Document:

Exhibit
10.22

 

PARAGON
SOLUTIONS, INC.

INCENTIVE
STOCK PLAN

 

1.  Purpose.  The Paragon Solutions, Inc.
Incentive Stock Plan (the “Plan”) is intended to provide incentives which will
attract and retain highly competent persons as officers and employees of Paragon
Solutions, Inc. and its designated subsidiaries (collectively, the “Company”),
as well as independent contractors providing consulting or advisory services to
the Company (including members of the Company’s Board of Directors (the
“Board”)), by providing them opportunities to acquire shares of common stock of
Paragon Solutions, Inc. (“Common Shares”) pursuant to Options, as described
herein.

 

2.  Administration.

 

(a)  The
Plan will be administered by the Board unless and until the Board delegates, or
is required to delegate, administration to a Committee, as provided in Sections
2(b) or 2(c) below.  The Board is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary or appropriate for the proper administration
of the Plan and to make such determinations and interpretations and to take
such action in connection with the Plan and any Options granted hereunder as it
deems necessary or advisable.  All
determinations and interpretations made by the Board shall be binding and
conclusive on all participants and their legal representatives.  No member of the Board, and no employee of
the Company shall be liable for any act or failure to act hereunder, by any
other member or employee or by any agent to whom duties in connection with the
administration of this Plan have been delegated or, except in circumstances
involving his bad faith, gross negligence or fraud, for any act or failure to
act by the member or employee.

 

(b)  The
Board may delegate all or any portion of administration of the Plan to a
committee composed of not fewer than two (2) members of the Board (the
“Committee”).  If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee, as
applicable), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may terminate all or any portion
of the Committee’s authority under the Plan at any time and revest in the Board
all or any portion of the administration of the Plan.

 

(c)  The
Board shall be required to delegate administration of the Plan to a Committee,
all of whose members shall be “nonemployee directors,” effective on and after
the date of the first registration of an equity security of the Company under
Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”).  Any “nonemployee director” shall otherwise
comply with the requirements of Rule 16b-3 of the Exchange Act as in effect at
the relevant time and, to the extent necessary, Internal Revenue Code Section
162(m).

 

3.  Participants.  Participants will consist of
such officers and employees of the Company, and independent contractors
providing consulting or advisory services to the Company (including members of
the Board), as the Board, in its sole discretion, determines to be
significantly responsible for the success and future growth and profitability
of the Company and whom the Board may designate from time to time to receive
Options under the Plan.  Designation as
a participant in any year shall not require the Board to designate such person
to receive an Option in any other year or, once designated, to receive the same
type or amount of Options as granted to the participant, or any other
participant, in any year.  The Board
shall consider such factors as it deems pertinent in selecting participants and
in determining the type and amount of their respective Options.

 

4.  Shares Reserved under the Plan. 
There is hereby reserved for issuance under the Plan an aggregate of
773,620 Common Shares.  Any shares
subject to any form of Option hereunder may thereafter be subject to new
Options under this Plan if there is a lapse, expiration or termination of any
such Options granted prior to issuance of the shares, or if shares are issued
under Options and thereafter are reacquired by the Company pursuant to rights
reserved by the Company upon issuance thereof. 
All of the available Common Shares may, but need not, be issued pursuant
to Incentive Stock Options (as

 

 

defined
below).

 

5.  Options.  Options will consist of awards
from the Company that will enable the holder to purchase a specific number of
Common Shares, at set terms and at a fixed purchase price.  Options may be “incentive stock options”
within the meaning of Section 422 of the Internal Revenue Code (“Incentive
Stock Options”) or Options that do not constitute Incentive Stock Options
(“Nonqualified Stock Options,” and together with Incentive Stock Options,
“Options”).  The Board will have the
authority to grant to any participant one or more Incentive Stock Options,
Nonqualified Stock Options, or both types of Options.  Each Option shall be evidenced by a written option agreement in
such form and shall be subject to such terms and conditions as the Board may
approve from time to time, including without limitation the following:

 

(a)  Exercise Price.  Each Option granted hereunder
shall have such per-share exercise price as the Board may determine at the date
of grant; provided, however, that the per-share exercise price for Nonqualified
Stock Options shall not be less than 85% of the Fair Market Value of the Common
Shares on the date the option is granted, and provided further that the
per-share exercise price for Incentive Stock Options shall not be less than
100% of the Fair Market Value of the Common Shares on the date the option is
granted

 

(b)  Payment of Exercise Price.  The
option exercise price may be paid by check or, in the discretion of the Board,
by the delivery (or certification of ownership) of Common Shares of the Company
then owned by the participant; provided, however, that payment of the exercise
price by delivery of Common Shares of the Company then owned by the participant
may be made only if such payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board.  In the discretion of the Board, if Common
Shares are readily tradeable on a national securities exchange or other market
system at the time of option exercise, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price.  To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms.

