Exhibit 10.1

 

SEVERANCE AGREEMENT AND GENERAL RELEASE

This Severance Agreement and General Release (hereinafter “Agreement”) is made
and voluntarily entered into between Elliott Grossbard (“Employee”) and Rigel
Pharmaceuticals, Inc., its affiliated companies, subsidiaries, agents,
attorneys, successors, assigns, and representatives (hereinafter collectively,
the “Company”).  The Company and Employee are collectively referred to herein as
the “Parties.”

WHEREAS, Employee’s employment with the Company terminated effective June 30,
2016;

WHEREAS, Employee is not aware of any work-related injury or illness that has
not already been disclosed to the Company; 

WHEREAS, Employee represents that Employee has not initiated, and is not aware
of, any action in any forum, including any state or federal court or agency, on
his behalf that involves the Company; 

WHEREAS, in exchange for separation compensation, Employee releases the Company
from any claims arising from or related to the employment relationship and the
termination thereof; 

WHEREAS, Employee has agreed to resolve any and all disputes, claims,
complaints, grievances, charges, actions, petitions and demands that Employee
may have, including, but not limited to, any and all claims arising or in any
way related to Employee’s employment with, or termination from, the Company;

WHERE AS, Employee also understands that in order to receive severance
compensation under this Agreement, Employee must sign and return this Agreement
to Dolly Vance, Executive Vice President and General Counsel on or before July
21, 2016 and not revoke the Agreement as set forth below.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed by and between the Parties as follows:

1.Company’s Consideration.  

a.In consideration for the release of all claims as set forth below and other
obligations under this Agreement, and upon Employee’s delivery on or before July
21, 2016 to Dolly Vance, Executive Vice President and General Counsel, of a
fully signed original of this Agreement and does not revoke this Agreement as
described below, the Company shall cause all unvested time-vesting stock options
as of Employee’s last day of employment to become vested (see Exhibit A) and the
period for the Employee to exercise all stock options vested on the last day of
his employment to be extended until March 31, 2018.  Such extension of exercise
term shall be made no sooner than the seventh day and no later than the twelfth
day following the Company’s receipt of a signed copy of this Agreement, provided
that Employee does not revoke this Agreement by the means identified below.
Finally, the Compensation Committee of the Board of Directors of Company will
grant to Employee a cash bonus equal to the total percentage of goals reached
under the Rigel 2016 Cash Incentive Plan at 50% of Employee’s salary and
consulting fees earned during calendar year 2016, subject to all applicable
taxes and other withholdings authorized by Employee or required by law and
provided that Employee does not terminate his consulting agreement before the
end of 2016.

 

b.Employee agrees that the foregoing acceleration of unvested stock options,
extension of term to exercise stock options and eligibility for cash bonus,
hereinafter called “Severance Benefits”, shall constitute the entire amount of
monetary consideration provided to Employee under this Agreement and that
Employee will not seek any further compensation for any claimed damages, costs
or attorney’s fees in connection with the matters encompassed by this
Agreement. 

 

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2.Tax Indemnification. Employee acknowledges and agrees that the Company has
made no representations or warranties regarding the tax consequences of any
amounts paid by the Company pursuant to this Agreement.  Employee agrees to pay
all federal or state taxes owed by Employee, if any, which are required by law
to be paid with respect to the payments herein.  Employee further agrees to
indemnify and hold the Company harmless from any taxes owed by Employee,
including interest or penalties owed by Employee, on account of this
Agreement.  Employee further agrees to reimburse Company for any attorney’s fees
and costs incurred by Company as a result of having to obtain indemnification
under this Agreement. 

 

3.Effective Dates. The “Effective Date” of this Agreement is the date it is
signed by Employee and not revoked within seven (7) calendar days after signing
as described in Paragraph 7, below.  The “Effective Date” of the ADEA is 12:01
a.m. on the eighth (8th) calendar day from the signature date.

