Document:

Exhibit 10.3

 

PTC Therapeutics, Inc.

 

NON-QUALIFIED STOCK OPTION CERTIFICATE

 

THIS NON-QUALIFIED STOCK OPTION CERTIFICATE (this “Certificate”), dated as of XXXX, XXXX, certifies that, pursuant to the PTC Therapeutics, Inc. 1998 Employee, Director and Consultant Stock Option Plan, as it may be amended from time to time, (the “Plan”), the Board of Directors of PTC Therapeutics, Inc. (the “Company”) has granted an Option to purchase shares of Common Stock, $.001 par value per share (the “Shares”), of the Company, as follows:

 

	
 
    	
Name of Optionee: 
    	
XXXX
    	
 
    
	
 
    	
Address of Optionee:
    	
XXXX
    	
 
    
	
 
    	
 
    	
XXXX
    	
 
    
	
 
    	
Grant ID Number:
    	
#XXXX
    	
 
    
	
 
    	
Number of Shares:
    	
XXXX
    	
 
    
	
 
    	
Option Price:
    	
US   $XXX per share
    	
 
    
	
 
    	
Date of Grant:
    	
XXXX
    	
 
    
	
 
    	
Vesting Reference Date:
    	
XXXX
    	
 
    

 

The Option is subject to all the terms, conditions and limitations set forth in the Plan, which is incorporated herein by reference, and to the following additional terms specified by the Board of Directors of the Company. The Optionee acknowledges receipt of a copy of the Plan. All capitalized terms used in this Certificate and not otherwise defined herein shall have the respective meanings ascribed to them in the Plan.

 

The Option shall vest and be exercisable as follows:

 

The shares under each Option shall vest ratably over a 4-year period on a quarterly basis, such that six and one-quarter percent (6 and 1/4%) of the Option becomes exercisable on each quarterly anniversary of the Vesting Reference Date.

 

The Option shall terminate ten (10) years from the Date of Grant or such shorter period as set forth in the Plan in the event of the Optionee’s termination of service, Death or Disability.

 

The Option is not assignable or transferable, other than as provided in the Plan, and is a non-qualified option. Until the effective date of the registration of the Shares pursuant to the Securities Exchange Act of 1934, the Optionee may exercise this Option by written notice to the Company, in substantially the form of Exhibit A attached hereto, and as provided in the Plan. Following such registration of the Shares pursuant to the Securities Exchange Act of 1934, the form of written notice for exercise of the Option shall be in a form to be approved by the Company’s Board of Directors. No partial exercise of the Option may be for less than 100 full shares. In no event shall the Company be required to issue fractional shares.

 

The Optionee acknowledges that upon exercise of the Option the Optionee will be deemed to have taxable income measured by the difference between the then fair market value of the Shares received upon exercise and the price paid for such Shares pursuant to this Certificate. The Optionee acknowledges that any income taxes or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the Optionee’s responsibility.

 

No Shares will be issued pursuant to the exercise of this Option unless and until the Optionee pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of such exercise of this Option. The Company may withhold from the Optionee’s remuneration, if any, any withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income. At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or in kind from the Shares otherwise deliverable to the Optionee on exercise of the Option. The Optionee further agrees that, if the Company does not withhold an amount from the Optionee’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Optionee will reimburse the Company on demand, in cash, for the amount under-withheld prior to the issuance of the Shares upon such exercise.

 

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PTC Nonqualified Stock Option Certificate
    	
Confidential
    

 

The Shares acquired by the Optionee pursuant to the exercise of the Option granted hereby shall not be transferred by the Optionee except as permitted herein. The provisions of this paragraph shall terminate upon the effective date of the registration of the Shares pursuant to the Securities Exchange Act of 1934.

 

In the event of the Optionee’s termination of service for “cause” as defined in Article 11 of the Plan, or in the event the Administrator determines, subsequent to the Optionee’s termination of service, that either prior or subsequent to Optionee’s termination the Optionee engaged in conduct which would constitute “cause,” then the Company shall have the option, but not the obligation, to repurchase all or any part of the Shares issued pursuant to this Certificate (including, without limitation, Shares purchased after termination of employment, consultancy or directorship, Disability or death in accordance with the Plan). In the event the Company does not exercise its option pursuant to this paragraph, the restrictions set forth in the balance of this Certificate shall not thereby lapse, and the Optionee for himself or herself, his or her heirs, legatees, executors, administrators and other successors in interest, agrees that the Shares shall remain subject to such restrictions. The following provisions shall apply to a repurchase under this paragraph:

 

	
(a)
    	
The   per share repurchase price of the Shares to be sold to the Company upon   exercise of its option under this paragraph shall be equal to the Fair Market   Value of each such Share determined in accordance with the Plan as of the   date of termination of service;
    
	
(b)
    	
The   Company’s option to repurchase the Optionee’s Shares in the event of   termination of service shall be valid for a period of eighteen (18) months   commencing with the date of such termination of service;
    
	
(c)
    	
In   the event the Company shall be entitled to and shall elect to exercise its   option to repurchase the Optionee’s Shares under this paragraph, the Company   shall notify the Optionee, or in case of death, his or her representative, in   writing of its intent to repurchase the Shares. Such written notice may be   mailed by the Company up to and including the last day of the time period   provided for in subsection (b) of this paragraph for exercise of the   Company’s option to repurchase;
    