 

(c)  Exercise Period.  Options granted under the Plan
shall be exercisable at such times and subject to such terms and conditions as
shall be determined by the Board; provided, however, that Nonqualified Stock
Options shall not be exercisable more than 15 years after the date they are
granted and Incentive Stock Options shall not be exercisable more than 10 years
after the date they are granted.  All
Options shall terminate at such earlier times and upon such conditions or
circumstances as the Board shall in its sole discretion set forth in such
option at the date of grant, including but not limited to limitations on
exercisability following termination of the participant’s employment or
consulting relationship.

 

(d)  Limitations on Incentive Stock Options.  Incentive
Stock Options may be granted only to participants who are employees of the
Company or one of its subsidiaries (within the meaning of Section 424(f) of the
Internal Revenue Code) at the date of grant. 
The aggregate Fair Market Value (determined as of the time the option is
granted) of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by a participant during any calendar year (under
all option plans of the Company) shall not exceed $100,000.  Incentive Stock Options may not be granted
to any participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company,
unless the option price is fixed at not less than 110% of the Fair Market Value
of the Common Shares on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five years from the date of
grant of such option.

 

(e)  Redesignation as Nonqualified Stock Options. 
Options designated as Incentive Stock Options that fail to meet the
requirements of Section 422 of the Internal Revenue Code shall be redesignated
as nonqualified options for Federal income tax purposes automatically without
further action by the Board on the date of such failure to continue to meet the
requirements of Section 422 of the Code.

 

(f)  Limitation of Rights in Shares.  The
recipient of an Option shall not be deemed for

 

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any purpose to be a shareholder of the Company with respect to any of
the shares subject thereto except to the extent that the Option shall have been
exercised and, in addition, a certificate shall have been issued and delivered
to the participant.

 

(g)  Individual Limitation on Number of Shares. 
Following the date of the first registration of an equity security of
the Company under Section 12 of the Exchange Act, the maximum number of Common
Shares with respect to which Options may be granted during any calendar year to
any one participant under this Plan shall not exceed 10% of authorized stock
for options pursuant to Section 4, subject to adjustment as provided in Section
6.

 

6.  Adjustment Provisions.

 

(a)  If
the Company shall at any time change the number of issued Common Shares without
new consideration to the Company by stock dividend, stock split,
recapitalization, reorganization, exchange of shares, liquidation, combination
or other change in corporate structure affecting the Common Shares, the total
number of shares available for Options under this Plan shall be appropriately
adjusted and the number of shares covered by each outstanding Option and the
exercise price thereunder shall be adjusted so that the net value of such
Option shall not be changed, all of the foregoing, including the appropriations
of any such adjustment as determined by the Board, in its discretion.  It is specifically understood that the provisions
of this subsection (a) are intended to apply solely to capital events that are
independent of, and unrelated to, any transaction involving the direct or
indirect sale or issuance of securities of the Company for value (and
irrespective of the adequacy of the consideration so paid).

 

(b)  In
the case of any sale of assets, merger, consolidation, combination or other
corporate reorganization or restructuring of the Company with or into another
corporation which results in the outstanding Common Shares being converted into
or exchanged for different securities, cash or other property, or any
combination thereof (an “Acquisition”), subject to the provisions of this Plan
and any limitation applicable to the Option, any participant to whom an Option
has been granted shall have the right thereafter and during the term of the
Option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon the Acquisition by a holder of the number of
Common Shares that might have been obtained upon exercise of the Option or portion
thereof, as the case may be, immediately prior to the Acquisition.  The term “Acquisition Consideration” shall
mean the kind and amount of securities, cash or other property or any
combination thereof receivable in respect of one Common Share upon consummation
of an Acquisition.

