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EXHIBIT 99.2
INSITE VISION INCORPORATED
1994 STOCK OPTION PLAN
(Amended and Restated as of January 4, 1999)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
A. The 1994 Stock Option Plan (the "Plan") was adopted as the 1993
Stock Plan as of July 28, 1993 to be effective October 25, 1993 (the "Effective
Date") to promote the interests of InSite Vision Incorporated, a Delaware
corporation (the "Corporation"), by providing eligible individuals 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 (or its parent or subsidiary corporations). This
amendment and restatement of the Plan is effective as of January 4, 1999.
B. This Plan serves as the successor to the Corporation's 1989 Stock
Plan (the 1989 Plan"), and no further option grants shall be made under the 1989
Plan from and after the Effective Date. All options outstanding under the 1989
Plan on such Effective Date have been incorporated into this Plan and are
treated as outstanding options under this Plan. However, each outstanding option
so incorporated continues to be governed solely by the express terms and
conditions of the instrument evidencing such grant, and no provision of this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holders of such incorporated options with respect to their acquisition of
shares of the Corporation's common stock thereunder or their exercise of any
outstanding stock appreciation rights thereunder.
C. For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation
shall be considered to be a PARENT corporation of the
Corporation, provided each such 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.
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Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a SUBSIDIARY of the Corporation,
provided each such 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.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate components: the
Discretionary Option Grant Program specified in Article Two and the Automatic
Option Grant Program specified in Article Three. Under the Discretionary Option
Grant Program, eligible individuals may be granted options to purchase shares of
the Corporation's common stock. Under the Automatic Option Grant Program, each
eligible member of the Corporation's Board of Directors (the "Board") will
automatically receive an option grant to purchase shares of the Corporation's
common stock.
B. The provisions of Articles One and Four of the Plan shall apply to
the Discretionary Option Grant Program and the Automatic Option Grant Program
and shall accordingly govern the interests of all individuals in the Plan.
III. ADMINISTRATION OF THE PLAN
A. Article Two of the Plan shall be administered by a committee
("Committee") of two (2) or more non-employee 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 which shall act as Plan Administrator (the "Plan
Administrator") shall have full power and authority (subject to the express
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for the proper administration of the Discretionary Option Grant
Program and to make such determinations and interpretations concerning such
program and any outstanding option under Article Two as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties with an interest in any outstanding option under the Plan.
C. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate under Article Two of the Plan
shall be limited to the following:
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(i) officers and other employees of the Corporation
(or its parent or subsidiary corporations) who render services
which contribute to the management, growth and financial
success of the Corporation (or any parent or subsidiary
corporation);
(ii) non-employee members of the Board or the
non-employee members of the board of directors of any parent
or subsidiary corporation;
(iii) those consultants or independent contractors
who provide valuable services to the Corporation (or any
parent or subsidiary corporation).
B. Non-employee members of the Board shall also be eligible to receive
automatic option grants pursuant to the provisions of Article Three, and such
individuals shall, for purposes of Articles Three and Four, be referred to as
"Eligible Directors".
C. The Plan Administrator shall have full authority to determine which
eligible individuals are to receive discretionary option grants under Article
Two, the number of shares to be covered by each such grant, whether the granted
option is to be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements, the time or times at which each
such option is to become exercisable, and the maximum term for which the option
is to remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's common stock, par value $0.01 per share
("Common Stock") shall be available for issuance under the Plan and shall be
drawn from either the Corporation's authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including shares repurchased by
the Corporation on the open market. The aggregate number of shares available for
issuance under the Plan from and after the Effective Date shall not exceed
3,497,269 shares of Common Stock, subject to adjustment from time to time in
accordance with the provisions of this Section V. Such share reserve includes
(i) the initial number of shares reserved for issuance under the Plan on the
Effective Date, including the shares reserved for issuance under outstanding
options granted under the 1989 Plan and incorporated into this Plan, (ii) the
500,000-share increase authorized by the Board on March 29, 1994 and approved by
the stockholders on May 31, 1994, (iii) an additional 500,000-share increase
authorized by the Board on March 17, 1997 and approved by the stockholders on
June 2, 1997, (iv) the 265,521 share increase effected on January 2, 1998
pursuant to the automatic annual share increase provisions of the Plan, (v) the
336,979 share increase effected on January 2, 1999 pursuant to the automatic
annual share increase provisions of the Plan, and (vi) the 405,916 share
increase effected on January 3, 2000 pursuant to the automatic annual share
increase provisions of the Plan. To the extent one or more outstanding options
under the 1989 Plan which have been incorporated into this Plan are subsequently
exercised, the number of shares issued with respect to each such option shall
reduce, on a share-for-share basis, the number of shares available for issuance
under this Plan.
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B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first day of January each calendar
year, beginning with the 1998 calendar year, by an amount equal to two percent
(2%) of the total number of shares of the Corporation's Common Stock outstanding
on December 31st of the immediately preceding calendar year. All options granted
on the basis of each such annual share increase shall be non-statutory options
under the federal tax laws.