	
(d)
    	
The   written notice to the Optionee shall specify the address at, and the time and   date on, which payment of the repurchase price is to be made (the “Closing”).   The date specified shall not be less than ten (10) days nor more than   sixty (60) days from the date of the mailing of the notice, and the Optionee   or his or her successor in interest with respect to the Shares shall have no   further rights as the owner thereof from and after the date specified in the   notice. At the Closing, the repurchase price shall be delivered to the   Optionee or his or her successor in interest and the Shares being purchased,   duly endorsed for transfer, shall, to the extent that they are not then in   the possession of the Company, be delivered to the Company by the Optionee or   his or her successor in interest; and
    
	
(e)
    	
The   provisions of this paragraph shall terminate upon the effective date of the   registration of the Shares pursuant to the Securities Exchange Act of 1934.
    

 

It shall be a condition precedent to the validity of any sale or other transfer of any Shares by the Optionee that the following restrictions be complied with (except as hereinafter otherwise provided) (the following restrictions, the “ROFR Restrictions”):

 

	
(a)
    	
No   Shares owned by the Optionee may be sold, pledged or otherwise transferred   (including by gift or devise) to any person or entity, voluntarily, or by   operation of law, except in accordance with the terms and conditions   hereinafter set forth;
    
	
(b)
    	
Before   selling or otherwise transferring all or part of the Shares, the Optionee   shall give written notice of such intention to the Company, which notice   shall include the name of the proposed transferee, the proposed purchase   price per share, the terms of payment of such purchase price and all other   matters relating to such sale or transfer, and shall be accompanied by a copy   of the binding written agreement of the proposed transferee to purchase the   Shares of the Optionee. Such notice shall constitute a binding offer by the   Optionee to sell to the Company such number of the Shares then held by the   Optionee as are proposed to be sold in the notice at the monetary price per   share designated in such notice, payable on the terms offered to the Optionee   by the proposed transferee (provided, however, that the Company shall not be   required to meet any non-monetary terms of the proposed transfer, including,   without limitation, delivery of other securities in exchange for the Shares   proposed to be sold). The Company shall give written notice to the Optionee   as to whether such offer has been accepted in whole by the Company within   sixty (60) days after its receipt of written notice from the Optionee. The   Company may only accept such offer in whole and may not accept such offer in   part. Such acceptance notice shall fix a time, location and date for the   closing on such purchase (“Closing Date”) which shall not be less than
    

 

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ten   (10) nor more than sixty (60) days after the giving of the acceptance   notice. The place for such closing shall be at the Company’s principal   office. At such closing, the Optionee shall accept payment as set forth   herein and shall deliver to the Company in exchange therefor certificates for   the number of Shares stated in the notice accompanied by duly executed   instruments of transfer;
    
	
(c)
    	
If   the Company shall fail to accept any such offer, the Optionee shall be free   to sell all, but not less than all, of the Shares set forth in his or her   notice to the designated transferee at the price and terms designated in the   Optionee’s notice, provided that (i) such sale is consummated within six   (6) months after the giving of notice by the Optionee to the Company as   aforesaid, and (ii) the transferee first agrees in writing to be bound   by the provisions of these ROFR Restrictions so that such transferee (and all   subsequent transferees) shall thereafter only be permitted to sell or   transfer the Shares in accordance with the terms hereof. After the expiration   of such six (6) months, the provisions of this paragraph shall again   apply with respect to any proposed voluntary transfer of the Optionee’s   Shares;
    
	
(d)
    	
The   restrictions on transfer contained in this paragraph shall not apply to   (a) transfers by the Optionee to his or her spouse or children or to a   trust for the benefit of his or her spouse or children, (b) transfers by   the Optionee to his or her guardian or conservator, and (c) or transfers   by the Optionee, in the event of his or her death, to his or her   executor(s) or administrator(s) or to trustee(s) under his or   her will (collectively, “Permitted Transferees”); provided however, that in   any such event the Shares so transferred in the hands of each such Permitted   Transferee shall remain subject to this Certificate, and each such Permitted   Transferee shall so acknowledge in writing as a condition precedent to the   effectiveness of such transfer;
    
	
(e)
    	
The   provisions of this paragraph may be waived by the Company. Any such waiver   may be unconditional or based upon such conditions as the Company may impose;   and
    
	
(f)
    	
The   provisions of this paragraph shall terminate upon the effective date of the   registration of the Shares pursuant to the Securities Exchange Act of 1934.
    

 

In the event that the Optionee or his or her successor in interest fails to deliver the Shares to be repurchased by the Company under this Certificate, the Company may elect (a) to establish a segregated account in the amount of the repurchase price, such account to be turned over to the Optionee or his or her successor in interest upon delivery of such Shares, and (b) immediately to take such action as is appropriate to transfer record title of such Shares from the Optionee to the Company and to treat the Optionee and such Shares in all respects as if delivery of such Shares had been made as required by this Certificate. The Optionee hereby irrevocably grants the Company a power of attorney which shall be coupled with an interest for the purpose of effectuating the preceding sentence.