 

(c) 
Notwithstanding any other provision of this Plan to the contrary,
whether express or implied, the Board may, in its sole discretion, by providing
at least 30-days prior written notice to the participant, elect to (i) accelerate
the date of expiration of outstanding Options to the effective date of an
Acquisition or (ii) require that in lieu of the exercise of an Option, that the
participant be provided with a net payment as set forth in this Section 6(c).  Any payments to be made to a participant
under this Section 6(c) shall be in an amount equal to the excess, if any, of
(i) the fair market value of the Common Stock on the effective date of the
Acquisition over (ii) the exercise price as provided herein, multiplied by the
number of shares for which the number of option shares with respect to which
such payment is being made, less any required withholding taxes.  Payments under this Section 6(c) may be
made, in the sole discretion of the Company, (i) in cash, (ii) in the Acquisition
Consideration being paid in connection with such Acquisition, or (iii) any
combination of the foregoing.

 

7.  Nontransferability.

 

(a) 
Each Option granted under the Plan to a participant shall not be
transferable by him otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the participant’s lifetime, only
by him.  In the event of the death of a
participant while the participant is rendering employment, consulting or
advisory services to the Company, each Option theretofore granted to him shall
be exercisable during such period after his death as the Board shall in its
discretion set forth in such option at the date of grant (but not beyond the
stated duration of the option) and then only:

 

(i)  By
the executor or administrator of the estate of the deceased participant or the

 

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person or persons to whom
the deceased participant’s rights under the Option shall pass by will or the
laws of descent and distribution; and

 

(ii)  To
the extent that the deceased participant was entitled to do so at the date of
his death.

 

(b)  Notwithstanding
Section 7(a), in the discretion of the Board, Options granted hereunder may be
transferred to members of the participant’s immediate family (which for
purposes of this Plan shall be limited to the participant’s children,
grandchildren and spouse), or to one or more trusts for the benefit of such
family members, or to partnerships or limited liability companies in which such
family members and/or trusts are the only partners or members, but only if the
Option expressly so provides.

 

8.  Other Provisions.  Options granted under the Plan
may also be subject to such other provisions (whether or not applicable to any
other Options awarded under the Plan to the participant or to any other
participant) as the Board determines appropriate, including without limitation,
provisions for the installment purchase of Common Shares, provisions to assist
the participant in financing the acquisition of Common Shares, provisions for
the forfeiture of, or restrictions on resale or other disposition of, Common
Shares acquired under any form of Option, provisions for the deferral of option
gains, provisions for the acceleration of exercisability and/or early
termination of Options in the event of a change of control of the Company,
provisions for the payment of the value of Options to participants in the event
of a change of control of the Company, provisions for the forfeiture of the
Options, or provisions to comply with Federal and state securities laws, or
understandings or conditions as to the participant’s employment in addition to
those specifically provided for under the Plan.

 

9.  Fair Market Value.  For
purposes of this Plan and any Options awarded hereunder, the Fair Market Value
of Common Shares shall be the mean between the highest and lowest sale prices
for the Company’s Common Shares as reported on the Nasdaq National Market (or
such other consolidated transaction reporting system on which such Common
Shares are primarily traded) on the date of calculation (or on the next
preceding trading date if Common Shares were not traded on the date of
calculation); provided, however, that if the Company’s Common Shares are not at
any time readily tradeable on a national securities exchange or other market
system, Fair Market Value shall mean the amount determined in good faith by the
Board as the fair market value of the Common Shares of the Company.

 

10.  Withholding.  All payments or distributions made
pursuant to the Plan shall be net of any amounts required to be withheld
pursuant to applicable federal, state and local income and/or employment tax
withholding requirements.  If the
Company proposes or is required to distribute Common Shares pursuant to the
exercise of Options, it may require the recipient to remit to it an amount
sufficient to satisfy such tax withholding requirements prior to the delivery
of any certificates for such Common Shares. 
The Board may, in its discretion and subject to such rules as it may
adopt, permit an optionee to pay all or a portion of the federal, state and
local withholding taxes arising in connection with the exercise of an Option,
by electing to have the Company withhold Common Shares having a Fair Market
Value equal to the amount of taxes required to be withheld.

