Document:

Exhibit 10.2

 

CHINA ONLINE EDUCATION GROUP

 

EMPLOYEE EQUITY INCENTIVE PLAN

 

December 17, 2014

 

(Amended by the written resolutions of the board of directors dated February 15, 2016)

 

 

CHINA ONLINE EDUCATION GROUP

 

EMPLOYEE EQUITY INCENTIVE PLAN

 

1.                                      Purposes of the Plan.  The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2.                                      Definitions.  The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement.  In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

 

(a)         “Administrator” means the Board or any entity appointed by the Board to administrate the Plan.

 

(b)                                 “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c)                                  “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any jurisdiction applicable to Awards granted to residents therein.

 

(d)                                 “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(e)                                  “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Share, Restricted Share Unit or other right or benefit under the Plan.

 

(f)                                   “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(g)                                  “Board” means the Board of Directors of the Company.

 

(h)                                 “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and

 

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definition, is based on, in the determination of the Administrator, the Grantee’s:  (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person.

 

(i)                                     “Change in Control” means a change in the ownership or control of the Company after the Registration Date effected through either of the following transactions:

 

(i)                                     the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offer or do not recommend such shareholders accept, or

 

(ii)                                  a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

 

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

 

(k)                                 “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(l)             “Ordinary Share” means a share of US$0.0001 nominal or par value, of the Company having the rights, preferences, privileges and restrictions set out in the Amended and Restated Memorandum and Articles of Association.

 

(m)     “Company” means CHINA ONLINE EDUCATION GROUP, a company incorporated under the laws of the Cayman Islands or any successor corporation that adopts the Plan in connection with a Corporate Transaction.

 

(n)                                 “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(o)                                 “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

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(p)                                 “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated.  In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before the termination of an Employee, Director or Consultant become effective under Applicable Laws.  A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity.  Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement).  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

 

(q)                                 “Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under following parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

(i)                                     a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

 

(ii)                                  the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(iii)                               the complete liquidation or dissolution of the Company;

 

(iv)                              any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the Ordinary Shares outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

(v)                                 acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or 

 

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series of related transactions that the Administrator determines shall not be a Corporate Transaction.

 

(r)                                    “Director” means a member of the Board or the board of directors of any Related Entity.

 

(s)                                   “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days.  A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(t)                                    “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Ordinary Shares.

 

(u)                                 “Employee” means any person, including an Officer or Director, who is in the employment of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(v)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(w)                               “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows:

 

(i)                                     If the Ordinary Shares are listed on one or more established stock exchanges or national market systems, including without limitation The Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Ordinary Shares are listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii)                                  If the Ordinary Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such shares as quoted on such system on the date of determination, but if selling prices are not reported, the Fair Market Value of an Ordinary Share shall be the mean between the high bid and low asked prices for the Ordinary Shares on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

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(iii)                               In the absence of an established market for the Ordinary Shares of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

(x)                                 “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(y)                                 “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(z)                                  “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

(aa)                          “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(bb)                          “Plan” means this Employee Equity Incentive Plan.

 

(cc)                            “Registration Date” means the first to occur of (i) the closing of the first sale to the general public pursuant to a registration statement filed with and declared effective by the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Ordinary Shares or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Ordinary Shares; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

 

(dd)                          “Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.

 

(ee)                            “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable share or stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award.  The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(ff)                              “Restricted Share” means a Share issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

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(gg)                            “Restricted Share Units” means an Award which may be earned in whole or in part upon the passage of time and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

(hh)                          “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(ii)                                  “SAR” means a share appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Ordinary Shares.

 

(jj)                                “Share” means an Ordinary Share of the Company.

 

(kk)                          “Spin-off Transaction” means a distribution by the Company to its shareholders of all or any portion of the securities of any Subsidiary of the Company.

 

(ll)                                  “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.                                      Shares Subject to the Plan.

 

(a)                                 Subject to the provisions of Section 15, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards shall be 32,229,922 ordinary share.  The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Ordinary Shares.