 

If the Company shall pay a stock dividend or declare a stock split on or with respect to any of its Common Stock, or otherwise distribute securities of the Company to the holders of its Common Stock, the number of shares of stock or other securities of Company issued to the Optionee with respect to the Shares then subject to the restrictions contained in this Certificate shall be added to the Shares subject to the Company’s rights to repurchase pursuant to this Certificate. If the Company shall distribute to its stockholders shares of stock of another corporation, the shares of stock of such other corporation, distributed to the Optionee with respect to the Shares then subject to the restrictions contained in this Certificate, shall be added to the Shares subject to the Company’s rights to repurchase pursuant to this Certificate.

 

If the outstanding shares of Common Stock of the Company shall be subdivided into a greater number of shares or combined into a smaller number of shares, or in the event of a reclassification of the outstanding shares of Common Stock of the Company, or if the Company shall be a party to a merger, consolidation or capital reorganization, there shall be substituted for the Shares then subject to the restrictions contained in this Certificate such amount and kind of securities as are issued in such subdivision, combination, reclassification, merger, consolidation or capital reorganization in respect of the Shares subject immediately prior thereto to the Company’s rights to repurchase pursuant to this Certificate.

 

The Company shall not be required to transfer any Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Certificate, or to treat as owner of such Shares, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Shares shall have been so sold, assigned or otherwise transferred, in violation of this Certificate.

 

The Optionee agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, (a) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock of the Company held by the

 

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Optionee (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, and (b) to execute any agreement reflecting clause (a) above as may be requested by the Company or the managing underwriters at the time of such offering.

 

The Optionee acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Optionee any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the employment, consultancy or directorship of the Optionee by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity.

 

All certificates representing the Shares to be issued to the Optionee pursuant to this Certificate shall have endorsed thereon a legend substantially as follows: “The shares represented by this certificate are subject to transfer and other restrictions, each as set forth in a Stock Option Certificate with this Company, a copy of which Certificate is available for inspection at the offices of the Company or will be made available upon request.”

 

Any notices required or permitted by the terms of this Certificate or the Plan shall be given by recognized overnight courier service, facsimile, or registered or certified mail, return receipt requested, addressed to the Company at its principal place of business or to the Optionee at the address set forth above or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized overnight courier service or three business days following mailing by registered or certified mail.

 

This Certificate, together with the Plan and any other written agreement between the Company and the Optionee relevant to the subject matter hereof and executed contemporaneously herewith or hereafter, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof, and no other statement, representation, warranty, covenant or agreement shall affect or be used to interpret, change or restrict, the express terms and provisions of this Stock Option Grant, provided, however, in any event, this Certificate shall be subject to and governed by the Plan.

 

IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its duly authorized officer, and the Optionee or the Optionee’s authorized representative, as the case may be, has hereunto set his or her hand, all as of the date first above written.

 

	
PTC THERAPEUTICS, INC. 
    	
 
    	
OPTIONEE: 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:   
    	
 
    	
Name:   XXXX
    
	
Title:   
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Grant   ID#: XXXX
    	
 
    	
 
    

 

4

 

Exhibit A

 

NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION

 

	
To:
    	
PTC   Therapeutics, Inc.
   100 Corporate Court
   Middlesex Business Center 
   South Plainfield, NJ 07080
    

 

Ladies and Gentlemen:

 

The undersigned entity or individual (the “Optionee”) hereby exercises the Non-Qualified Stock Option to purchase                      shares (the “Shares”) of the common stock, $.001 par value, of PTC Therapeutics, Inc. (the “Company”), at the exercise price of $         per share, pursuant to and subject to the terms of that certain Non-Qualified Stock Option Certificate between the Optionee and the Company dated                   , 20    .

 

Optionee is aware that the issuance of the Shares has not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or any state securities laws. Optionee understands that the reliance by the Company on exemptions under the 1933 Act is predicated in part upon the truth and accuracy of the statements by Optionee in this Notice of Exercise.

 

Optionee hereby represents and warrants that (1) Optionee has been furnished with all information which Optionee deems necessary to evaluate the merits and risks of the purchase of the Shares; (2) Optionee has had the opportunity to ask questions concerning the Shares and the Company and all questions posed have been answered to Optionee’s satisfaction; (3) Optionee has been given the opportunity to obtain any additional information Optionee deems necessary to verify the accuracy of any information obtained concerning the Shares and the Company; and (4) Optionee has such knowledge and experience in financial and business matters that Optionee is able to evaluate the merits and risks of purchasing the Shares and to make an informed investment decision relating thereto.

 

Optionee hereby represents and warrants that Optionee is purchasing the Shares for Optionee’s own account for investment and not with a view to the sale or distribution of all or any part of the Shares.

 

Optionee understands that because the issuance of the Shares has not been registered under the 1933 Act, Optionee must continue to bear the economic risk of the investment for an indefinite time and the Shares cannot be sold unless the Shares are subsequently registered under applicable federal and state securities laws or an exemption from such registration requirements is available.

 

In addition to any other restrictions that may apply, Optionee agrees that Optionee will in no event sell or distribute or otherwise dispose of all or any part of the Shares unless (1) a registration statement covering the Shares under the Securities Exchange Act of 1934 has been effective for at least 90 days or (2) the Company receives an opinion of Optionee’s legal counsel (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.

