARs exceeds the Exercise
Price.
7.7 Modification or Assumption of SARs. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company
or by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an SAR shall, without the
consent of the Optionee, alter or impair his or her rights or obligations
under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS
8.1 Time, Amount and Form of Awards. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in
any combination of both. Restricted Shares or Stock Units may also be awarded
in combination with NSOs or SARs, and such an Award may provide that the
Restricted Shares or Stock Units will be forfeited in the event that the
related NSOs or SARs are exercised.
8.2 Payment for Awards. To the extent that an Award is granted in
the form of newly issued Restricted Shares, the Award recipient, as a
condition to the grant of such Award, shall be required to pay the Company in
cash an amount equal to the par value of such Restricted Shares. To the
extent that an Award is granted in the form of Restricted Shares from the
Company's treasury or in the form of Stock Units, no cash consideration shall
be required of the Award recipients.
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8.3 Vesting Conditions. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. A Stock Award
Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee
may determine, at the time of making an Award or thereafter, that such Award
shall become fully vested in the event that a Change in Control occurs with
respect to the Company.
8.4 Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of
Stock Units eligible for settlement may be larger or smaller than the number
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation)
a method based on the average Fair Market Value of Common Shares over a
series of trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed,
or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Stock Units is settled, the number of such
Stock Units shall be subject to adjustment pursuant to Article 10.
8.5 Death of Recipient. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's
beneficiary or beneficiaries. Each recipient of a Stock Units Award under the
Plan shall designate one or more beneficiaries for this purpose by filing the
prescribed form with the Company. A beneficiary designation may be changed by
filing the prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient's death shall be distributed to the
recipient's estate.
8.6 Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent
an unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS
9.1 Restricted Shares. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Stock Award Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid. Such additional Restricted Shares shall not
reduce the number of Common Shares available under Article 3.
9.2 Stock Units. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the
Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount
equal to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to
distribution, any dividend equivalents which are not paid shall be subject to
the same conditions and restrictions as the Stock Units to which they attach.
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ARTICLE 10. PROTECTION AGAINST DILUTION
10.1 Adjustments. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or
more of (a) the number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Article 3, (b) the limitations set forth in
Sections 5.2 and 7.2, (c) the number of NSOs to be granted to Outside
Directors under Section 4.2, (d) the number of Stock Units included in any
prior Award which has not yet been settled, (e) the number of Common Shares
covered by each outstanding Option and SAR or (f) the Exercise Price under
each outstanding Option and SAR. Except as provided in this Article 10, a
Participant shall have no rights by reason of any issue by the Company of
stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of
any stock dividend or any other increase or decrease in the number of shares
of stock of any class.
10.2 Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, SARs, Restricted Shares
and Stock Units shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Awards by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated expiration (provided
the Company has previously had its initial public offering), or for
settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS
The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Common Shares issued under this Plan.
Such Common Shares shall be treated for all purposes under the Plan like
Common Shares issued in settlement of Stock Units and shall, when issued,
reduce the number of Common Shares available under Article 3.
ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES
12.1 Effective Date. No provision of this Article 12 shall be
effective unless and until the Board has determined to implement such
provision.
12.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 12 shall be filed with the Company on the prescribed form.
12.3 Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise
be paid in cash shall be calculated in a manner determined by the Board. The
terms of such NSOs, Restricted Shares or Stock Units shall also be determined
by the Board.
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ARTICLE 13. LIMITATION ON RIGHTS
13.1 Retention Rights. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain an
employee, consultant or director of the Company, a Parent or a Subsidiary.
The Company and its Parents and Subsidiaries reserve the right to terminate
the service of any employee, consultant or director at any time, with or
without cause, subject to applicable laws, the Company's certificate of
incorporation and by-laws and a written employment agreement (if any).
13.2 Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 8, 9 and
10.
13.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under
the Plan shall be subject to all applicable laws, rules and regulations and
such approval by any regulatory body as may be required. The Company reserves
the right to restrict, in whole or in part, the delivery of Common Shares
pursuant to any Award prior to the satisfaction of all legal requirements
relating to the issuance of such Common Shares, to their registration,
qualification or listing or to an exemption from registration, qualification
or listing.