 

4.Consent to Amendment of Incentive Stock Options. Employee holds certain
options to purchase common stock of the Company, which were granted pursuant to
the Company’s 2000 Equity Incentive Plan and 2011 Equity Incentive Plan (the
“Plans”) and, as of June 30, 2016, such options will not be all vested, and the
remaining vested options would not be exercisable for a period longer than three
(3) months from the date of termination of Employee’s continuous service with
the Company (the “Options”).  Certain of the Options are "incentive stock
options" (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”)).  Employee’s continuous service with the Company
will terminate effective the end of day June 30, 2016 (the “Separation
Date”).  At a date shortly following the Effective Date of this Agreement, the
Compensation Committee of the Board of Directors of the Company (the “Board”)
will approve an amendment to the Options to accelerate vesting of all unvested
Options to be fully vested on the Effective Date and to extend the exercise
period for all of the Options to March 31, 2018, regardless of Employee’s
employment status (the “Amendment”).  The Amendment impacts the status of some
of the Options that are incentive stock options, as summarized in this Paragraph
4 and the attached Exhibit B.  The Plans permit the Board to amend the terms of
the Options, but provides that Employee’s rights and obligations under the
Options shall not be impaired by any such amendment unless the Company obtains
Employee’s consent and Employee consents to the amendment in writing. Employee
acknowledges that because the Amendment adversely impacts the incentive stock
option status of many of the Options, the Amendment will not be effective as to
the Options unless and until Employee consents to the Amendment, as part of this
Agreement. Employee understands that Employee is under no obligation to consent
to the Amendment.  Employee acknowledges that she has read this Paragraph 4 and
attached Exhibit B and has had sufficient time to review and discuss this
matter.  Employee further understands that this Paragraph 4 and Exhibit B are
intended as a brief summary of the amendment to the Options and, thus, if there
is any inconsistency between the information included in this Paragraph 4 and
the Options, the terms of the Options shall govern.  Employee acknowledges that
the Amendment shall not override any contrary provision in the terms of the
Options, the applicable Plan and option agreement under which the Options were
granted that would provide for earlier termination of any Options in connection
with a corporate transaction, change in control, or other similar transaction,
and that in any event, the Options may not be exercised beyond their original
termination date. Employee acknowledges that neither the Company nor its agents
have recommended or influenced his decision to consent to the amendment of the
Options.  Employee further acknowledges that she has had the opportunity to seek
independent advice regarding this matter from his legal counsel and tax advisor
and she is not relying on any tax advice from the Company or its agents. After
due consideration of the above, by signing and not revoking this Agreement,
Employee agrees to the Amendment of all of the Options as described in this
Paragraph 4.

 

5.Payment in Full. Employee acknowledges and agrees that Employee has received
all salary, wages, accrued vacation, bonuses, commissions, expense
reimbursements, or other such sums due to Employee other than amounts to be paid
pursuant to this Agreement.  In light of the payment by the Company of all wages
due, the Parties further acknowledge and agree that California Labor Code §
206.5 is not violated by virtue of Employees execution of this Agreement.  That
section provides in pertinent part as follows:

 

No employer shall require the execution of any release of any claim or right on
account of wages due, or to become due, or made as an advance on wages to be
earned, unless payment of such wages has been made.

6.Release of Claims.  In consideration for the Company’s promises and premium
contributions set forth above, all of which are in excess of any regular Company
policy, Employee agrees (except as otherwise indicated in the final paragraph of
this Paragraph 6) to forever and fully release and discharge the Company,
defined to

