Document:

Exhibit 10.18

 

Amended 4/28/2003

 

 

INTELLICHEM, INC.

 

 

2003 STOCK OPTION PLAN

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
  Purpose

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  Stock Subject to
  This Plan

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  Administration.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  Options and
  Eligible Participants.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  Provisions
  Applicable to All Options

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  Provisions
  applicable to ISOs Only

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  Employment
  with Related Entities

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  Termination
  of Relationship with Company

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  Options Not Transferable

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  Changes
  in Company’s Capital Structure.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  Securities
  Regulation and Other Required Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  Withholding Tax
  Requirement

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  Status of Shareholder

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
  Rights and
  Relationships.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
  Amendment and
  Termination.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
  Applicable Law

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
  Effectiveness of
  This Plan

  	
   

  

 

2

 

INTELLICHEM, INC.

 

2003 STOCK OPTION PLAN

 

SECTION 1.                            Purpose.  The purpose of this IntelliChem, Inc. 2003
Stock Option Plan (this “Plan”) is to provide a means for IntelliChem, Inc.
(the “Company”) and related entities to continue to attract, motivate and
retain key employees, consultants and other independent contractors and
directors, and to provide these individuals with greater incentive for their
service to the Company (and related entities) by linking their interests in the
Company’s success with those of the Company and its shareholders.

 

SECTION 2.                            Definitions.  When
used in this Plan the following terms are defined as set forth below:

 

“Administrator” has the meaning provided in Section 4.

 

“Board” means the Board of Directors of the
Company.

 

“Capitalization Change” has the meaning
provided in Section 11.1.

 

“Cause” has the meaning provided in Section 9.1.2.

 

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

 

“Common Stock” has the meaning provided in Section 3.

 

“Company” means IntelliChem, Inc.

 

“Effective Date” has the meaning provided in
Section 17.

 

“Eligible Participants” has the meaning
provided in Section 5.2.

 

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

 

“Exercise Price” means the amount to be paid
by an Optionee to exercise an Option.

 

“Fair Market Value” of a share of Common
Stock is the fair market value established in good faith by the Administrator,
unless one of the following applies: (a) If the Common Stock is listed on the
Nasdaq National Market, then the Fair Market Value is the closing sales price
for the Common Stock as recorded by the Nasdaq SmallCap or National Market for
the immediately preceding trading day; (b) if the Common Stock is listed on the
New York Stock Exchange or the American Stock Exchange, then the Fair Market
Value is the closing sales price for the Common Stock as such price is
officially quoted in the composite tape of transactions on such exchange for
the immediately preceding trading day; or (c) if the Common Stock is publicly
traded but there is no reported closing sales price on Nasdaq or the applicable
exchange for the date in question, then such price on the last preceding date
for which a closing sales price exists shall be determinative of Fair Market
Value.

 

“Grant Date” means the date on which the
Administrator completes the corporate action relating to the grant of an Option
and all conditions precedent to the grant have been satisfied, provided that conditions
relating to exercisability or vesting of an Option shall not defer the Grant
Date.

 

“ISO” or “Incentive
Stock Option” has the meaning provided in Section 4.1.

 

“NQSO” or
“Nonqualified Stock Option” has
the meaning provided in Section 5.1.

 

3

 

“Option” means an option granted pursuant to
this Plan for the purchase of shares of Common Stock.

 

“Option Agreement” means a written agreement
that details the terms and conditions of a particular Option.

 

“Optionee” means an individual or entity who
has received an Option under this Plan.

 

“Plan” means this IntelliChem, Inc. 2003
Stock Option Plan.

 

“Related Entity” means any entity that,
directly or indirectly, is in control of, or is controlled by, or under common
control with the Company.

 

“Sales Event” has the meaning provided in Section 11.2.1.

 

“Securities Act” means the Securities Act of
1933, as amended.

 

“Total Disability” has the meaning provided
in Section 9.2.

 

SECTION 3.                            Stock Subject to This Plan. The stock issuable under this Plan is the
Company’s Common Stock, with voting rights, either authorized but unissued or
reacquired by the Company.

 

3.1                               Amount. 
Subject to adjustment under Section 11.1, the maximum amount of
Common Stock that may be issued for Options under this Plan is 4,000,000
shares, as such Common Stock was constituted on the Effective Date.

 

3.2                               Returned Shares.  If
any outstanding Option expires, or is exchanged, canceled or terminated for any
reason without having been exercised or realized in full, then the unpurchased
or unissued shares subject to such Options will again be available for issuance
under this Plan.  If the Company
repurchases shares of Common Stock issued pursuant to an Option, then the
repurchased shares will not be available again for issuance under this Plan,
unless the shares relate to an Option (or portion of an Option) that was
exercised prior to becoming vested, which shares are then repurchased by the
Company, for the Optionee’s Exercise Price, in conjunction with the Optionee
terminating employment or services with the Company prior to satisfaction of
the underlying vesting schedule, in which case the repurchased shares will
again be available for issuance under this Plan; provided, that the aggregate
number of shares that may be issued upon the exercise of ISOs will in no event
exceed 3,552,300, subject to adjustment from time to time as provided in Section 11.1.

