<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1998
REGISTRATION NO. 333-___________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIOMAGNETIC TECHNOLOGIES, INC.
(Exact name of issuer as specified in its charter)
CALIFORNIA 95-2647755
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9727 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(Address of Principal Executive Office) (Zip Code)
______________________
1997 STOCK INCENTIVE PLAN
1992 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plan)
______________________
D. SCOTT BUCHANAN
President and Chief Executive Officer
BIOMAGNETIC TECHNOLOGIES, INC.
9727 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121 (619) 453-6300
(Name, address and telephone number, including area code, of agent for service)
______________________
Copies to:
Faye H. Russell, Esq.
BROBECK, PHLEGER & HARRISON LLP
550 West C Street, Suite 1300
San Diego, California 92101
(619) 234-1966
______________________
This Registration Statement shall become effective immediately
upon filing with the Securities and Exchange Commission
and sales of the registered securities will begin as soon
as reasonably practicable after such effective date.
______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Title of Proposed maximum Proposed maximum
securities to Amount to be offering price aggregate Amount of
be registered registered per share offering price registration fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 Stock Incentive Plan
Common Stock, no par value 3,000,000(1) $.54(2) $1,620,000(2) $478.00
1992 Employee Stock Purchase Plan
Common Stock, no par value 450,000(1) $.54(2) $ 243,000(2) $295.00
TOTAL: $773.00
</TABLE>
- ---------------
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under (a) the 1997 Stock Incentive
Plan or (b) the 1992 Employee Stock Purchase Plan by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase
in the number of the Company's outstanding shares of Common Stock.
(2) Estimated solely for the purposes of computing the amount of registration
fee in accordance with Rule 457(h) under the Securities Act of 1933, as
amended, on the basis of the average of the high and low selling prices per
share of the Registrant's Common Stock on July 31, 1998, as reported on
the Nasdaq National Market.
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- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Biomagnetic Technologies, Inc. (the "Registrant" or "Company") hereby
incorporates by reference into this Registration Statement the following
documents previously filed with the Securities and Exchange Commission (the
"Commission"):
(a) the Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997;
(b) the Registrant's Annual Report on Form 11-K for the fiscal year ended
September 30, 1997;
(c) the Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997;
(d) the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
(e) the Registrant's Current Report on Form 8-K dated September 26,
1997, filed with the Commission on October 2, 1997;
(f) the Registrant's Current Report on Form 8-K dated December 16,
1997, filed with the Commission on December 24, 1997;
(g) the Registrant's Proxy Statement dated February 17, 1998 in connection
with the Annual Meeting of Shareholders held on March 25, 1998; and
(h) the section entitled "Description of Capital Stock" contained in the
Post-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form S-1, filed with the Commission May 8, 1992, in
which there is described the terms, rights and provisions applicable
to the Registrant's Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act") after the date of this Registration
Statement and prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in
any subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
II-1
<PAGE>
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 317 of the California General Corporation Law provides for
the indemnification to officers and directors of the Registrant and its
subsidiaries against expenses, judgments, fines and amounts paid in
settlement under certain conditions and subject to certain limitations.
(b) Article IV, Section 10 of the Restated Bylaws (the "Bylaws") of the
Registrant provides that the Registrant shall have power to indemnify any
person who is or was an agent of the Registrant as provided in Section 317 of
the California General Corporation Law. The rights to indemnity thereunder
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director
or officer in defending a civil or criminal action, suit or proceeding by
reason of the fact that he or she is or was a director or officer of the
Registrant (or was serving at the Registrant's request as a director or
officer of another corporation) shall be paid by the Registrant in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Registrant as authorized by the relevant section of the
California General Corporation Law.
(c) Article V of the Registrant's Fourth Restated Articles of
Incorporation, as amended, (the "Articles of Incorporation") provides that
the liability of the directors of the Registrant for monetary damages shall
be eliminated to the fullest extent permissible under California law.
Accordingly, a director will not be liable for monetary damages for breach of
duty to the Registrant or its shareholders in any action brought by or in the
right of the Registrant. However, a director remains liable to the extent
required by law (i) for acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Registrant or
its shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard
for the director's duty to the Registrant or its shareholders in
circumstances in which the director was aware, or should have been aware, in
the ordinary course of performing a director's duties, of a risk of serious
injury to the Registrant or its shareholders, (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication
of the director's duty to the Registrant or its shareholders, (vi) for any
act or omission occurring prior to the date when the exculpation provision
became effective and (vii) for any act or omission as an officer,
notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the directors. The
effect of the provisions in the Articles of Incorporation is to eliminate the
rights of the Registrant and its shareholders (through shareholders'
derivative suits on behalf of the Registrant) to recover monetary damages
against a director for breach of duty as a director, including breaches
resulting from negligent behavior in the context of transactions involving a
change of control of the Registrant or otherwise, except in the situations
described in clauses (i) through (vii) above. These provisions will not
alter the liability of directors under federal securities laws.
(d) Pursuant to authorization provided under the Articles of
Incorporation, the Registrant has entered into indemnification agreements
with each of its present and certain of its former directors. The Registrant
has also entered into similar agreements with certain of the Registrant's
executive officers who are not directors. Generally, the indemnification
agreements attempt to provide the maximum protection permitted by California
law as it may be amended from time to time. Moreover, the indemnification
agreements provide for certain additional indemnification. Under such
additional indemnification
II-2
<PAGE>
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the
Registrant (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnity for expenses), for settlements not approved
by the Registrant or for settlements and expenses if the settlement is not
approved by the court. The indemnification agreements provide for the
Registrant to advance to the individual any and all reasonable expenses
(including legal fees and expenses) incurred in investigating or defending
any such action, suit or proceeding. In order to receive an advance of
expenses, the individual must submit to the Registrant copies of invoices
presented to him or her for such expenses. Also, the individual must repay
such advances upon a final judicial decision that he or she is not entitled
to indemnification. The Registrant's Bylaws contain a provision of similar
effect relating to advancement of expenses to a director or officer, subject
to an undertaking to repay if it is ultimately determined that
indemnification is unavailable.
(e) There is directors' and officers' liability insurance now in effect
which insures directors and officers of the Registrant.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
Item 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- -------
<S> <C>
4.1 Instruments Defining Rights of Shareholders. Reference is made to
Registrant's Registration Statement No. 33-81294 on Form S-1,
which is incorporated herein by reference pursuant to Item 3(g) of
this Registration Statement.
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit
5.1).
23.2 Consent of Independent Accountants, Arthur Andersen LLP.
23.3 Consent of Independent Accountants, PricewaterhouseCoopers LLP
24.1 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 1997 Stock Incentive Plan.
99.2 1997 Stock Incentive Plan Form of Stock Option Agreement and
Notice of Grant.
99.3 1992 Employee Stock Purchase Plan, as amended.