 

(b)                                 Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan.  Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan.  To the extent not prohibited by Section 422(b)(1) of the Code (and the corresponding regulations thereunder), the listing requirements of The Nasdaq National Market (or other established stock exchange or national market system on which the Ordinary Shares are traded) and Applicable Law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

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4.                                      Administration of the Plan.

 

(a)                                 Plan Administrator.

 

With respect to grants of Awards to Directors, Consultants or Employees including Officers of the Company, the Plan shall be administered by the Board. The Board may authorize the Chief Executive Officer to grant such Awards and may limit such authority as the Board determines from time to time.

 

(b)                                 Administration Errors.

 

In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

(c)                                  Powers of the Administrator.

 

Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)                                     to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)                                  to determine whether and to what extent Awards are granted hereunder;

 

(iii)                               to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)                              to approve forms of Award Agreements for use under the Plan;

 

(v)                                 to determine the terms and conditions of any Award granted hereunder (including the vesting schedule set forth in the Notice of Stock Option Award);

 

(vi)                              to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent;

 

(vii)                           to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii)                        to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan;

 

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(ix)                              to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

5.                                      Indemnification.  In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officer or Employee of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

6.                                      Eligibility.  Awards may be granted to Employees, Directors and Consultants.  An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.

 

7.                                      Terms and Conditions of Awards.

 

(a)                                 Types of Awards.  The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time or the occurrence of one or more events.  Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Share, Restricted Share Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

 

(b)                                 Designation of Award.  Each Award shall be designated in the Award Agreement.

 

(c)                                  Conditions of Award.  Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award and payment contingencies.

 

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(d)                                 Acquisitions and Other Transactions.  The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction.

 

(e)                                  Deferral of Award Payment.  The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award.  The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

 

(f)                                   Separate Programs.  The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(g)                                  Early Exercise.  The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to the full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

(h)                                 Term of Award.  The term of each Award shall be the term stated in the Award Agreement.  Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

 

(i)                                     Transferability of Awards.  The Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator.  Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

(j)                                    Time of Granting Awards.  The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator.

 

8.                                      Award Exercise or Purchase Price, Consideration and Taxes.

 

(a)                                 Exercise or Purchase Price.  The exercise or purchase price, if any, for an Award shall be determined by the Administrator.

 

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(b)                                 Notwithstanding the foregoing provisions of this Section 8(a), in the case of an Award issued pursuant to Section 7(d), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(c)                                  Consideration.  Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

 

(i)                                     cash;

 

(ii)                                  check;

 

(iii)                               if the exercise or purchase occurs on or after the Registration Date, surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised, provided, however, that Shares acquired under the Plan or any other equity compensation plan or agreement of the Company must have been held by the Grantee for a period of more than six (6) months (and not used for another Award exercise by attestation during such period);

 

(iv)                              with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

 

(v)                                 any combination of the foregoing methods of payment.

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(c)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

 

(d)                                 Taxes.  No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations. Upon exercise of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

 

9.                                      Exercise of Award.

 

(a)                                 Procedure for Exercise; Rights as a Shareholder.

 

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(i)                                     Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)                                  An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 8(c)(iv).

 

(b)                                 Exercise of Award Following Termination of Continuous Service.

 

(i)                                     An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

 

(ii)                                  Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

 

10.                               Conditions Upon Issuance of Shares.

 

(a)                                 Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b)                                 As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

(c)                                  As a condition to the exercise of an Award, the Grantee shall grant the power of attorney to the Board or any person designated by the Board to exercise the voting rights with respect to the Shares.