 

11.  Tenure.  A participant’s right, if any,
to continue to serve the Company as an officer, employee, consultant, advisor,
or otherwise, shall not be enlarged or otherwise affected by his designation as
a participant under the Plan, nor shall this Plan in any way interfere with the
right of the Company, subject to the terms of any separate agreement to the
contrary, at any time to terminate such employment, consulting or advisory
relationship, or to increase or decrease the compensation of the participant
from the rate in existence at the time of the grant of an Option.

 

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12.  Duration, Amendment and Termination.  No
Option shall be granted after November 5, 2009; provided, however, that the
terms and conditions applicable to any Option granted prior to such date may
thereafter be amended or modified by mutual agreement between the Company and
the participant or such other persons as may then have an interest
therein.  Also, by mutual agreement
between the Company and a participant hereunder, under this Plan or under any
other present or future plan of the Company, Options may be granted to such
participant in substitution and exchange for, and in cancellation of, any
Options previously granted such participant under this Plan, or any other
present or future plan of the Company. 
The Board may amend the Plan from time to time or terminate the Plan at
any time, subject to any requirement of stockholder approval required by
applicable law, rule or regulation. 
However, no action authorized by this Section 12 shall reduce the amount
of any outstanding Option or change the terms or conditions thereof without the
participant’s consent.

 

13.  Governing Law.  This Plan and actions taken in
connection herewith shall be governed and construed in accordance with the laws
of the State of Illinois (regardless of the law that might otherwise govern
under applicable Illinois principles of conflict of laws).

 

14.                               Approval.  The
Plan was adopted by the Board of the Company on September 24, 1999 and the
shareholders of the Company on November 19, 1999.

 

5Exhibit
10.22.1

 

STOCK
OPTION AGREEMENT

under
the

PARAGON
SOLUTIONS, INC.

INCENTIVE
STOCK OPTION PLAN

 

Number Shares
Subject to Option: 
See the Notice of Conversion of Paragon Solutions, Inc. Stock Options
delivered with this Agreement (the “Conversion Notice”)

 

Exercise Price per
Share:   $

 

Date of Grant:
                                       See Conversion Notice

 

Type of Option:                                ý  Incentive Stock Option

 

  o  Non-Qualified Stock Option

 

1.   Grant of Option.  First Consulting Group, Inc. (the
“Company”), assumed the Paragon Solutions, Inc. Incentive Stock Plan (the
“Plan”) in connection with the merger of its wholly-owned subsidiary and
Paragon Solutions, Inc. (the “Merger”). 
This agreement (the “Agreement”) sets forth the terms and conditions of
the Non-Qualified Stock Option granted to the Optionee named on the signature
page hereto (the “Optionee”) by Paragon Solutions, Inc. on the Date of Grant
set forth in the Conversion Notice. 
This Agreement also sets forth the number of shares of the Company’s
$0.001 par value common stock represented by this stock option (the “Stock”)
(as converted from the common stock of Paragon Solutions, Inc. to the Stock of
the Company, in accordance with the terms of the Merger), at the exercise price
per share set forth in the Conversion Notice (the “Option”).  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned such terms in the Plan.

 

2.   Vesting
of Option.  See the Conversion
Notice for vesting schedule.  No further
vesting occurs with regard to your stock options after your termination date.

 

3.   Period of Option and Limitations on
Right to Exercise.   A Non-Qualified
Stock Option shall not be exercisable more than fifteen (15) years after the
date it is granted (the “Expiration Date”). 
An Incentive Stock Option shall not be exercisable more than ten (10)
years after the date it is granted.  The
Option will, to the extent not previously exercised, lapse under the earliest
of the following circumstances:

 

(a)                                  The
Option shall lapse as of 5:00 p.m., Eastern Time, on the Expiration Date as shown above.

 

(b)                                 The
Option shall lapse on the fifth (5th) day after the Optionee’s
termination of service with Paragon Solutions, Inc. or its affiliates or
subsidiaries for any reason, including death and disability.

 

Exercise of Option.  The Option shall be exercised by written
notice directed to the Secretary of the Company at the principal executive
offices of the Company.  (See Conversion
Memo for E*TRADE information).

 

4.   Withholding.  The Company has the authority and the right
to deduct or withhold, or require the Optionee to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes (including the
Optionee’s FICA obligation) required by law to be withheld with respect to any
taxable event arising as a result of the exercise of the Option.  Such withholding requirement may be
satisfied, in whole or in part, at the election of the Company, by withholding
from the Option shares of Stock having a Fair Market Value on the date of
withholding equal to the minimum amount (and not any greater amount) required
to be withheld for tax purposes, all in accordance with such procedures as the
Committee establishes.