</TABLE>
Item 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii)
to reflect in the prospectus any facts or events arising after the effective
date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration
Statement, and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that clauses (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered
II-3
<PAGE>
therein and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof; and (3) to remove from
registration by means of a post-effective amendment any of the securities
being registered which remain unsold upon the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or controlling
persons of the Registrant pursuant to the indemnity provisions incorporated
by reference in Item 6, or otherwise, the Registrant has been informed that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Diego, State of California, on
this 5th day of August, 1998.
BIOMAGNETIC TECHNOLOGIES, INC.
By /s/ D. Scott Buchanan
-------------------------------------
D. SCOTT BUCHANAN
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Biomagnetic
Technologies, Inc. a California corporation, do hereby constitute and appoint
D. Scott Buchanan and Eugene Hirschkoff, and each of them, the lawful
attorneys-in-fact and agents with full power and authority to do any and all
acts and things and to execute any and all instruments which said attorneys
and agents, and either one of them, determine may be necessary or advisable
or required to enable said corporation to comply with the Securities Act of
1933, as amended, and any rules or regulations or requirements of the
Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and
authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this Registration
Statement, and to any and all instruments or documents filed as part of or in
conjunction with this Registration Statement or amendments or supplements
thereof, and each of the undersigned hereby ratifies and confirms that all
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------- ---------------------------------- ---------------
<S> <C> <C>
/s/ D. Scott Buchanan Director, President, and Chief
- --------------------------- Executive Officer August 5, 1998
D. Scott Buchanan (Principal Executive and Operating
Officer)
/s/ Herman Bergman Director, Vice President, Finance August 5, 1998
- --------------------------- Chief Financial Officer and Secretary
Herman Bergman (Principal Financial Officer)
/s/ Martin P. Egli Director August 5, 1998
- ---------------------------
Martin P. Egli
/s/ Enrique Maso Director August 5, 1998
- ---------------------------
Enrique Maso
/s/ Rodolfo Llinas Director August 5, 1998
- ---------------------------
Rodolfo Llinas
</TABLE>
II-5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
BIOMAGNETIC TECHNOLOGIES, INC.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- -------- --------------
<S> <C>
4.1 Instruments Defining Rights of Shareholders. Reference is made to
Registrant's Registration Statement No. 33-81294 on Form S-1, which is
incorporated herein by reference pursuant to Item 3(g) of this
Registration Statement.
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit 5.1).
23.2 Consent of Independent Accountants, Arthur Andersen LLP.
23.3 Consent of Independent Accountants, PricewaterhouseCoopers LLP.
24.1 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 1997 Stock Incentive Plan.
99.2 1997 Stock Incentive Plan Form of Stock Option Agreement and
Notice of Grant.
99.3 1992 Employee Stock Purchase Plan, as amended.
</TABLE>
<PAGE>
Exhibit 4.1
Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement No. 33-81294 on
Form S-1, which is incorporated herein by reference pursuant
to Item 3(g) of this Registration Statement.
<PAGE>
Exhibit 5.1
Opinion and consent of Brobeck, Phleger & Harrison LLP
<PAGE>
August 5, 1998
Biomagnetic Technologies, Inc.
9727 Pacific Heights Boulevard
San Diego, CA 92121
Re: BIOMAGNETIC TECHNOLOGIES, INC. REGISTRATION STATEMENT ON
FORM S-8 FOR 3,450,000 SHARES OF COMMON STOCK AND RELATED STOCK OPTIONS
Ladies and Gentlemen:
We have acted as counsel to Biomagnetic Technologies, Inc., a
California corporation (the "Company") in connection with the registration on
Form S-8 (the "Registration Statement") under the Securities Act of 1933, as
amended, of (i) 3,000,000 shares of Common Stock of the Company (the
"Incentive Plan Shares") and related stock options for issuance under the
Company's 1997 Stock Incentive Plan (the "Incentive Plan") and (ii) 450,000
shares (the "Plan Shares") of the Common Stock of the Company under the
Company's 1992 Employee Stock Purchase Plan, as amended (the "Stock Purchase
Plan"). The Incentive Plan Shares and the Plan Shares are collectively
referred to herein as the "Shares" and the Incentive Plan and the Stock
Purchase Plan are collectively referred to herein as the "Plans."
This opinion is being furnished in accordance with the requirements
of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plans. Based on such review, we are of the opinion that, if, as and when the
Shares have been issued and sold (and the consideration therefore received)
pursuant to (a) the provisions of option agreements duly authorized under the
Incentive Plan and in accordance with the Registration Statement, or (b) duly
authorized direct stock issuances in accordance with the respective Plans and
in accordance with the Registration Statement, such Shares will be duly
authorized, legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement. In giving this consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
or Item 509 of Regulation S-K.
<PAGE>
This opinion letter is rendered as of the date first written above
and we disclaim any obligation to advise you of facts, circumstances, events
or developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the Plans of the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 23.2
Consent of Independent Accountants, Arthur Andersen LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 19,
1997 included in Biomagnetic Technologies, Inc.'s Form 10-K for the year
ended September 30, 1997 and of our report dated March 13, 1998 included in
Biomagnetic Technologies, Inc.'s Form 11-K for the year ended September 30,
1997.
/s/ ARTHUR ANDERSEN LLP
San Diego, California
August 3, 1998
<PAGE>
Exhibit 23.3
Consent of Independent Accountants, PricewaterhouseCoopers LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 10, 1997, except as to Note
12, which is as of December 19, 1997 appearing on page 39 of Biomagnetic
Technologies, Inc.'s Annual Report on Form 10-K for the year ended September
30, 1997. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule appearing on page 40 of such Annual Report
on Form 10-K. We also consent to the incorporation by reference in the
Registration Statement of our report dated January 10, 1997 appearing on
page 3 of the Annual Report of the Biomagnetic Technologies, Inc. 1992
Employee Stock Purchase Plan on Form 11-K for the year ended September 30,
1997.
/s/PRICEWATERHOUSECOOPERS LLP
San Diego, California
August 3, 1998
<PAGE>
Exhibit 99.1
1997 Stock Incentive Plan
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the interests
of Biomagnetic Technologies, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation. This Plan
shall serve as the successor equity incentive program to the Corporation's
1987 Stock Option Plan.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase
of such shares or as a bonus for services rendered the Corporation (or
any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive option
grants at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate
in those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of
the Secondary Committee may be Board members who are Employees eligible to
receive discretionary option grants or direct stock issuances under the Plan
or any other stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate
the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options or stock issuances thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within
the scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option Grant
and Stock Issuance Programs under its jurisdiction or any option or stock
issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No
member of the Primary Committee or the Secondary Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
option grants or stock issuances under the Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under such program.