 

Optionee consents to the placing of a legend on Optionee’s certificate for the Shares stating that the issuance of the Shares has not been registered and setting forth the restriction on transfer contemplated hereby and to the placing of a stop transfer order on the books of the Company and with any transfer agents against the Shares until the Shares may be legally resold or distributed without restriction.

 

Optionee understands that at the present time Rule 144 of the Securities and Exchange Commission (the “SEC”) may not be relied on for the resale or distribution of the Shares by Optionee. Optionee understands that the Company has no obligation to Optionee to register the sale of the Shares with the SEC and has not represented to Optionee that it will register the sale of the Shares.

 

Optionee understands the terms and restrictions on the right to dispose of the Shares set forth in the PTC Therapeutics, Inc. 1998 Employee, Director and Consultant Stock Option Plan, as it may be amended from time to time, and the Non-Qualified Stock Option Certificate, both of which Optionee has carefully reviewed. Optionee consents to the placing of a legend on Optionee’s certificate for the Shares referring to such restriction and the placing of stop transfer orders until the Shares may be transferred in accordance with the terms of such restrictions.

 

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Optionee has considered the Federal, state and local income tax implications of the exercise of the Option and the purchase and subsequent sale of the Shares.

 

Optionee is paying the option exercise price for the Shares as follows:

 

 

 

Please issue the stock certificate for the Shares (check one):

 

o to Optionee; or

 

o to Optionee and                                 , as joint tenants with right of survivorship

 

and mail the certificate to Optionee at the following address:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

Optionee’s mailing address for shareholder communications, if different from the address listed above is:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Optionee   (signature)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Print   Name
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Date
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FEIN/Social   Security Number
    

 

6Exhibit 10.4

 

 

PTC THERAPEUTICS, INC.

 

2009 EQUITY AND LONG TERM INCENTIVE PLAN

 

Contents:

 

1.              Purpose & Eligibility

2.              Administration and Delegation

3.              Stock Available for Awards

4.              Stock Options

5.              Restricted Stock; Restricted Stock Units

6.              Other Stock and Cash Based Awards

7.              Adjustments for Changes in Common Stock and Certain Other Events

8.              General Provisions Applicable to Awards

9.              Miscellaneous

 

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1.              Purpose & Eligibility

 

A.            Purpose:  The purpose of this 2009 Equity and Long Term Incentive Plan (the “Plan”) of PTC Therapeutics, Inc., a Delaware  corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align better the interests of such persons with those of the Company’s stockholders.  Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

 

B.            Eligibility:  All of the Company’s employees, officers, directors, consultants, contractors and advisors are eligible to be granted Options (as defined in Section 4), stock appreciation rights (“SARs”), restricted stock, restricted stock units and other cash and stock based awards (each, an “Award”) under the Plan.  Each person who is granted an Award under the Plan is deemed a “Participant”.  The documentation (written, electronic or otherwise) evidencing each Award is deemed a “Notice of Award”.  Notwithstanding the foregoing, the Board may authorize the grant of an Award to a person not then an employee, officer, director, consultant, contractor or advisor of the Company; provided, however, that the actual grant of such Award shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the delivery of the Notice of Award evidencing such Award.

 

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Administration and Delegation

 

C.            Administration by Board of Directors.  The Plan will be administered by the Board.  The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable.  The Board may construe and interpret the terms of the Plan and any Notices of Award entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency.  All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award.  No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

 

D.            Appointment of Committees.  To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”).  All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 2.C to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.

 

E.             Delegation to Officers.  To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Options and other Awards that constitute rights under Delaware law (subject to any limitations under the Plan) to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine; provided, however, that the Board shall fix the terms of the Awards to be granted by such officers (including the exercise price of the Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to such Awards that the officers may grant; and provided, further, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act). The Board may not delegate authority under this Section to grant Restricted Stock unless Delaware law then permits such delegation.

 

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2.              Stock Available for Awards

 

A.            Number of Shares.  Subject to adjustment under Section 7, Awards may be made under the Plan for up to the number of shares of common stock, par value $0.001 per share, of PTC Therapeutics, Inc. (the “Common Stock”) that is equal to the sum of:

 

I.                800,000 shares of Common Stock; plus

 

II.           such additional number of shares of Common Stock (up to 3,850,000 shares) as is equal to the sum of (x) the number of shares of Common Stock reserved for issuance under the Company’s 1998 Employee, Director And Consultant Stock Option Plan, as amended and restated (the “1998 Plan”) that remained available for grant under the 1998 Plan upon the termination of the 1998 Plan and (y) the number of shares of Common Stock subject to awards granted under the 1998 Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right; plus

 

III.      an annual increase to be added on the first day of each of the Company’s fiscal years during the term of the Plan beginning in fiscal year 2010 equal to the lowest of (i) 800,000 shares of Common Stock, (ii) 4% of the outstanding shares of Common Stock on such date (including for such purposes all shares of Common Stock issuable upon conversion of all then-outstanding shares of the Company’s preferred stock) and (iii) an amount determined by the Board.