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include its successors, affiliates, subsidiaries, assigns, executives,
directors, employees, managers, officers, investors, insurers, and attorneys,
from all claims and damages of every kind and nature, known and unknown, which
exist or can arise out of Employee’s employment and/or termination of employment
with the Company, through and including the date of his signing of this
Agreement.  This release includes, but is not limited to, any rights or claims
arising under the California Constitution; California statutory and common law
(including contract law, employment law and tort law); the California Fair
Employment and Housing Act; the California Labor Code; the Age Discrimination in
Employment Act (ADEA); Title VII of the Civil Rights Act of 1964; the Americans
with Disabilities Act; federal and state family leave statutes; and any and all
other federal, state and local laws, statutes, executive orders, regulations and
common law; any claim for any loss, cost, damage, or expense arising out of any
dispute over the non-withholding or other tax treatment of any of the proceeds
received by Employee as a result of this Agreement; any and all claims for
attorneys’ fees and costs; and any and all claims relating to, or arising from,
Employee’s right to purchase, or actual purchase of shares of stock of the
Company, including, without limitation, any claims for fraud, misrepresentation,
breach of fiduciary duty, breach of duty under applicable state corporate law,
and securities fraud under any state or federal law.  Employee and the Company
agree that this is a compromise settlement of all such claims and therefore,
this Agreement does not constitute any admission of liability on the part of the
Company.

Employee further agrees and acknowledges that the release provided for in this
Section shall apply to all unknown and unanticipated injuries and/or damages (as
well as those now disclosed).  Employee acknowledges and understands that
Section 1542 of the Civil Code of the State of California provides as follows:

 

A general release does not extend to claims which the creditor does not know or
suspect to exist in his/her favor at the time of executing the release, which if
known by him/her must have materially affected his/her settlement with the
debtor.

Being aware of Section 1542 of the California Civil Code, Employee by signing
this Agreement expressly waives the provisions of Section 1542 of the California
Civil Code and any other similar provisions of law that may be applicable.

Notwithstanding the release of claims otherwise provided for in this Section of
the Agreement, it is expressly understood that nothing in this Agreement will
prevent Employee from filing a charge of discrimination with any state or
federal agency, including but not limited to the National Labor Relations Board
or the Equal Employment Opportunity Commission or any of its state or local
deferral agencies, or participating in any investigation by the National Labor
Relations Board, the Equal Employment Opportunity Commission or any of its state
or local deferral agencies, although Employee understands and agrees that by
signing this Agreement she waives his right (if any) to any monetary or other
recovery should any governmental agency or other third party pursue any claims
on Employee’s behalf, either individually, or as part of any class, collective
or representative action.  Further, it is expressly understood that nothing in
this Agreement shall be construed to be a waiver by Employee of any benefit that
vested in any benefit plan prior to his termination date or as a waiver of his
right to continue any benefit in accordance with the terms of a benefit
plan.  Likewise nothing in this Agreement shall be construed to waive any right
that is not subject to waiver by private agreement, including any right that
Employee may have under California Labor Code Section 2802 to indemnification of
any employee expenses or losses incurred in discharging his duties.  It is also
expressly understood that nothing in this Agreement shall in any way prohibit
Employee from bringing any complaint, claim or action seeking to challenge the
validity of this Agreement and/or bringing any complaint claim or action
alleging a breach of this Agreement by the Company.

 

7.Acknowledgement of Waiver of Claims Under ADEA.  Employee acknowledges waiving
and releasing any rights under the Age Discrimination in Employment Act of 1967
(“ADEA”) and that this waiver and release is knowing and voluntary.  Employee
and the Company agree that this waiver and release does not apply to any rights
or claims that may arise under the ADEA after the Effective Date of this
Agreement.  Employee acknowledges that the consideration given for this waiver
and release Agreement is in addition to anything of value to which Employee was
already entitled.  Employee further acknowledges notice by this writing that:

(a)Employee should consult with an attorney prior to executing this Agreement;

(b)Employee has up to twenty-one (21) calendar days within which to consider
this Agreement;

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(c)Employee has seven (7) calendar days following Employee’s execution of this
Agreement to revoke the Agreement;

(d)the ADEA waiver in this Agreement shall not be effective until the seven (7)
day revocation period has expired; and

(e)nothing in this Agreement prevents or precludes Employee from challenging or
seeking a determination in good faith of the validity of this waiver under the
ADEA, nor does it impose any condition precedent, penalties or costs for doing
so, unless specifically authorized by federal law;

(f)Employee understands that, notwithstanding any contrary language in this
Agreement, rights or claims that may not be released, waived or compromised by
private agreement are not waived, and that nothing in this Agreement prevents
him from filing any charges or claims with the EEOC, the NLRB or any other
federal agency, or from participating fully in any investigation or matter
pending before any state or federal agency.