C. The maximum number of shares of Common Stock for which any one
participant in the Plan may be granted stock options and separately exercisable
stock appreciation rights over the term of the Plan shall be limited to 850,000
shares, subject to adjustment from time to time in accordance with the
provisions of this Section V. For purposes of the foregoing limitation, stock
options and stock appreciation rights granted prior to January 1, 1994 shall not
be taken into account.
D. Should one or more outstanding options under this Plan (including
any outstanding options under the 1989 Plan incorporated into this Plan) expire
or terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section IV
of Article Two of the Plan), the shares subject to the portion of the option not
so exercised shall be available for subsequent option grant under the Plan.
Shares subject to any option or portion thereof surrendered or cancelled in
accordance with Section V of Article Two and Section III of Article Three of the
Plan shall not be available for subsequent option grant under the Plan. Should
the exercise price of an outstanding option under the Plan (including any option
incorporated from the 1989 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 outstanding option under the Plan, then the number of shares
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised, and not by the net number of shares of
Common Stock issued to the option holder.
E. In the event any change is made to the Common Stock issuable under
the Plan 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 receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities issuable for which any one individual may be granted stock options
and separately exercisable stock appreciation rights under the Plan after
December 31, 1993, (iii) the number and/or class of securities for which stock
options are to be granted to newly-elected or continuing non-employee Board
members under the Automatic Option Grant Program and (iv) the number and/or
class of securities and price per share in effect under each outstanding option
under the Plan (including each outstanding option incorporated into this Plan
from the 1989 Plan). The purpose of such adjustments to the outstanding options
shall be to preclude the enlargement or dilution of rights and benefits under
those 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. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non-statutory
options. Each option granted shall be evidenced by one or more instruments in
the form approved by the Plan Administrator. Each such instrument shall,
however, comply with the terms and conditions specified below, and each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.
A. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator, but in no event shall the option price per share be less than the
fair market value per share of Common Stock on the date of the option grant.
2. The option price shall become immediately due upon exercise
of the option and, subject to the provisions of Section VI of this Article Two
and the instrument evidencing the grant, shall be payable in one of the
following alternative forms:
- cash or check made payable to the Corporation's
order;
- shares of Common Stock held by the optionee 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 (as such term
is defined below); or
- through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide
irrevocable instructions (I) to a 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
option price payable for the purchased shares plus all
applicable federal and state income and employment taxes
required to be withheld by the Corporation in connection with
such purchase and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
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For purposes of this Section I.A.2, the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is used in
connection with the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
3. The fair market value per share of Common Stock on any
relevant date under the Plan shall be determined in accordance with the
following provisions:
- If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the
Fair Market Value shall be 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 reported sale of Common Stock on such exchange on the
date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding
date for which such quotation exists.
- If the Common Stock is not at the time listed or
admitted to trading on any national stock exchange but is
traded on the Nasdaq National Market, the Fair Market Value
shall be the closing selling price per share of Common Stock
on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the
Common Stock on the date in question, then the closing selling
price on the last preceding date for which such quotation
exists on the Nasdaq National Market shall be determinative of
Fair Market Value.
B. Term and Exercise of Options. Each option granted under this Article
Two 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 instrument evidencing the option grant. No such option, however, shall
have a maximum term in excess of ten (10) years from the grant date.
C. 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, non-statutory options
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
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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.
D. Termination of Service.
1. Except to the extent otherwise provided pursuant to Section
VII of this Article Two, the following provisions shall govern the exercise
period applicable to any options held by the optionee at the time of cessation
of Service or death.
- Should the optionee cease to remain in Service for
any reason other than death or permanent disability, then the
period for which each outstanding option held by such optionee
is to remain exercisable shall be limited to the three
(3)-month period following the date of such cessation of
Service.
- In the event such Service terminates by reason of
permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), then the period for which each
outstanding option held by the optionee is to remain
exercisable shall be limited to the twelve (12)-month period
following the date of such cessation of Service.
- Should the optionee die while in Service or during
the three (3)-month period following his or her cessation of
Service, then the period for which each of his or her
outstanding options is to remain exercisable shall be limited
to the twelve (12)-month period following the date of the
optionee's cessation of Service. During such limited period,
the option may be 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.
- Under no circumstances, however, shall any option
be exercisable after the specified expiration date of the
option term.
- Each such option shall, during such limited
exercise period, be exercisable for any or all of the shares
for which the option is exercisable on the date of the
optionee's cessation of Service. Upon the expiration of such
limited exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
exercisable.
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2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the optionee
under this Article Two to be exercised, during the limited period of
exercisability provided under Section I.D. 1 above, not only with respect to the
number of shares for which each such option is exercisable at the time of the
optionee's cessation of Service but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had such cessation of Service not occurred. The Plan
Administrator shall also have full power and authority to extend the period of
time for which any option granted under this Article Two is to remain
exercisable following the optionee's cessation of Service or death from the
limited period in effect under Section I.D. 1 of this Article Two to such
greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
3. For purposes of the foregoing provisions of this Section
I.D (and for all other purposes under the Plan):
- The optionee shall be deemed to remain in the
SERVICE of the Corporation for so long as such individual
renders services on a periodic basis to the Corporation (or
any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The optionee shall be considered to be an EMPLOYEE
for so long as such individual remains in the employ of the
Corporation or one or more of its parent or subsidiary
corporations, subject to the control and direction of the
employer entity as to the work to be performed and the manner
and method of performance.
