Document:

Exhibit 10.32

 

SUBLEASE AGREEMENT

 

This Sublease Agreement (this “Sublease”), made as of
the          day of November,
2004, by and between BioReliance Corp, a Delaware corporation, having an office
at 14920 Broschart Road, Rockville, Maryland 20850 (hereinafter referred to as “Sublandlord”),
and ADVANCED CELL TECHNOLOGY, a Delaware Corporation, having an office at
                                             
(hereinafter referred to as “Subtenant”);

 

W  I  T  N  E  S
S  E  T  H:

 

WHEREAS, pursuant to that certain Lease dated December 27, 1999
(the “Overlease”), ARE-Five Biotech LLC, predecessor landlord to
Alexandria Real Estate Entities (hereinafter referred to as “Overlandlord”),
leased to Q-One Biotech, Inc., predecessor tenant to Sublandlord, as
lessee, approximately 13,900 square feet of rentable area (the “Premises”)
of the building located at Five Biotech, 381 Plantation Street, Worcester, MA
(hereinafter referred to as the “Building”), upon and subject to the
terms and conditions set forth in the Overlease; and

 

WHEREAS, Subtenant desires to sublet the Premises from Sublandlord upon
the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, the parties hereto, for themselves, their successors
and assigns, mutually covenant and agree as follows:

 

1.             Capitalized
Terms.  Any capitalized terms not
otherwise defined in this Sublease shall have the meanings ascribed thereto in
the Overlease.

 

2.             Demise.  Sublandlord does hereby sublease to Subtenant,
and Subtenant does hereby sublease from Sublandlord, for the term and upon the
conditions hereinafter provided, the entire Premises as more particularly
delineated on Exhibit A attached hereto and made part hereof,
together with the right to use the common areas and facilities as contemplated
by Article 1 of the Overlease.

 

3.             Condition of the
Premises.  Subtenant represents that
it has thoroughly examined the Building and the Premises and that the same are
accepted by Subtenant in their “as is”, “where is” condition existing on the
date of this Sublease.  The Premises
shall be delivered to Subtenant free of occupants and personal property, and
otherwise in broom clean condition.

 

4.             Term.  The term of this Sublease shall commence on November 20,
2004 or such later date as of which the Overlandlord has consented to this
Sublease, as required by the Overlease (the “Term Commencement Date”),
and shall end on April 30, 2010, or on such earlier date upon which said
term may expire or be terminated pursuant to any of the conditions or
limitations or other provisions of this Sublease or pursuant to law (which date
for the termination of the term hereof shall hereafter be called the “Termination
Date”).

 

 

5              Yearly Fixed
Rent.  Subtenant shall pay to
Sublandlord from and after December 20, 2004 (the “Rent Commencement Date”)
to Sublandlord, as Yearly Fixed Rent, the amounts set forth below:

 

	
  Rental Period

  	
   

  	
  Yearly Fixed Rent Per

  Square Foot

  	
   

  	
  Yearly Fixed Rent

  	
   

  	
  Monthly Fixed Rent

  	
   

  
	
  12/20/04-7/31/05

  	
   

  	
  $

  	
  15.50

  	
   

  	
  $

  	
  161,588

  	
   

  	
  $

  	
  17,954.16

  	
   

  
	
  8/l/05-7/31/06

  	
   

  	
  $

  	
  16.00

  	
   

  	
  $

  	
  222,400

  	
   

  	
  $

  	
  18,533.33

  	
   

  
	
  8/1/06-7/31/07

  	
   

  	
  $

  	
  16.50

  	
   

  	
  $

  	
  229,350

  	
   

  	
  $

  	
  19,112.50

  	
   

  
	
  8/1/07-7/31/08

  	
   

  	
  $

  	
  17.00

  	
   

  	
  $

  	
  236,300

  	
   

  	
  $

  	
  19,691.66

  	
   

  
	
  8/1/08-7/31/09

  	
   

  	
  $

  	
  17.50

  	
   

  	
  $

  	
  243,250

  	
   

  	
  $

  	
  20,270.83

  	
   

  
	
  8/1/09-4/30/10

  	
   

  	
  $

  	
  18.00

  	
   

  	
  $

  	
  187,650

  	
   

  	
  $

  	
  20,850.00

  	
   

  

 

Yearly
Fixed Rent shall be paid to Sublandlord on the 30th day of each month during the term, commencing on the Rent Commencement
Date, in advance, in equal monthly installments, without notice, offset,
deduction (except as otherwise provided in this Sublease) or demand.  Yearly Fixed Rent for any partial month during
the term shall be pro rated on a per diem basis.