(g)in order to revoke this Agreement, Employee must deliver to Dolly Vance’s
attention at the following address a written revocation before 12:00 a.m.
(midnight) p.s.t. on the seventh calendar day following the date Employee signs
the Agreement:

Dolly Vance

Executive Vice President and General Counsel

1180 Veterans Boulevard

South San Francisco, CA 94080

Fax: 650-624-1101

8.No Pending or Future Lawsuits. Employee attests that Employee has not filed
any lawsuits, administrative complaints or made any other charges, either in
Employee’s name or on behalf of any other person or entity, against the Company
in any local, state or federal court or with any local, state, federal or
administrative agency.  Employee further represents that Employee will not bring
any action in the future in which Employee seeks to recover any damages from the
Company relating to or arising from Employee’s employment or the termination of
Employee’s employment with the Company, other than an action to enforce
Employee’s rights under this Agreement.  If any organization (governmental or
nongovernmental) brings an action against the Company for any reason, and any
money or other benefit is given to Employee as a result of the action, Employee
agrees to give the proceeds of said action given to Employee to the Company. 

9.Confidentiality. Employee understands that the terms and existence of this
Agreement are personal to Employee and that maintaining the confidential nature
of this Agreement is a material term of the Agreement.  Employee covenants that
Employee has not disclosed and will not disclose the existence or terms of this
Agreement to anyone other than Employee’s spouse, registered domestic partner,
attorney, and accountant.  It is further provided that any party hereto may make
such disclosures as is required by law and as is necessary for legitimate law
enforcement or compliance purposes. 

10.Liquidated Damages. The Parties acknowledge and agree that the time and
expense involved in proving actual damages of the confidentiality agreement set
forth in Paragraph 9 render any breach appropriate for liquidated
damages.  Accordingly, in lieu of requiring actual proof of damages or losses,
the Parties agree that the liquidated damage for any breach of the
confidentiality agreement (but not as a penalty), the Employee shall pay the
Company the sum of $1,000.  This liquidated damage amount shall be enforceable
pursuant to final and binding arbitration as set forth below.  The party seeking
liquidated damages shall have the burden of proof by a preponderance of the
evidence.  Attorneys’ fees and costs shall be awarded to the prevailing
party.  Neither the breach of the confidentiality agreement nor the payment of
liquidated damages shall affect the continuing validity or enforceability of
this Agreement. 

 

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11.Future Employment. While Employee is free to apply for future positions with
the Company, Employee understands and agrees that Employee will not receive any
special treatment or position in the reapplication process. 

 

12.Non-Disclosure of Confidential and Proprietary Information. Employee
specifically acknowledges that Employee’s employment with the Company created a
relationship of trust between Employee and the Company with respect to any
information of a confidential or secret nature of which Employee became aware
during the period of his employment and which (i) relates to the business of the
Company, or to the business of any customer or supplier of the Company; or (ii)
is processed by the Company and has been created, discovered, or developed by,
or has otherwise become known to the Company that has commercial value to the
business in which the Company is engaged.  All said information is herein called
“Proprietary Information.”  By way of illustration, and not in limitation,
proprietary information includes trade secrets, patents, patent applications,
inventions, processes, computer programs, data, know how, strategies, forecasts,
customer lists, pricing, policies, operational procedures, staffing, billing,
and collection practices, contract provisions, philosophies or other
intellectual property rights of the Company.  At all times Employee will keep in
confidence and trust all such proprietary information and will not use or
disclose any such Proprietary Information or anything relating to it without the
written consent of the Company.  Employee hereby agrees that all Proprietary
Information shall be the sole and exclusive property of the Company and its
assigns.  Employee further acknowledges and agrees that Employee’s Proprietary
Information and Inventions Agreement with the Company remains in full force and
effect and is unaffected by this Agreement.