 

If any Award expires or is terminated, surrendered or canceled without having been fully exercised, is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), is settled in cash or otherwise results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan.  However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code.  Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.  The Board may provide that Awards be granted subject to subsequent approval by the shareholders of the Company of any amendments to this Plan; provided, however, that the actual grant of such Award shall be conditioned upon obtaining such shareholder approval prior to the time of the delivery of the Notice of Award evidencing such Award

 

B.            Section 162(m) Per-Participant Limit.  Subject to adjustment under Section 6, for Awards granted after the Common Stock is registered under the Exchange Act, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 400,000 per fiscal year.  For purposes of the foregoing limit, the combination of an Option in tandem with a SAR shall be treated as a single Award.  The per-Participant limit described in this Section 2.B shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).

 

C.            Substitute Awards.  In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof (“Substitute Awards”).  Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan.  Substitute Awards shall not count against the overall share limit set forth in Section 3.A, except as may be required by reason of Section 422 and related provisions of the Code.

 

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3.              Stock Options

 

A.            General.  The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.  An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be a “Nonstatutory Stock Option”.

 

B.            Incentive Stock Options.  An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company, any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code.  The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.

 

C.            Exercise Price.  The Board shall establish the exercise price of each Option and specify the exercise price in the Notice of Award for such Option.  The exercise price shall not be less than 100% of the Fair Market Value on the date the Option is granted; provided, however, that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on such future date.  As used in this Plan, “Fair Market Value” means the fair market value of a share of Common Stock as determined by (or in a manner approved by) the Board.

 

D.            Duration of Options.  Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable Notice of Award; provided, however, that no Option will be granted for a term in excess of 10 years; and provided, further, that if no term is specified in the Notice of Award for an Option, then the term of such Option shall be 10 years.

 

E.             Exercise of Option.  Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with payment in full as specified in Section 3.F for the number of shares for which the Option is exercised (which number must not result in the issuance of a fractional share).  Shares of Common Stock subject to the Option will be issued by the Company following exercise as soon as practicable following exercise.

 

F.              Payment Upon Exercise.  Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

 

I.                in cash or by check, payable to the order of the Company;

 

II.           when the Common Stock is registered under the Exchange Act, except as may otherwise be provided in the applicable Notice of Award, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

 

III.      when the Common Stock is registered under the Exchange Act, to the extent provided for in the applicable Notice of Award or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value; provided:  (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

 

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IV.       to the extent provided for in the applicable Notice of Award or approved by the Board in its sole discretion, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive the number of shares of Common Stock underlying the Option so exercised reduced by the number of shares of Common Stock equal to the aggregate exercise price of the Option divided by the Fair Market Value on the date of exercise; provided, however, that such provision shall only be operative in a Notice of Award for an Incentive Stock Option to the extent that the inclusion of such provision will not cause the Option to fail to qualify as an Incentive Stock Option under the applicable Code rules;

 

V.            to the extent permitted by applicable law and provided for in the applicable Notice of Award or approved by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

 

VI.       by any combination of the above permitted forms of payment.

 

Notwithstanding the foregoing, payment for Common Stock purchased upon the exercise of an Incentive Stock Option may only be made in a manner permitted by Section 422 of the Code.

 

G.            Effect on Options of Termination of a Participant’s Service for Good Cause.  Except to the extent specifically provided to the contrary in the Notice of Award evidencing a particular Option, if a Participant’s service (whether as an employee, director or consultant) with the Company is terminated for Good Cause prior to the time that any of such Participant’s Options have been exercised in full, all such outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated for Good Cause will immediately be forfeited.  Furthermore, in the event that the Company determines that a Participant’s discharge for Good Cause was warranted as contemplated by the last sentence of the following paragraph and such determination occurs prior to the exercise of an Option, the right to exercise any such Option shall be forfeited.  The Company may suspend the ability of a Participant to exercise any Options during the time period in which the Company may determine whether discharge for Good Cause was warranted.

 

As used in this Plan, except as otherwise defined in a Notice of Award, or in any other agreement between the Company and a particular Participant, “Good Cause” shall mean a good faith finding by the Company that a Participant has:  (i) failed to perform or was negligent in performing his or her duties diligently and such failure or negligence is not substantially cured with 30 days after such Participant’s receipt of written notice from the Company of such failure or negligence, (ii) engaged in serious misconduct, including but not limited to misconduct harmful to the interests of the Company which causes economic damage to the Company (for example, misappropriation of Company funds), (iii) engaged in conduct which significantly interferes with such Participant’s ability to perform his or her duties (for example, abuse of alcohol or illicit drugs, or criminal or immoral acts that damage the Company or its reputation), or (iv) a material breach by such Participant of any employment agreement, confidentiality agreement, assignment of inventions agreement, non-competition agreement or non-solicitation agreement to which such Participant is a party that is not substantially cured within 30 days after such Participant’s receipt of written notice from the Company of the breach.  A Participant shall be considered to have been discharged for “Good Cause” if the Company determines, within 30 days after such Participant’s resignation or termination, that discharge for Good Cause was warranted and the Company provides written notice to such Participant listing the reasons for such determination no later than 45 days after such resignation or termination.