E. Stockholder Rights. An optionee shall have no stockholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as "non-statutory" options when issued under the Plan shall not be
subject to such terms and conditions.
A. Dollar Limitation. The aggregate fair market value (determined as of
the respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the federal tax laws during
any one calendar year shall not exceed the sum of One
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Hundred Thousand Dollars ($100,000). To the extent the Employee holds two 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 stock options under the federal tax laws shall be applied on the basis
of the order in which such options are granted.
B. 10% Stockholder. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting power
of all classes of stock of the Corporation or any one of its parent or
subsidiary corporations ("10% Stockholder"), then the option price per share
shall not be less than one hundred and ten percent (110%) of the fair market
value per share of Common Stock on the grant date, and the option term shall not
exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of the Plan shall apply to all Incentive Options granted hereunder.
III. CORPORATE TRANSACTION/CHANGES IN CONTROL
A. In the event of any Corporate Transaction or Change in Control (as
defined below), each option which is at the time outstanding under this Article
Two shall automatically accelerate so that each such option shall, immediately
prior to the specified effective date for the Corporate Transaction or Change in
Control, respectively, 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 all or any portion of such shares. However, an outstanding option
under this Article Two shall not so accelerate upon a Corporate Transaction if
and to the extent such option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or parent thereof or be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof. The determination of comparability
shall be made by the Plan Administrator, and its determination shall be final
and binding.
B. A "Corporate Transaction" shall mean any of the following
stockholder-approved transactions:
(a) 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
(b) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
C. For all purposes under the Plan, a "Change in Control" shall mean a
change in control of the Corporation of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of
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1934, as amended (the "Exchange Act"), whether or not the Corporation is then
subject to such reporting requirement, other than a Corporate Transaction;
provided that, without limitation, a Change in Control shall be deemed to have
occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other
entity, or any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Corporation representing
forty percent (40%) or more of the combined voting power of
the Corporation's then outstanding securities entitled to vote
in the election of directors of the Corporation, pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such
stockholders to accept; or
(ii) a change in the composition of the Board occurs
over any period of two (2) consecutive years or less such that
a majority of the Board ceases for any reason to be comprised
of individuals who either (A) have been Board members
continuously since the beginning of that period or (B) have
been elected or nominated for election as Board members during
such period by a vote of at least three-fourths (3/4) of the
Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.
D. Upon the consummation of the Corporate Transaction, all outstanding
options under this Article Two shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent company.
Any options accelerated in connection with the Change in Control shall remain
fully exercisable until the expiration or sooner termination of the option term.
E. Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the option price
payable per share, provided the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
F. The grant of options under this Article Two 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.
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G. The exercisability as incentive stock options under the federal tax
laws of any options accelerated under this Section III in connection with a
Corporate Transaction or Change in Control shall remain subject to the dollar
limitation of Section II of this Article Two. To the extent such dollar
limitation is exceeded, the accelerated option shall be exercisable as a
non-statutory option under the federal tax laws.
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 optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than the fair market value of the Common Stock on the new grant date (or one
hundred ten percent (110%) of such fair market value in the case of an Incentive
Option granted to a 10% Stockholder).
V. STOCK APPRECIATION RIGHTS
A. Each officer of the Corporation subject to the short-swing profit
restrictions of the federal securities laws shall be granted limited stock
appreciation rights in tandem with his or her outstanding options under this
Article Two. Upon the occurrence of a Hostile Take-Over, each outstanding option
with such a limited stock appreciation right shall automatically be cancelled,
and 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 at the time subject to the cancelled option (whether or
not the option is otherwise at the time exercisable for those shares) over (ii)
the aggregate exercise price payable for such shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following the
consummation of the Hostile Take-Over. The Plan Administrator shall pre-approve,
at the time the limited stock appreciation right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and the
provisions of this Section V.A. No additional approval of the Plan Administrator
or the Board shall be required at the time of the actual option cancellation and
cash distribution.
B. For purposes of Section V.A, the following definitions shall be in
effect:
A Hostile Take-Over shall be deemed to occur in the event 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) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange 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
which the Board does not recommend the Corporation's stockholders to accept.
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The Take-Over Price per share shall be deemed to be equal to
the greater of (a) the fair market value per share on the date of cancellation,
as determined pursuant to the valuation provisions of Section I.A.3 of this
Article Two, or (b) the highest reported price per share paid in effecting such
Hostile Take-Over. However, if the cancelled option is an Incentive Option, the
Take-Over Price shall not exceed the clause (a) price per share.
C. The shares of Common Stock subject to any option surrendered or
cancelled for an appreciation distribution pursuant to this Section V shall NOT
be available for subsequent option grants under the Plan.