 

11.                               Adjustments Upon Changes in Capitalization.

 

Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Award have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any fiscal year of the Company, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, share dividend, combination or

 

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reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Ordinary Shares including a corporate merger, consolidation, acquisition of property or equity, separation (including a spin-off or other distribution of shares or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.  In the event of a Spin-off Transaction, the Administrator may in its discretion make such adjustments and take such other action as it deems appropriate with respect to outstanding Awards under the Plan, including but not limited to: (i) adjustments to the number and kind of Shares, the exercise or purchase price per Share and the vesting periods of outstanding Awards, (ii) prohibit the exercise of Awards during certain periods of time prior to the consummation of the Spin-off Transaction, or (iii) the substitution, exchange or grant of Awards to purchase securities of the Subsidiary; provided that the Administrator shall not be obligated to make any such adjustments or take any such action hereunder. Notwithstanding the forgoing, no inferior adjustment  with respect to the substantial conditions offered to the Grantee in any outstanding Awards shall be made by the Administrator, unless with prior approval of the Board by means of board resolutions,

 

12.                               Corporate Transactions and Changes in Control.

 

(a)                                 Termination of Award to Extent Not Assumed in Corporate Transaction.

 

Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

(b)                                 Acceleration of Award Upon Corporate Transaction or Change in Control.

 

(i)                                     Corporate Transaction. Except as provided otherwise in a separate Board resolution or an individual Award Agreement and except for the complete liquidation or dissolution of the Company, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date.  The portion of the Award that is not Assumed shall terminate under subsection (a) of this Section 12 to the extent not exercised prior to the consummation of such Corporate Transaction.

 

(ii)                                  Change in Control.  Except as provided otherwise in a separate Board resolution or an individual Award Agreement, in the event of a Change in Control (other

 

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than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that the Grantee’s Continuous Service has not terminated prior to such date.

 

13.                               Effective Date and Term of Plan.

 

The Plan shall become effective upon its adoption by the Board of the Company.  It shall continue in effect for a term of ten (10) years unless sooner terminated by the approval of the Board of the Company with its unanimous resolutions. Subject to Section 14, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

14.                               Amendment, Suspension or Termination of the Plan.

 

(a)                                 The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(c)(vi) or this Section 14(a).

 

(b)                                 No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)                                  No suspension or termination of the Plan (including termination of the Plan under Section 13 above) shall adversely affect any rights under Awards already granted to a Grantee.

 

15.                               Reservation of Shares.

 

(a)                                 The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)                                 The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

16.                               No Effect on Terms of Employment/Consulting Relationship.  The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of

 

13

 

a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

17.                               No Effect on Retirement and Other Benefit Plans.  Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to the level of compensation.  The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

18.                               Unfunded Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended.  Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any change in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

19.                               Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

14ex10_1.htm

EXHIBIT 10.1

 

 

 

AMENDMENT AGREEMENT NO. 3 TO REGISTRATION RIGHTS AGREEMENT

This Third Amendment Agreement (this “Third Amendment Agreement”) is entered into as of May 11, 2016, by and between Great Basin Scientific, Inc., a Delaware corporation (the “Company”), and the undersigned holder (the “Holder”) which is one of the investors listed on the Schedule of Buyers (“Schedule of Buyers”) attached to that certain Securities Purchase Agreement between the Company and all of the investors listed on the Schedule of Buyers (the “Buyers”) dated December 28, 2015 (the “SPA”) with reference to the following facts:

 

A.  On December 28, 2015, the Company and the Buyers (as defined in the Registration Rights Agreement) entered into the SPA in relation to the issuance and sale by the Company and purchase by the Holders of: (i) that aggregate principal amount of senior secured convertible notes of the Company, in substantially the form attached to the SPA as Exhibit A (the “Notes”), set forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which aggregate principal amount of Notes for all Buyers was $22,100,000) and (ii) related Series D Warrants, in substantially the form attached to the SPA as Exhibit B (the “Warrants”), representing the right to acquire that number of shares of common stock of the Company, par value $0.0001 (“Common Stock”), set forth opposite such Buyer's name in column (4) on the Schedule of Buyers (as exercised, collectively, the “Warrant Shares”), which totaled in the aggregate 3,503,116 Warrant Shares.

 

B.  The issuance of the Notes and the Warrants occurred at a closing on December 30, 2015 (the “Closing Date”).

 

C.  In accordance with the terms of the SPA, the Company agreed to provide certain registration rights under the United States Securities Act of 1933, as amended and the rules and regulations thereunder pursuant to the Registration Rights Agreement by and between the Company and each of the Buyers (the “Original Registration Rights Agreement”) entered into December 30, 2015.

