Exhibit 10.3

NOVAN, INC.

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

(Awarding Non-Qualified Stock Option)

The Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of Novan, Inc., a Delaware corporation (the “Company”), pursuant to
Nasdaq Listing Rule 5635(c)(4) and not under any equity incentive plan of the
Company, hereby grants to the holder listed below (“Holder”) this Non-Qualified
Stock Option to purchase the number of shares of the Company’s common stock, par
value $0.0001 per share (“Common Stock”) set forth below (the “Option”).  The
Option is subject to the terms and conditions set forth in this Stock Option
Grant Notice (this “Grant Notice”) and the Stock Option Agreement attached
hereto as Exhibit A (the “Agreement”), which is incorporated herein by
reference, and the grant of the Option is conditioned upon Holder’s compliance
with any Confidentiality and Assignment of Inventions Agreement and/or
Noncompetition Agreement existing or entered into in connection herewith (the
“Restrictive Covenants Agreement[s]”).  

 

Holder:

[[FIRSTNAME]] [[MIDDLENAME]] [[LASTNAME]]

Grant Date:

[[GRANTDATE]]

Grant Number:  

[[GRANTNUMBER]]

Exercise Price Per Share:

[[GRANTPRICE]]

Total Option Shares Granted:

[[SHARESGRANTED]]

Vesting Commencement Date:

[[VESTINGSTARTDATE]]

Expiration Date:

[[GRANTEXPIRATIONDATE]]

Type of Option:

Non-Qualified Stock Option

Vesting Schedule:

[[VESTINGTEMPLATEDESC]]

 

By Holder’s electronic signature, Holder agrees to be bound by the terms and
conditions of the Agreement, the Grant Notice and the Restrictive Covenants
Agreement[s].  Holder has reviewed the Agreement, the Grant Notice, and the
Restrictive Covenants Agreement[s] in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing the Grant Notice and fully
understands all provisions of the Grant Notice, the Agreement, and the
Restrictive Covenants Agreement[s].  Holder hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Grant Notice, the Agreement or the Restrictive
Covenants Agreement[s].

 

 

 

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EXHIBIT A

TO STOCK OPTION GRANT NOTICE

STOCK OPTION AGREEMENT

Pursuant to the Grant Notice to which this Agreement is attached, the Company
has granted to Holder an Option to purchase the number of shares of Common Stock
set forth in the Grant Notice.  

Article I.

general

1.1Defined Terms.  Capitalized terms not specifically defined herein shall have
the meanings specified in the Grant Notice.  For purposes of this Agreement,

(a)“Affiliates” shall mean (A) any person or entity which owns or controls at
least fifty percent (50%) of the equity or voting stock of the Company, or
(B) any person or entity fifty percent (50%) of whose equity or voting stock is
owned or controlled by the Company or (C) any person or entity of which at least
fifty percent (50%) of the equity or voting stock is owned or controlled by the
same person or entity owning or controlling at least fifty percent (50%) of the
Company.

(b)“Applicable Accounting Standards” shall mean Generally Accepted Accounting
Principles in the United States, International Financial Reporting Standards or
such other accounting principles or standards as may apply to the Company’s
financial statements under United States federal securities laws from time to
time.

(c)“Applicable Law” shall mean any applicable law, including without limitation:
(A) provisions of the Code, the Securities Act of 1933, as amended, the Exchange
Act of 1934, as amended, and any rules or regulations thereunder; (B) corporate,
securities, tax or other laws, statutes, rules, requirements or regulations,
whether federal, state, local or foreign; and (C) rules of any securities
exchange or automated quotation system on which the Shares are listed, quoted or
traded.

(d)“Cause” shall mean (A) willful misconduct, gross negligence or an act of
dishonesty of Holder with regard to the Company or any of its Affiliates, which
in either case, results in or could reasonably be expected to result in material
harm to the Company or such Affiliate; (B) the willful and continued failure of
Holder to attempt to perform his or her duties with the Company or any of its
Affiliates (other than any such failure resulting from Disability), which
failure is not remedied within 30 days after receiving written notice thereof;
(C) the conviction of Holder of (or the plea by Holder of guilty or nolo
contendere to) any felony involving moral turpitude (other than traffic related
offenses or as a result of vicarious liability); or (D) a material breach by
Holder of any material provision of any written service agreement, which breach
is not remedied within 10 days after receiving written notice thereof.
Notwithstanding the foregoing, if Holder is a party to a written service
agreement with the Company (or any of its Subsidiaries) in which the term
“cause” is defined, then “Cause” shall be as such term is defined in the
applicable written agreement.