VI. LOANS OR INSTALLMENT PAYMENTS
The Plan Administrator may assist any optionee (including any officer)
in the exercise of one or more outstanding options under this Article Two,
including the satisfaction of any federal and state income and employment tax
obligations arising therefrom, by (a) authorizing the extension of a loan to
such optionee from the Corporation or (b) permitting the optionee to pay the
option price for the purchased Common Stock in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) will be established by the Plan
Administrator in its sole discretion. Loans and installment payments may be
granted with or without security or collateral (other than to optionees who are
consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares), but the
maximum credit available to the optionee shall not exceed the sum of (i) the
aggregate option price (less par value) of the purchased shares plus (ii) any
federal and state income and employment tax liability incurred by the optionee
in connection with the exercise of the option.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant to
the provisions of this Article Three shall be limited to (i) those individuals
who are first elected or appointed as non-employee Board members on or after the
Effective Date, whether through appointment by the Board or election by the
Corporation's stockholders, provided they have not otherwise been in the prior
employ of the Corporation (or any parent or subsidiary corporation) and (ii)
those individuals who continue to serve as non-employee Board members on one or
more automatic annual option grant dates below while this Automatic Grant
Program remains in effect.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article Three on
the dates specified below. The revised automatic grant program was approved by
the stockholders at the 1998 Annual Meeting.
(i) Each individual who first becomes a non-employee
Board member at any time after October 25, 1993, whether
through election at an Annual Stockholders Meeting or through
appointment by the Board, and who has not previously been in
the employ of the Corporation (or any parent or subsidiary
corporation) shall automatically be granted upon the terms and
conditions of this Article Three, at the time of such initial
election or appointment, a non-statutory stock option to
purchase 10,000 shares of Common Stock. A non-employee Board
member who replaces a Board member shall not receive an
initial 10,000-share grant if both the new and former Board
member are affiliated with the same investment fund or similar
entity.
(ii) On December 15, 1997, each individual serving as
a non-employee Board member shall automatically be granted a
non-statutory stock option to purchase 10,000 shares of Common
Stock.
(iii) On the date of the first Board meeting in
December each year, beginning December 1998, each individual
continuing to serve as a non-employee Board member shall
automatically be granted a non-statutory stock option to
purchase 10,000 shares of Common Stock, provided such
individual did not receive his or her initial option grant
under this Article III within the preceding six (6) months. In
the event there is no Board meeting in December of
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any year, then the automatic option grant for that year shall
be made on December 15th: If December 15th in any year is not
a day on which the New York Stock Exchange is open for
business (a "Trading Day"), then the grant for that year shall
be made on the immediately succeeding Trading Day.
The 10,000-share limitation applicable to each initial
automatic option grant and each annual automatic option grant per eligible
non-employee Board member shall be subject to periodic adjustment pursuant to
the applicable provisions of paragraph V.E of Article One.
Stockholder approval of the December 15, 1997 restatement of
the Plan constitutes pre-approval of each option granted on or after that date
pursuant to the provisions of this Article Three and the subsequent exercise of
that option in accordance with the terms and conditions of this Article Three.
B. Exercise Price. 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
automatic grant date.
C. Payment. The option price shall become immediately due upon exercise
of the option and shall be payable in one of the alternative forms specified in
Section I.A.2 of Article Two.
D. Option Term. Each automatic grant under this Article Three shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic option grant under this Article Three
shall become exercisable for the option shares one (1) year after the date of
grant, provided the optionee remains a member of the Board through such date.
Each such option shall remain exercisable until the expiration or sooner
termination of the option term.
F. Limited Transferability. Each automatic grant under this Article
Three 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.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to be a Board member for any
reason (other than death or Permanent Disability (as defined in Code Section
22(e)(3)) while holding an automatic option grant under this Article Three, then
he or she shall have a three (3)-month period following the date of such
cessation of Board membership in which to exercise such option for any or all of
the shares of Common Stock for which the option is exercisable at the time the
optionee ceases service as a Board member.
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<PAGE> 15
2. Should the optionee cease to be a Board member by reason of
Permanent Disability while holding an automatic option grant under this Article
Three, then he or she shall have a six (6)-month period following the date of
such cessation of Board membership in which to exercise such option for any or
all of the shares of Common Stock for which the option is exercisable at the
time the optionee ceases service as a Board member.
3. Should the optionee die while serving as a Board member or
during the three (3)-month period following his or her cessation of Board
service, then the option may subsequently be exercised, for any or all of the
shares of Common Stock for which the option is exercisable at the time of the
optionee's cessation of Board membership, by the personal representative of his
or her 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. Any such exercise must, however, occur within six (6) months after
the date of the optionee's death.
4. In no event shall any automatic grant under this Article
Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with subparagraphs 1, 2 and 3 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be exercisable.
H. Stockholder Rights. The holder of an automatic option grant under
this Article Three shall have no stockholder rights with respect to any shares
covered by such option until such individual shall have exercised the option and
paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Director Automatic
Grant Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. Each automatic option grant outstanding at the time of a Corporate
Transaction or a Change in Control shall automatically accelerate so that each
such option shall, immediately prior to the specified effective date for such
Corporate Transaction or Change in Control, 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 all or any portion of such shares at any
time prior to the expiration or sooner termination of the option term. Upon the
consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to be outstanding.
B. Upon the occurrence of a Hostile Take-Over, each outstanding
automatic option grant made pursuant to the provisions of this Article Three
shall automatically be cancelled and the optionee shall in return be entitled to
a cash distribution from the Corporation calculated in accordance with Section
V.B of Article Two and payable at the time and in the manner set forth in
Section V.B of Article Two. Stockholder approval of the December 15, 1997
restatement of
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the Plan constitutes pre-approval of each option subsequently granted under this
Article Three with such a cancellation provision and the subsequent cancellation
of that option in accordance with the terms of this Section III.B. No additional
approval of the Board or any Plan Administrator shall be required at the time of
the actual option cancellation and cash distribution.