 

H.           Effect on Options of Termination of Service for Disability.  Except to the extent specifically provided to the contrary in the Notice of Award evidencing a particular Option, a Participant who ceases to be an employee, director or consultant of the Company by reason of such Participant becoming Disabled (within the meaning of Section 22(e)(3) may exercise any Option granted to such Participant:

 

I.                To the extent that the Option has become exercisable according to the vesting period of such Option as of the date that such Participant became Disabled; and

 

II.           To the extent of a pro rata portion through such date of disability of any additional Options that would have become exercisable on the next vesting date had the Participant not become Disabled.

 

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The proration shall be based upon the number of days accrued in the current vesting period prior to such date of disability.

 

A Disabled Participant may exercise such rights only within the period ending one (1) year after the date of the Participant’s termination of employment, directorship or consultancy, as the case may be, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not become Disabled and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

 

The Board shall make the determination both of whether a Participant has become Disabled and the date that such Participant became Disabled (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Board, the cost of which examination shall be paid for by the Company.

 

I.                Effect on Options of a Participant’s Death.  Except to the extent specifically provided to the contrary in the Notice of Award evidencing a particular Option, in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company, the deceased Participant’s legal representatives and/or any person or persons who acquired such Participant’s rights to an Option by will or by the laws of descent and distribution (collectively, “Survivors”) may exercise any outstanding Option granted to such Participant:

 

I.                To the extent that the Option has become exercisable according to the vesting period of such Option as of the date of death; and

 

II.           To the extent of a pro rata portion through the date of death of any additional Options that would have become exercisable on the next vesting date had such Participant not died.  The proration shall be based upon the number of days accrued in the current vesting period prior to the date of death.

 

If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one (1) year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

 

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4.              Restricted Stock; Restricted Stock Units

 

A.            General.  The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Notice of Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award.  Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests (“Restricted Stock Units”).  Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”.

 

B.            Terms and Conditions for all Restricted Stock Awards.  The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

 

C.            Additional Provisions Relating to Restricted Stock.

 

I.                Dividends.  Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided by the Board.  Unless otherwise provided by the Board, if any such dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid.  Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the date the dividends are paid to stockholders of that class of stock.

 

II.           Stock Certificates.  The Company may require that any stock certificates issued in respect of shares of Restricted Stock shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee).  At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”).  In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.

 

D.            Additional Provisions Relating to Restricted Stock Units.

 

I.                Settlement.  Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Notice of Award.  The Board may, in its discretion, provide in the applicable Notice of Award that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant in a manner that complies with Code Section 409A.

 

II.           Voting Rights.  A Participant shall have no voting rights with respect to any Restricted Stock Units.

 

III.      Dividend Equivalents.  To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”).  Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cash and/or shares of Common Stock and may be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board in its sole discretion, subject in each case to such terms and conditions as the Board shall establish, in each case to be set forth in the applicable Notice of Award.

 

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5.              Other Stock-Based and Cash-Based Awards

 

A.            General.  Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock or SARs to be delivered in the future.  Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan.  Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine.  Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based or Cash-Based Award, including any purchase price applicable thereto.

 

B.            Terms and Conditions.  The Company may also grant Performance Awards (as defined below) or other Awards denominated in cash rather than shares of Common Stock (“Cash-Based Awards”).

 

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6.              Adjustments for Changes in Common Stock and Certain Other Events

 

A.            Changes in Capitalization.  In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 3.B, (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share- and per-share provisions and the exercise price of each SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (vi) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

 

B.            Fundamental and Change in Control Events.

 

I.                Definitions.

 

a.              A “Fundamental Event” shall mean:

 

i                     any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled;

 

ii                  any transfer or disposition of all of the Common Stock of the Company for cash or other securities or other property pursuant to a share exchange transaction; or

 

iii               any liquidation or dissolution of the Company.

 

b.              A “Change in Control Event” shall mean:

 

i                     the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x) the aggregate number of shares of Common Stock then outstanding (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection i, the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection iii of this definition or (D) any acquisition by any corporation pursuant to a Business Combination (as defined below) immediately following which either one of the following two conditions is met: (1) a majority of the Board of Directors of the Company consists of individuals who

 

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were directors of the Company prior to such acquisition or (2) the management team of the Company consists of substantially the same group of individuals performing in similar roles to those that existed prior to such acquisition; or

 

ii                  such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of this Plan by the Board or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

 

iii               the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or the liquidation or dissolution of the Company.

 

c.               “Good Cause” shall have the meaning set forth in Section 4.G.

 

d.              “Good Reason” shall mean (i) a material reduction in the scope or nature of the authority, powers, functions or duties of the Participant (other than in connection with circumstances that would constitute Good Cause for termination) from and after such Fundamental Event or Change in Control Event, as the case may be, or (ii) a material reduction in the Participant’s base salary from and after such Fundamental Event or Change in Control Event, as the case may be.