2
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times when each
option is to become exercisable, the vesting schedule (if any) applicable to
the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued
to each Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration for such shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members after the Effective Date, whether
through appointment by the Board or election by the Corporation's
shareholders, and (ii) those individuals who continue to serve as
non-employee Board members at one or more Annual Shareholders Meetings held
after the Effective Date. A non-employee Board member who has previously
been in the employ of the Corporation (or any Parent or Subsidiary) shall not
be eligible to receive an option grant under the Automatic Option Grant
Program at the time he or she first becomes a non-employee Board member, but
shall be eligible to receive periodic option grants under the Automatic
Option Grant Program while he or she continues to serve as a non-employee
Board member.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock initially reserved for issuance over the term of the
Plan shall not exceed 3,000,000 shares.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances
for more than 500,000 shares of Common Stock in the aggregate per calendar
year, beginning with the 1997 calendar year.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested
shares issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original exercise or issue price paid per share pursuant
to the Corporation's repurchase rights under the Plan, shall be added back to
the number of shares of Common Stock reserved for issuance under the Plan and
shall accordingly be available for reissuance through one or more subsequent
option grants or direct stock issuances under the Plan. However, should the
exercise price of an option under the Plan be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares
for which the option is exercised or which vest under the stock issuance, and
not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance.
D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under this
Plan per calendar year, (iii) the number and/or class of securities for which
grants are subsequently to be made under the Automatic Option Grant Program
to new and continuing non-employee Board members and (iv) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option under the Plan. Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the enlargement
or dilution of rights and benefits under such options. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or
more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the
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Plan Administrator and set forth in the documents evidencing the option.
However, no option shall have a term in excess of ten (10) years measured
from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option
to such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of
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vested shares of Common Stock for which such option is exercisable at
the time of the Optionee's cessation of Service but also with respect
to one or more additional installments in which the Optionee would have
vested had the Optionee continued in Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest
in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section
II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. EXERCISE PRICE. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more
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options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Shareholder, then the exercise price per share shall not
be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock
at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an outstanding
option shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof), (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares or (iii) the acceleration
of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made
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to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall
remain the same, (ii) the maximum number and/or class of securities available
for issuance over the remaining term of the Plan and (iii) the maximum number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant one or more options under the Discretionary Option Grant Program which
will automatically accelerate in the event the Optionee's Service
subsequently terminates by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the
effective date of (i) any Corporate Transaction in which those options are
assumed or replaced and do not otherwise accelerate or (ii) any Change in
Control. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.
F. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
G. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program and to grant in substitution new options covering the
same or different number of shares of Common Stock but with an exercise price
per share based on the Fair Market Value per share of Common Stock on the new
grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
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B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender is
so approved, then the distribution to which the Optionee shall be
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms of the
documents evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (B) the
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aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the option surrender date.
(iii) The Plan Administrator shall pre-approve, at the
time the limited right is granted, the subsequent exercise of that
right in accordance with the terms of the grant and the provisions of
this Section V. No additional approval of the Plan Administrator or
the Board shall be required at the time of the actual option surrender
and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents
evidencing such option.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be
attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
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(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator
is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which
the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote
such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further shareholder rights with respect to
those shares. To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Corporation shall repay
to the Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock
which would otherwise occur upon the cessation of the Participant's Service
or the non-attainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the
Participant's interest in the shares as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.
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II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and
all the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except
to the extent (i) those repurchase/cancellation rights are to be assigned to
the successor corporation (or parent thereof) in connection with such
Corporate Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time
while the Corporation's repurchase/cancellation rights with respect to such
shares remain outstanding under the Stock Issuance Program, to provide that
those rights shall automatically terminate in whole or in part, and the
shares of Common Stock subject to those terminated rights shall immediately
vest, in the event the Participant's Service should subsequently terminate by
reason of an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of (i) any
Corporate Transaction in which those repurchase/cancellation rights are
assigned to the successor corporation (or parent thereof) or (ii) any Change
in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Effective Date shall
automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase [10,000] shares of Common
Stock, provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
2. On the date of each Annual Shareholders Meeting held
after the Effective Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for re-election
to the Board at that particular Annual Meeting, shall automatically be
granted a Non-Statutory Option to purchase 3,500 shares of Common Stock,
provided such individual has served as a non-employee Board member for at
least six (6) months. There shall be no limit on the number of such [3,500]
- -share option grants any one Eligible Director may receive over his or her
period of Board service, and non-employee Board members who have previously
been in the employ of the Corporation (or any Parent or Subsidiary) or who
have otherwise received a stock option grant from the Corporation prior to
the Effective Date shall be eligible to receive one or more such annual
option grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. The shares
subject to each initial or annual option grant shall vest, and the
Corporation's repurchase right with respect to
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those shares shall lapse, in a series of sixteen (16) successive equal
quarterly installments upon the Optionee's period of continued Board service,
with the first such installment to vest upon the Optionee's completion of
three (3) months of Board service measured from the option grant date.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares of Common Stock for which the option is exercisable
at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Board service for any reason other than death or
Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of those shares as
fully-vested shares
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of Common Stock. Immediately following the consummation of the Corporation
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
of his or her outstanding automatic option grants, to the extent those grants
are exercisable for vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock
in which the Optionee is at the time vested under each surrendered option
over (ii) the aggregate exercise price payable for such vested shares. Such
cash distribution shall be paid within five (5) days following the surrender
of the option to the Corporation. Shareholder approval of the Plan shall
constitute pre-approval of the grant of each such option surrender right
under this Automatic Option Grant Program and the subsequent exercise of such
right in accordance with the terms and provisions of this Section II.C of
Article Four. No additional approval of the Board or any Plan Administrator
shall be required at the time of the actual option surrender and cash
distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, PROVIDED the aggregate
exercise price payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one
or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum credit
available to the Optionee or Participant exceed the sum of (i) the aggregate
option exercise price or purchase price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability
incurred by the Optionee or the Participant in connection with the option
exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to use shares of Common Stock
in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the
following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated
by the holder.
STOCK DELIVERY: The election to deliver to the Corporation,
at the time the Non-Statutory Option is exercised or the shares vest, one or
more shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes)
with an aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
18
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Effective
Date. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Effective Date.
However, no options granted under the Plan may be exercised, and no shares
shall be issued under the Plan, until the Plan is approved by the
Corporation's shareholders. If such shareholder approval is not obtained
within twelve (12) months after the Effective Date, then all options
previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plan which do not otherwise contain such provisions.
C. The Plan shall terminate upon the EARLIEST of (i) December 31,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and
obligations with respect to stock options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments
may require shareholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may
be issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs shall be held
in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made,
then (i) any unexercised options granted on the basis of such excess shares
shall terminate and cease to be outstanding and (ii) the Corporation shall
promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal
19
<PAGE>
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the stock options granted under it and the shares of Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person)
or of the Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person's Service at any time for any
reason, with or without cause.
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<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation), of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. CORPORATION shall mean Biomagnetic Technologies, Inc., a California
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. EFFECTIVE DATE shall mean January 1, 1997, the date on which the Plan
was adopted by the Board.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
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<PAGE>
(iii) [OVER-THE-COUNTER]
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
O. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
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<PAGE>
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
X. PLAN shall mean the Corporation's 1997 Stock Incentive Plan, as set
forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders.