 

D.  On February 16, 2016, the Company and certain of the Buyers holding enough of the Notes and Warrants to constitute the Required Holders under Section 9 (e) of the SPA and Section 10 of the Registration Rights Agreement entered into Amendment Agreement No.1 to the Original Registration Rights Agreement (the “First Amendment Agreement”), whereby the Company and the Buyers agreed to, among other things, to redefine the term “Initial Filing Deadline” as “February 29, 2016” and redefine “Initial Effectiveness Deadline” as “the date which is the earlier of (x) (i) in the event that the Initial Registration Statement is not subject to a review by the SEC, March 30, 2016 or (ii) in the event that the Initial Registration Statement is subject to a review by the SEC, April 14, 2016 and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Initial Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.”

 

 

  

  

  

 

 

E.  On February 29, 2016, the Company and certain of the Buyers holding enough of the Notes and Warrant to consitute the Required Holders under Section 9€ of the SPA and Section 10 of the Registration Rights Agreement entered into Amendment No. 2 to the Original Registration Rights Agreement (the “Second Amendment Agreement”, and the Original Registration Rights Agreement as amended by the First Amendment Agreement and the Second Amendment Agreement, the "Registration Rights Agreement")

 

F.  On March 1, 2016, the Company filed the Initial Registration Statement with the SEC; as of the date of this Waiver the Initial Registration Statement remains subject to SEC review and was not brought effective by April 14, 2016, the Initial Effectiveness Deadline, pursuant to Section 2(a) of the Registration Rights Agreement and therefore an Effectiveness Failure has occurred under Section 2(g) of the Registration Rights Agreement.

 

G.  The Company desires to further amend the definition of “Initial Effectiveness Deadline” in the Registration Rights Agreement.

 

H.  In compliance with Section 10 of the Registration Rights Agreement, this Third Amendment Agreement shall only be effective upon the execution and delivery of this Third Amendment Agreement and agreements in form and substance identical to this Third Amendment Agreement (the “Other Third Amendment Agreements”) by other holders of Registrable Securities (as defined in the SPA) (each an “Other Holder”) representing on the Closing Date at least fifty-one percent (51%) of the aggregate number of Registrable Securities issued or issuable under the Cash Notes and Cash Warrants issued on the Closing Date and shall include Hudson Bay so long as Hudson Bay and/or any of its affiliates collectively hold at least five percent (5%) of the Registrable Securities, in the aggregate (the “Required Holders”) (such time, the “Effective Time”).

 

NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.  Initial Effectiveness Deadline. Section 1(x) of the Registration Rights Agreement is amended such that “Initial Effectiveness Deadline” is now defined as “the date which is the earlier of (x) (i) May 31, 2016 and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Initial Registration Statement will not be subject to further review; provided, however, that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.”

 

2.  Waiver. The Holder hereby waives, with the intention that upon the satisfaction of the requirements of Section 10 of the Registration Rights Agreement such waiver will be binding for all Other Holders: (i) any breach of the Registration Rights Agreement prior to the date hereof under Section 2(a) of the Registration Rights Agreement for the Company’s failure to have the Initial Registration Statement brought effective by the Initial Effectiveness 

 

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Deadline, prior to this Third Amendment Agreement and (ii) the Holder’s right to Registration Delay Payments (as defined under the Registration Rights Agreement) prior to the date hereof for the Company’s failure to have the Initial Registration Statement brought effective by the Initial Effectiveness Deadline.

 

3.  Acknowledgments. The Company hereby confirms and agrees that (i) except with respect to the amendment set forth in Section 1 above as of the Effective Time, the Registration Rights Agreement shall continue to be, in full force and effect; (ii) the execution, delivery and effectiveness of this Third Amendment Agreement shall not operate as an amendment of any right, power or remedy of the Holder except to the extent set forth herein. As of the Effective Time, the Registration Rights Agreement will be deemed to be fully amended and restated to reflect the amendment set forth in Section 1 above.