(e)“Change in Control” shall mean and includes each of the following:

(A)A transaction or series of transactions (other than an offering of Common
Stock to the general public through a registration statement filed with the
Securities and Exchange Commission) whereby any “person” or related “group” of
“persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) directly or indirectly acquires
beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the
Securities Exchange Act of

 

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1934, as amended) of securities of the Company possessing more than 50% of the
total combined voting power of the Company’s securities outstanding immediately
after such acquisition; provided, however, that the following acquisitions shall
not constitute a Change in Control: (i) any acquisition by the Company or any of
its Subsidiaries; (ii) any acquisition by an employee benefit plan maintained by
the Company or any of its Subsidiaries, (iii) any acquisition which complies
with Sections 1.1(e)(D)(i), 1.1(e)(D)(ii) and 1.1(e)(D)(iii); or (iv) in respect
of this Option, any acquisition by the Holder or any group of persons including
the Holder (or any entity controlled by the Holder or any group of persons
including the Holder); or

(B)The Incumbent Directors cease for any reason to constitute a majority of the
Board;  

(C)The consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination, (y) a sale or
other disposition of all or substantially all of the Company’s assets in any
single transaction or series of related transactions or (z) the acquisition of
assets or stock of another entity, in each case other than a transaction:

(i)which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the Company or the person that,
as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least a majority of
the combined voting power of the Successor Entity’s outstanding voting
securities immediately after the transaction, and

(ii)after which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor
Entity; provided, however, that no person or group shall be treated for purposes
of this Section 1.1(e)(C)(ii) as beneficially owning 50% or more of the combined
voting power of the Successor Entity solely as a result of the voting power held
in the Company prior to the consummation of the transaction; and

(iii)after which at least a majority of the members of the board of directors
(or the analogous governing body) of the Successor Entity were Board members at
the time of the Board's approval of the execution of the initial agreement
providing for such transaction; or

(D)The date of the completion of a liquidation or dissolution of the Company.

Notwithstanding the foregoing, if a Change in Control constitutes a payment
event with respect to the Option (or any portion of the Option) that provides
for the deferral of compensation that is subject to Section 409A, to the extent
required to avoid the imposition of additional taxes under Section 409A, the
transaction or event described in subsection (A), (B), (C) or (D) with respect
to the Option (or portion thereof) shall only constitute a Change in Control for
purposes of the payment timing of the Option if such transaction also
constitutes a “change in control event,” as defined in Treasury Regulation
Section 1.409A-3(i)(5).

The Committee shall have full and final authority, which shall be exercised in
its sole discretion, to determine conclusively whether a Change in Control has
occurred pursuant to the above definition, the date of the occurrence of such
Change in Control and any incidental matters relating thereto; provided that any
exercise of authority in conjunction with a determination of whether a Change in
Control is a “change in control event” as defined in Treasury Regulation Section
1.409A-3(i)(5) shall be consistent with such regulation.

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(f)“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, together with the regulations and official guidance promulgated
thereunder, whether issued prior or subsequent to this grant.

(g)“Consultant” shall mean any consultant or adviser engaged to provide services
to the Company or any Subsidiary who qualifies as a consultant or advisor under
the applicable rules of the Securities and Exchange Commission for registration
of shares on a Form S-8 Registration Statement.

(h)“Director” shall mean a member of the Board, as constituted from time to
time.

(i)“Disability” shall mean Holder’s inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that can be expected to
last for a continuous period of not less than twelve (12) months.

(j)“DRO” shall mean a “domestic relations order” as defined by the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended from time
to time, or the rules thereunder.

(k)“Equity Restructuring” shall mean a nonreciprocal transaction between the
Company and its stockholders, such as a stock dividend, stock split, spin-off,
rights offering or recapitalization through a large, nonrecurring cash dividend,
that affects the number or kind of Shares (or other securities of the Company)
or the share price of Common Stock (or other securities) and causes a change in
the per-share value of the Common Stock underlying outstanding Option.

(l)“Employee” shall mean any officer or other employee (as determined in
accordance with Section 3401(c) of the Code and the Treasury Regulations
thereunder) of the Company or of any Subsidiary.

(m)“Fair Market Value” shall mean, as of any given date, the value of a share
determined as follows:

(A)If the Common Stock is (i) listed on any established securities exchange
(such as the New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq
Global Market and the Nasdaq Global Select Market), (ii) listed on any national
market system or (iii) quoted or traded on any automated quotation system, its
Fair Market Value shall be the closing sales price for a share as quoted on such
exchange or system for such date or, if there is no closing sales price for a
share on the date in question, the closing sales price for a share on the last
preceding date for which such quotation exists, as reported in The Wall Street
Journal or such other source as the Committee deems reliable;

(B)If the Common Stock is not listed on an established securities exchange,
national market system or automated quotation system, but the Common Stock is
regularly quoted by a recognized securities dealer, its Fair Market Value shall
be the mean of the high bid and low asked prices for such date or, if there are
no high bid and low asked prices for a share on such date, the high bid and low
asked prices for a share on the last preceding date for which such information
exists, as reported in The Wall Street Journal or such other source as the
Committee deems reliable; or

(C)If the Common Stock is neither listed on an established securities exchange,
national market system or automated quotation system nor regularly quoted by a
recognized securities dealer, its Fair Market Value shall be established by the
Committee in good faith.

