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SCIENTIFIC LEARNING CORPORATION
1999 EQUITY INCENTIVE PLAN
ADOPTED FEBRUARY 19, 1996
APPROVED BY STOCKHOLDERS MARCH 30, 1996
AMENDED AND RESTATED SEPTEMBER 27, 1996
APPROVED BY STOCKHOLDERS JUNE 11, 1997
AMENDED MARCH 11, 1999
AMENDED AND RESTATED MAY 17, 1999
APPROVED BY STOCKHOLDERS MAY 28, 1999
AMENDED MARCH 8, 2000
APPROVED BY STOCKHOLDERS MAY 18, 2000
TERMINATION DATE: MAY 17, 2009
1. PURPOSES.
(a) The Plan initially was established effective as of February
19, 1996 (the "Prior Plan"). The Prior Plan hereby is amended and restated in
its entirety as the Plan, effective as of the date of the closing of the
initial public offering ("IPO") of the common stock of the Company ("Common
Stock"). The terms of the Prior Plan shall remain in effect and apply to all
options granted pursuant to the Prior Plan.
(b) The purpose of the Plan is to provide a means by which
selected Employees, Directors and Consultants may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock
bonuses, (iv) rights to purchase restricted stock and (v) Stock Appreciation
Rights.
(c) The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees, Directors or Consultants, 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.
(d) 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, (ii) stock
bonuses or rights to purchase restricted stock granted pursuant to Section 7
hereof or (iii) Stock Appreciation Rights granted pursuant to Section 8
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.
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(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.
(e) "COMPANY" means Scientific Learning Corporation, 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 Optionee's employment
or service with the Company or an Affiliate of the Company, whether in the
capacity of an Employee, a Director or a Consultant, is not interrupted or
terminated. The Optionee's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders employment or service to the Company or an Affiliate or the Company
or a change in the entity for which the Optionee renders such employment or
service, provided that there is no interruption or termination of the
Optionee's Continuous Service. The Board or the Chief Executive Officer of
the Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave
of absence approved by the Board or the Chief Executive Officer of the
Company, including sick leave, military leave, or any other personal leave.
(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 stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e)(3) of the Code.
(k) "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.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock of the Company determined as follows:
(1) 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
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the greatest volume of trading in Common Stock) on the trading day prior to
the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(2) In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.
(n) "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.
(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), 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 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.
(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 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 Scientific Learning Corporation 1999
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 when discretion is being exercised with
respect to the Plan.
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(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "STOCK APPRECIATION RIGHT" means any of the various types
of rights which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan,
including any Option, any stock bonus, any right to purchase restricted stock
and any Stock Appreciation Right.
(aa) "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 Board shall administer the Plan 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:
(1) 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 or a Nonstatutory Stock Option, a stock bonus, a right
to purchase restricted stock, a Stock Appreciation Right 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; whether a person shall be permitted
to receive stock upon exercise of an Independent Stock Appreciation Right;
and the number of shares with respect to which a Stock Award shall be granted
to each such person.
(2) 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.
(3) To amend the Plan or a Stock Award as
provided in Section 13.
(4) 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 or Committees of one or more members of the Board. In the
discretion of the Board, a Committee may consist solely of two or more
Outside Directors, in accordance with Code Section 162(m), or solely of two
or more Non-Employee Directors, in accordance with Rule 16b-3. 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 (and references in this Plan to the Board shall
thereafter be to the
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Committee), 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. 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 Options to eligible persons
who (1) are not then subject to Section 16 of the Exchange Act and/or (2) 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 Option, or
(ii) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of subsection 12(a) relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate Three Million Two Hundred
Ninety Two Thousand Six Hundred Sixty Six (3,292,666) shares of 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 (or vested in the
case of restricted stock), the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the Plan.
Shares subject to Stock Appreciation Rights exercised in accordance with
Section 8 of the Plan shall not be available for subsequent 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 and Stock Appreciation Rights
appurtenant thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant thereto may
be granted to Employees, Directors and Consultants.