AA. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
BB. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
CC. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
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<PAGE>
DD. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
EE. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
HH. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
II. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
JJ. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
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<PAGE>
Exhibit 99.2
1997 Stock Incentive Plan Form of Stock Option Agreement and Notice of Grant
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN:
STOCK OPTION AGREEMENT & NOTICE OF GRANT
THIS AGREEMENT, made and entered into as of the_____________and between
BIOMAGNETIC TECHNOLOGIES, INC., a California corporation, and
____________________, (the "Optionee").
W I T N E S S E T H:
1. DEFINITIONS.
(a) "AGREEMENT" shall mean this stock option agreement.
(b) "BOARD" shall mean the Board of Directors of the Corporation, as
constituted from time to time.
(c) "CAUSE" shall mean fraud, dishonesty, willful and habitual neglect
of or repeated failure to perform properly, the duties assigned to an
Optionee or conduct that is contrary to the best interests of the
Corporation. Cause shall be determined by the Committee in good faith.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean the Compensation committee of the Board in
accordance with Section 4 of the Plan.
(f) "CORPORATION" shall mean Biomagnetic Technologies, Inc., a
California corporation.
(g) "DATE OF GRANT" shall mean the date of this Agreement.
(h) "EMPLOYEE" shall mean (i) an individual who is an employee (within
the meaning of section 3401(c) of the Code and the regulations thereunder) of
the Corporation or of a Parent or Subsidiary or (ii) a director or adviser of
the Corporation or of a Parent or Subsidiary. Service as such a director or
adviser shall be deemed to be employment and service for all purposes of the
Plan except Section 5(b) thereof.
(i) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this Option, as specified in Paragraph 2 of this
Agreement.
(j) "INCENTIVE STOCK OPTION" shall mean an option described in section
422(b) of the Code.
<PAGE>
(k) "NONQUALIFIED STOCK OPTION" shall mean an option not described in
sections 422(b) or 423(b) of the Code.
(l) "OPTION" shall mean either an Incentive Stock Option or a
Nonqualified Stock Option granted pursuant to the Plan and entitling the
holder to purchase Shares.
(m) "OPTION PERIOD" shall mean the term of this Option, as specified in
Paragraph 4 of this Agreement.
(n) "PARENT" shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, if each of the
corporations other than the Corporation owns stock possessing at least fifty
percent (50%) of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(o) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(p) "PLAN" shall mean the Biomagnetic Technologies, Inc. 1997 Stock
Option Plan, as it may be amended.
(q) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is exercised.
(r) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(s) "SHARE" shall mean one (1) share of Stock, as adjusted in
accordance with Section 10 of the Plan (if applicable).
(t) "SHAREHOLDERS" shall mean collectively the holders of the Common
Stock of the Corporation.
(u) "STOCK" shall mean the Common Stock of the Corporation.
(v) "SUBSIDIARY" shall mean any corporation, if the Corporation and/or
one or more other Subsidiaries own at least fifty percent (50%) of the total
combined voting power of all classes of outstanding stock or other evidence
of ownership in such corporation.
(w) "TOTAL AND PERMANENT DISABILITY" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected to last, for a
continuous period of not less than twelve (12) months.
<PAGE>
2. GRANT OF OPTION.
On the terms and conditions stated below, the Corporation hereby grants
to the Optionee the option to purchase ________________ for the sum of
_________ per Share, which is agreed to be ONE HUNDRED PERCENT (100%) of the
fair market value thereof on the Date of Grant.
This Option is granted pursuant to the Plan, a copy of which the
Optionee acknowledges having received and read.
3. RIGHT TO EXERCISE.
Subject to the conditions set forth below and the exceptions set forth
in Paragraphs 4(a) and 5 of this Agreement, this Option shall become
exercisable in cumulative installment as shown on Attachment "A" attached
hereto.
4. TERM OF OPTION.
This Option shall in any event expire TEN (10) YEARS after the Date of
Grant. In addition, this Option shall expire upon termination of the
Optionee's service as Employee, if such termination occurs first, subject to
the following provisions:
a) If the termination of service as an Employee is caused by the Optionee's
death, then this Option may be exercised in full, whether or not the Option
is then exercisable pursuant to its terms, to the extent that it had not
previously been exercised, within twelve (12) months after the Optionee's
death by the Optionee's executors or administrators or by any person or
persons who have acquired this Option directly from the Optionee by bequest
or inheritance.
(b) If an Optionee ceases to be an Employee by reason of his or her
termination or removal for Cause, then the Optionee shall have the right to
exercise an Option (to the extent not previously exercised and not expired
and to the extent that the Option was exercisable under Paragraph 3 of this
Agreement on the date of termination) at any time within thirty (30) days
following the date of termination or removal; provided, however, that such
thirty day period shall be shortened to ten days if the Corporation sends a
notice of its intention to purchase shares upon exercise to the Optionee
following such termination or removal, in which event the Optionee shall have
ten days from the date of such notice to exercise an Option (to the extent
not previously exercised and not expired and to the extent that, on
termination, the Option has accrued (vested) pursuant to the terms of this
Agreement). In the event that Optionee exercises an Option within the ten
day period described in the preceding sentence, all Shares acquired upon such
exercise shall be deemed to be immediately offered to the Corporation for
cash purchase by the Corporation or its designee at Fair Market Value, and
any purchase by the Corporation or its designee must be consummated within
ten days after Optionee's exercise.
<PAGE>
(c) If the termination of service as an Employee is caused by any
reason other than for Cause or by death, then this Option (to the extent not
previously exercised) may be exercised within a period of three (3) months
after the termination (twelve (12) months after the termination if the
termination is caused by Total and Permanent Disability), but only to the
extent that this Option was exercisable under Paragraph 3 of this Agreement
on the date of the termination. If the Optionee dies within such period,
this Option (to the extent not previously exercised) may be exercised within
twelve (12) months after the Optionee's death by the Optionee's executors or
administrators or by any person or persons who have acquired this Option
directly from the Optionee by bequest or inheritance, but only to the extent
that this Option was exercisable under Paragraph 3 of this Agreement on the
date of the termination.
Notwithstanding any other provision of this Agreement to the contrary,
this Option shall not be exercisable after the expiration date set forth in
the first sentence of this Paragraph 4.
For purposes of this Paragraph 4, service as an Employee shall be deemed to
continue while the Optionee is on military leave, sick leave or other bona fide
leave of absence (to be determined in the sole discretion of the Committee).
Notwithstanding the foregoing sentence, if this Option is designated as an
Incentive Stock Option in Paragraph 16 of this Agreement, service as an Employee
shall not be deemed to continue beyond the ninetieth (90th) day after the
Optionee ceased active employment as a common-law employee, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
<PAGE>
5. SHARES AND ADJUSTMENTS.
The Corporation agrees that it will at all times during the Option
Period reserve and keep available sufficient authorized but unissued Stock to
satisfy the requirements of this Agreement.