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(n)“Incumbent Directors” shall mean for any period of 12 consecutive months,
individuals who, at the beginning of such period, constitute the Board together
with any new Director(s) (other than a Director designated by a person who shall
have entered into an agreement with the Company to effect a transaction
described in Section 1.1(e)(A) or 1.1(e)(D)) whose election or nomination for
election to the Board was approved by a vote of at least a majority (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for Director without objection to such nomination)
of the Directors then still in office who either were Directors at the beginning
of the 12-month period or whose election or nomination for election was
previously so approved. No individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election contest
with respect to Directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than the Board shall
be an Incumbent Director.

(o)“Non-Qualified Stock Option” shall mean an Option that is not an “Incentive
Stock Option” as such term is defined in Section 422 of the Code.

(p)“Option” shall mean a right to purchase Shares of the Company’s Common Stock
at a specified exercise price.

(q)“Section 409A” shall mean Section 409A of the Code and the Department of
Treasury regulations and other interpretative guidance issued thereunder,
including, without limitation, any such regulations or other guidance that may
be issued after the grant of this Option.

(r)“Shares” shall mean shares of Common Stock.

(s)“Subsidiary” shall mean any entity (other than the Company), whether domestic
or foreign, in an unbroken chain of entities beginning with the Company if each
of the entities other than the last entity in the unbroken chain beneficially
owns, at the time of the determination, securities or interests representing at
least fifty percent (50%) of the total combined voting power of all classes of
securities or interests in one of the other entities in such chain.

(t)“Termination of Service” shall mean:

(i)As to a Consultant, the time when the engagement of a Holder as a Consultant
to the Company or any Subsidiary is terminated for any reason, with or without
cause, including, without limitation, a termination by resignation, discharge,
death, disability or retirement; but excluding terminations where the Consultant
simultaneously commences or remains in employment or service with the Company or
any Subsidiary.

(ii)As to an Employee, the time when the employee-employer relationship between
a Holder and the Company or any Subsidiary is terminated for any reason,
including, without limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding terminations where the Holder
simultaneously commences or remains in employment or service with the Company or
any Subsidiary.

The Committee, in its sole discretion, shall determine the effect of all matters
and questions relating to any Termination of Service, including, without
limitation, whether a Termination of Service has occurred, whether a Termination
of Service resulted from a discharge for cause and all questions of whether
particular leaves of absence constitute a Termination of Service. For purposes
hereof, a Holder’s employee-employer relationship or consultancy relations shall
be deemed to be terminated in the event that the Subsidiary employing or
contracting with such Holder ceases to remain an Subsidiary following any
merger, sale of stock or other corporate transaction or event (including,
without limitation, a spin-off).

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Article II.

GRANT OF OPTION

2.1Grant of Option.  In consideration of Holder’s past and/or continued
employment with or service to the Company or a Subsidiary and Holder’s execution
of and/or continued compliance with the Restrictive Covenants Agreement(s) and
for other good and valuable consideration, effective as of the grant date set
forth in the Grant Notice (the “Grant Date”), the Company has granted to Holder
the Option to purchase any part or all of an aggregate number of shares of
Common Stock set forth in the Grant Notice, upon the terms and conditions set
forth in the Grant Notice and this Agreement, subject to adjustment as provided
in Section 3.1(b) hereof.

2.2Exercise Price.  The exercise price per share of the shares of Common Stock
subject to the Option (the “Exercise Price”) shall be as set forth in the Grant
Notice.

2.3Consideration to the Company.  In consideration of the grant of the Option by
the Company, Holder agrees to render faithful and efficient services to the
Company or any Subsidiary. Nothing in the Grant Notice or this Agreement shall
confer upon Holder any right to continue in the employment or service of the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and its Subsidiaries, which rights are hereby expressly
reserved, to discharge or terminate the conditions of employment or services of
Holder at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in a written agreement between the
Company or a Subsidiary and Holder.

2.4Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Grant Notice or this Agreement, if Holder is subject to Section
16 of the Securities Exchange Act of 1934, as amended, this Option shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 thereof (including Rule 16b‑3 thereof and any amendments
thereto) that are requirements for the application of such exemptive rule. To
the extent permitted by Applicable Law, this Option shall be deemed amended to
the extent necessary to conform to such applicable exemptive rule.

Article III.

PERIOD OF EXERCISABILITY

3.1Commencement of Exercisability.

(a)Subject to Holder’s continued employment with or service to the Company or a
Subsidiary on each applicable vesting date and subject to Sections 3.1(b),_3.2,
3.3, 6.9 and 6.15 hereof, the Option shall become vested and exercisable in such
amounts and at such times as are set forth in the Grant Notice.