(b) No person shall be eligible for the grant of an Incentive
Stock Option 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.
(c) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, no employee shall be eligible to be
granted Options and Stock Appreciation Rights covering more than Four Hundred
Twenty Thousand (420,000) shares of the Common Stock in any calendar year.
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:
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(a) TERM. No Incentive Stock 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 Option on the date the Option is granted, but the
exercise price of each Nonstatutory Stock Option shall be any price
determined by the Board in its sole discretion. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Incentive Stock
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 or (ii) at the discretion of the
Board (A) by delivery to the Company of other Common Stock of the Company,
(B) according to a deferred payment (however, payment of the common stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment), 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.
(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. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory Stock
Option, the Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution or pursuant to a domestic
relations order satisfying the requirements of Rule 16 of the Exchange Act
and shall be exercisable during the lifetime of the person to whom the Option
is granted only by such person or any transferee pursuant to a domestic
relations order. 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.
The vesting provisions of
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individual Options may vary. 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 THE OPTIONEE'S CONTINUOUS SERVICE. In the
event an Optionee's Continuous Service terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her Option
(to the extent that the Optionee was entitled to exercise it at the date of
termination) but only within such period of time ending on the earlier of
(i) the date three (3) months after the termination of the Optionee's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, after termination, the Optionee does not exercise
his or her 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 be
prohibited at any time solely because the issuance of shares would violate
the registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option as
described in subsection 6(a) 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 (if such provisions would result in an extension of
the time during which the Option may be exercised beyond the period described
in the first paragraph of this subsection 6(f)).
(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 his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, 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 his or her 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 his or her 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 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 at 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 eighteen (18) months following
the date of death (or such longer or shorter period 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 his or her 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
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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 before the Optionee's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. 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.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority
of the Board to make or not to make grants of Options hereunder, the Board
shall have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the Fair Market Value of the Common Stock subject
to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and which is granted to a 10% stockholder (as described in subsection
5(b)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; provided, however, that the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(e) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and shall be subject to such other
terms and conditions as the Board may determine which are not inconsistent
with the express provisions of the Plan regarding the terms of Options.
7. 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 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 shall determine and
designate in such agreement.
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Notwithstanding the foregoing, the Board 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
for its benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted
stock purchase agreement may be transferred to the extent provided in the
agreement; provided that if the agreement does not expressly permit the
transfer of such rights, no rights under the agreement shall be transferable
except by will or the laws of descent and distribution or, if the agreement
so provides, pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3 so long as stock awarded under such 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;
(ii) at the discretion of the Board, 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 in its
discretion. Notwithstanding the foregoing, the Board 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.
(e) TERMINATION OF CONTINUOUS SERVICE. In the event the Stock
Award recipient's Continuous Service terminates, the Company may repurchase
or otherwise reacquire 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. STOCK APPRECIATION RIGHTS.
(a) To exercise any outstanding Stock Appreciation Right, the
holder must provide written notice of exercise to the Company in compliance
with the provisions of the Stock Award Agreement evidencing such right.
Except as provided in subsection 5(c), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be
authorized for issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem
Stock Appreciation Rights will be granted appurtenant to an Option, and
shall, except as specifically set forth in this Section 8, be subject to the
same terms and conditions applicable to the particular Option grant to which
it pertains. Tandem Stock Appreciation Rights will require the holder to
elect between the exercise of the underlying Option for shares of stock and
the surrender, in whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the exercised Tandem
Right shall be in cash (or, if so provided, in an equivalent number of shares
of stock based
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on Fair Market Value on the date of the Option surrender) in an amount up to
the excess of (A) the Fair Market Value (on the date of the Option surrender)
of the number of shares of stock covered by that portion of the surrendered
Option in which the Optionee is vested over (B) the aggregate exercise price
payable for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS.