 

1

 

5.   Limitation of Rights.  The Option does not confer to the Optionee
or the Optionee’s personal representative any rights of a shareholder of the
Company unless and until shares of Stock are in fact issued to such person in
connection with the exercise of the Option. 
Nothing in this Agreement shall interfere with or limit in any way the
right of the Company or any of its subsidiaries to terminate the Optionee’s
service at any time, nor confer upon the Optionee any right to continue in the
service of the Company or any of its subsidiaries.

 

6.   Stock
Reserve.  The Company shall at all
times during the term of this Agreement reserve and keep available such number
of shares of Stock as will be sufficient to satisfy the requirements of this
Agreement.

 

7.   Restrictions on Transfer and Pledge.  The Option may not be pledged, encumbered,
or hypothecated to or in favor of any party other than the Company any of its
subsidiaries, or be subject to any lien, obligation, or liability of the
Optionee to any other party other than the Company or any of its subsidiaries.  The Option is not assignable or transferable
by the Optionee other than by will or the laws of descent and distribution or
pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A)
of the Code; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability
(i) does not result in accelerated taxation and (ii) is otherwise
appropriate and desirable, taking into account any factors deemed relevant,
including without limitation, state or federal tax or securities laws
applicable to transferable options. The Option may be exercised during the
lifetime of the Optionee only by the Optionee or any permitted transferee.

 

8.   Plan Controls.  The terms contained in the Plan are
incorporated into and made a part of this Agreement and this Agreement shall be
governed by and construed in accordance with the Plan.  In the event of any actual or alleged
conflict between the provisions of the Plan and the provisions of this
Agreement, the provisions of the Plan shall be controlling and determinative.

 

9.   Successors.  This Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Agreement and
the Plan.

 

10.   Severability.  If any one or more of the provisions
contained in this Agreement are invalid, illegal or unenforceable, the other
provisions of this Agreement will be construed and enforced as if the invalid,
illegal or unenforceable provision had never been included.

 

11.   Notice.  Notices and communications under this Agreement must be in
writing and either personally delivered or sent by registered or certified
United States mail, return receipt requested, postage prepaid.  Notices to the Company must be addressed to:

 

First Consulting Group,
Inc.

111 West Ocean Boulevard,
4th Floor

Long Beach,
California  90802 

Attn:  Corporate and Legal Affairs

 

or any other address
designated by the Company in a written notice to the Optionee.  Notices to the Optionee will be directed to
the address of the Optionee then currently on file with the Company, or at any
other address given by the Optionee in a written notice to the Company.

 

12.   Tax Consequences.  Set forth below is a brief summary of some
of the federal tax consequences of exercise of the Option and disposition of
the Option Shares.  THIS SUMMARY IS NOT
COMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
OPTION SHARES.

 

(a)                                  Exercise
of Non-Qualified Stock Option.  Upon
exercise of a Non-Qualified Stock Option, Optionee normally will be treated as
having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the Fair Market Value of the

 

2

 

Option Shares on the date
of exercise over the Exercise Price. 
The Company will be required to withhold from Optionee’s compensation or
collect from Optionee and pay to the applicable taxing authorities an amount in
cash equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Option Shares if
such withholding amounts are not delivered at the time of exercise.

 

(b)                                 Disposition
of Shares. Upon the exercise of a Non-Qualified Stock Option, any gain
realized on disposition of the Option Shares will be treated as capital gain,
which may be long-term or short-term depending on the period that the Option
Shares were held.

 

13.                                 Supercedence.  This
Agreement, the Conversion Notice, and the Plan contain the entire agreement
between the parties with respect to the Option granted herein and supercede any
other agreement, arrangement or understanding between Paragon Solutions, Inc
and the Optionee with respect to such Option. 
Optionee represents and warrants that no written or oral promise or
inducement has been offered or made except as set forth herein.

 

IN WITNESS WHEREOF, First
Consulting Group, Inc., acting by and through its duly authorized officers, has
caused this Agreement to be executed, and the Optionee has executed this
Agreement, all as of the day and year first above written.

 

	
   

  	
  FIRST CONSULTING
  GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PRINT NAME:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE ID:

  	
   

  	
   

  
											

 

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