(b)Notwithstanding the Grant Notice or the provisions of Section 3.1(a) and (c),
in the event of Holder’s Termination of Service as a result of a termination by
the Company without Cause within six (6) months following a Change in Control,
the Option shall become vested and exercisable in full on the date of such
Termination of Service; and

(c)Except as set forth in Section 3.1(b), unless otherwise determined by the
Committee or as set forth in a written agreement between Holder and the Company,
any portion of the Option that has not become vested and exercisable on or prior
to the date of Holder’s Termination of Service shall be forfeited on the date of
Holder’s Termination of Service and shall not thereafter become vested or
exercisable.

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3.2Duration of Exercisability.  The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative. Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth
in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3 hereof. Once the Option becomes unexercisable,
it shall be forfeited immediately.

3.3Expiration of Option.  The Option may not be exercised to any extent by
anyone after the first to occur of the following events:

(a)The expiration date set forth in the Grant Notice;

(b)Except as the Committee may otherwise approve, in the event of Holder’s
Termination of Service other than for Cause or by reason of Holder’s death or
Disability, the expiration of ninety (90) days from the date of Holder’s
Termination of Service;

(c)Except as the Committee may otherwise approve, the expiration of one (1) year
from the date of Holder’s Termination of Service by reason of Holder’s death or
Disability; or

(d)Except as the Committee may otherwise approve, upon Holder’s Termination of
Service for Cause.

3.4Tax Withholding.  Notwithstanding any other provision of this Agreement:

(a)The Company and its Subsidiaries have the authority to deduct or withhold, or
require Holder to remit to the Company or the applicable Subsidiary, an amount
sufficient to satisfy any applicable federal, state, local and foreign taxes
(including the employee portion of any FICA obligation, if applicable) required
by law to be withheld with respect to any taxable event arising pursuant to this
Agreement.  The Company and its Subsidiaries may withhold or Holder may make
such payment in one or more of the forms specified below:

(i)by cash or check made payable to the Company or the Subsidiary with respect
to which the withholding obligation arises;

(ii)by the deduction of such amount from other compensation payable to Holder;

(iii)with respect to any withholding taxes arising in connection with the
exercise of the Option, with the consent of the Committee, by requesting that
the Company withhold a net number of shares of Common Stock issuable upon the
exercise of the Option having a then current Fair Market Value not exceeding the
amount necessary to satisfy the withholding obligation of the Company and its
Subsidiaries based on the minimum applicable statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes;

(iv)with respect to any withholding taxes arising in connection with the
exercise of the Option, with the consent of the Committee, by tendering to the
Company shares of Common Stock having a then current Fair Market Value not
exceeding the amount necessary to satisfy the withholding obligation of the
Company and its Subsidiaries based on the minimum applicable statutory
withholding rates for federal, state, local and foreign income tax and payroll
tax purposes;

(v)with respect to any withholding taxes arising in connection with the exercise
of the Option, through the delivery of a notice that Holder has placed a market
sell order with a

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broker acceptable to the Company with respect to shares of Common Stock then
issuable to Holder pursuant to the Option, and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company or
the Subsidiary with respect to which the withholding obligation arises in
satisfaction of such withholding taxes; provided that payment of such proceeds
is then made to the Company or the applicable Subsidiary at such time as may be
required by the Committee, but in any event not later than the settlement of
such sale; or

(vi)in any combination of the foregoing.

(b)With respect to any withholding taxes arising in connection with the Option,
in the event Holder fails to provide timely payment of all sums required
pursuant to Section 3.4(a), the Company shall have the right and option, but not
the obligation, to treat such failure as an election by Holder to satisfy all or
any portion of Holder’s required payment obligation pursuant to
Section 3.4(a)(ii) or Section 3.4(a)(iii) above, or any combination of the
foregoing as the Company may determine to be appropriate. The Company shall not
be obligated to deliver any certificate representing shares of Common Stock
issuable with respect to the exercise of the Option to, or to cause any such
shares of Common Stock to be held in book-entry form by, Holder or his or her
legal representative unless and until Holder or his or her legal representative
shall have paid or otherwise satisfied in full the amount of all federal, state,
local and foreign taxes applicable with respect to the taxable income of Holder
resulting from the exercise of the Option or any other taxable event related to
the Option.

(c)In the event any tax withholding obligation arising in connection with the
Option will be satisfied under Section 3.4(a)(iii), then the Company may elect
to instruct any brokerage firm determined acceptable to the Company for such
purpose to sell on Holder’s behalf a whole number of shares from those shares of
Common Stock then issuable upon the exercise of the Option as the Company
determines to be appropriate to generate cash proceeds sufficient to satisfy the
tax withholding obligation and to remit the proceeds of such sale to the Company
or the Subsidiary with respect to which the withholding obligation
arises.  Holder’s acceptance of this Option constitutes Holder’s instruction and
authorization to the Company and such brokerage firm to complete the
transactions described in this Section 3.4(c), including the transactions
described in the previous sentence, as applicable.  The Company may refuse to
issue any shares of Common Stock to Holder until the foregoing tax withholding
obligations are satisfied, provided that no payment shall be delayed under this
Section 3.4(c) if such delay will result in a violation of Section 409A of the
Code.