C. The automatic option grants outstanding under this Article Three
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.
D. The shares of Common Stock subject to each option cancelled in
connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
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ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or cash upon
the exercise of stock options or stock appreciation rights granted 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 and upon such
terms and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of Rule 16b-3 of the Exchange Act) provide any or all
holders of outstanding option grants under Article Two with the election to have
the Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such options, one or more of such shares with an aggregate
fair market value equal to the designated percentage (any multiple of 5%
specified by the optionee) of the federal and state income and employment
withholding taxes ("Withholding Taxes") to which such holders may become subject
in connection with the acquisition of such shares. In lieu of such direct
withholding, one or more optionees may also be granted the right to deliver
shares of Common Stock to the Corporation in satisfaction of such Withholding
Taxes. The withheld or delivered shares shall be valued at the Fair Market Value
on the applicable determination date for such Withholding Taxes.
III. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Corporation's 1989 Plan,
became effective as of the October 25, 1993 Effective Date. The Plan was
subsequently amended and restated by the Board on December 15, 1993 with the
purpose of, among other provisions, deleting direct stock issuances and renaming
the Plan to the 1994 Stock Option Plan. On March 29, 1994 the Board amended and
restated the Plan (the "1994 Restatement") to increase the number of shares of
Common Stock issuable thereunder by 500,000 shares and to impose a limitation on
the maximum number of shares of Common Stock for which any one participant in
the Plan may be granted stock options and separately exercisable stock
appreciation rights after December 31, 1993. The 1994 Restatement was approved
by the Corporation's stockholders in May 1994. On March 17, 1997, the Board
adopted amendments to the Plan (the "1997 Restatement") to effect the following
changes: (i) increase the maximum number of shares of Common Stock available
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for issuance over the term of the Plan by an additional 500,000 shares; (ii)
implement an automatic share increase feature pursuant to which the number of
shares of Common Stock available for issuance under the Plan will automatically
increase on the first day of January each year, beginning January 1, 1998, by
two percent (2%) of the total number of shares of Common Stock outstanding on
the last day of December in the immediately preceding year; (iii) increase the
maximum number of shares available for issuance under the Automatic Option Grant
Program in effect under the Plan by an additional 33,334 shares to 150,000
shares; (iv) impose a specific limitation of 850,000 shares on the maximum
number of shares for which any one participant may be granted stock options and
separately exercisable stock appreciation rights in the aggregate under the 1994
Plan; (v) render the non-employee Board members eligible to receive option
grants under the Discretionary Option Grant Program; (vi) remove certain
restrictions on the eligibility of non-employee Board members to serve as Plan
Administrator; and (vii) effect a series of additional changes to the provisions
of the Plan (including the stockholder approval requirements, the
transferability of non-statutory stock options and the elimination of the six
(6) month holding period requirement as a condition to the exercise of stock
appreciation rights) in order to take advantage of the recent amendments to Rule
16b-3 of the Securities and Exchange Commission which exempts certain officer
and director transactions under the 1993 Plan from the short-swing liability
provisions of the federal securities laws. The 1997 Restatement was approved by
the Corporation's stockholders on June 2, 1997.
B. On December 15, 1997, the Board adopted a series of
amendments (the "1997 Amendment") to the Plan which effect the following changes
to the Automatic Option Grant Program for non-employee Board members under
Article Three of the Plan: (i) increase the number of shares of Common Stock for
which options are to be granted annually (the "Annual Automatic Grant") to each
non-employee Board member from five thousand (5,000) shares to ten thousand
(10,000) shares; (ii) change the date on which such Annual Automatic Grants are
to be made to the non-employee Board members from the date of the Annual
Stockholders Meeting to the date of the first Board meeting in December each
year (commencing December 1997); provided, however, that if there is no Board
meeting in December of any year, the Annual Automatic Grants for that year shall
be made on December 15 or, if December 15th is not a Trading Day, the
immediately succeeding Trading Day; (iii) authorize and effect an Annual
Automatic Grant for each individual serving as a non-employee Board member on
December 15, 1997, whether or not that individual received his or her initial
automatic grant within the preceding six (6) months; (iv) provide that after
December 15, 1997, each non-employee Board member shall be eligible to receive
an Automatic Option Grant in December of any year only if that individual did
not receive his or her initial automatic grant within the preceding six (6)
months; and (v) eliminate the provisions of the Plan which impose a
150,000-share limitation on the maximum number of shares issuable under the
Automatic Option Grant Program. The 1997 Amendment was approved by the
stockholders at the 1998 Annual Meeting. All option grants made prior to the
1997 Amendment shall remain outstanding in accordance with the terms and
conditions of the respective instruments evidencing those options, and nothing
in the 1997 Amendment shall be deemed to modify or in any way affect those
outstanding options.