Subject to any required action by the Shareholders, the number of Shares
subject to this Option and the Exercise Price shall be adjusted
proportionately for any increase or decrease in the number of issued Shares
resulting from a subdivision or consolidation of Shares or the payment of a
stock dividend or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Corporation.
In the event of any of the following transactions (a "Corporate
Transaction"):
_ a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation,
_ the sale, transfer or other disposition of all or substantially all of
the assets of the Company,
_ any reverse merger in which the Company is the surviving entity but in
which fifty percent (50%) or more of the Company's outstanding voting
stock is transferred to holders different from those who held the
stock immediately prior to such merger,
then the exercisability of each option outstanding under the Option Plan
shall be automatically accelerated so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock purchasable under such option and may be exercised
for all or any portion of such shares. However, an outstanding option
under the Option Plan shall not be so accelerated if and to the extent the
acceleration of such option is subject to other applicable limitations
imposed by the Committee at the time of grant.
Upon the consummation of the Corporate Transaction, all outstanding
options under the Option Plan shall, to the extent not previously exercised
or assumed by the successor corporation or its parent company, terminate and
cease to be outstanding.
The grant of options under the Option Plan shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
<PAGE>
To the extent that the foregoing adjustments relate to securities of the
Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
6. EXERCISE OF OPTION.
The Optionee or the Optionee's representative may exercise this Option
by giving written notice to the Secretary of the Corporation by delivery to
the Corporation of an exercise letter in the form attached as Exhibit "B".
The letter shall specify the election to exercise the Option, and the number
of Shares for which it is being exercised. The letter shall be signed by the
person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the letter shall be
accompanied by proof satisfactory to the Corporation of the representative's
right to exercise this Option. The Optionee or the Optionee's representative
shall deliver to the Secretary of the Corporation at the time of giving the
letter payment in a form which conforms to Paragraph 16 of this Agreement for
the full amount of the Purchase Price.
The Corporation shall thereafter cause to be issued a certificate or
certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising the Option (or (i) in the
names of such person and his or her spouse as community property or as joint
tenants with right of survivorship, or (ii) to a revocable inter vivos trust
of which the Optionee and the Optionee's spouse are both the sole trustees
and beneficiaries with right of survivorship). The Corporation shall cause
such certificate or certificates to be delivered to or upon the order of the
person exercising this Option.
7. WITHHOLDING TAXES.
In the event that the Corporation determines that it is required to
withhold federal, state or local tax as a result of the exercise of this
Option, the Optionee, as a condition to the exercise of this Option, shall
make arrangements satisfactory to the Corporation to enable it to satisfy
such withholding requirements.
8. RIGHTS AS A SHAREHOLDER.
Neither the Optionee nor the Optionee's representative shall have any
rights as a Shareholder with respect to any Shares subject to this Option
until such Shares have been issued in the name of the Optionee or the
Optionee's representative.
9. RESTRICTIVE LEGEND.
Stock certificates evidencing Shares acquired under this Agreement
in an unregistered transaction shall bear the following restrictive legend
(and such other restrictive legends as are required or deemed advisable under
the provisions of any applicable law):
<PAGE>
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE
ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR
THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER
TO COMPLY WITH THE ACT."
10. REGISTRATION OF SECURITIES.
The Corporation may, but shall not be obligated to, register or qualify
the sale of Shares under the Securities Act or any other applicable law. The
Corporation shall not be obligated to take any affirmative action in order to
cause the sale of Shares under this Agreement to comply with any law.
11. REMOVAL OF LEGENDS.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares sold under this Agreement
is no longer required, the holder of such a certificate shall be entitled to
exchange such certificate for a certificate representing the same number of
Shares but lacking such legend.
12. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the
rights and privileges conferred hereby shall not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this Option, or of any right or privilege conferred
hereby, contrary to the provisions hereof, or upon any attempted sale under
any execution, attachment or similar process upon the rights and privileges
conferred hereby, this Option and the rights and privileges conferred hereby
shall immediately become null and void.
13. NO EMPLOYMENT RIGHTS.
Nothing in this Agreement shall be construed as giving the Optionee the
right to be retained as an Employee or as impairing the right of the
Corporation to terminate his or her service at any time, with or without
cause.
<PAGE>
14. DESIGNATION OF OPTION.
The Committee hereby designates this Option as (check one only):
(a) X An Incentive Stock Option (common-law employees only)
(b) A Nonqualified Stock Option
15. PAYMENT FOR STOCK.
The entire Purchase Price shall be paid in cash (in U.S. dollars by
certified check, cashier's check or personal check), or shares of the
Company's Stock owned by the Optionee duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the
aggregate purchase price of the shares with respect to which such Option or
portion is exercised, or any other legal consideration (or combination
thereof) acceptable to the Committee at the time of exercise, in its sole and
absolute discretion, subject to any conditions the Committee may impose in
the case of payment other than cash.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by its officer duly authorized to act on behalf of the
Committee, and the Optionee has personally executed this Agreement.
________________________ BIOMAGNETIC TECHNOLOGIES, INC.
Optionee
By:________________________________
D.S. Buchanan
President & C.E.O
<PAGE>
EXHIBIT B
EXERCISE LETTER
INCENTIVE STOCK OPTION
_____________________________
(Name)
_____________________________
_____________________________
(Address)
_____________________________
(Date)
BIOMAGNETIC TECHNOLOGIES, INC.
9727 Pacific Heights Boulevard
San Diego, CA 92121
Attention: Corporate Secretary
Gentlemen:
I hereby exercise my right to purchase _______ shares of Common Stock of
BIOMAGNETIC TECHNOLOGIES, INC., a California corporation ("Corporation"),
pursuant to, and in accordance with, that Stock Option Agreement
("Agreement") dated January 1, 1997. I am also delivering with this notice
the consideration called for in the Agreement in the amount of the aggregate
exercise price. Please deliver to me at my address as set forth above stock
certificates representing the subject shares registered in my name (and
_________________________________________, as ___________________________).
(spouse) (style of vesting)
In making this purchase, I represent to you and agree that:
1. NATURE OF RISK. I understand the nature of the investment, and I
am able to bear the economic risk thereof. I now have and have had access to
such information as to the Company's financial condition, operations,
products, marketing, sales and management as I have deemed appropriate in
evaluating the merits and risks of my prospective investment. Page Two
<PAGE>
Page Two
Name:______________________________
Date:______________________________
2. TAX MATTERS. I represent and acknowledge my understanding that the
stock acquired upon exercise of the option must be held for at least one year
after the date of exercise and two years after the date of grant of the option
in order for the option to be treated as an Incentive Stock Option under Section
422A of the Internal Revenue Code of 1986, as amended. I understand that my tax
treatment may be adversely affected if I sell the stock acquired upon exercise
within two years after the option is granted or one year after the date of
exercise. I also understand that my exercise may subject me to the alternative
minimum tax. I have consulted with my own tax advisor with respect to these
matters and the tax consequences generally of this exercise.