 

6.             Additional Rent.
 In addition to Yearly Fixed Rent,
Subtenant shall pay to Sublandlord, from and after the Rent Commencement Date,
all other payments due and payable under the Overlease.  Subtenant shall make such payments to
Sublandlord on account of additional rent as aforesaid at the same time
(subject to paragraph 12 of this Sublease below), and in the same manner, as
required by the Overlease.

 

7.             Utilities.  Utilities for the Premises shall be paid for
as Additional Rent by Subtenant as provided in the Overlease.

 

8.             Termination
Right.  Subtenant shall have the
one-time right, by notice given to Sublandlord on or before July 31, 2007
accompanied by payment of Three Hundred Forty Five Thousand Eight Hundred
Ninety Three and 00/100 Dollars ($345,893.00), to accelerate the expiration
date of this Sublease to July 31, 2008.

 

9.             Security Deposit.
 On January 15th, 2005, Subtenant shall deposit with Sublandlord security for performance
of all of its obligations under this Sublease in an amount equal to Seventeen
Thousand Nine Hundred Fifty Four and 16/100 Dollars ($17,954.16) in cash, and within thirty days thereafter, Subtenant
shall deposit with Sublandlord as security an additional Seventeen Thousand
Nine Hundred Fifty Four and 16/100 Dollars ($17,954.16), resulting in an
aggregate security deposit held by Sublandlord of Thirty Five Thousand Nine
Hundred Eight and 32/100 Dollars (notwithstanding anything in the Overlease incorporated,
herein to the contrary), which may be commingled by Sublandlord, and may, at
Sublandlord’s election, be used by Sublandlord, in whole or in part, to fund
Sublandlord’s security deposit obligations under the Overlease.  If Tenant fails to deliver to

 

2

 

Landlord
the second installment of the security deposit as specified above: (i) such
failure shall be deemed a default pursuant to the terms of this Sublease
Agreement and the Overlease; and (ii) the aggregate security deposit due
under this Section 9 shall immediately be increased to an amount equal to
Fifty Three Thousand Eight Hundred Sixty Two and 50/100 Dollars ($53,862.50).

 

10.           Insurance.  Subtenant shall obtain and maintain all
insurance types and coverage as specified in the Overlease to be obtained and
maintained by Sublandlord, as lessee, in amounts not less than those specified
in the Overlease.  All such policies of
insurance shall name Overlandlord and Sublandlord as additional insureds
thereunder.  Subtenant’s insurance shall
be primary over Overlandlord’s and Sublandlord’s insurance.

 

11.           Indemnification
of the Overlandlord and the Sublandlord.  Notwithstanding any other provision of this
Sublease or the Overlease to the contrary, Subtenant will save Overlandlord and
Sublandlord harmless, and will exonerate and indemnify Overlandlord and
Sublandlord, from and against any and all claims, liabilities or penalties
asserted by or on behalf of any person, firm, corporation or public authority:

 

(a)           On account of or based upon any injury to person, or loss
of or damage to property sustained or occurring on the Premises on account of
or based upon the act, omission, fault, negligence or misconduct of any person
whomsoever (other than Overlandlord and Sublandlord or their respective agents,
contractors or employees);

 

(b)           On account of or based upon any injury to person or loss
of or damage to property, sustained or occurring elsewhere (other than on the
Premises) in or about the Building (and, in particular, without limiting the
generality of the foregoing on or about the elevators, stairways, public
corridors, sidewalks, concourses, arcades, malls, galleries, vehicular tunnels,
approaches, areaways, roof, or other appurtenances and facilities used in
connection with the Building or the Premises) arising out of the negligent act
or omission or willful misconduct of Subtenant, its agents, employees or
invitees; and

 

(c)           On account of or based upon (including monies due on
account of) any work or thing whatsoever done (other than by Overlandlord or
Sublandlord or their respective contractors, agents or employees of either) on
the Premises during the term of this Sublease and during the period of time, if
any, prior to the Term Commencement Date that Subtenant may have been given
access to the Premises.

 

If either of Overlandlord or Sublandlord shall, without fault on its
part, be made a party to any litigation commenced against Subtenant or
commenced by Subtenant against a party other than Overlandlord or Sublandlord,
then Subtenant shall protect, indemnify and hold Overlandlord or Sublandlord
harmless and shall pay all costs, expenses and reasonable legal fees incurred
or paid by Overlandlord or Sublandlord in connection with such litigation.  Subtenant shall also pay all costs, expenses
and reasonable third-party legal fees that may be incurred or paid by
Overlandlord or Sublandlord in successfully enforcing the terms, covenants and
conditions in this Sublease.  Sublandlord
shall pay all costs, expenses and reasonable legal fees

 

3

 

that
may be incurred or paid by Subtenant in successfully enforcing the terms,
covenants and conditions in this Sublease against Sublandlord.