 

13.Return of Company Property. Within five (5) days of Employee’s signing this
agreement, Employee will deliver to the Company all property, documents, data,
and proprietary information of any nature pertaining to the Company or its
affiliated companies.  Employee also affirms that employee has not taken from
the Company or its affiliated companies any documents or data of any description
or any reproduction containing or pertaining to any Proprietary Information nor
has Employee utilized nor will Employee utilize Proprietary Information outside
of Employee’s duties as an Employee of the Company.

 

14.Non-Disparagement. Employee agrees to refrain from communicating any
disparaging, derogatory, libelous, or scandalous statements to any third party
regarding the Company, including its employees.  Employee further agrees to
refrain from tortious interference with the contracts and relationships of the
Company.  Employee further agrees that Employee shall not act, in any way, as an
agent of the Company, or state or imply that Employee has any authority to bind
the Company.

15. No Admission of Liability. This Agreement and compliance with this Agreement
shall not be construed as an admission by the Company of any liability
whatsoever, or as an admission by the Company of any violation of the rights of
Employee or any person, or of the violation of any order, law, statute, duty, or
contract whatsoever against Employee or any person.  The Company specifically
disclaims any liability to Employee or any other person for any alleged
violation of the rights of Employee or any person, or for any alleged violation
of any order, law, statute, duty, or contract on the part of the Company, its
employees or agents or related companies or their employees or agents.

16.No Representations. Each party represents that it has had the opportunity to
consult with an attorney, and has carefully read and understands the scope and
effect of the provisions of this Agreement.  The Parties hereto further
represent and acknowledge that in executing this Agreement they do not rely and
have not relied upon any representation or statement made by any of the Parties
or by any of the Parties' agents, attorneys, or representatives with regard to
the subject matter, basis, or effect of the Agreement or otherwise, other than
those specifically stated in this written Agreement.

17.Final and Binding. This Agreement shall be binding upon the Parties hereto
and upon their heirs, administrators, representatives, executors, successors,
and assigns, and shall inure to the benefit of said Parties and each of them and
to their heirs, administrators, representatives, executors, successors, and
assigns.  Employee expressly warrants that such Employee has not transferred to
any person or entity any rights, causes of action, or claims released in the
Agreement.

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18.Severability. Should any provision of this Agreement be found by a court of
competent jurisdiction or an arbitrator to be illegal, invalid, unenforceable or
void, that provision shall be considered severable and the remaining provisions
shall remain in full force and effect without said provision.

19.Entire Agreement. With the exception of any agreement with the Company
pertaining to proprietary, trade secret, or other confidential information,
which shall remain in full force and effect, this Agreement sets forth the
entire agreement and understanding between the Parties hereto concerning the
subject matter of this Agreement and fully supersedes any and all prior
agreements or understandings, written or oral, between the Parties hereto
pertaining to the subject matter hereof.

20.Plain Meaning. This Agreement shall be interpreted in accordance with the
plain meaning of its terms and not strictly for or against any of the Parties
hereto.

21.Governing Law. This Agreement shall be deemed to have been executed and
delivered within the State of California, and it shall be construed,
interpreted, governed, and enforced in accordance with the laws of the State of
California, without regard to the State of California’s conflict of law
principles.

22.No Knowledge of Wrongdoing.  Employee represents that Employee has no
knowledge of any wrongdoing involving a federal or state governmental agency, or
any other wrongdoing that involves Employee or other present or former Company
employees.