Concurrent Rights will be granted appurtenant to an Option and may apply to
all or any portion of the shares of stock subject to the underlying Option
and shall, except as specifically set forth in this Section 8, be subject to
the same terms and conditions applicable to the particular Option grant to
which it pertains. A Concurrent Right shall be exercised automatically at the
same time the underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains. The appreciation
distribution payable on an exercised Concurrent Right shall be in cash (or,
if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the exercise of the Concurrent Right) in an
amount equal to such portion as shall be determined by the Board or the
Committee at the time of the grant of the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the Concurrent Right) of the
vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (B) the aggregate exercise price
paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS.
Independent Rights will be granted independently of any Option and shall,
except as specifically set forth in this Section 8, be subject to the same
terms and conditions applicable to Nonstatutory Stock Options as set forth in
Section 6. They shall be denominated in share equivalents. The appreciation
distribution payable on the exercised Independent Right shall be not greater
than an amount equal to the excess of (A) the aggregate Fair Market Value (on
the date of the exercise of the Independent Right) of a number of shares of
Company stock equal to the number of share equivalents in which the holder is
vested under such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the aggregate Fair
Market Value (on the date of the grant of the Independent Right) of such
number of shares of Company stock. The appreciation distribution payable on
the exercised Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date
of the exercise of the Independent Right.
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 under Stock Awards; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
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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, 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 the recipient of a Stock Award nor any person to
whom a Stock Award is transferred in accordance with the Plan shall be deemed
to be the holder of, or to have any of the rights of a holder with respect
to, any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any recipient 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 Consultant or a Director, or shall
affect the right of the Company or any Affiliate to terminate the employment
of any Employee with or without notice and with or without cause, or the
right to terminate the relationship of any Consultant pursuant to the terms
of such Consultant's agreement with the Company or Affiliate or service as a
Director pursuant to the Company's Bylaws and the provisions of the corporate
law of the state in which the Company is incorporated.
(d) 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 all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall
be treated as Nonstatutory Stock Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance
with the Plan, 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
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to the Company, place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) 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 (in
addition to the Company's right to withhold from any compensation paid to
such person by the Company) 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 the Common Stock
of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving the receipt
of consideration by the Company), the Plan will be appropriately adjusted in
the class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares 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 class(es) and
number of shares and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board, 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) In the event of a proposed dissolution or liquidation of
the Company, the Board shall notify the Stock Award holder at least fifteen
(15) days prior to such proposed action. To the extent it has not been
previously exercised, the Stock Award shall terminate immediately prior to
the consummation of such proposed action.
(c) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; or (3) 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 (i) 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(b)) for those outstanding under the Plan, or (ii) 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, (A) with respect to Stock Awards held by persons 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 prior to such event and the Stock Awards terminated if
not exercised
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(if applicable) after such acceleration and at or prior to such event, and
(B) with respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall be terminated if not exercised (if applicable) prior to
such event.
(d) In the event of the 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 any Affiliate of 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, then,
with respect to Stock Awards held by persons 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
immediately upon the happening of such event.
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 shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary
for the Plan to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or any Nasdaq or securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide
eligible Optionees 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 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 Awards; provided, however, that the rights
under any Stock Award shall not be impaired by any such amendment unless (i)
the Company requests the consent of the 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 ten (10) years from the
date the Plan is adopted by the Board or approved by
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the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
Notwithstanding the foregoing, all Incentive Stock Options shall be granted,
if at all, no later than the last day preceding the tenth (10th) anniversary
of the earlier of (i) the date on which the latest increase in the maximum
number of shares issuable under the Plan was approved by the stockholders of
the Company or (ii) the date such amendment was adopted by the Board.
(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 consent of the person to whom the Stock Award was
granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as of the date of the closing of the
IPO, but no Options or rights to purchase restricted stock granted under the
Plan shall be exercised, and no stock bonuses shall be granted under the
Plan, unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after
the date the Plan was adopted by the Board.
14.