 

Subtenant shall neither do not permit anything to be done which would
cause a default under the Overlease, or termination or forfeiture by reason of
any right of termination or forfeiture, reserved or vested in the Overlandlord
under the Overlease, and Subtenant shall indemnify and hold Sublandlord
harmless from and against all claims of any kind whatsoever by reason of the
termination or forfeiture of Sublandlord’s interest under the Overlease caused
by such breach or default on the part of Subtenant.

 

12.           Terms of
Overlease.  Except as expressly
otherwise provided in this paragraph 12 and in paragraphs 13, 14 and 15, as
between the parties hereto, all of the terms, provisions, covenants and
conditions of the Overlease are incorporated herein by reference and hereby
made a part of this Sublease.  However,
for purposes of such incorporation by reference, all references to Landlord and
Tenant shall be deemed references to Sublandlord and Subtenant, respectively,
all references to the Premises or the Demised Premises shall be deemed references
to the Premises and all references to the term of the Overlease shall be deemed
references to the term of this Sublease.  Subtenant shall be entitled to the same notice
and cure periods, less three (3) business days, as Sublandlord is afforded
pursuant to Article 19 of the Overlease.  Sublandlord shall have all of the rights of
the Overlandlord under the Overlease as against Subtenant and, as between the
parties hereto, Subtenant agrees to observe and perform all of the terms,
covenants and conditions on Sublandlord’s part to be observed and performed
under the Overlease.

 

13.           Overlandlord’s
Services and Obligations under the Overlease.  Notwithstanding anything in this Sublease to
the contrary, including without limitation paragraph 12 hereof, Subtenant agrees
that Sublandlord shall not be obligated to furnish for Subtenant any services
of any nature whatsoever, including, without limitation, climate control,
elevator service, cleaning services, security, electrical energy and
miscellaneous power services, water and other public utilities and construction
of any improvements at the Premises, or to perform any of Overlandlord’s
obligations under the Overlease. Sublandlord shall, upon written request of
Subtenant, make reasonable efforts (at no cost or expense to Sublandlord unless
Subtenant first agrees to reimburse Sublandlord in full for all such reasonable
costs and expenses) to enforce the obligations of Overlandlord under the
Overlease.  In enforcing performance of
such obligations of Overlandlord, Sublandlord shall upon Subtenant’s reasonable
written request, promptly notify Overlandlord of its nonperformance under the
Overlease and request that Overlandlord perform its obligations under the
Overlease.  If, within ten (10) business
days after receipt of written request from Subtenant, Sublandlord shall fail or
refuse to take necessary action to enforce Sublandlord’s rights against
Overlandlord with respect to the Premises, Subtenant shall have the right to
take such action in its own name, and for that purpose and only to such extent,
all of the rights of Sublandlord as “Tenant” with respect to the Premises under
the Overlease hereby are conferred upon and assigned to Subtenant, and
Subtenant hereby is subrogated to such rights to the extent that the same shall
apply to the Premises.

 

14.           Sublandlord’s
Approval of the Subtenant’s Alterations and Improvements.  Notwithstanding anything to the contrary set
forth in Article 11 of the Overlease as incorporated herein by reference,
Subtenant shall first obtain the written consent of Sublandlord with respect

 

4

 

to
any proposed alterations, installments, removals, additions or improvements to
any part of the Premises, which consent shall not be unreasonably withheld,
conditioned or delayed.  Sublandlord
shall be deemed reasonable in refusing its consent if Overlandlord has refused
to grant consent.  Nothing in this
Sublease shall be construed as an agreement that Sublandlord has any obligation
to perform any alterations, installments, removals, additions or improvements
for Subtenant whatsoever.

 

15.           Certain Overlease
Provisions Not Incorporated.  The
following provisions of the Overlease are expressly not incorporated
into this Sublease: Articles 2[except for the entire third paragraph thereof,
but for the reference to Landlord’s Work, of which there is none], 3(a) [except
for the first, fourth and fifth sentences thereof], 37 and 39(a), as well as
the entirety of Exhibit C thereof.  Subtenant
acknowledges that, except for the redacted portions thereof, it has reviewed
the Overlease attached hereto and made a part hereof as Exhibit B,
and that it is familiar with the contents thereof.

 

16.           Assigning and
Subletting.  Notwithstanding anything
to the contrary in Article 21 of the Overlease as incorporated herein by
reference, Subtenant covenants and agrees that neither this Sublease nor the
term hereof and leasehold hereby granted, nor any interest herein or therein,
will be assigned, mortgaged, pledged, encumbered or otherwise transferred,
voluntarily, by operation of law or otherwise, and that neither the Premises,
nor any part thereof will be encumbered in any manner by reason of any act or
omission on the part of Subtenant, or used or occupied, or permitted to be used
or occupied, by anyone other than Subtenant, or for any use or purposes other
than as permitted hereunder, or be sublet or offered or advertised for
subletting without the prior written consent of Overlandlord in accordance with
the provisions of the Overlease and the prior written consent of Sublandlord,
which consent may be withheld in Sublandlord’s sole discretion.