23.Costs.  The Parties shall each bear their own attorneys’ fees and other fees
incurred in connection with this Agreement.

24.Arbitration. The Parties agree that any dispute regarding any aspect of this
Agreement, including the confidentiality provisions, shall be submitted
exclusively to final and binding arbitration before a mutually agreed upon
arbitrator in accordance with the Federal Arbitration Act (“FAA”), 9 U.S.C. §§
1, et seq.  In the event the FAA does not apply for any reason, then the
arbitration will proceed pursuant to the California Arbitration Act, California
Code of Civil Procedure §§ 1280, et seq.  The arbitrator shall be empowered to
award any appropriate relief, including remedies at law, in equity or injunctive
relief.  Arbitration proceedings shall be held in San Francisco, California or
at any other location mutually agreed upon by the Parties.  The Parties agree
that this arbitration shall be the exclusive means of resolving any dispute
under this Agreement and that no other action will be brought by them in any
court or other forum.  If the Parties cannot agree on an arbitrator, then an
arbitrator will be selected using the alternate striking method from a list of
five (5) neutral arbitrators provided by JAMS (Judicial Arbitration & Mediation
Services).  Employee will have the option of making the first strike.  Each
Party will pay the fees for their own counsel, subject to any remedies to which
that party may later be entitled under applicable law.  However, in all cases
where required by applicable law, the Company will pay the arbitrator’s fees and
the arbitration costs.  If under applicable law the Company is not required to
pay the arbitrator’s fees and the arbitration costs, then such fees and costs
will be apportioned equally between each set of adverse parties.

 

25.Authority. The Company represents and warrants that the undersigned has the
authority to act on behalf of the Company and to bind the Company and all that
may claim through it, to the terms and conditions of this Agreement.  Employee
represents and warrants that Employee has the capacity to act on Employee’s own
behalf, and on behalf of all others, to bind them to the terms and conditions of
this Agreement.  Each party warrants and represents that there are no liens or
claims of lien, or assignments in law or equity or otherwise, of or against any
of the claims or causes of action released herein. 

 

26.No Waiver.  The failure of any party to insist upon the performance of any of
the terms and conditions in this Agreement, or the failure to prosecute any
breach of any of the terms and conditions of this Agreement, shall not be
construed thereafter as a waiver of any such terms or conditions.  This entire
Agreement shall remain in full force and effect as if no such forbearance or
failure of performance had occurred.

 

27.No Oral Modification.  Any modification or amendment of this Agreement, or
additional obligation assumed by either party in connection with this Agreement,
shall be effective only if placed in writing and

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signed by both Parties or by authorized representatives of each party.  No
provision of this Agreement can be changed, altered, modified, or waived except
by an executed writing by the Parties.

 

28.Attorneys’ Fees.  In the event that either Party brings an action to enforce
or affect its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including the costs of mediation,
arbitration, litigation, and court fees, plus reasonable attorneys’ fees,
incurred in connection with such an action, provided that such recovery is
consistent with applicable law.

 

29.Counterparts. This Agreement may be executed in counterparts and each
counterpart, when executed, shall have the efficacy of a second
original.  Photographic copies of such signed counterparts may be used in lieu
of the original for any purpose.

 

30.Voluntary Execution of Agreement.  This Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the Parties
hereto, with the full intent of releasing all claims.  The Parties acknowledge
that:

 

(a)they have read this Agreement;

(b)they have been represented in the preparation, negotiation, and execution of
this Agreement by legal counsel of their own choice or that they have
voluntarily declined to seek such counsel;

(c)they understand the terms and consequences of this Agreement and of the
releases it contains; and

(d)they are fully aware of the legal and binding effect of this Agreement.

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective
dates set forth below.

 

 

 

Dated:

June 30, 2016

 

/s/ Elliott Grossbard

 

 

 

Employee

 

 

 

 

 

 

For Rigel Pharmaceuticals, Inc.

