1998 Stock Option Plan - Heuristic Physics Laboratories Inc.
HEURISTIC PHYSICS LABORATORIES, INC.
1998 STOCK OPTION PLAN
(AS AMENDED AND RESTATED ON MAY 22, 2001)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Awards granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code), non-statutory stock options, restricted
stock and stock appreciation rights, as determined by the Administrator at the
time of grant of an Award.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "AWARD" means any award under the Plan, including any Option,
Restricted Stock or Stock Appreciation Rights.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Committee appointed by the Board of Directors
in accordance with paragraph (a) of Section 5 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Heuristic Physics Laboratories, Inc., a California
(h) "CONSULTANT" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render advisory or consulting
services and is compensated for such services, and any director of the Company
whether compensated for such services or not.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary or Parent of the Company. Continuous Status as an Employee shall not
be considered interrupted in the case of: (i) sick leave, military leave or any
other leave of absence approved by the Board, provided that such leave is for a
period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (ii) in the case of transfers
between locations of the Company or between the Company, its Subsidiaries,
Parents or its successor.
(j) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) if the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
(o) "NON EMPLOYEE DIRECTOR" means Non-Employee Director as defined in
Rule 16b-3(b)(3) promulgated under the Exchange Act.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTIONED STOCK" means the Common Stock subject to an Option.
(s) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "PARTICIPANT" means an person who receives an Award under the Plan.
(u) "PLAN" means this 1998 Stock Option Plan, as amended from time to
(v) "RESTRICTED STOCK AWARD" means an Award of Shares, subject to
restriction under the Plan, as more fully described in Section 7.
(w) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(x) "STOCK APPRECIATION RIGHT" or "SAR" means a right granted under
Section 8 to receive a payment that is measured with reference to the amount by
which the Fair Market Value of a specified number of Shares appreciates from a
specified date, such as the date of grant of the SAR, to the date of exercise.
(y) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 7,500,000 Shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Award should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan.
4. ELIGIBILITY. Incentive Stock Options may be granted only to Employees.
All other Awards may be granted to Employees and Consultants, provided such
Consultants render bona fide services. No person will be eligible to receive an
Award covering more than 250,000 Shares in any calendar year under the Plan. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Award or Awards.
5. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATION. The Plan shall be administered by the Board or by a
Committee designated by the Board to administer the Plan (the "Administrator").
Once appointed, such Committee shall continue to serve in its designated
otherwise directed by the Board. The Administrator may authorize the Chief
Executive Office or President of the Company to grant Award to non-executive
level Employees. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all in accordance with all applicable laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
(i) construe and interpret the Plan, the agreements granting Award
hereunder and any agreement or document executed pursuant to the Plan;
(ii) to determine the Fair Market Value of the Common Stock, as
set forth in Section 2(l) of the Plan;
(iii) to select the Consultants and Employees to whom Awards may
be granted from time to time under the Plan;
(iv) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(v) to approve the forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Award granted hereunder (including, but not
limited to the share price and any restriction or limitation, based in each case
on such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine the terms and restrictions applicable to
Restricted Stock granted under the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(ix) to grant waivers under the Plan;
(x) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan, and any agreement under the Plan;
(xi) to make any other such determinations with respect to Awards
under the Plan as it shall deem appropriate, including (without limitation)
determinations with respect to vesting, exercisability and price adjustments.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Participants and any other holders of any Awards.
(a) TYPE. The Administrator may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options or
Nonstatutory Stock Options, the number of Shares subject to the Option, the
exercise price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option.
(b) FORM OF OPTION GRANT. Each Option shall be designated in a written
option agreement in a form the Administrator may from time to time approve,
which will comply with and be subject to the terms and conditions of the Plan.
(c) LIMITATIONS ON INCENTIVE STOCK OPTIONS. If the Fair Market Value of
Shares on the date of grant with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year (under this Plan or under any other incentive stock option plan of
the Company or any Parent or Subsidiary) will be Incentive Stock Options and the
Options for the amount in excess of $100,000 that become exercisable in that
calendar year will be Nonstatutory Stock Options. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
(d) TERM OF OPTION. The term of each Option shall be the term stated in
the option agreement; provided, however, that in the case of any Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the option agreement.
However, in the case of an Incentive Stock Option granted to a Participant who,
at the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of such Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
(e) OPTION EXERCISE PRICE. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the following:
(1) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date
(2) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of
(f) EXERCISE OF OPTION.