Very truly yours,
_____________________________________
<PAGE>
EXHIBIT B
EXERCISE LETTER
NONQUALIFIED STOCK OPTION
_____________________________
(Name)
_____________________________
_____________________________
(Address)
_____________________________
(Date)
BIOMAGNETIC TECHNOLOGIES, INC.
9727 Pacific Heights Boulevard
San Diego, CA 92121
Attention: Corporate Secretary
Gentlemen:
I hereby exercise my right to purchase _______ shares of Common Stock of
BIOMAGNETIC TECHNOLOGIES, INC., a California corporation ("Corporation"),
pursuant to, and in accordance with, that Non-Qualified Stock Option Agreement
("Agreement") dated January 1, 1997. As provided in that Agreement, I deliver
herewith a personal, certified or bank cashier's check in the amount of the
aggregate option price. Please deliver to me at my address as set forth above
stock certificates representing the subject shares registered in my name
(and______________________, as____________________).
(spouse) (style of vesting)
In making this purchase, I represent to you and agree that:
I understand the nature of the investment, and I am able to bear the
economic risk thereof. I now have and have had access to such information as to
the Company's financial condition, operations, products, marketing, sales and
management as I have deemed appropriate in evaluating the merits and risks of my
prospective investment.
Very truly yours,
_________________________________
<PAGE>
Exhibit 99.3
1992 Employee Stock Purchase Plan, as amended
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED THROUGH MARCH 31, 1996
I. PURPOSE
The Biomagnetic Technologies, Inc. 1992 Employee Stock Purchase
Plan (the "Plan") is intended to provide eligible employees of the Company
and one or more of its Corporate Affiliates with the opportunity to acquire a
proprietary interest in the Company through participation in a plan designed
to qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code (the "Code").
II. DEFINITIONS
For purposes of administration of the Plan, the following terms
shall have the meanings indicated:
BASE SALARY means (i) the regular base earnings paid to an Eligible
Employee by one or more Participating Companies during such individual's
period of participation in the Plan, plus (ii) all overtime payments and any
salary deferral contributions made by such individual to any Code Section
401(k) Plan now or hereafter maintained by the Company during such period.
There shall be excluded from the calculation of Base Salary (I) bonuses,
commissions, profit-sharing distributions and other incentive-type payments
and (II) all contributions (other than Code Section 401(k) contributions)
made by the Company or any Corporate Affiliate on such individual's behalf
under any employee benefit or welfare plan now or hereafter established.
BENEFICIARY means the person designated by the Participant to
exercise the Participant's rights under the Plan in the event of his or her
death. Each individual shall, at the time he or she becomes a Participant,
designate a Beneficiary on the form prescribed for that purpose by the Plan
Administrator. Such designation shall become effective when filed with the
Plan Administrator and may be changed from time to time by the Participant by
filing a new Beneficiary designation form with the Plan Administrator.
BOARD means the Company's Board of Directors.
COMPANY means Biomagnetic Technologies, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Biomagnetic Technologies, Inc. which shall by
appropriate action adopt the Plan.
CORPORATE AFFILIATE means any company which is either the parent
corporation or a subsidiary corporation of the Company (as determined in
accordance with Section 424 of
<PAGE>
the Code), including any parent or subsidiary corporation which becomes such
after the Effective Date.
EFFECTIVE DATE means January 1, 1992. However, any Corporate
Affiliate which becomes a Participating Company in the Plan after January 1,
1992 shall designate a subsequent Effective Date with respect to its
employee-Participants.
ELIGIBLE EMPLOYEE means any person who is regularly engaged, for a
period of more than 5 hours per week and more than 3 consecutive months per
calendar year, in the rendition of personal services to the Company or any
other Participating Company for earnings considered wages under Section
3121(a) of the Code.
PARTICIPANT means any Eligible Employee of a Participating Company
who (i) has satisfied the service requirement set forth in Article V and (ii)
is actively participating in the Plan.
PARTICIPATING COMPANY means the Company and such Corporate
Affiliate or Affiliates as may be authorized from time to time by the Board
to extend the benefits of the Plan to their Eligible Employees. The
Participating Companies in the Plan, as of January 1, 1992, are listed in
attached Schedule A.
STOCK means shares of the common stock of the Company.
III. ADMINISTRATION
A. The Plan shall be administered by a committee (the
"Committee") of two or more Board members appointed by the Board. Members of
the Committee shall serve for such period of time as the Board may determine
and shall be subject to removal by the Board at any time.
B. The Committee as Plan Administrator shall have full authority
to administer the Plan, including authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Section 423 of the Internal Revenue Code. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan.
IV. PURCHASE PERIODS
A. Stock shall be offered for purchase under the Plan through a
series of successive purchase periods until such time as (i) the maximum
number of shares of Stock available for issuance under the Plan shall have
been issued pursuant to purchase rights granted under the Plan or (ii) the
Plan shall have been sooner terminated in accordance with Article IX.
B. Under no circumstances shall any purchase rights granted under
the Plan be exercised, nor shall any shares of Stock be issued hereunder,
until such time as (i) the Plan
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<PAGE>
shall have been approved by the Company's shareholders and (ii) the Company
shall have complied with all applicable requirements of the Securities Act of
1933 (as amended), all applicable listing requirements of the primary
securities exchange or (if applicable) the NASDAQ National Market System on
which the Stock is traded and all other applicable requirements established
by law or regulation.
C. The Plan shall be implemented in a series of purchase periods,
each to be of such duration (not to exceed twenty-seven (27) months per
purchase period) as the Plan Administrator shall determine prior to
commencement of the purchase period. The initial purchase period shall of be
twenty-seven (27) months duration and shall begin on January 1, 1992 and end
on March 31, 1994.
D. Each individual who participates in the Plan for a particular
purchase period shall be granted a separate purchase right for that purchase
period. Such purchase right shall be granted on the applicable date
specified below:
(i) For an Eligible Employee who completes the minimum
service requirement of Article V prior to the first day of the purchase
period, the purchase right shall be granted to such individual on the
first day of such purchase period, provided he/she has enrolled in the
Plan for such purchase period in accordance with Article V.
(ii) For an Eligible Employee who first completes the minimum
service requirement of Article V after the first day of the purchase
period, the purchase right shall be granted to such individual on the
first day of the first calendar quarter within such purchase period as of
which he/she has satisfied the applicable service requirement, provided
he/she has enrolled in the Plan for such purchase period. If such
individual does not enroll in the Plan prior to the first day of such
calendar quarter, then he/she will not be eligible to participate in the
Plan for that purchase period and will not be granted any purchase right
for that purchase period.
E. The purchase right shall automatically be exercised on the
last business day of the purchase period or (if earlier) on the date the
purchase right terminates in accordance with the change in ownership
provisions of Article VII of the Plan.
F. The acquisition of Stock through participation in the Plan for
any purchase period shall neither limit nor require the acquisition of Stock
by the Participant in any subsequent purchase period.
V. ELIGIBILITY AND PARTICIPATION
3
<PAGE>
A. Each Eligible Employee shall become eligible to participate in a
particular purchase period under the Plan on the applicable eligibility date
(the "Eligibility Date") specified below:
(i) the first day of such purchase period, provided such
individual has completed at least ninety (90) days of continuous service
with the Company or any Corporate Affiliate prior to such Eligibility
Date, or
(ii) the first day of the first calendar quarter within such
purchase period following such individual's completion of ninety (90)
days of continuous service with the Company or any Corporate Affiliate.
An Eligible Employee may not participate in the Plan for a
particular purchase period unless such individual enrolls in the Plan on or
before the applicable Eligibility Date for that purchase period.
B. In order to participate in the Plan for a particular purchase
period, an Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or
its designate) during the applicable enrollment period ending with such
individual's Eligibility Date for that purchase period.
C. The payroll deduction authorized by a Participant for
purposes of acquiring Stock under the Plan may be any multiple of 1% of the
Base Salary paid to the Participant during the purchase period, up to a
maximum of 15%. The deduction rate so authorized shall continue in effect
for the entire purchase period, unless the Participant shall, prior to the
commencement of any calendar quarter, designate a different rate by filing
the appropriate form with the Plan Administrator (or its designate). The new
rate shall become effective as of the first day of the calendar quarter
following the filing of such form. Payroll deductions shall, however,
automatically cease upon the termination of the Participant's purchase right
in accordance with the applicable provisions of Article VII.
VI. STOCK SUBJECT TO PLAN
A. The Stock purchasable by Participants under the Plan shall,
solely in the Board's discretion, be made available from either authorized
but unissued shares of Stock or from reacquired shares of Stock, including
shares purchased on the open market. The total number of shares which may be
issued under the Plan shall not exceed 750,000 shares, subject to periodic
adjustment under paragraph B. below.
B. In the event any change is made to the Stock purchasable under
the Plan by reason of any stock dividend, stock split, combination of shares,
recapitalization or other change affecting the outstanding Common Stock of
the Company as a class without receipt of consideration, appropriate
adjustments shall be made by the Plan Administrator to (i) the class
4
<PAGE>
and maximum number of shares issuable over the term of the Plan, (ii) the
class and maximum number of shares purchasable per Participant under any one
purchase right, and (iii) the class and number of shares and the price per
share of the Stock subject to each purchase right at the time outstanding
under the Plan.
VII. PURCHASE RIGHTS
Each Eligible Employee who participates in the Plan for a
particular purchase period shall have the right to purchase Stock upon the
terms and conditions set forth below and shall execute a purchase agreement
embodying such terms and conditions and such other provisions (not
inconsistent with the Plan) as the Plan Administrator may deem advisable.
PURCHASE PRICE. The purchase price per share shall be the LESSER
of (i) 85% of the fair market value per share of Stock on the date on which
the purchase right is granted or (ii) 85% of the fair market value per share
of Stock on the date the purchase right is exercised. For purposes of
determining such fair market value (and for all other valuation purposes
under the Plan), the fair market value per share of Stock on any relevant
date shall be the closing selling price per share of the Stock on such date,
as reported on the NASDAQ National Market System. If the Stock is
subsequently traded on one or more securities exchanges, then the fair market
value of the Stock shall be the closing selling price on the date in
question, as officially quoted on the principal exchange on which the Stock
is at the time traded. If there are no reported sales of Stock on the date
in question, then the closing selling price for the Stock on the next
preceding day for which there do exist such quotations shall be determinative
of fair market value.
PAYMENT. Payment for the shares of Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll
deductions. Such deductions shall begin on the first pay day coincident with
or immediately following the commencement date of the relevant purchase
period and shall terminate with the pay day ending with or immediately prior
to the last day of the purchase period. The amounts so deducted shall be
credited to the payroll deduction account established for the Participant
under the Plan, and the credited amounts shall be deposited in an
interest-bearing account maintained for each Participant with a responsible
bank or other financial institution. Accordingly, each Participant's payroll
deduction account shall accrue interest at the same rate as the
interest-bearing account, and no amounts credited to such account shall be
commingled with the general assets of the Company.
NUMBER OF PURCHASABLE SHARES. The number of shares purchasable by
a Participant upon any exercise of the outstanding purchase right shall be
the number of whole shares obtained by dividing (i) the amount credited to
the Participant's payroll deduction account by (ii) the purchase price in
effect for the purchase period in which the purchase right is exercised.
However, the maximum number of shares purchasable by any Participant during
any one purchase period shall not exceed 40,000 shares (subject to periodic
adjustment under Section VI.B).
Under no circumstances shall a purchase right be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning
5
<PAGE>
of Section 424(d) of the Code), or hold outstanding options or other rights
to purchase, stock possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company or any of its Corporate
Affiliates.
TERMINATION OF PURCHASE RIGHTS. A Participant may terminate
his/her outstanding purchase right at any time on or before the last day of
the purchase period by filing the prescribed notification form with the Plan
Administrator (or its designate). The Company shall promptly refund the
balance credited to the Participant's payroll deduction account, and no
further amounts will be collected from the Participant with respect to the
terminated purchase right. The termination shall be irrevocable with respect
to the particular purchase right to which it pertains and shall require the
Participant to re-enroll in the Plan (by making a timely filing of a new
purchase agreement and payroll deduction authorization) if the Participant
wishes to resume participation in a subsequent purchase period.
TERMINATION OF EMPLOYMENT. If a Participant ceases to remain an
Employee, his/her outstanding purchase right shall immediately terminate and
the balance credited to the Participant's payroll deduction account shall be
promptly refunded. However, should the Participant die or become permanently
disabled while an Employee, then the Participant (or the Participant's
designated Beneficiary) shall have the following election, exercisable up
until the end of the purchase period in which the Participant dies or becomes
permanently disabled:
(i) withdraw all the funds in the Participant's payroll
deduction account at the time of her/her cessation of Employee status,
or
(ii) have such funds held for the purchase of shares of Stock at
the end of the purchase period.
If no such election is made, then such funds shall automatically be
refunded. In no event, however, shall any further payroll deductions be
added to the Participant's account following his/her cessation of Employee
status.
For purposes of the Plan: the Participant shall be considered to
be an EMPLOYEE for so long as such Participant remains in the employ of the
Company or any other Participating Company under the Plan, and the
Participant shall be deemed to be PERMANENTLY DISABLED if he/she is unable,
by reason of any medically-determinable physical or mental impairment
expected to result in death or to be of continuous duration of at least
twelve (12) months, to engage in any substantial gainful employment.
STOCK PURCHASE. The Stock subject to each outstanding purchase
right (excluding all purchase rights previously terminated in accordance with
this Article VII) shall be automatically purchased on the last business day
of the purchase period. The purchase shall be effected by applying the
amount credited to each Participant's payroll deduction account on the date
of purchase to the purchase of whole shares of Stock (subject to the
limitations on the maximum number of purchasable shares set forth in this
Article VII) at the purchase price in
6
<PAGE>
effect for such purchase period. Any amount remaining in the Participant's
payroll deduction account shall be refunded promptly after the purchase date.
PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
Stock which are to be purchased pursuant to outstanding purchase rights on
any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of
the available shares on a uniform and nondiscriminatory basis, and any
amounts credited to the payroll deduction accounts of Participants shall, to
the extent not applied to the purchase of Stock, be promptly refunded to the
Participants.
RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to shares covered by his/her outstanding purchase
right under the Plan until the shares are actually purchased on the
Participant's behalf in accordance with this Article VII. No adjustments
shall be made for dividends, distributions or other rights for which the
record date is prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as practicable
after the close of the purchase period, a stock certificate for the number of
shares purchased on the Participant's behalf for that purchase period. Such
certificate may, upon the Participant's request, be issued in the names of
the Participant and his/her spouse as community property or as joint tenants
with right of survivorship.
ASSIGNABILITY. No purchase right granted under the Plan shall be
assignable or transferable by a Participant other than by will or by the laws
of descent and distribution, and during the Participant's lifetime the
purchase right shall be exercisable only by the Participant.
CHANGE IN OWNERSHIP. Should the Company or its shareholders enter
into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or reorganization in which the Company will
not be the surviving corporation (other than a reorganization effected
primarily to change the State in which the Company is incorporated), or
(ii) a reverse merger in which the Company is the surviving
corporation but in which more than 50% of the Company's outstanding voting
stock is transferred to holders different from those who held the stock
immediately prior to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such
sale, merger, reorganization or reverse merger by applying the amounts
credited to the payroll deduction accounts of Participants to the purchase of
whole shares of Stock, subject, however, to the applicable share limitations
of Article VII. The Company shall, however, use its best efforts to provide
at least 10-days advance notice of
7
<PAGE>
the occurrence of any such sale, merger, reorganization or reverse merger,
and Participants shall, following the receipt of such notice, have the right
to terminate their outstanding purchase rights in accordance with the
applicable provisions of this Article VII.
INTEREST. Interest shall be paid, subject to all applicable
withholding taxes, on all payroll deductions credited to the Participant's
payroll deduction account under the Plan. Any sums refunded to a Participant
by reason of the termination of his/her purchase right shall include the
interest earned on such sums while held in the payroll deduction account.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Stock pursuant to any purchase right outstanding under this Plan if
and to the extent such accrual, when aggregated with (I) other outstanding
purchase rights accrued under this Plan and (II) similar purchase rights
accrued under other employee stock purchase plans (within the meaning of
Section 423 of the Code) of the Company or its Corporate Affiliates, would
otherwise permit such Participant to purchase more than $25,000 worth of
stock of the Company or any Corporate Affiliate (determined on the basis of
the fair market value of such stock on the date or dates such rights are
granted to the Participant) for each calendar year such rights are at any
time outstanding.
B. For purposes of applying the accrual limitations of this
Article VIII, the right to acquire Stock pursuant to each purchase right
granted under the Plan shall accrue as follows:
(i) The right to acquire Stock under each such purchase right
shall accrue as and when the purchase right first becomes exercisable on
the last business day of the purchase period for which such right is
granted.
(ii) No right to acquire Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire $25,000 worth of Stock (determined
on the basis of the fair market value on the date or dates of grant)
pursuant to one or more other purchase rights granted to the Participant
during such calendar year.
(iii) If one or more purchase rights of the Participant do not,
by reason of the accrual limitations of this Article VIII, accrue on the
last business day of the particular purchase period for which such right is
granted, then the payroll deductions which the Participant made during that
purchase period with respect to such purchase right shall be promptly
refunded with interest.
8
<PAGE>
C. In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. AMENDMENT AND TERMINATION
A. The Board may from time to time alter, amend, suspend or
discontinue the Plan. However, no such action shall adversely affect
purchase rights at the time outstanding under the Plan. Notwithstanding the
above, any such action by the Board to alter or amend the Plan so as to (i)
materially increase the number of shares issuable under the Plan (ii) to
increase the maximum number of shares which any one Participant may purchase
under the Plan during a single purchase period (except to the extent
necessary to reflect changes in the Company's capital structure in accordance
with Section VI.B), (ii) alter the purchase price formula so as to reduce the
purchase price specified in the Plan, (iv) otherwise materially increase the
benefits accruing to Participants under the Plan, or (v) materially modify
the requirements for eligibility to participate in the Plan shall be
effective only if approved by the Company's shareholders within twelve months
of the date on which such amendment is adopted.
B. In the event that the Plan is amended in any respect requiring
shareholder approval, the Plan may thereafter be implemented except that no
shares shall be actually issued under the Plan as amended until such
shareholder approval is obtained. If such shareholder approval is not
obtained within twelve (12) months after the date the first such excess
option grants or excess share issuances are made, then the Board shall make
such adjustments as may be necessary to cause the Plan to be implemented in
accordance with the Plan as in effect prior to such Amendments, including
appropriate adjustment of the level of payroll deduction under the Plan.
C. The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate the Plan immediately
following the close of any outstanding purchase period. Should the Company
elect to exercise such right, then the Plan shall terminate in its entirety,
and no further purchase rights shall thereafter be granted, and no further
payroll deductions shall thereafter be collected, under the Plan.
X. GENERAL PROVISIONS
A. The Plan shall become effective on the designated Effective
Date, PROVIDED that no purchase rights granted under the Plan shall be
exercised, and no shares of Stock shall be issued hereunder, until (i) the
Plan shall have been approved by the shareholders and (ii) the Company shall
have complied with all applicable requirements of the Securities Act of 1933
(as amended), all applicable listing requirements of the primary securities
exchange or (if applicable) the NASDAQ National Market System on which the
Stock is traded and all other applicable requirements established by law or
regulation. In the event such shareholder approval is not obtained, or such
Company compliance is not effected, within twelve (12) months after the date
9
<PAGE>
on which the Plan is adopted by the Board, the Plan shall terminate and have
no further force or effect, and all payroll deductions collected to date from
Participants during the initial purchase period hereunder shall be refunded
with interest.
B. The Plan shall in all events terminate upon the EARLIER of (i)
December 31, 2001 or (ii) the date on which all shares available for issuance
under the Plan shall have been sold pursuant to purchase rights exercised
under the Plan.
C. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
D. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator,
nor any provision of the Plan itself shall be construed so as to grant any
person the right to remain in the employ of the Company or any of its
Corporate Affiliates for any period of specific duration, and such person's
employment may be terminated at any time, with or without cause.
E. The provisions of the Plan shall be governed by the laws of
the State of California.
10
<PAGE>
SCHEDULE A
COMPANIES PARTICIPATING IN
1992 EMPLOYEE STOCK PURCHASE PLAN
-------------
Biomagnetic Technologies, Inc.
Biomagnetic Technologies GmbH