(d)Holder is ultimately liable and responsible for all taxes owed in connection
with the Option, regardless of any action the Company or any Subsidiary takes
with respect to any tax withholding obligations that arise in connection with
the Option.  Neither the Company nor any Subsidiary makes any representation or
undertaking regarding the treatment of any tax withholding in connection with
the awarding, vesting or exercise of the Option or the subsequent sale of Common
Stock.  The Company and the Subsidiaries do not commit and are under no
obligation to structure the Option to reduce or eliminate Holder’s tax
liability.

Article IV.

EXERCISE OF OPTION

4.1Person Eligible to Exercise.  During the lifetime of Holder, only Holder may
exercise the Option or any portion thereof.  After the death of Holder, any
exercisable portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3 hereof, be exercised by Holder’s personal
representative or by any person empowered to do so under the deceased Holder’s
will or under the then applicable laws of descent and distribution.

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4.2Partial Exercise.  Subject to Section 6.2, any exercisable portion of the
Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3 hereof.

4.3Manner of Exercise.  The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company (or any third party
administrator or other person or entity designated by the Company), during
regular business hours, of all of the following prior to the time when the
Option or such portion thereof becomes unexercisable under Section 3.3 hereof.

(a)An exercise notice in a form specified by the Committee, stating that the
Option or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee;

(b)The receipt by the Company of full payment for the shares of Common Stock
with respect to which the Option or portion thereof is exercised, in such form
of consideration permitted under Section 4.4 hereof that is acceptable to the
Committee;

(c)The payment of any applicable withholding tax in accordance with Section 3.4;

(d)Any other written representations or documents as may be required in the
Committee’s sole discretion to effect compliance with Applicable Law; and

(e)In the event the Option or portion thereof shall be exercised pursuant to
Section 4.1 hereof by any person or persons other than Holder, appropriate proof
of the right of such person or persons to exercise the Option.

Notwithstanding any of the foregoing, the Committee shall have the right to
specify all conditions of the manner of exercise, which conditions may vary by
country and which may be subject to change from time to time.

4.4Method of Payment.  Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of Holder:

(a)Cash or check;

(b)With the consent of the Committee, surrender of shares of Common Stock
(including, without limitation, shares of Common Stock otherwise issuable upon
exercise of the Option) held for such period of time as may be required by the
Committee in order to avoid adverse accounting consequences and having a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof;

(c)Through the delivery of a notice that Holder has placed a market sell order
with a broker acceptable to the Company with respect to shares of Common Stock
then issuable upon exercise of the Option, and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; provided that payment of such
proceeds is then made to the Company at such time as may be required by the
Committee, but in any event not later than the settlement of such sale; or

(d)Any other form of legal consideration acceptable to the Committee.

4.5Conditions to Issuance of Common Stock.  The Company shall not be required to
issue or deliver any shares of Common Stock purchased upon the exercise of the
Option or portion thereof prior to

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fulfillment of all of the following conditions: (a) the admission of such shares
of Common Stock to listing on all stock exchanges on which such Common Stock is
then listed, (b) the completion of any registration or other qualification of
such shares of Common Stock under any state or federal law or under rulings or
regulations of the Securities and Exchange Commission or other governmental
regulatory body, which the Committee shall, in its absolute discretion, deem
necessary or advisable, (c) the obtaining of any approval or other clearance
from any state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable, (d) the receipt by
the Company of full payment for such shares of Common Stock, which may be in one
or more of the forms of consideration permitted under Section 4.4 hereof, and
(e) the receipt of full payment of any applicable withholding tax in accordance
with Section 3.4 by the Company or its Subsidiary with respect to which the
applicable withholding obligation arises.

4.6Rights as Stockholder.  Neither Holder nor any person or entity claiming
under or through Holder will have any of the rights or privileges of a
stockholder of the Company in respect of any shares of Common Stock purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares of Common Stock (which may be in book-entry form) will
have been issued and recorded on the records of the Company or its transfer
agents or registrars and delivered to Holder (including through electronic
delivery to a brokerage account).  No adjustment will be made for a dividend or
other right for which the record date is prior to the date of such issuance,
recordation and delivery, except as provided in Article V hereof.  Except as
otherwise provided herein, after such issuance, recordation and delivery, Holder
will have all the rights of a stockholder of the Company with respect to such
shares of Common Stock, including, without limitation, the right to receipt of
dividends and distributions on such shares.