(1) Options may be exercisable only after expiration of six (6)
months from the date of grant (subject to the Company's right of
repurchase) or may be exercisable within the times or upon the events
determined by the Administrator as set forth in the exercise agreement
governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the
Option is granted; and provided further that no Incentive Stock Option
granted to a person who owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary will be exercisable after the expiration of five (5)
years from the date the Incentive Stock Option. The Administrator also may
provide for the exercise of Options to become exercisable at one time or
from time to time, periodically or otherwise, in such number of Shares or
percentage of Shares as the Administrator determines. An Option may not be
exercised for a fraction of a Share.
(2) Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
(3) TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee
with the Company (as the case may be), such Optionee may, but within no
less than thirty (30) days after the date of such termination (or such
other longer period as is set out by the Administrator in the option
agreement, but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to
the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein,
the Option shall terminate. Notwithstanding anything to the contrary
contained herein, in the event that the Optionee's employment has
terminated for cause (as determined by the Administrator in accordance
with the policies of the Company), the Option shall terminate immediately
on the date of termination of employment.
(4) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 6(f)(3) above, in the event of termination of an Optionee's
Consulting relationship or Continuous Status as an Employee as a result of
his disability (as determined by the Administrator in accordance with the
policies of the Company), Optionee may, but within no less than six (6)
months from the date of such termination (or such other longer period as
is set out by the Administrator in the Option Agreement, but in no event
later than the expiration date of the term of such Option as set forth in
the option agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(5) DEATH OF OPTIONEE. In the event of the death of an Optionee,
the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but
only to the extent the Optionee was entitled to exercise the Option at the
date of death. To the extent that Optionee was not entitled to exercise
the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(g) NON-EMPLOYEE DIRECTOR OPTIONS. The provisions of this Section 6(g)
shall apply only to grants of Options to Non-Employee Directors. Except as set
forth in this Section 6(g), the other provisions of the Plan shall apply to
grants of Options to Non-Employee Directors to the extent not inconsistent with
this Section. For purposes of interpreting Section 6(g) of the Plan, a
Non-Employee Director shall be deemed to have Continuous Service as an Employee
as long as he serves as a member of the Board.
(1) GENERAL. Non-Employee Directors shall receive Nonstatutory
Stock Options in accordance with this Section 6(g) and may not be granted
Incentive Stock Options under this Plan. The exercise price for Options
granted to Non-Employee Directors shall be the Fair Market Value on the
date of grant. No Agreement with any Non-Employee Director may alter the
provisions of this Section and no Option granted to a Non-Employee
Director may be subject to a discretionary acceleration of
(2) GRANTS TO NON-EMPLOYEE DIRECTORS. Commencing at the 2002
Annual Meeting of Stockholders of the Company, each Non-Employee
Director who is elected or appointed to the Board (including by a way
of re-election or re-appointment) will, at the time such director is
elected or appointed and duly qualified, be granted automatically,
without action by the Committee, an option to purchase 7,500 Shares.
Such option shall be fully exercisable at the time of grant.
(3) DURATION. Subject to the immediately following sentence, each
Option granted to a Non-Employee Director shall be for a term of 10 years.
Upon the cessation of a Non-Employee Director's membership on the Board
for any reason, Options granted to such Non-Employee Director shall expire
upon the earlier of (i) three (3) years from the date of such cessation of
Board membership or (ii) expiration of the term of the Option. The
Administrator may not provide for an extended exercise period beyond the
periods set forth in this Section 6(g)(3).
7. RESTRICTED STOCK.
(a) RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Administrator will determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which
the Shares will be subject, and all other terms and conditions of the Restricted
Stock Award, subject to the following:
(b) FORM OF RESTRICTED STOCK AWARD. All purchases under a Restricted
Stock Award made pursuant to the Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Administrator will from time to
time approve, and will comply with and be subject to the terms and conditions of
the Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Committee.
(c) PURCHASE PRICE. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee and will be at least
85% of the Fair Market Value of the Shares on the date the Restricted Stock
Award is granted, except in the case of a sale to person who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, in which case the Purchase
Price will be 100% of the Fair Market Value. Payment of the Purchase Price may
be made in accordance with Section 9 of the Plan.
(d) RESTRICTIONS. Restricted Stock Awards will be subject to such
restrictions (if any) as the Administrator may impose. The Administrator may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or part, based on length of service,
performance or such other factors or criteria as the Administrator may
8. STOCK APPRECIATION RIGHTS.
(a) GRANTING OF STOCK APPRECIATION RIGHTS. The Administrator may at any
time and from time to time approve the grant of Stock Appreciation Rights,
related or unrelated to Options.
(b) SARS RELATED TO OPTIONS.