 

17.           Notice.  Any and all communications delivered hereunder
shall be in writing and shall be given by hand delivery or by certified mail,
return receipt requested, addressed as follows: if to Overlandlord:                                                                                ,

if
to Sublandlord: BioReliance Corp, 14920 Broschart, Rd., Rockville, MD 20850
Attention: Mr. Paul Nevins; with a copy to Goodwin Procter LLP, Exchange
Place, Boston, Massachusetts 02109, Attention: Michael J. Litchman, Esq.;
and if to Subtenant:
                                                                     ,
Attention:                                           ,
or to such other address and attention as any of the above shall notify the
others in writing.

 

18.           Successors and
Assigns.  This Sublease and
everything herein contained shall extend to and bind and inure to the benefit
of Sublandlord and its successors and assigns and Subtenant and its heirs,
executors, administrators and permitted successors and assigns.  No rights shall inure to the benefit of any
assignee, subtenant or occupant unless the provisions of Article 21 of the
Overlease and paragraph 16 of this Sublease are complied with.

 

19.           Miscellaneous.  Neither
Sublandlord nor any agent or representative of Sublandlord has made or is
making, and Subtenant in executing and delivering this Sublease is not relying
upon, any warranties, representations, promises or statements whatsoever,
except to

 

5

 

the
extent expressly set forth in this Sublease.  All understandings and agreements, if any,
heretofore had between the parties are merged into this Sublease, which alone
fully and completely expresses the agreement of the parties.  No surrender of possession of the Premises or
of any part thereof or of any remainder of the term of this Sublease shall
release Subtenant from any of its obligations hereunder unless accepted by
Sublandlord in writing.  The receipt and
retention by Sublandlord of Yearly Fixed Rent from anyone other than Subtenant
shall not be deemed a waiver of the breach by Subtenant of any covenant,
agreement, term or provision of this Sublease, or as the acceptance of such
other person as a tenant, or as a release of Subtenant from the covenants,
agreements, terms, provisions and conditions herein contained.  The receipt and retention by Sublandlord of
Yearly Fixed Rent or Additional Rent with knowledge of the breach of any
covenant, agreement, term, provision or condition herein contained shall not be
deemed a waiver of such breach.  This
Sublease shall be governed by, and construed in accordance with the laws of The
Commonwealth of Massachusetts.  Neither
this Sublease nor any provision hereof may be modified, amended, discharged or
terminated, except by an instrument in writing signed by both parties.  This Sublease constitutes the entire agreement
of the parties hereto with respect to the
Premises.  If any term or provision of
this Sublease or the application thereof to any person or circumstance shall to
any extent be held invalid or unenforceable, the remainder of this Sublease or
the application of such term or provision to other persons or circumstances
shall not be affected thereby, and each term and provision of this Sublease
shall be valid and enforceable to the fullest extent permitted by law.

 

20.           Quiet Enjoyment.
 So long as Subtenant is not in default
(beyond any applicable notice and cure period) under this Sublease, its quiet
enjoyment of the Premises shall not be disturbed or interfered with by
Sublandlord or anyone claiming by, through or under Sublandlord.

 

21.           Overlandlord’s
Consent.  This Sublease shall not be
effective unless and until Overlandlord’s written consent hereto, in form and
content reasonably acceptable to Subtenant, has been delivered to Subtenant.  Sublandlord shall make diligent efforts to
obtain such consent from Overlandlord, and if Sublandlord has not delivered
such consent to Subtenant within fifteen business days of the date on which
Subtenant delivers executed counterparts of this Sublease to Sublandlord,
either party shall have the right to cancel this Sublease upon written notice
to the other.  It is hereby acknowledged
by Sublandlord and Subtenant that Overlandlord’s consent to this Sublease shall
not create any contractual liability or duty on the part of Overlandlord or its
agent to the Subtenant, and shall not in any manner increase, decrease or
otherwise affect the rights and obligations of Overlandlord and Sublandlord, as
the lessee under the Overlease, with respect to the Premises.

 

22.           Sublandlord’s
Consent.  Whenever Sublandlord’s
consent is required under this Sublease, Sublandlord’s rejection of a request
made by Subtenant shall not deemed unreasonable, in any case, if such rejection
is based on Overlandlord’s rejection of such request.

 

23.           Brokers.  Sublandlord and Subtenant each hereby
represent and warrant that it has not dealt with any broker other than Cushman &
Wakefield in connection with this Sublease for the Premises, and that
Sublandlord shall pay any brokerage fees which shall be due in connection

 

6

 

therewith.
 Each party shall indemnify the other
against any cost or liability resulting from the indemnifying party’s breach of
the foregoing representation and warranty.