Article V.

Certain changes and corporate events

5.1Changes in Common Stock or Assets.  In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other
distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of the Company’s stock or
the share price of the Company’s stock other than an Equity Restructuring, the
Committee may make equitable adjustments, if any, to reflect such change with
respect to: (a) the number and kind of Shares (or other securities or property)
subject to the Option; (b) the terms and conditions of the Option (including,
without limitation, any applicable performance targets or criteria with respect
thereto); and (c) the grant or exercise price per share for the Option.

5.2Potential Actions. In the event of any transaction or event described in
Section 5.1 or any unusual or nonrecurring transactions or events affecting the
Company, any Subsidiary of the Company, or the financial statements of the
Company or any Subsidiary, or of changes in Applicable Law or Applicable
Accounting Standards, the Committee, in its sole discretion, and on such terms
and conditions as it deems appropriate, either by the terms of the Option or by
action taken prior to the occurrence of such transaction or event, is hereby
authorized to take any one or more of the following actions whenever the
Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available with respect to the Option, to facilitate such transactions or
events or to give effect to such changes in Applicable Law or Applicable
Accounting Standards:

(a)To provide for the termination of the Option in exchange for an amount of
cash and/or other property with a value equal to the amount that would have been
attained upon the exercise of the Option or realization of the Holder’s rights
(and, for the avoidance of doubt, if as of the date of the occurrence of the
transaction or event described in this Article V the Committee determines in
good faith

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that no amount would have been attained upon the exercise of the Option or
realization of the Holder’s rights, then the Option may be terminated by the
Company without payment);

(b)To provide that the Option be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of Shares and applicable exercise or
purchase price, in all cases, as determined by the Committee;

(c)To make adjustments in the number and type of Shares of the Company’s stock
(or other securities or property) subject to the Option, and/or in the terms and
conditions of (including the grant or exercise price), and the criteria included
in, the Option;

(d)To provide that the Option shall be exercisable or payable or fully vested
with respect to all Shares covered thereby, notwithstanding anything to the
Agreement;

(e)To replace the Option with other rights or property selected by the
Committee; and/or

(f)To provide that the Option cannot vest, be exercised or become payable after
such event.

5.3Equity Restructurings.  In connection with the occurrence of any Equity
Restructuring, and notwithstanding anything to the contrary in Sections 5.1 and
5.2, the number and type of securities subject to the Option and the exercise
price or grant price thereof, if applicable, shall be equitably adjusted (and
the adjustments provided under this Section 5.4(a) shall be nondiscretionary and
shall be final and binding on the Holder and the Company.

5.4Change of Control.  

(a)In the event of a Change in Control, unless the Committee elects to (A)
terminate the Option in exchange for cash, rights or property, or (B) cause the
Option to become fully exercisable and no longer subject to any forfeiture
restrictions prior to the consummation of a Change in Control, pursuant to
Article V, (x) the Option (other than any portion subject to performance-based
vesting) shall continue in effect or be assumed or an equivalent Option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation and (y) the portion of the Option subject to
performance-based vesting shall be subject to the terms and conditions of the
Agreement and, in the absence of applicable terms and conditions, the
Committee’s discretion. In the event the Option continues in effect or is
assumed or an equivalent Option substituted, and a Holder incurs a Termination
of Service without “cause” (as such term is defined in the sole discretion of
the Committee, or as set forth in the Agreement) upon or within six (6) months
following the Change in Control, then such Holder shall be fully vested in such
continued, assumed or substituted Option.

(b)In the event that the successor corporation in a Change in Control refuses to
assume or substitute for the Option (other than any portion subject to
performance-based vesting), the Committee may cause (A) any or all of the Option
(or portion thereof) to terminate in exchange for cash, rights or other property
pursuant to Section 5.2(a) or (B) any or all of the Option (or portion thereof)
to become fully exercisable immediately prior to the consummation of such
transaction and all forfeiture restrictions on any or all of the Option to
lapse. If the Option is exercisable in lieu of assumption or substitution in the
event of a Change in Control, the Committee shall notify the Holder that the
Option shall be fully exercisable for

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a period of fifteen (15) days from the date of such notice, contingent upon the
occurrence of the Change in Control, and the Option shall terminate upon the
expiration of such period.

(c)For the purposes of this Article V, the Option shall be considered assumed
if, following the Change in Control, the Option confers the right to purchase or
receive, for each share subject to the Option immediately prior to the Change in
Control, the consideration (whether stock, cash, or other securities or
property) received in the Change in Control by holders of Common Stock for each
share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the Change in Control was not solely common stock of
the successor corporation or its parent, the Committee may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each share subject to the Option, to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per-share consideration received by holders of Common Stock in the
Change in Control.

5.5Additional Provisions.