 

4.  Fees And Expenses.  .  [NTD: HB ONLY: The Company shall reimburse the Holder for its legal fees and expenses in connection with the preparation and negotiation of this Third Amendment Agreement and transactions contemplated thereby, by paying any such amount to Schulte Roth & Zabel LLP (the "Holder Counsel Expense") by wire transfer of immediately available funds in accordance with the written instructions of Schulte Roth & Zabel LLP delivered to the Company.  The Holder Counsel Expense shall be paid by the Company whether or not the transactions contemplated by this Third Amendment Agreement are consummated.  Except as otherwise set forth above, each party to this Third Amendment Agreement shall bear its own expenses in connection with the transactions contemplated hereby.] [NTD: ALL OTHERS: Each party to this Third Amendment Agreement shall bear its own expenses in connection with the transactions contemplated hereby.].

 

5.  No Material, Nonpublic Information.  The Company hereby agrees and acknowledges that the transactions contemplated by this Third Amendment Agreement do not constitute material, nonpublic information of the Company or any of its Subsidiaries and that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and each Holder or any of its affiliates, on the other hand, have terminated prior to the date hereof. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, affiliates, employees and agents, not to, provide any Holder with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof without the express prior written consent of such Holder.  To the extent that the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates employees or agents delivers any material, non-public information to any Holder without such Holder’s consent, the Company hereby covenants and agrees that such Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents with respect to, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents not to trade on the basis of, such material, non-public information.  The Company understands and confirms that the Holder will rely on the foregoing representations in effecting transactions in securities of the Company.

 

6.  Independent Nature of Holder Obligations and Rights.  The obligations of the Holder under this Third Amendment Agreement are several and not joint with the obligations 

 

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of any Other Holder, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any Other Third Amendment Agreement.  Nothing contained herein or in any Other Third Amendment Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holder and Other Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Third Amendment Agreement or any Other Third Amendment Agreement and the Company acknowledges that the Holders are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Third Amendment Agreement or  any Other Third Amendment Agreement.  The Company and the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors.  The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Third Amendment Agreement or, any Other Third Amendment Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose.

 

7.  No Third Party Beneficiaries.  This Third Amendment Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

8.  Counterparts.  This Third Amendment Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

9.  No Strict Construction.  The language used in this Third Amendment Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

10.  Headings.  The headings of this Third Amendment Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Third Amendment Agreement.

 

11.  Severability.  If any provision of this Third Amendment Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Third Amendment Agreement so long as this Third Amendment Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, 

 

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invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

12.  Amendments.  No provision of this Third Amendment Agreement may be amended other than by an instrument in writing signed by the Company and the Required Holders.

 

13.  Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Third Amendment Agreement and the consummation of the transactions contemplated hereby.

 

14.  Notice.  Whenever notice is required to be given under this Third Amendment Agreement, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the SPA.

 

15.  Successors and Assigns.  This Third Amendment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

16.  Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the respective meaning set forth in the Registration Rights Agreement.

 

17.  Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction, validity, enforcement and interpretation of this Third Amendment Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Third Amendment Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE 

 

 

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HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS THIRD AMENDMENT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

[Signature Pages Follow]

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, each Undersigned and the Company have caused their respective signature page to this Third Amendment Agreement to be duly executed as of the date first written above.

 

	  	  	  	
COMPANY:

	  	  	  	  
	  	  	  	
GREAT BASIN SCIENTIFIC, INC.

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	
By:

	  
	  	  	  	  	
Name: Ryan Ashton

	  	  	  	  	
Title: President, CEO

	  	  	  	  	  

 

 

	  	  	  

[Signature Page to Third Registration Rights Amendment Agreement]

  

  

  

IN WITNESS WHEREOF, each Undersigned and the Company have caused their respective signature page to this Third Amendment Agreement to be duly executed as of the date first written above.

 

 

	  	  	  	
HOLDER:

	  	  	  	  
	  	  	  	  	  
	  	  	  	
By:

	  
	  	  	  	  	
Name: 

	  	  	  	  	
Title: 

	  	  	  	  	  

 

 

 

	  	  	  

[Signature Page to Third Registration Rights Amendment Agreement]

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