 

II.           Effect on Options.

 

a.              Fundamental Event.  Upon the occurrence of a Fundamental Event (regardless of whether such event also constitutes a Change in Control Event), or the execution by the Company of any agreement with respect to a Fundamental Event (regardless of whether such event will result in a Change in Control Event), the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); provided, however, that if such Fundamental Event also constitutes a Change in Control Event, except to the extent specifically provided to the contrary in the Notice of Award evidencing any Option or in any other agreement between a Participant and the Company, (A) one-half of the number of shares subject to the Option which were not already

 

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vested shall be exercisable upon the occurrence of such Fundamental Event and, subject to (B) below, the remaining one-half of such number of shares shall continue to become vested in accordance with the original vesting schedule of such Option, with one-half of the number of shares that would otherwise have become vested on each subsequent vesting date in accordance with the original schedule becoming vested on each subsequent vesting date and (B) such assumed or substituted options shall become immediately exercisable in full if, on or prior to the first anniversary of the date of the consummation of the Fundamental Event, the Participant’s employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Good Cause by the Company or the acquiring or succeeding corporation.  For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Fundamental Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Fundamental Event, the consideration (whether cash, securities or other property) received as a result of the Fundamental Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Fundamental Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Fundamental Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Fundamental Event.

 

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, or in the event of a liquidation or dissolution of the Company, the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Fundamental Event and will terminate immediately prior to the consummation of such Fundamental Event, except to the extent exercised by the Participants before the consummation of such Fundamental Event; provided, however, that in the event of a Fundamental Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Fundamental Event (the “Acquisition Price”), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Fundamental Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options.

 

b.              Change in Control Event that is not a Fundamental Event.  Upon the occurrence of a Change in Control Event that does not also constitute a Fundamental Event, except to the extent specifically provided to the contrary in the Notice of Award evidencing any Option or in any other agreement between a Participant and the Company, (A) one-half of the number of shares subject to the Option which were not already vested shall be exercisable upon the occurrence of such Change in Control Event and, subject to (B) below, the remaining one-half of such number of shares shall continue to become vested in accordance with the original vesting schedule of such Option, with one-half of the number of shares that would otherwise have become vested on each subsequent vesting date in accordance with the original schedule becoming vested on each such subsequent vesting date and (B) such Option shall become immediately exercisable in full if, on or prior to the first anniversary of the date of the consummation of the Change in Control Event, the Participant’s employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Good Cause by the Company or the acquiring or succeeding corporation.

 

III.      Effect on Restricted Stock Awards.

 

a.              Fundamental Event that is not a Change in Control Event.  Upon the occurrence of a Fundamental Event that is not a Change in Control Event, the repurchase and other rights of

 

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the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Fundamental Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

 

a.              Change in Control Event.  Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes a Fundamental Event), except to the extent specifically provided to the contrary in the Notice of Award evidencing any Restricted Stock Award or in any other agreement between a Participant and the Company, the vesting schedule of all Restricted Stock Awards shall be accelerated in part so that one-half of the number of shares that would otherwise have first become free from conditions or restrictions on any date after the date of the Change in Control Event shall immediately become free from conditions or restrictions.  Subject to the following sentence, the remaining one-half of such number of shares shall continue to become free from conditions or restrictions in accordance with the original vesting schedule of such Restricted Stock Award, with one-half of the number of shares that would otherwise have become free from conditions or restrictions on each subsequent vesting date in accordance with the original schedule becoming free from conditions or restrictions on each subsequent vesting date.  In addition, each such Restricted Stock Award shall immediately become free from all conditions or restrictions if, on or prior to the first anniversary of the date of the consummation of the Change in Control Event, the Participant’s employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Good Cause by the Company or the acquiring or succeeding corporation.

 

IV.       Effect on Other Stock-Based Awards.

 

a.              The Board may specify in the applicable Notice of Award at the time of the grant the effect of a Fundamental Event and Change in Control Event on any Other Stock-Based Award.

 

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7.              General Provisions Applicable to Awards

 

A.            Transferability of Awards.  Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (or other formal division of property rights set forth in an authorized settlement agreement arising from the Participant’s divorce), and, during the life of the Participant, shall be exercisable only by the Participant (or by the Participant’s legal representative); provided, however, that the gratuitous transfer of the Award by the Participant to or for the benefit of any Immediate Family Member of such Participant or any trust or other entity established for the benefit of the Participant and/or an Immediate Family Member thereof shall be permitted if, with respect to such proposed transferee, the Company would be eligible to use a Registration Statement on Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such authorized 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 the Award; and, provided, further, that no option intended to be an Incentive Stock Option shall be transferable or exercisable by any person other than the Participant unless the Board shall otherwise permit.  References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

 

“Immediate Family Member” of any person means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, domestic partner and any person sharing such person’s household (other than a tenant or employee).

 

B.            Notices of Award.  Each Notice of Award shall be in such form (written, electronic or otherwise) as the Board shall determine, which form need not require a signature, or other form of acknowledgement of the applicable award, by the Participant.  Each Notice of Award may contain terms and conditions in addition to those set forth in the Plan.

 

C.            Board Discretion.  Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award.  The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

 

D.            Termination of Status.  The Board shall determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.  Except as otherwise required by law or as specifically provided in a Notice of Award, military or sick leave or other bona fide leave consistent with the applicable Company policy shall not be deemed, by virtue of such leave alone, a termination of employment, provided that it does not exceed the longer of ninety (90) days or the period during which the absent Participant’s reemployment rights, if any, are guaranteed by statute or by contract.  Except as otherwise required by law or as specifically provided in a Notice of Award, Awards granted under the Plan shall not be affected by any change of a Participant’s status within the Company, so long as such Participant remains an employee, officer, director, consultant, contractor or advisor of the Company.