 

 

Dated:

June 30, 2016

 

/s/ Dolly Vance

 

 

 

Title: General Counsel, EVP, Corp. Affairs

 

 

 

 

 

 

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Exhibit A

 

ELLIOTT GROSSBARD OPTION GRANTS AS OF 06/30/2016

 

 

 

 

 

 

 

 

 

 

 

 

Grant#

Grant Date

Plan/Type

Shares

Price

Exercised

Vested

Cancelled

Unvested

Outstanding

Exercisable

00000815

07/16/2003

2000/NQ

15,277 
$
8.25 

0 

0 

15,277 

0 

0 

0 

00000816

07/16/2003

2000/NQ

134,723 
$
8.25 

0 

0 

134,723 

0 

0 

0 

R0000131

07/28/2003

2000/NQ

24,064 
$
9.20 

0 

0 

24,064 

0 

0 

0 

R0000132

07/28/2003

2000/NQ

3,714 
$
9.20 

0 

0 

3,714 

0 

0 

0 

00001000

06/03/2004

2000/NQ

7,378 
$
17.66 

0 

0 

7,378 

0 

0 

0 

00001001

06/03/2004

2000/NQ

27,622 
$
17.66 

0 

0 

27,622 

0 

0 

0 

00001170

01/20/2005

2000/NQ

32,222 
$
22.17 

0 

0 

32,222 

0 

0 

0 

00001288

10/04/2005

2000/NQ

5,083 
$
24.56 

0 

0 

5,083 

0 

0 

0 

00001289

10/04/2005

2000/NQ

59,917 
$
24.56 

0 

0 

59,917 

0 

0 

0 

00001490

01/25/2006

2000/NQ

60,000 
$
7.40 

0 

0 

60,000 

0 

0 

0 

00001591

08/07/2006

2000/NQ

625 
$
9.56 

0 

625 

0 

0 

625 

625 

00001592

08/07/2006

2000/NQ

27,153 
$
9.56 

0 

27,153 

0 

0 

27,153 

27,153 

00001845

01/31/2007

2000/NQ

80,000 
$
11.73 

0 

80,000 

0 

0 

80,000 

80,000 

00001999

01/31/2008

2000/NQ

130,000 
$
26.45 

0 

130,000 

0 

0 

130,000 

130,000 

00002347

03/30/2009

2000/ISO

30,816 
$
6.49 

0 

30,816 

0 

0 

30,816 

30,816 

00002348

03/30/2009

2000/NQ

84,184 
$
6.49 

0 

84,184 

0 

0 

84,184 

84,184 

00002371

01/20/2010

2000/ISO

9,584 
$
9.62 

0 

9,584 

0 

0 

9,584 

9,584 

00002372

01/20/2010

2000/NQ

105,416 
$
9.62 

0 

105,416 

0 

0 

105,416 

105,416 

00002831

02/01/2011

2000/ISO

6,576 
$
6.73 

0 

6,576 

0 

0 

6,576 

6,576 

00002832

02/01/2011

2000/NQ

58,424 
$
6.73 

0 

58,424 

0 

0 

58,424 

58,424 

00003085

01/25/2012

2011/ISO

20,065 
$
8.15 

0 

20,065 

0 

0 

20,065 

20,065 

00003086

01/25/2012

2011/NQ

129,935 
$
8.15 

0 

129,935 

0 

0 

129,935 

129,935 

00003113

01/30/2013

2011/ISO

21,611 
$
6.51 

0 

21,611 

0 

0 

21,611 

21,611 

00003114

01/30/2013

2011/NQ

128,389 
$
6.51 

0 

128,389 

0 

0 

128,389 

128,389 

00003693

02/27/2014

2011/ISO

75,357 
$
3.59 

0 

30,449 

0 

44,908 

75,357 

30,449 

00003694

02/27/2014

2011/NQ

74,643 
$
3.59 

0 

60,175 

0 

14,468 

74,643 

60,175 

00003702

02/27/2014

2011/NQ

150,000 
$
3.59 

0 

75,000 

0 

75,000 

150,000 

75,000 

00003906

01/26/2015

2011/NQ

175,000 
$
2.14 

0 

123,958 

0 

51,042 

175,000 

123,958 

00003911

01/26/2015

2011/NQ

175,000 
$
2.14 

0 

175,000 

0 

0 

175,000 

175,000 

00004132

01/26/2016

2000/ISO

6,250 
$
2.74 

0 

0 

0 

6,250 

6,250 

0 

00004133

01/26/2016

2000/NQ

143,750 
$
2.74 

0 

31,250 

0 

112,500 

143,750 

31,250 

00004134

01/26/2016

2000/NQ

150,000 
$
2.74 

0 

0 

0 

150,000 

150,000 

0 

 

 

 

2,152,778 

 

0 

1,328,610 

370,000 

454,168 

1,782,778 

1,328,610 

 

 

 

8

 

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Exhibit B

 

Upon the exercise of a nonstatutory stock option, an optionee generally is taxed
based on the excess of the fair market value of the stock on the date of
exercise over the exercise price of the option.  In general, potentially