 

24.           Place for
Payments.  All payments required to
be made by the Subtenant herein shall be made to Sublandlord, at Sublandlord’s
office specified in paragraph 16, Attention: Accounts Payable
department or to such agent or agents of Sublandlord or at such other place as
Sublandlord shall hereafter from time to time direct in writing.

 

25.           Termination of
Overlease.  In the event of a default
under the Overlease that results in the termination of the Overlease, Subtenant
shall, at the option of Overlandlord, attorn and recognize Overlandlord as
Sublandlord hereunder and shall, promptly upon Overlandlord’s request, execute
and deliver all instruments necessary or appropriate to confirm such attornment
and recognition; provided that Sublandlord’s default was not directly caused by
a default by Subtenant under the Overlease.

 

26.           Sublandlord’s
Obligations.  Sublandlord hereby
agrees to make all payments of rent and other amounts required to be paid to
Overlandlord under the Overlease, to perform all other obligations imposed upon
it by the Overlease which are not assumed by Subtenant hereunder, and to
indemnify Subtenant against and hold it harmless from all reasonable costs and
expenses incurred by Subtenant or asserted against it as a result of the
failure of Sublandlord to perform its obligations hereunder, provided such
failure is not a result of the action or inaction of Subtenant or its agents,
employees or contractors.

 

27.           Parking.  Subtenant shall have all rights to the parking
spaces provided to Sublandlord under the Overlease.

 

(The remainder of this page is
intentionally left blank.)

 

7

 

IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed this
Sublease, as an instrument under seal, as of the day and year first above
written.

 

 

	
   

  	
  SUBLANDLORD 

  
	
   

  	
   

  
	
   

  	
  BioReliance Corp

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ John M. Green

  	
   

  
	
   

  	
   

  	
  Name:

  	
  JOHN M. GREEN

  	
   

  
	
   

  	
   

  	
  Title:

  	
  VP & CFO - BIORELIANCE

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBTENANT:

  
	
   

  	
   

  
	
   

  	
  ADVANCED CELL TECHNOLOGIES

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

8Exhibit 10.33

 

Advanced Cell Technology, Inc.

 

2004 STOCK OPTION PLAN

 

1.                                       Purpose.  Advanced Cell Technology, Inc.
(the “Company”), hereby adopts the Advanced Cell Technology, Inc. 2004
Stock Option Plan (the “Plan”).  The Plan
is intended to recognize the contributions made to the Company by employees of
the Company or any Affiliate, to provide such persons with additional incentive
to devote themselves to the future success of the Company or an Affiliate, and
to improve the ability of the Company or an Affiliate to attract, retain, and
motivate individuals upon whom the Company’s sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of rights to
acquire the Company’s Common Stock, par value $0.001 per Share (the “Common
Stock”).

 

2.                                       Definitions.  Unless the context clearly
indicates otherwise, the following terms shall have the following meanings:

 

(a)                                  “Affiliate” means a corporation which is a
parent corporation or a subsidiary corporation with respect to the Company
within the meaning of Section 424(e) or (f) of the Code.

 

(b)                                 “Board of Directors” means the Board of
Directors of the company.

 

(c)                                  “Code” means the Internal Revenue Code of 1986,
as amended.

 

(e)                                  “Committee” means the Board of Directors, or
a committee of the Board of Directors appointed in accordance with Section 3
of the Plan, when acting in connection with the administration of the Plan.

 

(f)                                    “Company” means Advanced Cell Technology, Inc.,
a Delaware corporation.

 

(g)                                 “Disability” shall have the meaning set forth
in Section 22(c)(3) of the Code.

 

(h)                                 “Fair Market Value” shall have the meaning
set forth in Subsection 8(b) of the Plan.

 

(i)                                     “ISO” means an Option granted under the Plan
that is intended to qualify as an “incentive stock option” within the meaning
of Section 422(b) of the code.

 

(j)            “Non-qualified Stock Option” means
an Option granted under the Plan which is not intended to qualify, or otherwise
does not qualify, as an “incentive stock option” within the meaning of Section 422(b) of
the Code.

 

 

(k)                                  “Option” means either an ISO or a
Non-qualified Stock Option granted under the Plan.

 

(1)                                  “Optionee” means a person to whom an option
has been granted under the Plan, which Option has not been exercised and has
not expired or terminated.

 

(m)                               “Option Document” means the document
described in Section 8 of the Plan, which sets forth the terms and
conditions of each grant of Options.

 

(n)                                 “Option Price” means the price at which
Shares may be purchased upon exercise of an Option, as calculated pursuant to
Subsection 8(b) of the Plan.

 

(o)                                 “Rule 16b-3” means Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended.