(1) A Stock Appreciation Right related to an Option will entitle
the holder of the related Option, upon exercise of the Stock Appreciation
Right, to surrender such Stock Option, or any portion thereof to the
extent previously vested but unexercised, with respect to the number of
shares as to which such Stock Appreciation Right is exercised, and to
receive payment of an amount computed pursuant to Section 8(e). Such
Option will, to the extent surrendered, then cease to be exercisable.
(2) A Stock Appreciation Right related to an Option hereunder will
be exercisable at such time or times, and only to the extent that, the
related Option is exercisable, and will not be transferable except to the
extent that such related Option may be transferable (and under the same
conditions), will expire no later than the expiration of the related
Option, and may be exercised only when the market price of the Common
Stock subject to the related Option exceeds the exercise price of the
(3) Upon the exercise of a Stock Appreciation Right related to an
Option, the Recipient will be entitled to receive payment of an amount
determined by multiplying: (A) the difference obtained by subtracting the
exercise price of a share of Common Stock specified in the related Option
from the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right (or as of such other date or as
of the occurrence of such event as may have been specified in the
instrument evidencing the grant of the Stock Appreciation Right), by (B)
the number of shares as to which such Stock Appreciation Right is
(c) SARS UNRELATED TO OPTIONS. The Administrator may grant Stock
Appreciation Rights unrelated to Options. Section 8(e) will govern the amount
payable at exercise under such Stock Appreciation Right, except that in lieu of
an option exercise price the initial base amount specified in the Award shall be
(d) LIMITS. Notwithstanding the foregoing, the Administrator, in its
discretion, may place a dollar limitation on the maximum amount that will be
payable upon the exercise of a Stock Appreciation Right.
(e) PAYMENTS. Payment of the amount determined under the foregoing
provisions may be made solely in whole Shares valued at their Fair Market Value
on the date of exercise of the Stock Appreciation Right or, alternatively, at
the discretion of the Administrator, in cash or in a combination of cash and
shares of Common Stock as the Administrator deems advisable. The Administrator
has full discretion to determine the form in which payment of a Stock
Appreciation Right will be made and to consent to or disapprove the election of
a Recipient to receive cash in full or partial settlement of a Stock
Appreciation Right. If the Administrator decides to make full payment in shares
of Common Stock, and the amount payable results in a fractional share, payment
for the fractional share will be made in cash.
(a) Participants may make all or any portion of any payment due to the
(i) with respect to the consideration payable for an Award, or
(ii) upon exercise of an Award,
by any form of lawful consideration approved by the Administrator
including, without limitation, the following:
(2) surrender of shares that either: (i) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of Rule 144 under the Securities Act (and, if such shares were
purchased from the Company by use of a promissory note, such note has been
fully paid with respect to such shares); or (2) were obtained by
Participant in the public market;
(3) with respect only to purchases upon exercise of an
Option, and provided that a public market for the Company's stock exists:
(A) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby the
Participant irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the exercise price of the
Option, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the Company; or
(B) through a "margin" commitment from the Participant
and a NASD Dealer whereby the Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the amount
of the exercise price of the Option, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise
price of the Option directly to the Company; or
(4) any combination of the foregoing.
(b) Any Participant exercising rights and obtaining Shares pursuant to
Awards granted under the Plan must pay cash or other valid consideration
approved by the Committee equal to the aggregate par value of such Shares to the
extent required by the Delaware General Corporation Law.
10. WITHHOLDING TAXES.
(a) WITHHOLDING GENERALLY. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements (including any such withholding
that is necessary to allow the Company to claim tax deductions or other
benefits), as determined by the Company in its discretion, prior to the
delivery of any certificate or certificates for such Shares. Whenever, under
the Plan, payments in satisfaction of Awards are to be made in cash, such
payment will be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements (including any such withholding that is
necessary to allow the Company to claim tax deductions or other benefits), as
determined by the Company in its discretion.
(b) STOCK WITHHOLDING. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Administrator may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). All elections by a Participant to
have Shares withheld for this purpose will be made in writing in a form
acceptable to the Committee and will be subject to the following restrictions:
(1) the election must be made on or prior to the applicable
(2) once made, then except as provided below, the election
will be irrevocable as to the particular Shares as to which the election
(3) all elections will be subject to the consent or
disapproval of the Committee;
(4) if the Participant is an Insider and if the Company is
subject to Section 16(b) of the Exchange Act: (i) the election may not be
made within six (6) months of the date of grant of the Award, except as
otherwise permitted by SEC Rule 16b-3(e) under the Exchange Act, and (ii)
either (A) the election to use stock withholding must be irrevocably made
at least six (6) months prior to the Tax Date (although such election may
be revoked at any time at least six (6) months prior to the Tax Date) or
(B) the exercise of the Option or election to use stock withholding must
be made in the ten (10) day period beginning on the third day following
the release of the Company's quarterly or annual summary statement of
sales or earnings; and
(5) in the event that the Tax Date is deferred until six (6)
months after the delivery of Shares under Section 83(b) of the Code, the
Participant will receive the full number of Shares with respect to which
the exercise occurs, but such Participant will be unconditionally
obligated to tender back to the Company the proper number of Shares on the
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each Award, and the number of shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Award, as well as the price per share of Common Stock covered by each such
Award, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.