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C. Each option issued and outstanding under the 1989 Plan
immediately prior to the Effective Date shall be incorporated into this Plan and
treated as an outstanding option under this Plan, but each such option shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such options with
respect to their acquisition of shares of Common Stock thereunder or their
exercise of outstanding stock appreciation rights thereunder.
D. The Plan shall terminate upon the earlier of (i) July 27,
2003 or (ii) the date on which all shares available for issuance under the Plan
have been issued pursuant to the exercise of options granted under Article Two.
If the date of termination is determined under clause (i) above, then no options
outstanding on such date shall be affected by the termination of the Plan, and
such securities shall thereafter continue to have force and effect in accordance
with the provisions of the instruments evidencing such options.
E. Options may be granted under this Plan to purchase shares
of Common Stock in excess of the number of shares then available for issuance
under the Plan, provided each option granted is not to become exercisable, in
whole or in part, at any time prior to stockholder approval of an amendment
authorizing a sufficient increase in the number of shares issuable under the
Plan.
IV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
hereunder, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the procurement by the Corporation of all approvals
and permits required by regulatory authorities having jurisdiction over the
Plan, the options granted under it and the 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 a Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the right
to remain in the employ or Service of the Corporation (or any
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<PAGE> 20
parent or subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's employment or Service at any
time and for any reason, with or without cause.
VII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any optionee.
B. The provisions of the Plan shall be governed by the laws of
the state of California, as such laws are applied to contracts entered into and
performed in such state.
C. The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the optionees, the legal representatives
of their respective estates, their respective heirs or legatees and their
permitted assignees.
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EXHIBIT A
Director Automatic Grant Agreement
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INSITE VISION INCORPORATED
1994 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED THROUGH APRIL 17, 2000)
I. PURPOSE
The InSite Vision Incorporated 1994 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 Code.
II. DEFINITIONS
For purposes of administration of the Plan, the following
terms shall have the meanings indicated:
BOARD means the Board of Directors of the Company.
CODE means the Internal Revenue Code of 1986, as amended.
COMPANY means InSite Vision Incorporated, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of InSite Vision Incorporated which shall by appropriate
action adopt the Plan.
COMPENSATION means the regular basic earnings paid to an
Eligible Employee by one or more Participating Companies during such
individual's period of participation in the Plan, plus (i) any salary deferral
contributions made by such individual to the Company's 401(k) Plan during such
period, (ii) any other pre-tax contributions which such individual makes during
the period to any of the Company's Code Section 125 cafeteria benefit programs
and (iii) all overtime payments, bonuses, commissions, profit-sharing
distributions and other incentive-type payments. There shall be excluded from
such Compensation: all contributions (other than Code Section 125 or Section
401(k) contributions) made by the Company or its Corporate Affiliates for such
individual's benefit under any employee benefit or welfare plan now or hereafter
established, moving or relocation allowances, car allowances, imputed income
(including income attributable to cars or life insurance), taxable fringe
benefits, and similar items.
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 the Code), including any parent or subsidiary
corporation which becomes such after the Effective Date.
<PAGE> 23
EFFECTIVE DATE means April 1, 1994, the start date of the
first scheduled purchase period under the Plan. Any Corporate Affiliate which
becomes a Participating Company in the Plan after such Effective Date 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 twenty (20) hours per week and more than five (5)
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 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 the Effective Date, are listed in attached Schedule
A.
PLAN ADMINISTRATOR shall have the meaning given such term in
Article III.
STOCK means shares of the common stock of the Company.
III. ADMINISTRATION
The Plan Administrator shall have sole and exclusive authority
to administer the Plan and shall consist of a committee (the "Plan
Administrator") of two (2) or more non-employee Board members appointed from
time to time by the Board. The Plan Administrator shall have full 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 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 or overlapping 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 subsection I
of Article VII.
B. The Plan shall be implemented in a series of successive or
overlapping purchase periods, each to be of such duration (not to exceed
twenty-four (24) months per purchase period) as determined by the Plan
Administrator prior to the commencement date of the purchase period. Purchase
periods will commence, at the Plan Administrator's discretion, on the
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first business day of January and July each year. Accordingly, up to two (2)
separate purchase periods may commence in each subsequent calendar year during
which the Plan remains in existence.
C. The Participant shall be granted a separate purchase right
for each purchase period in which he/she participates. The purchase right shall
be granted on the first day of the purchase period and shall be automatically
exercised in successive semiannual installments on the last business day of June
and December on which such purchase right remains outstanding.
D. An Eligible Employee may participate in only one purchase
period at a time. Accordingly, except as provided in subsection E below, an
Eligible Employee who wishes to join a new purchase period must withdraw from
the current purchase period in which he/she is participating and must also
enroll in the new purchase period prior to the commencement date for that
period.
E. If the fair market value per share of Stock on any purchase
date is lower than the fair market value per share of Stock on the start date of
that purchase period, then all Participants in such purchase period shall be
automatically withdrawn from such purchase period immediately after the exercise
of their purchase right on such purchase date and automatically re-enrolled in
the immediately following purchase period as of the first day thereof.
F. No purchase rights granted under the Plan shall be
exercised, and no shares of Stock shall be issued hereunder, until such time as
(i) the Plan shall have been approved by the Company's stockholders and (ii) the
Company shall have complied with all applicable requirements of the Securities
Act of 1933 (as amended), all applicable listing requirements of any securities
exchange on which the Stock is listed and all other applicable requirements
established by law or regulation.