(a)Unless otherwise determined by the Committee, no adjustment or action
described in this Article V shall be authorized to the extent it would result in
short-swing profits liability under Section 16 of the Securities Exchange Act of
1934, as amended, or violate the exemptive conditions of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, or cause the Option to fail to be
exempt from or comply with Section 409A.

(b)The existence of the Agreement and/or the Option shall not affect or restrict
in any way the right or power of the Company or the stockholders of the Company
to make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the rights
thereof or which are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

(c)In the event of any pending stock dividend, stock split, combination or
exchange of shares, merger, consolidation or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change
affecting the Shares or the share price of the Common Stock including any Equity
Restructuring, for reasons of administrative convenience, the Committee, in its
sole discretion, may refuse to permit the exercise of the Option during a period
of up to thirty (30) days prior to the consummation of any such transaction.

Article VI.

other provisions

6.1Administration.  The Committee shall have the power to interpret the Grant
Notice and this Agreement and to adopt such rules for the administration,
interpretation and application of the Grant Notice and this Agreement as are
consistent therewith and to interpret, amend or revoke any such rules.  All
actions taken and all interpretations and determinations made by the Committee
will be final and binding upon Holder, the Company and all other interested
persons.  To the extent allowable pursuant to Applicable Law, no member of the
Committee or the Board will be personally liable for any action, determination
or interpretation made with respect to the Grant Notice or this Agreement.

6.2Whole Shares.  The Option may only be exercised for whole shares of Common
Stock.

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6.3Option Not Transferable.  Subject to Section 4.1 hereof, the Option may not
be sold, pledged, assigned or transferred in any manner other than (a) by will
or the laws of descent and distribution or (b) with the consent of the
Committee, pursuant to a DRO or otherwise, to the extent permissible under
Applicable Law, unless and until the shares of Common Stock underlying the
Option have been issued, and all restrictions applicable to such Shares have
lapsed; provided, however, that, subject to the approval of the Committee, to
the extent permissible under Applicable Law, Holder may transfer this Option to
or for the benefit of any immediate family member, family trust or other entity
established for the benefit of Holder and/or an immediate family member thereof
so long as the Company is eligible to use a Form S-8 under the Securities Act of
1933, as amended, for the registration of the sale of the Common Stock subject
to this Option to such proposed transferee; provided further, that the Company
shall not be required to recognize any such permitted transfer until such time
as such permitted transferee shall, as a condition to such transfer, deliver to
the Company a written instrument in form and substance satisfactory to the
Company confirming that such transferee shall be bound by all of the terms and
conditions of this Option. For the avoidance of doubt, nothing contained in this
Section 6.3 shall be deemed to restrict a transfer to the Company.  Neither the
Option nor any interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of Holder or his or her successors in interest
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by this Section 6.3.

6.4Adjustments.  The Committee may accelerate the vesting of all or a portion of
the Option in such circumstances as it, in its sole discretion, may determine.
In addition, upon the occurrence of certain events relating to the Common Stock
contemplated by Article V hereof (including, without limitation, an
extraordinary cash dividend on such Common Stock) (and subject to the terms of
Section 3.1(b) hereof), the Committee may make such adjustments as the Committee
deems appropriate in the number of shares of Common Stock subject to the Option,
the exercise price of the Option and the kind of securities that may be issued
upon exercise of the Option.   Holder acknowledges that the Option is subject to
adjustment, modification and termination in certain events as provided in this
Agreement, including Article V hereof (subject to the terms of Section 3.1(b)
hereof).

6.5Notices.  Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the
Company at the Company’s principal office, and any notice to be given to Holder
shall be addressed to Holder at Holder’s last address reflected on the Company’s
records.  By a notice given pursuant to this Section 6.5, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

6.6Titles.  Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.

6.7Governing Law.   The laws of the State of Delaware shall govern the
interpretation, validity, administration, enforcement and performance of the
terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.

6.8Conformity to Securities Laws.  Holder acknowledges that the Grant Notice and
this Agreement are intended to conform to the extent necessary with all
Applicable Laws, including, without limitation, the provisions of the Securities
Act of 1933, as amended, and the Exchange Act of 1934, as amended, and any and
all regulations and rules promulgated thereunder by the Securities and Exchange

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Commission and state securities laws and regulations.  Notwithstanding anything
herein to the contrary, the Option is granted and may be exercised, only in such
a manner as to conform to Applicable Law.  To the extent permitted by Applicable
Law, the Grant Notice and this Agreement shall be deemed amended to the extent
necessary to conform to Applicable Law.

6.9Amendment, Suspension and Termination.  To the extent permitted by Applicable
Law, this Agreement may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee or the
Board, provided that, except as may otherwise be provided herein, no amendment,
modification, suspension or termination of this Agreement shall adversely affect
the Option in any material way without the prior written consent of Holder.

6.10Forfeiture and Claw-Back Provisions.  This Option (including any proceeds,
gains, or other economic benefit actually or constructively received by Holder
upon exercise of this Option or upon the resale of any Shares underlying the
Option) shall be subject to the provisions of any claw-back policy implemented
by the Committee or the Company, including, without limitation, any claw-back
policy adopted to comply with the requirements of Applicable Law, including,
without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection
Act and any rules or regulations promulgated thereunder, whether or not such
claw-back policy was in place at the time of grant of this Option, to the extent
set forth in such claw-back policy and/or in this Agreement.

6.11Successors and Assigns.  The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the
benefit of the successors and assigns of the Company.  Subject to the
restrictions on transfer set forth in Section 6.3, this Agreement shall be
binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successors and assigns of the parties hereto.

6.12Limitations Applicable to Section 16 Persons.  Notwithstanding any other
provision of this Agreement, if Holder is subject to Section 16 of the Exchange
Act, the Option, the Grant Notice and this Agreement shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule.  To the
extent permitted by Applicable Law, this Agreement shall be deemed amended to
the extent necessary to conform to such applicable exemptive rule.

6.13Not a Contract of Employment.  Nothing in the Grant Notice or in this
Agreement shall confer upon Holder any right to continue to serve as an employee
or other service provider of the Company or any Subsidiary or shall interfere
with or restrict in any way the rights of the Company and its Subsidiaries,
which rights are hereby expressly reserved, to discharge or terminate the
services of Holder at any time for any reason whatsoever, with or without cause,
except to the extent expressly provided otherwise in a written agreement between
the Company or a Subsidiary and Holder.

6.14Entire Agreement.  The Grant Notice and this Agreement (including any
exhibit hereto) constitute the entire agreement of the parties and supersede in
their entirety all prior undertakings and agreements of the Company and Holder
with respect to the subject matter hereof.

6.15Section 409A.  This Option is not intended to constitute “nonqualified
deferred compensation” within the meaning of Section 409A.  However,
notwithstanding any other provision of the Grant Notice or this Agreement, if at
any time the Committee determines that this Option (or any portion thereof) may
be subject to Section 409A, the Committee shall have the right in its sole
discretion (without any obligation to do so or to indemnify Holder or any other
person for failure to do so) to adopt such amendments to the Grant Notice or
this Agreement, or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions, as
the Committee

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determines are necessary or appropriate for this Option either to be exempt from
the application of Section 409A or to comply with the requirements of Section
409A.

6.16Agreement Severable.  In the event that any provision of the Grant Notice or
this Agreement is held invalid or unenforceable, such provision will be
severable from, and such invalidity or unenforceability will not be construed to
have any effect on, the remaining provisions of the Grant Notice or this
Agreement.

6.17Limitation on Holder’s Rights.  Receipt of the Option confers no rights or
interests other than as herein provided.  This Agreement creates only a
contractual obligation on the part of the Company as to amounts payable and
shall not be construed as creating a trust.  Holder shall have only the rights
of a general unsecured creditor of the Company with respect to amounts credited
and benefits payable, if any, with respect to the Option, and rights no greater
than the right to receive the Common Stock as a general unsecured creditor with
respect to options, as and when exercised pursuant to the terms hereof.

6.18Counterparts.  The Grant Notice may be executed in one or more counterparts,
including by way of any electronic signature, subject to Applicable Law, each of
which shall be deemed an original and all of which together shall constitute one
instrument.

6.19Broker-Assisted Sales.  In the event of any broker-assisted sale of shares
of Common Stock in connection with the payment of withholding taxes as provided
in Section 3.4(a)(iii) or Section 3.4(c) or the payment of the exercise price as
provided in Section 4.4(c): (a) any shares of Common Stock to be sold through a
broker-assisted sale will be sold on the day the tax withholding obligation or
exercise of the Option, as applicable, occurs or arises, or as soon thereafter
as practicable; (b) such shares of Common Stock may be sold as part of a block
trade with other holders in which all holders receive an average price; (c)
Holder will be responsible for all broker’s fees and other costs of sale, and
Holder agrees to indemnify and hold the Company harmless from any losses, costs,
damages, or expenses relating to any such sale; (d) to the extent the proceeds
of such sale exceed the applicable tax withholding obligation or exercise price,
the Company agrees to pay such excess in cash to Holder as soon as reasonably
practicable; (e) Holder acknowledges that the Company or its designee is under
no obligation to arrange for such sale at any particular price, and that the
proceeds of any such sale may not be sufficient to satisfy the applicable tax
withholding obligation or exercise price; and (f) in the event the proceeds of
such sale are insufficient to satisfy the applicable tax withholding obligation,
Holder agrees to pay immediately upon demand to the Company or its Subsidiary
with respect to which the withholding obligation arises an amount in cash
sufficient to satisfy any remaining portion of the Company’s or the applicable
Subsidiary’s withholding obligation.

* * * *

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