(b) CORPORATE TRANSACTIONS.
(1) ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In the event
of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under
this Plan are assumed, converted or replaced by the successor corporation,
which assumption will be binding on all Participants), (c) a merger in
which the Company is the surviving corporation but after which
stockholders owning more than 50% of the voting stock of the Company
(other than any stockholder which merges, or which owns or controls
another corporation which merges, with the Company in such merger) cease
to own their shares or other equity interests in the Company, or (d) the
sale of all or substantially all of the assets of the Company
(collectively, "Corporate Transaction"), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all
Participants. In the alternative, the successor corporation may substitute
equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account
the existing provisions of the Awards). The successor corporation may also
issue, in place of outstanding Shares of the Company held by the
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. Notwithstanding the
foregoing, if (a) any Participant whose options are (i) assumed, converted
or replaced by the successor corporation (if any), or (ii) substituted by
the successor corporation with equivalent Awards or substantially similar
consideration; and (b) such Participant is terminated by the Company or a
successor corporation (if any) without cause within twelve months of the
effective date of the Corporate Transaction; then any Options held by the
Participant will immediately become fully vested and exercisable by the
Participant. In the event such successor corporation (if any) refuses to
assume or substitute Options, as provided above, pursuant to a transaction
described in this Section 11(b)(1) then notwithstanding any other
provision in this Plan to the contrary, such Award will accelerate at such
time and on such conditions as the Board determines.
(2) OTHER TREATMENT OF AWARDS. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section
11(b), in the event of the occurrence of any transaction described in
Section 11(b)(1), any outstanding Awards will be treated as provided in
the applicable agreement or plan of merger, consolidation, dissolution,
liquidation, sale of assets or other "corporate transaction."
(3) ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company
or otherwise, by either: (a) granting an Award under the Plan in
substitution of such other company's award; or (b) assuming such award as
if it had been granted under this Plan if the terms of such assumed award
could be applied to an Award granted under this Plan. Such substitution or
assumption will be permissible if the holder of the substituted or assumed
award would have been eligible to be granted an Award under this Plan if
the other company had applied the rules of this Plan to such grant. In the
event the Company assumes an award granted by another company, the terms
and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise
of any such option will be adjusted appropriately pursuant to Section
424(a) of the Code).
12. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
13. TIME OF GRANTING AWARDS. The date of grant of an Award shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Award, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Award is so granted within a reasonable time after the date of such
14. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Administrator may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the Securities and
Exchange Commission or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
15. ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Administrator may require the Participant to deposit
all certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Administrator, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Administrator may
cause a legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Administrator may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Administrator will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
16. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 22 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 16 of the Plan.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Participant
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable Laws, the
Company shall obtain
stockholders approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Awards already granted and such Awards
shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Participant and the
Company, which agreement must be in writing and signed by the Participant and
18. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under the Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the Securities and Exchange
Commission or to effect compliance with the registration, qualification or
listing requirements of any state securities laws, stock exchange or automated
quotation system, and the Company will have no liability for any inability or
failure to do so.
19. RULE 16b-3. Notwithstanding any provision of the Plan, the Plan shall
always be administrated, and awards shall always be granted and exercised, in
such a manner as to conform to the provisions of Rule 16b-3.
20. NO OBLIGATION TO EMPLOYEE. Nothing in the Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary or limit in any way the right of the Company
or any Parent or Subsidiary to terminate Participant's employment or other
relationship at any time, with or without cause.
21. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
22. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the Stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such Stockholders approval shall be obtained
in the degree and manner required under applicable state and federal law.
23. RELEASE OF FINANCIAL INFORMATION. A copy of the Company's annual
report to stockholders shall be delivered to each Optionee if and at the time
any such report is distributed to the Company's stockholders. Upon request by
any Optionee, the Company shall furnish to such Optionee a copy of its most
recent annual report and each quarterly report and current report filed under
the Exchange Act since the end of the Company's prior fiscal year.
24. ADDITIONAL PLANS. Nothing contained in the Plan shall prevent the
Company, a Subsidiary or a Parent from adopting other or additional compensation
arrangements for its Employees and Consultants.
25. GOVERNING LAW. The Plan and all Awards shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof.