<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2000
REGISTRATION NO. 333-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
BIOMAGNETIC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2647755
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
9727 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
1997 STOCK INCENTIVE PLAN
(Full title of the plan)
-------------------
D. SCOTT BUCHANAN, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BIOMAGNETIC TECHNOLOGIES, INC.
9727 PACIFIC HEIGHTS BOULEVARD, SAN DIEGO,
CALIFORNIA 92121
(Name and address of agent for service)
(858) 453-6300
(Telephone number, including area code, of agent for service)
With Copies To:
Faye H. Russell, Esq.
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1200
San Diego, CA 92101
(619) 234-1966
-------------------
This registration statement will become effective immediately upon
filing with the Securities and Exchange Commission, and sales of the
registered securities will thereafter be effected upon option exercises
or stock issuances effected under the 1997 Stock Incentive Plan.
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Title of securities to Amount to be Proposed maximum Proposed maximum Amount of
be registered registered (1) offering price per share aggregate offering price registration fee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 Stock Incentive Plan
Common Stock, no par value 3,000,000 $ 0.795 (2) $ 2,385,000 (2) $ 664
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This registration statement will also cover any additional shares of common
stock which become issuable under the 1997 Stock Incentive 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 outstanding shares of common stock.
(2) Estimated solely for purposes of this offering under Rule 457(h) and 457(c)
of the Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of common stock of Biomagnetic
Technologies, Inc. as reported on the Nasdaq over-the-counter Bulletin Board on
February 4, 2000.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we have on
file at the SEC's public reference rooms in Washington, DC, New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0300 for further
information about the public reference rooms. Our SEC filings are also available
to the public at the SEC's web site at http://www.sec.gov.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The SEC allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this registration
statement, and later information filed with the SEC will update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act until our offering is complete:
(a) Our Annual Report on Form 10-K for the fiscal year
ended September 30, 1999;
(b) Our Annual Report on Form 11-K for the fiscal year
ended September 30, 1999;
(c) Our Current Report on Form 8-K filed with the SEC on
January 6, 2000; and
(d) The sections entitled "Description of Capital Stock"
and "Shares Eligible for Future Sale" contained in
the Post-Effective Amendment No. 1 to our
Registration Statement on Form S-1, filed with the
SEC on May 8, 1992, which describes the terms, rights
and provisions applicable to our Common Stock;
All reports and other documents that we subsequently file
under Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act prior
to the filing of a post-effective amendment which indicates that all securities
offered under this registration statement 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 of this registration
statement from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference into this
registration statement shall be deemed to be modified or superseded for purposes
of this registration statement to the extent that a statement contained in this
registration statement or in any subsequently filed document which also is
deemed to be incorporated by reference in this registration statement 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.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Biomagnetic Technologies, Inc.
9727 Pacific Heights Boulevard
San Diego, California 92121
Attn: Corporate Secretary
(858) 453-6300
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
II-1
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) California Corporations Code Section 317 provides for
the indemnification of our officers and directors against expenses, judgments,
fines and amounts paid in settlement under certain conditions and subject to
certain limitations.
(b) Article IV, Section 10 of our Restated Bylaws
provides that we shall have the power to indemnify any person who is or was our
agent as provided in California Corporations Code Section 317. The rights to
indemnity under our Restated Bylaws 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, officer, employee or agent in defending a civil or
criminal action, suit or proceeding by reason of the fact that he or she is or
was a director, officer, employee or agent of ours, or was serving at our
request as a director, officer, employee or agent of another corporation, may be
paid by us 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 us.
(c) Article V of our Fourth Restated Articles of
Incorporation, as amended, provides that the liability of our directors 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 us or our shareholders in any action brought by us or in
our right. However, a director remains liable to the extent required by law
- for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of
law,
- for acts or omissions that a director believes to be
contrary to our best interests or that of our
shareholders or that involve the absence of good
faith on the part of the director,
- for any transaction from which a director derived an
improper personal benefit,
- for acts or omissions that show a reckless disregard
for the director's duty to us or our 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 us or our shareholders,
- for acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication
of the director's duty to us or our shareholders,
- for any act or omission occurring prior to the date
when the exculpation provision became effective and
- 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 our rights and our shareholders' rights
(through shareholders' derivative suits on our
behalf) 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 us or otherwise, except in the situations
described above. These provisions will not alter the
liability of directors under federal securities laws.