favorable tax treatment is provided to the holders of stock options that qualify
as incentive stock options.  Upon the exercise of an incentive stock option, an
optionee is typically not subject to tax except for the possible imposition of
alternative minimum tax.  Rather, the optionee is taxed at the time he or she
disposes of the stock subject to the option.  Additionally, if the date on which
the optionee disposes of the stock subject to an incentive stock option is more
than two years from the date on which the incentive stock option was granted
(the “2-Year Holding Period”) and more than one year from the date on which the
optionee exercised the option (the “1-Year Holding Period”), then the optionee’s
entire gain or loss is characterized as long-term capital gain or loss, rather
than ordinary income. 

On the other hand, if the optionee fails to satisfy either the 2-Year Holding
Period and the 1-Year Holding Period, then a portion of the optionee’s profit
from the sale of the stock subject to the incentive stock option will be
characterized as ordinary income.  The portion of the profit that is
characterized as ordinary income will be equal to the lesser of (a) the excess
of the fair market value of the stock on the date of exercise over the exercise
price of the option and (b) the excess of the sales price over the exercise
price of the option.  Any profit over the amount characterized as ordinary
income will be characterized as capital gain.  This deferral of the recognition
of tax until the time of sale of the stock, as well as the possible treatment of
the “spread” as capital gain, are the principal advantages of the Options being
treated as incentive stock options.

Section 424(h) of the Code provides that if the terms of an incentive stock
option are modified, then such modification shall be considered as the granting
of a new option.  The proposed Amendment would be deemed a modification and,
thus, the grant of a new option.  As a result, the 2-Year Holding Period would
restart as of the date of the Amendment.

Section 422(d) of the Code provides that to the extent that the aggregate fair
market value of stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year
exceeds $100,000, such options shall be treated as options which are not
incentive stock options.  An amendment extending the post-termination exercise
period of the Options would be treated as the grant of a new option (as
described above) and, thus, would require a reapplication of the $100,000
exercisability limitation.  As a result, absent a delay in exercisability until
a later calendar year, a portion of Employee’s Options may fail to be treated as
incentive stock options.

Section 422(b) of the Code provides that an option is treated as an incentive
stock option only if the option price is not less than the fair market value of
the stock at the time such option is granted.  An amendment extending the
post-termination exercise period of each Option would be treated as the grant of
a new option (as described above) and, thus, would require a new comparison of
the option price and the current fair market value of the stock.  As a result,
to the extent that one or more of the Options has an exercise price less than
the fair market value of the Company’s common stock as of the date of the
Amendment, then each such Option would fail to be treated as an incentive stock
option.

 

9

 

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