 

E.             Withholding.  The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award.  The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages.  If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations.  Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise.  If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares

 

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retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income).  Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

 

F.              Amendment of Award.

 

I.                The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option  The Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 7 hereof.

 

II.           The Board may, without stockholder approval, amend any outstanding Award granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Award.  The Board may also, without stockholder approval, cancel any outstanding award (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled award.

 

G.            Conditions on Delivery of Stock.  The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

 

H.           Acceleration.  The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

 

I.                Performance Awards.

 

I.                Grants.  When the Common Stock is registered under the Exchange Act, Restricted Stock Awards and Other Stock-Based Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 7.I (“Performance Awards”), subject to the limit in Section 2.B on shares covered by such grants.  Performance Awards can also provide for cash payments of up to $500,000 per calendar year per individual.

 

II.           Committee.  Grants of Performance Awards to any Covered Employee intended to qualify as “performance-based compensation” under Section 162(m) (“Performance-Based Compensation”) shall be made only by a Committee (or subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as “performance-based compensation” under Section 162(m).  In the case of such Awards granted to Covered Employees, references to the Board or to a Committee shall be deemed to be references to such Committee or subcommittee.  “Covered Employee” shall mean any person who is, or whom the Committee, in its discretion, determines may be, a “covered employee” under Section 162(m)(3) of the Code.

 

III.      Performance Measures.  For any Award that is intended to qualify as Performance-Based Compensation, the Committee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall be based on the relative or absolute attainment of specified levels of one or any combination of the following:  (a) net income, (b) earnings before or after discontinued

 

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operations, interest, taxes, depreciation and/or amortization, (c) operating profit before or after discontinued operations and/or taxes, (d) sales, (e) sales growth, (f) earnings growth, (g) cash flow or cash position, (h) gross margins, (i) stock price, (j) market share, (k) return on sales, assets, equity or investment, (l) improvement of financial ratings, (m) achievement of balance sheet or income statement objectives; (n) total stockholder return; or (o) achievement of milestones with respect to discovery and development of therapeutic, diagnostic or prophylactic products, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated.  The Committee may specify that such performance measures shall be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, and (v) charges for restructuring and rationalization programs.  Such performance measures:  (i) may vary by Participant and may be different for different Awards; (ii) may be particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may cover such period as may be specified by the Committee; and (iii) shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m).  Awards that are not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine.

 

IV.       Adjustments.  Notwithstanding any provision of the Plan, with respect to any Performance Award that is intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance measures except in the case of the death or disability of the Participant or a Change in Control Event.

 

V.            Other.  The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation.

 

J.                Agreement in Connection with Initial Public Offering.  The receipt of any Award under this Plan shall be deemed to constitute the agreement by each Participant, in connection with the initial underwritten public offering of the Common Stock pursuant to a registration statement under the Securities Act, (1) not to (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any other securities of the Company or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of shares of Common Stock or other securities of the Company, whether any transaction described in clause (i) or (ii) is to be settled by delivery of securities, in cash or otherwise, during the period beginning on the date of the filing of such registration statement with the Securities and Exchange Commission and ending 180 days after the date of the final prospectus relating to the offering (plus up to an additional 34 days to the extent requested by the managing underwriters for such offering in order to address Rule 2711(f) of the Financial Industry Regulatory Authority or any similar successor provision), and (2) to execute any agreement reflecting clause (1) above as may be requested by the Company or the managing underwriters at the time of such offering.  The Company may impose stop-transfer instructions with respect to the shares of Common Stock or other securities subject to the foregoing restriction until the end of the foregoing “lock-up” period.

 

K.           Interaction with Employment Agreements.  Except as otherwise expressly provided in any particular Notice of Award, in case of any conflict between the terms of a particular Notice of Award and any employment agreement to which a Participant is a party, the terms of such employment agreement shall control.

 

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8.              Miscellaneous

 

A.            No Right to Employment or Other Status.  No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company.  The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Notice of Award or in any other agreement between such Participant and the Company

 

B.            No Rights as Stockholder.  Subject to the provisions of the applicable Notice of Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.

 

C.            Effective Date and Term of Plan.  The Plan shall become effective on the date on which it is adopted by the Board.  No Awards shall be granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

 

D.            Amendment of Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided that:  (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)); and (ii) no amendment that would require stockholder approval under the rules of any securities exchange on which the Common Stock is listed may be made effective unless and until such amendment shall have been approved by the Company’s stockholders.  In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval.  Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 12(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan.

 

E.             Authorization of Sub-Plans.  The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions.  The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable.  All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

 

F.              Provisions for Foreign Participants.  The Board may modify Awards or Options granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.

 

G.            Compliance with Code Section 409A.  The Company makes no representation or warranty and shall have no liability to the Participant or any other person if provision of or payments, compensation or other benefits under the Plan are determined to constitute non-qualified deferred compensation subject to Code Section 409A but do not satisfy the requirements under that section.

 

H.           Governing Law.  The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.

 

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