(d) We also have entered into indemnification agreements
with each of our present and some of our former directors. We have also entered
into similar agreements with some of our 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, as well as additional indemnification. Under such additional
indemnification provisions, however, an individual will not receive
indemnification for judgments, settlements or expenses if he or she is found
liable to us (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnify for expenses), for settlements we have not
approved or for settlements and expenses if the settlement is not approved by
the court. The indemnification agreements allow us to advance to the individual
any
II-2
<PAGE>
and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. To receive an
advance of expenses, the individual must provide us with 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. Our Restated Bylaws contain a similar provision 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 our directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
4.1 Instruments Defining the Rights of
Shareholders. Reference is made to our Form of
Certificate of Amendment of Fourth Restated
Articles of Incorporation, as amended, filed
with the California Secretary of State on May
18, 1999; our Fourth Restated Articles of
Incorporation, filed with the California
Secretary of State on February 23, 1990, as
amended on March 28, 1995 and March 31, 1997;
and our Restated Bylaws, effective as of
January 25, 1990, which are incorporated by
reference to Exhibits 3.1, 3.2 and 3.3,
respectively, of our Form 10-Q, filed with the
SEC on May 17, 1999; and the sections entitled
"Description of Capital Stock" and "Shares
Eligible for Future Sale" contained in our
Post-Effective Amendment No. 1 to our
Registration Statement on Form S-1 filed with
the SEC on May 8, 1992, which are incorporated
into this Registration Statement by reference.
5.1 Opinion and Consent of Brobeck, Phleger &
Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP
(contained in Exhibit 5.1 of this
Registration Statement on Form S-8).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney. Reference is made to page
II-5 of this Registration Statement on Form
S-8.
99.1 1997 Stock Incentive Plan.
</TABLE>
ITEM 9. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) 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;
(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
II-3
<PAGE>
(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 paragraphs (a)(i) and (a)(ii) shall not apply if the
information required to be in a post-effective amendment by those paragraphs is
contained in periodic reports we file pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference into this
registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment 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; and
(c) 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.
2. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
our annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference into this 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.
3. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act; and, where interim financial information required to be presented
by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
4. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities 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, as amended,
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 January 31,
2000.
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 each person whose signature
appears below constitutes and appoints D. Scott Buchanan and Aron P. Stern, or
either of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
Chief Executive Officer,
/s/ D. Scott Buchanan President and Director
- --------------------------------- (Principal Executive and Operating January 31, 2000
D. Scott Buchanan Officer)
Vice President, Finance,
/s/ Aron P. Stern Chief Financial Officer and
- --------------------------------- Secretary (Principal Financial January 31, 2000
Aron P. Stern Officer)
/s/ Martin P. Egli
- --------------------------------- Director January 31, 2000
Martin P. Egli
/s/ Galleon Graetz
- --------------------------------- Director January 31, 2000
Galleon Graetz
/s/ Enrique Maso
- --------------------------------- Director January 31, 2000
Enrique Maso
</TABLE>
II-5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
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 the Rights of Shareholders. Reference
is made to our Form of Certificate of Amendment of Fourth
Restated Articles of Incorporation, as amended, filed with
the California Secretary of State on May 18, 1999; our
Fourth Restated Articles of Incorporation, filed with the
California Secretary of State on February 23, 1990, as
amended on March 28, 1995 and March 31, 1997; and our
Restated Bylaws, effective as of January 25, 1990, which
are incorporated by reference to Exhibits 3.1, 3.2 and
3.3, respectively, of our Form 10-Q, filed with the SEC on
May 17, 1999; and the sections entitled "Description of
Capital Stock" and "Shares Eligible for Future Sale"
contained in our Post-Effective Amendment No. 1 to our
Registration Statement on Form S-1 filed with the SEC on
May 8, 1992, which are incorporated into this Registration
Statement by reference.