G. 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
A. Each Eligible Employee of a Participating Company may begin
participation in the Plan on the start date of any purchase period beginning on
or after his/her completion of six (6) months of continuous service with the
Company or any Corporate Affiliate.
B. In order to participate in the Plan, 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 specified
enrollment period for the purchase period.
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C. The payroll deduction authorized by a Participant for
purposes of acquiring Stock under the Plan may be any one percent (1%) multiple
(not to exceed ten percent (10%)) of the Compensation paid to him/her during the
purchase period. The deduction rate so authorized shall continue in effect for
the entire purchase period and for each successive purchase period, except to
the extent such rate is changed in accordance with the following guidelines:
- The Participant may, at any time during the
purchase period, reduce his/her rate of payroll deduction. Such
reduction shall become effective as soon as possible after filing of
the requisite reduction form with the Plan Administrator (or its
designate), but the Participant may not effect more than two (2) such
reductions per purchase period.
- The Participant may increase or decrease the rate
of his/her payroll deduction by filing, at least ten (10) business days
prior to the commencement of any new purchase period in which he/she
enrolls, the appropriate form with the Plan Administrator (or its
designate). The new rate (which may not exceed the ten percent (10%)
maximum) shall then become effective as of the start date of the new
purchase period.
Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Article VII below.
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 Stock or from reacquired Stock, including shares of Stock purchased on
the open market. The total number of shares which may be issued under the Plan
shall not exceed 218,333 shares (subject to adjustment under subsection B
below). Such share reserve includes the 85,000-share increase authorized by the
Board on March 13, 2000 and approved by the stockholders at the 2000 Annual
Meeting.
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 Company's outstanding
Common Stock as a class without the Company's receipt of consideration,
appropriate adjustments shall be made by the Plan Administrator to (i) the class
and maximum number of securities issuable over the term of the Plan, (ii) the
class and maximum number of securities purchasable per Participant on any one
purchase date, and (iii) the class and number of securities and the price per
share of the Stock in effect under each purchase right at the time outstanding
under the Plan in order to prevent the dilution or enlargement of benefits
thereunder.
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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.
A. PURCHASE PRICE. The purchase price per share shall be the
lesser of (i) eighty-five percent (85%) of the fair market value per share of
Stock on the start date of the purchase period or (ii) eighty-five percent (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 date shall be the closing selling price of such share on such date, as
officially quoted on the principal exchange on which the Stock is at the time
traded or, if not traded on any exchange, the closing selling price per share of
the Stock on such date, as reported on the Nasdaq National Market and published
in The Wall Street Journal. If there are no sales of Stock on such day, then the
closing selling price for the Stock on the next preceding day for which such
closing selling price is quoted shall be determinative of fair market value.
B. NUMBER OF PURCHASABLE SHARES. The number of shares
purchasable by a Participant upon the exercise of an outstanding purchase right
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the semiannual period
beginning with the start of the purchase period or the most recent purchase date
in the same purchase period (whichever is applicable), together with any amount
carried over from the preceding purchase date in the same purchase period
pursuant to the provisions of subsection E of Article VII, by the purchase price
in effect for that purchase date. However, the maximum number of shares
purchasable by any Participant on any purchase date shall not exceed 6,666
shares (subject to adjustment under subsection B of Article VI).
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)), or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or any Corporate Affiliate.
C. PAYMENT. Payment for Stock purchased under the Plan shall
be effected by means of the Participant's authorized payroll deductions. Such
deductions shall begin with the first pay day on or after the start date of the
purchase period and shall terminate on the last pay day within that purchase
period. The amounts so collected shall be credited to the Participant's
individual account upon the Company's books, but no interest shall be paid on
the outstanding balance credited to such book account. The amounts collected
from a Participant will not be held in any segregated account or trust fund and
may be commingled with the general assets of the Company and used for general
corporate purposes.
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D. TERMINATION OF PURCHASE RIGHTS. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last
ten (10) business days preceding a purchase date, terminate his/her
outstanding purchase right by filing the prescribed notification form
with the Plan Administrator (or its designate). No further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right, and any payroll deductions previously
collected from the Participant and not previously applied to the
purchase of Stock during that purchase period shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the purchase date. The Participant shall have
until ten (10) business days preceding the purchase date to make such
election. If no such election is made, then such funds shall be
refunded as soon as possible after the purchase date.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
purchase period for which the terminated purchase right was granted. In
order to resume participation in any subsequent purchase period, such
individual must re-enroll in the Plan (by making a timely filing of a
new purchase agreement and payroll deduction authorization) on or
before the start date of the new purchase period.
(iii) If the Participant ceases to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his/her purchase right remains outstanding, then such
individual (or the personal representative of the estate of a deceased
Participant) shall have the following election, exercisable at any time
prior to the last ten (10) days preceding the purchase date for the
semiannual period in which such cessation of Eligible Employee status
occurs:
- to withdraw all of the funds in the
Participant's payroll account at the time of his/her cessation of
Eligible Employee status or
- to have such funds held for the purchase of
shares on the purchase date.
If no such election is made, then such funds shall be
refunded as soon as possible after the purchase date. In no event,
however, may any payroll deductions be made on the Participant's behalf
following his/her cessation of Eligible Employee status.
E. STOCK PURCHASE. Outstanding purchase rights shall be
automatically exercised in a series of successive installments as provided in
subsection C of Article IV. The exercise shall be effected by applying the
amount credited to the Participant's account on the last date of the alternate
calendar quarter to the purchase of whole shares of Stock (subject to the
limitations on the maximum number of purchasable shares set forth in subsection
B of Article VII) at the purchase price in effect for such purchase date. Any
amount remaining in the
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Participant's account after such exercise shall be held for the purchase of
Stock on the next semiannual purchase date within the purchase period; provided,
however, that any amount not applied to the purchase of Stock at the end of a
purchase period shall be refunded promptly after the close of the purchase
period and any amount not applied to the purchase of stock by reason of the
limitation of subsection B of Article VII on the maximum number of purchasable
shares shall be refunded promptly after the semiannual purchase date.
F. 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 accounts of Participants shall, to the extent not
applied to the purchase of Stock, be refunded to the Participants.
G. RIGHTS AS STOCKHOLDER. A Participant shall have no
stockholder rights with respect to the shares of Stock covered by his/her
outstanding purchase right until the shares are actually purchased on the
Participant's behalf in accordance with subsection E of 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 issued, as soon as practicable after
the date of each purchase, a stock certificate for the number of shares
purchased on the Participant's behalf. 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.
Alternatively, the stock certificate may be delivered to a designated stock
brokerage account maintained for the Participant and held in "street name" in
order to facilitate the subsequent sale of the purchased shares.
H. ASSIGNABILITY. No purchase right granted under the Plan
shall be assignable or transferable by the Participant other than by will or by
the laws of descent and distribution following the Participant's death, and
during the Participant's lifetime the purchase right shall be exercisable only
by the Participant.
I. CHANGE IN OWNERSHIP. Should any of the following
transactions (a "Corporate Transaction") occur during the purchase period:
(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 those who held 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 complete
liquidation or dissolution of the Corporation,
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then all outstanding purchase rights under the Plan shall automatically be
exercised immediately prior to the consummation of such Corporate Transaction by
applying the payroll deductions previously collected from each Participant and
not previously applied to the purchase of Stock during the purchase period in
which such Corporate Transaction occurs to the purchase of whole shares of Stock
at eighty-five percent (85%) of the lower of (i) the fair market value per share
of Stock on the start date of the purchase period in which the Participant is
enrolled at the time of the Corporate Transaction or (ii) the fair market value
per share of Stock immediately prior to the consummation of such Corporate
Transaction. However, the applicable share limitations of Articles VII and VIII
shall continue to apply to any such purchase.
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) rights to purchase Stock
accrued under other purchase rights granted to the Participant under this Plan
and (ii) similar rights accrued by the Participant under other employee stock
purchase plans (within the meaning of Code Section 423) of the Company or its
Corporate Affiliates, would otherwise permit such Participant to purchase more
than $25,000 in value 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
subsection A 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 in a series of successive semiannual
installments as and when the purchase right first becomes exercisable
for each installment as provided in subsection C of Article IV.
(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 in value
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 by reason of the limitations of subsection A
of this Article VIII, the Participant's outstanding purchase right does
not accrue for a particular purchase date of any purchase period, then
the payroll deductions which the Participant made during that
semiannual period with respect to such purchase right shall be promptly
refunded.
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.
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IX. AMENDMENT AND TERMINATION
The Board may from time to time alter, amend, suspend or
discontinue the Plan; provided, however, that no such action shall adversely
affect purchase rights at the time outstanding under the Plan. In addition, no
such action of the Board may, without the approval of the Company's
stockholders, (i) increase the number of shares issuable under the Plan, except
to the extent authorized pursuant to subsection B of Article VI in connection
with certain changes in the Company's capital structure, (ii) alter the purchase
price formula so as to reduce the purchase price specified in the Plan or (iii)
modify the requirements for eligibility to participate in the Plan.
X. GENERAL PROVISIONS
A. The Plan was initially adopted by the Board on July 28,
1993 and approved by the stockholders in August 1993. The Board amended and
restated the Plan as of January 1, 1994, prior to its implementation, to provide
the Plan Administrator with the discretionary power to have overlapping purchase
periods of any duration up to twenty-four (24) months. Such restatement was
approved by the stockholders on May 31, 1994. The Board amended the Plan on
March 1, 1995 to increase the number of issuable shares by an additional 100,000
shares, and such share increase was approved by the stockholders at the 1995
Annual Meeting held on May 30, 1995. On __________, 2000, the Board authorized
an 85,000-share increase to the number of shares issuable under the Plan, and
such share increase is subject to stockholder approval at the 2000 Annual
Meeting to be held on June 12, 2000. Should such stockholder not be obtained,
then the 85,000-share increase shall not be implemented, and no purchase rights
shall be granted, and no stock issuances shall be made, on the basis of that
share increase.
B. The Plan shall terminate upon the earlier of (i) December
31, 2003 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 without resort to that State's conflict of laws rules.
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SCHEDULE A
COMPANIES PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
InSite Vision Incorporated