ARTICLE 14. LIMITATION ON PAYMENTS
14.1 Gross-Up Payment. In the event that it is determined that any
payment or transfer by the Company under the Plan to or for the benefit of
(the "Payment") would be subject to the excise tax imposed by section 4999 of
the Code or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest or penalties, are collectively
referred to as the "Excise Tax"), then the Participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount that shall
fund the payment by the Participant of any Excise Tax on the Payment as well
as all income taxes imposed on the Gross-Up Payment, any Excise Tax imposed
on the Gross-Up Payment and any interest or penalties imposed with respect to
taxes on the Gross-Up Payment or any Excise Tax.
14.2 Determination by Accountant. All mathematical determinations
and all determinations of whether any of the Payments are "parachute
payments" (within the meaning of section 280G of the Code) including all
determinations of whether a Gross-Up Payment is required, of the amount of
such Gross-Up Payment and of amounts determined under Section 14.3 shall be
made by the independent auditors most recently selected by the Board (the
"Auditors"), which shall provide its determination (the "Determination"),
together with detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matters, both to the Company and to
the Participant within seven business days of the Participant's termination
date, if applicable, or such earlier time as is requested by the Company or
by the Participant (if the Participant reasonably believes that any of the
Total Payments may be subject to the Excise Tax). If the Accounting Firm
determines that no Excise Tax is payable by the Participant, it shall furnish
the Participant with a written statement that the Auditors have concluded
that no Excise Tax is payable (including the reasons therefor) and that the
Participant has substantial authority not to report any Excise Tax on the
Participant's federal income tax return. If a Gross-Up Payment is determined
to be payable, it shall be paid to the Participant within five business days
after the Determination is delivered to the Company or the Participant. Any
determination by the Auditors shall be binding upon the Company and the
Participant, absent manifest error.
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14.3 Underpayments and Overpayments. As a result of uncertainty in
the application of section 4999 of the Code at the time of the initial
determination by the Auditors hereunder, it is possible that Gross-Up
Payments not made by the Company should have been made ("Underpayments") or
that Gross-Up Payments will have been made by the Company which should not
have been made ("Overpayments"). In either event, the Auditors shall
determine the amount of the Underpayment or Overpayment that has occurred. In
the case of an Underpayment, the amount of such Underpayment shall promptly
be paid by the Company to or for the benefit of the Employee. In the case of
an Overpayment, the Employee shall, at the direction and expense of the
Company, take such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from, and
procedures established by, the Company and otherwise reasonably cooperate
with the Company to correct such Overpayment; PROVIDED, HOWEVER, that (i) the
Employee shall in no event be obligated to return to the Company an amount
greater than the net after-tax portion of the Overpayment that the Employee
has retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a manner
consistent with the intent of this Article 14, which is to make the Employee
whole, on an after-tax basis, for the application of the Excise Tax, it being
understood that the correction of an Overpayment may result in the Employee's
repaying to the Company an amount which is less than the Overpayment.
14.4 Related Corporations. For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 15. WITHHOLDING TAXES
15.1 General. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Common Shares or make any cash
payment under the Plan until such obligations are satisfied.
15.2 Share Withholding. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that
otherwise would be issued to him or her or by surrendering all or a portion
of any Common Shares that he or she previously acquired. Such Common Shares
shall be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. Any payment of taxes by assigning Common Shares to
the Company may be subject to restrictions, including any restrictions
required by rules of the Securities and Exchange Commission.
ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS
16.1 General. An Award granted under the Plan shall not be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law, except as approved by the Committee. Notwithstanding the
foregoing, ISOs and, prior to the Company's initial public offering, NSOs may
not be transferable. However, this Article 16 shall not preclude a
Participant from designating a beneficiary who will receive any outstanding
Awards in the event of the Participant's death, nor shall it preclude a
transfer of Awards by will or by the laws of descent and distribution.
16.2 Trusts. Neither this Article 16 nor any other provision of the
Plan shall preclude a Participant from transferring or assigning Restricted
Shares to (a) the trustee of a trust that is revocable by such Participant
alone, both at the time of the transfer or assignment and at all times
thereafter prior to such Participant's death, or (b) the trustee of any other
trust to the extent approved in advance by the Committee in writing. A
transfer or assignment of Restricted Shares from such trustee to any person
other than such Participant shall be permitted only to the extent approved in
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advance by the Committee in writing, and Restricted Shares held by such
trustee shall be subject to all of the conditions and restrictions set forth
in the Plan and in the applicable Stock Award Agreement, as if such trustee
were a party to such Agreement.
ARTICLE 17. FUTURE OF THE PLAN
17.1 Term of the Plan. The Plan, as set forth herein, was adopted as
of August 1, 1997, and became effective August 1, 1997, except that Articles
7, 8 and 9 shall not be effective prior to the date of the Company's initial
public offering on April 14, 1998. The Plan shall remain in effect until it
is terminated under Section 17.2, except that no ISOs shall be granted after
July 31, 2007.
17.2 Amendment or Termination. The Board may, at any time and for
any reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules. No Awards shall be granted
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Award previously granted under
the Plan.
ARTICLE 18. DEFINITIONS
18.1 "Award" means any award of an Option, an SAR, a Restricted
Share or a Stock Unit under the Plan.
18.2 "Board" means the Company's Board of Directors, as constituted
from time to time.
18.3 "Change in Control" shall mean the occurrence of any of the
following events:
(a) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization is owned by
persons who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization;
(b) A change in the composition of the Board, as a result of
which fewer than one-half of the incumbent directors are directors who
either:
(A) Had been directors of the Company 24 months prior
to such change; or
(B) Were elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the
directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time
of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act) by the acquisition or aggregation of
securities is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the
right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities,
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shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any
securities of the Company. Thus, for example, any person who owns less
than 50% of the Company's outstanding shares, shall cause a Change in
Control to occur as of any subsequent date if such person then acquires
an additional interest in the Company which, when added to the person's
previous holdings, causes the person to hold more than 50% of the
Company's outstanding shares.
The term "Change in Control" shall not include the Company's initial public
offering or a transaction, the sole purpose of which is to change the state
of the Company's incorporation.
18.4 "Code" means the Internal Revenue Code of 1986, as amended.
18.5 "Committee" means a committee of the Board, as described in
Article 2.
18.6 "Common Share" means one share of the common stock of the Company.
18.7 "Company" means Nanogen, Inc., a Delaware corporation.
18.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
18.9 "Exercise Price," in the case of an Option, means the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share
in determining the amount payable upon exercise of such SAR.
18.10 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the
date in question but was not traded on the Nasdaq Stock Market or the
Nasdaq National Market, then the Fair Market Value shall be equal to
the mean between the last reported representative bid and asked prices
quoted for such date by the principal automated inter-dealer quotation
system on which the Common Shares are quoted or, if the Common Shares
are not quoted on any such system, by the "Pink Sheets" published by
the National Quotation Bureau, Inc.;
(b) If the Common Shares were traded over-the-counter on the
date in question and were traded on the Nasdaq Stock Market or the
Nasdaq National Market, then the Fair Market Value shall be equal to
the last-transaction price quoted for such date by the Nasdaq Stock
Market or the Nasdaq National Market;
(c) If the Common Shares were traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions report
for such date; and
(d) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Western Edition of THE WALL
STREET JOURNAL. Such determination shall be conclusive and binding on all
persons.
18.11 "ISO" means an incentive stock option described in section
422(b) of the Code.
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18.12 "Key Employee" means (a) a common-law employee of the Company,
a Parent or a Subsidiary, (b) an Outside Director and (c) a consultant or
adviser who provides services to the Company, a Parent or a Subsidiary as an
independent contractor. Service as an Outside Director or as an independent
contractor shall be considered employment for all purposes of the Plan,
except as provided in Sections 4.2 and 4.3.
18.13 "NSO" means a stock option not described in sections 422 or
423 of the Code.
18.14 "Option" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.
18.15 "Optionee" means an individual or estate who holds an Option
or SAR.
18.16 "Outside Director" shall mean a member of the Board who is not
a common-law employee of the Company, a Parent or a Subsidiary.
18.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent
on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.
18.18 "Participant" means an individual or estate who holds an Award.
18.19 "Plan" means this 1997 Stock Incentive Plan of Nanogen, Inc.,
as amended from time to time.
18.20 "Restricted Share" means a Common Share awarded under the Plan.
18.21 "SAR" means a stock appreciation right granted under the Plan.
18.22 "SAR Agreement" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to
his or her SAR.
18.23 "Stock Award Agreement" means the agreement between the
Company and the recipient of a Restricted Share or Stock Unit which contains
the terms, conditions and restrictions pertaining to such Restricted Share or
Stock Unit.
18.24 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
18.25 "Stock Unit" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
18.26 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
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ARTICLE 19. EXECUTION
To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to affix the corporate name and seal
hereto.
NANOGEN, INC.
By: /s/ Harry J. Leonhardt, Esq.
------------------------------
Harry J. Leonhardt, Esq.
Senior Vice President, General
Counsel and Secretary
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