 

(p)                                 “Shares” means the shares of Common Stock of
the Company that are the subject of Options.

 

3.                                       Administration of the Plan.  The
Plan shall be administered by the Board of Directors of the Company; however,
the Board of Directors may
designate a committee composed of at least two non-employee Directors within
the meaning of Rule 16b-3(3) to operate and administer the Plan
in its stead (the “Committee”).

 

(a)                                  Meetings.  The Committee shall hold
meetings at such times and places as it may determine.  Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by unanimous consent of
the members of the Committee shall be the valid acts of the Committee.

 

(b)                                 Grants.  The Committee shall from time
to time at its discretion direct the Company to grant Options pursuant to the
terms of the Plan.  The Committee shall
have plenary authority to (i) determine the Optionees to whom, the times
at which, and the price at which Options shall be granted, (ii) determine
the type of Option to be granted and the number of Shares subject thereto, and (iii) approve
the form and terms and conditions of the Option Documents; all subject,
however, to the express provisions of the Plan.  In making such determinations, the Committee
may take into account the nature of the Optionee’s services and
responsibilities, the Optionee’s present and potential contribution to the
Company’s success and such other factors, as it may deem relevant.  The interpretation and construction by the
Committee of any provisions of the Plan or of any Option granted under it shall
be final, binding and conclusive.

 

(c)                                  Exculpation.  No member of the Board of
Directors shall be personally liable for monetary damages for any action taken
or any failure to take any action in connection with the administration of the
Plan or the granting of Options under the Plan, provided that this Subsection 3(c) shall
not apply to (i) any breach of such member’s duty of loyalty to the
Company or its stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (iii) acts
or omissions that would result in liability

 

2

 

under
Section 174 of the General Corporation Law of the State of Delaware, as
amended, and (iv) any transaction from which the member derived an
improper personal benefit.

 

(d)                                 Indemnification.  Service
on the Committee shall constitute service as a member of the Board of Directors
of the Company.  Each member of the
Committee shall be entitled without further act on his part to indemnity from
the Company to the fullest extent provided by applicable law and the Company’s
Certificate of Incorporation and/or By-laws in connection with or arising out
of any action, suit or proceeding with respect to the administration of the
Plan or the granting of Options thereunder in which he or she may be involved
by reason of his or her being or having been a member of the Committee, whether
or not he or she continues to be such member of the Committee at the time of
the action, suit or proceeding.

 

4.                                       Grants under the Plan.  Grants
under the Plan may be in the form of a Non-qualified Stock Option, an ISO or a
combination thereof, at the discretion of the Committee.

 

5.                                       Eligibility.  All employees shall be
eligible to receive Options hereunder.

 

6.                                       Shares Subject to Plan.  The
aggregate maximum number of Shares for which Options may be granted pursuant to
the Plan is Two Million Eight Hundred Thousand (2,800,000) Shares, subject to
adjustment as provided in Section 9 of the Plan.  The Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company.  If an Option
terminates or expires without having been fully exercised for any reason, the
Shares for which the Option was not exercised may again be the subject of one
or more Options granted pursuant to the Plan.

 

7.                                       Term of the Plan.  The
Plan is effective as of August 12, 2004, the date on which it was adopted
by the Board of Directors of the Company.  No Option may be granted under the Plan after August 12,
2014.

 

8.                                       Option Documents and Terms.  Each
Option granted under the Plan shall be a Non-qualified Stock Option unless the
option shall be specifically designated at the time of grant to be an ISO.  If any Option designated an ISO is determined
for any reason not to qualify as an Incentive Stock Option within the meaning
of Section 422 of the Code, such Option shall be treated as a
Non-qualified Stock Option for all purposes under the provisions of the Plan.  Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall from time
to time approve, which Option Documents shall comply with and be subject to the
following terms and conditions and such other terms and conditions as the
Committee shall from time to time require which are not inconsistent with the
terms of the Plan.

 

(a)                                  Number of Option Shares.  Each
Option Document shall state the number of Shares to which it pertains.  An Optionee may receive more than one Option,
which may include Options which are intended to be ISO’s and options which are
not intended to be ISO’s, but only on the terms and subject to the conditions
and restrictions of the Plan.

 

(b)                                 Option Price.  Each
Option Document shall state the Option Price which, for a Non-qualified Stock
Option, may be less than, equal to or greater than the Fair Market Value of the
Shares on the date the Option is granted and, for an ISO, shall be at least
100% of

 

3

 

the Fair Market Value of the
Shares on the date the option is granted as determined by the Committee in
accordance with this Subsection 8(b); provided, however, that if an ISO is
granted to an Optionee who then owns, directly or by attribution under Section 424(d) of
the Code, shares possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or an Affiliate, then the Option
Price shall be at least 110% of the Fair Market Value of the Shares on the date
the Option is granted.  If the Common
Stock is traded on the OTC Bulletin Board, any similar electronic quotation
system or on a nationally recognized stock exchange, then the Fair Market Value
per share shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ National Market System, the last reported
sale price thereof on the relevant date or, if the Common Stock is not so
listed or included, the average of the last reported “bid” and “asked” prices
thereof on the relevant date, as reported on NASDAQ or, if not so reported, as
reported by the National Quotation Bureau, Inc., or as reported in a
customary financial reporting service, as applicable and as the Committee
determines.  At any time at which the
Common Stock is not traded on the OTC Bulletin Board, any similar electronic
quotation system or on a nationally recognized stock exchange, then the Fair
Market Value per share shall be determined by the Board of Directors, acting in
good faith, and such determination shall be final and binding for all purposes
of this Plan.

 

(c)                                  Exercise.  No Option shall be deemed to
have been exercised prior to the receipt by the Company of written notice of
such exercise and of payment in full of the Option Price for the Shares to be
purchased.  Each such notice shall
specify the number of Shares to be purchased and (unless the Shares are covered
by a then current registration statement or a Notification under Regulation A
under the Securities Act of 1933 (the “Act”)) shall contain the Optionee’s
acknowledgment in form and substance satisfactory to the Company that (a) such
Shares are being purchased for investment and not for distribution or resale
(other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (b) the Optionee has been advised and understands
that (i) the Shares have not been registered under the Act and are “restricted
securities” within the meaning of Rule 144 under the Act and are subject
to restrictions on transfer and (ii) the Company is under no obligation to
register the Shares under the Act or to take any action which would make
available to the Optionee any exemption from such registration, (c) such
Shares may not be transferred without compliance with all applicable federal
and state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions imposed under the
Option Documents may be endorsed on the certificates.  Notwithstanding the foregoing, if the Company
determines that issuance of Shares should be delayed pending (A) registration
under federal or state securities laws, (B) the receipt of an opinion of
counsel satisfactory to the Company that an appropriate exemption from such
registration is available, (C) the listing or inclusion of the Shares on
any securities exchange or an automated quotation system or (D) the
consent or approval of any governmental regulatory body whose consent or
approval is necessary in connection with the issuance of such Shares, the
Company may defer exercise of any Option granted hereunder until any of the
events described in this sentence has occurred.

 

(d)                                 Medium of Payment.  An
Optionee shall pay for Shares (i) in cash, (ii) by certified, bank or
cashier’s check payable in clearing house funds to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve,
including payment

 

4

 

through
a broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board.  Furthermore, the
Committee may provide in an Option Document that payment may be made in whole
or in part in shares of the Company’s Common Stock held by the Optionee.  If payment is made in whole or in part in
shares of the Company’s Common Stock, then the Optionee shall deliver to the
Company certificates registered in the name of such Optionee representing the
shares owned by such Optionee, free of all liens, claims and encumbrances of
every kind and having an aggregate Fair Market Value on the date of delivery
that is at least as great as the Option Price of the Shares (or relevant
portion thereof) with respect to which such Option is to be exercised by the
payment in shares of Common Stock, endorsed in blank or accompanied by stock
powers duly endorsed in blank by the Optionee, In the event that certificates
for shares of the Company’s Common Stock delivered to the Company represent a
number of shares in excess of the number of shares required to make payment for
the Option Price of the Shares (or relevant portion thereof) with respect to
which such Option is to be exercised by payment in shares of Common Stock, the
stock certificate issued to the Optionee shall represent the Shares in respect
of which payment is made, and an additional certificate shall be issued to the
Optionee for such excess number of shares.

 

(e)                                  Termination of Options.

 

(i)                                     No Option shall be exercisable after the
first to occur of the following:

 

(A)                              Expiration of the Option term specified in
the Option Document, which shall not occur after (10) ten years from the
date of grant, or (2) five years from the date of grant of an ISO if the
Optionee on the date of grant owns, directly or by attribution under Section 424(d) of
the Code, shares possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of an Affiliate.

 

(B)                                A Finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and the Optionee, that the
Optionee has breached his employment or service contract with the Company or an
Affiliate, or has been engaged in disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his employment or service, or has
disclosed trade secrets or confidential information of the Company or an
Affiliate, In such event, in addition to immediate termination of the option,
the Optionee shall automatically forfeit all Shares for which the Company has
not yet delivered the share certificates upon refund by the Company of the
Option Price.  Notwithstanding anything
herein to the contrary, the Company may withhold delivery of share certificates
pending the resolution of any inquiry that could lead to a finding resulting in
a forfeiture.

 

(C)                                 The date, if any, set by the Board of
Directors as an accelerated expiration date in the event of the liquidation or
dissolution of the Company.