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in
Exhibit 5.1 of this Registration Statement on Form S-8).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney. Reference is made to page II-5 of this
Registration Statement on Form S-8.
99.1 1997 Stock Incentive Plan.
</TABLE>
<PAGE>
EXHIBIT 4.1
INSTRUMENTS DEFINING THE RIGHTS OF SHAREHOLDERS
Reference is made to our Form of Certificate of Amendment of Fourth Restated
Articles of Incorporation, as amended, filed with the California Secretary of
State on May 18, 1999; our Fourth Restated Articles of Incorporation, filed with
the California Secretary of State on February 23, 1990, as amended on March 28,
1995 and March 31, 1997; and our Restated Bylaws, effective as of January 25,
1990, which are incorporated by reference to Exhibits 3.1, 3.2 and 3.3,
respectively, of our Form 10-Q, filed with the SEC on May 17, 1999; and the
sections entitled "Description of Capital Stock" and "Shares Eligible for Future
Sale" contained in our Post-Effective Amendment No. 1 to our Registration
Statement on Form S-1 filed with the SEC on May 8, 1992, which are incorporated
into this Registration Statement by reference.
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
February 7, 2000
Biomagnetic Technologies, Inc.
9727 Pacific Heights Boulevard
San Diego, CA 92121
Re: Biomagnetic Technologies, Inc. Registration Statement
on Form S-8 for 3,000,000 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 3,000,000 shares of common stock (the "Shares") and related stock
options for issuance under the Company's 1997 Stock Incentive Plan, as amended
to date (the "Plan").
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
Plan. Based on such review, we are of the opinion that, if, as and when the
Shares have been issued and sold (and the consideration therefor received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan and in accordance with the Registration Statement, or (b) duly authorized
direct stock issuances in accordance with the Plan 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
Plan or the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF ARTHUR ANDERSEN LLP
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 November 24,
1999 (except with respect to the matter discussed in Note 13, as to which the
date is December 22, 1999) included in Biomagnetic Technologies, Inc.'s Form
10-K for the year ended September 30, 1999 and of our report dated November
24, 1999 included in Biomagnetic Technologies, Inc.'s Form 11-K for the year
ended September 30, 1999.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Diego, California
February 7, 2000
<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.
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. However, any discretionary option grants or
stock issuances for members of the Primary Committee shall be made by a
disinterested majority of the Board.
<PAGE>
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. However, any discretionary option
grants or stock issuances for members of the Primary Committee shall be made by
a disinterested majority of the Board. 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.
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
2
<PAGE>
(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.
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
6,000,000 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
3
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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. Shares of Common Stock underlying one
or more stock appreciation rights exercised under the Plan shall NOT be
available for subsequent issuance under the Plan.
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.
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,
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(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 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,
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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
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.
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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 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, except as otherwise
provided in the option agreement, 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. Except as otherwise provided in the stock option or purchase
agreement, 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 created.
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).
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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
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 that 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. 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 under each surrendered option
(or surrendered portion thereof) over (B) the 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
(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
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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.
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
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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.
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.
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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
those shares shall lapse, in a series of sixteen (16) successive equal quarterly
installments over 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 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).
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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. All outstanding repurchase rights shall automatically terminate, and
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction or Change in Control.
D. 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. 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 over (ii) the
aggregate exercise price payable for such 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.D 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.
E. 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.
F. 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.
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
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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 Optionee's 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 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.
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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 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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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
shareholders, 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
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in a 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.
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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.
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 shareholders which the Board does not recommend such
shareholders 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
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(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.
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
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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 one (1) 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.
DD. STOCK EXCHANGE shall mean either the Nasdaq National Market, 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 offer or 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.
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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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