 

(ii)                                  Notwithstanding the foregoing, the Committee
may extend the period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in the Option
Document pursuant to Subsection 8(e)(i)(A), provided that

 

5

 

any
change pursuant to this Subsection 8(e)(ii) which would cause an ISO
to become a Non-qualified Stock Option may be made only with the consent of the
Optionee.  The Committee may also grant
Options with shorter periods during which the Options may be exercised.

 

(f)                                    Transfers.  No Option granted under the
Plan may be transferred, except by will or by the laws of descent and
distribution.  During the lifetime of the
person to whom an option is granted, such Option may be exercised only by him.  Notwithstanding the foregoing, a Non-qualified
Stock Option may be transferred pursuant to the terms of a “qualified domestic
relations order,” within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended.

 

(g)                                 Limitation on ISO Grants.  In
no event shall the aggregate fair market value of the shares of Common Stock
(determined at the time the ISO is granted) with respect to which incentive
stock options under all incentive stock option plans of the Company or its
Affiliates are exercisable for the first time by the Optionee during any
calendar year exceed $100,000.

 

(h)                                 Other Provisions.  Subject
to the provisions of the Plan, the Option Documents shall contain such other
provisions including, without limitation, provisions authorizing the Committee
to accelerate the exercisability of all or any portion of an option granted
pursuant to the Plan, additional restrictions upon the exercise of the option
or additional limitations upon the term of the Option, as the Committee shall
deem advisable.

 

(i)                                     Amendment.
 Subject to the provisions of the Plan,
the Committee shall have the right to amend Option Documents issued to an
Optionee, subject to the Optionee’s consent if such amendment is not favorable
to the Optionee, except that the consent of the Optionee shall not be required
for any amendment made pursuant to Subsection 8(e)(i)(C) or Section 9
of the Plan, as applicable.

 

9.                                       Adjustments on Changes in Capitalization.  The
aggregate number of Shares and class of shares as to which Options may be
granted hereunder, the number and class or classes of shares covered by each
outstanding Option and the Option Price thereof shall be appropriately adjusted
in the event of a stock dividend, stock split, recapitalization or other change
in the number or class of issued and outstanding equity securities of the
Company resulting from a subdivision or consolidation of the Common Stock
and/or, if appropriate, other outstanding equity securities or a
recapitalization or other capital adjustment (not including the issuance of
Common Stock on the conversion or exchange of other securities of the Company
which are convertible into or exchangeable for Common Stock) affecting the
Common Stock which is effected without receipt of consideration by the Company.
 The Committee shall have authority to
determine the adjustments to be made under this Section, and any such
determination by the Committee shall be final, binding and conclusive;
provided, however, that no adjustment shall be made which will cause an ISO to
lose its status as such without the consent of the Optionee.

 

6

 

10.                                 Amendment of the Plan.  The
Board of Directors of the Company may amend the Plan from time to time in such
manner as it may deem advisable.  Nevertheless,
the Board of Directors of the Company may not change the class of individuals
eligible to receive an ISO or increase the maximum number of shares as to which
Options may be granted without obtaining approval, within twelve months before
or after such action, by vote of a majority of the votes cast at a duly called
meeting of the stockholders at which a quorum representing a majority of all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting on the matter.  No
amendment to the Plan shall adversely affect any outstanding Option, however,
without the consent of the Optionee.

 

11.                                 No Commitment to Retain.  The
grant of an Option pursuant to the Plan shall not be construed to imply or to
constitute evidence of any agreement, express or implied, on the part of the
Company or any Affiliate to retain the Optionee in the employ of the Company or
an Affiliate and/or as a member of the Company’s Board of Directors or in any
other capacity.

 

12.                                 Withholding of Taxes.  Whenever
the Company proposes or is required to deliver or transfer Shares in connection
with the exercise of an Option, the Company shall have the right to (a) require
the recipient to remit or otherwise make available to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Shares or (b) take whatever other action it deems
necessary to protect its interests with respect to tax liabilities.  The Company’s obligation to make any delivery
or transfer of Shares shall be conditioned on the Optionee’s compliance, to the
Company’s satisfaction, with any withholding requirement.

 

13.                                 Interpretation.  The
Plan is intended to enable transactions under the Plan with respect to
directors and officers (within the meaning of Section 16(a) under the
Securities Exchange Act of 1934, as amended) to satisfy the conditions of Rule 16b-3
or its successors; to the extent that any provision of the Plan would cause a
conflict with such conditions or would cause the administration of the Plan as
provided in Section 3 to fail to satisfy the conditions of Rule 16b-3,
such provision shall be deemed null and void to the extent permitted by
applicable law.  This Section shall
not be applicable if no class of the Company’s equity securities is then
registered pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended.

 

7

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