 

SECTION 4.                            Administration.

 

4.1                               Administrator.  The
Board of Directors of the Company will administer this Plan, except to the
extent that it delegates administrative responsibilities to a committee or
subcommittee.  The body charged with
administering the Plan is referred to as the “Administrator.”  Notwithstanding the delegation of
administrative authority, the Board has exclusive authority to (a) amend or
terminate this Plan as provided in Section 16, and (b) remove members from
and add members to the Administrator. 
The Administrator may further delegate administrative duties to those
officers and managers of the Company as it so determines.

 

4.2                               Procedures.  The
Administrator may hold meetings at such times and places as it determines, and
from time to time adopt and amend rules and regulations relating to the
administration of this Plan, provided that absent the adoption of any formal
rules, the acts of a majority of the members of the Administrator at a meeting,
or acts approved in writing by all Administrator members, are valid acts of the
Administrator.

 

4

 

4.3                               Responsibilities. 
Except as stated elsewhere in this Plan, the Administrator has full
discretionary authority to determine all matters relating to Options, including
but not limited to (a) the selection of Eligible Participants to receive Options,
(b) the number of shares subject to each Option, (c) the Exercise Price to be
paid for any Option, (d) any vesting or forfeiture schedule, (e) the
acceleration of the exercise date, and (f) the extension of the exercise
period.  In exercising its authority to
set the terms and conditions of an Option, and subject only to the limits of
applicable law, the Administrator shall be under no obligation or duty to treat
similarly situated Optionees in the same manner, and any action taken by the
Administrator with respect to the grant of an Option to one individual shall in
no way obligate the Administrator to take the same or similar action with
respect to any other individual.  The
Administrator may exercise its discretion in a manner such that Options granted
to individuals who are foreign nationals or are employed outside the United
States contain terms and conditions that are different from the provisions
otherwise anticipated in this Plan, but which are consistent with the tax and
other laws of applicable foreign jurisdictions and consistent with the Company’s
objectives in establishing this Plan.

 

4.4                               Plan Construction and
Interpretation.  Subject to Section 4.5, the
Administrator may correct any defect, supply any omission, or reconcile any
inconsistency (a) within this Plan, (b) between this Plan and any
related agreement, or (c) between this Plan and any rule or regulation
promulgated under this Plan, in the manner and to the extent the Administrator
deems appropriate to carry out this Plan. 
The Administrator’s interpretation or construction of any such Plan
provision, related agreement, rule or regulation shall be final, conclusive and
binding on all interested parties.

 

4.5                               Amendment of Options.  The
Administrator may modify or amend outstanding Options granted under this
Plan.  The modification or amendment of
an outstanding Option shall not, without the consent of the Optionee, impair,
diminish or terminate any of the rights of the Optionee or any of the obligations
of the Company under the Option, except as otherwise provided in this Plan, or
as required to comply with applicable law. 
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding ISOs granted under this Plan will be made in a manner so as not to
constitute a “modification,” as defined in Code § 424(h), and so as not to
cause any ISO to fail to continue to qualify under Code § 422(b).

 

SECTION 5.                            Options and Eligible
Participants. 

 

5.1                               Types.  Subject to Section 4, the Administrator may, from time to time,
grant under this Plan (i) incentive stock options (also referred to as “ISOs”),
as defined in Code § 422, or (ii) options that do not qualify as ISOs
(referred to as “nonqualified stock options” or “NQSOs”).  ISOs and NQSOs may be granted singly or in
combination.

 

5.2                               Eligible Participants.  The Administrator, as it determines from time to time, may grant
Options to officers, directors and employees of the Company and its Related
Entities.  The Administrator may also
grant Options to consultants, agents, advisors and independent contractors who
provide services to the Company or its Related Entities, or both, provided that
such Option recipients (a) render bona fide services that are not in connection
with the offer and sale of the Company’s securities in a capital-raising
transaction, and (b) render bona fide services that do not directly or
indirectly promote or maintain a market for the Company’s securities.

 

5.3                               Terms and Conditions.  The
terms and conditions of Options granted under this Plan need not be identical
in any respect, even when grants are made simultaneously or to persons with the
same or similar status.

 

SECTION 6.                            Provisions Applicable to All
Options.  The
provisions of this Section 6 apply to both ISOs and NQSOs.

 

5

 

6.1                               Option Agreement.  Each
Option will be evidenced by an Option Agreement that incorporates this Plan by
reference and describes the terms and conditions of the Option.  In particular, the Option Agreement will
specify the number of shares of Company Stock that may be purchased, whether
the Option is an ISO or a NQSO, the Option’s expiration date, the schedule (if
any) under which the Option may be exercised, the Exercise Price, and any other
terms, conditions, restrictions, representations or warranties required by the
Administrator.

 

6.2                               Exercise Price.  The
Administrator will determine the Exercise Price of NQSOs and ISOs, provided
that subject to the requirements of Section 7, the per share Exercise
Price with respect to an ISO will be at least the Fair Market Value of a share
of the Common Stock as of the Grant Date.

 

6.3                               Term.  The
term of each Option will be ten years from the Grant Date, unless a shorter
period is required under Section 7 or the Administrator establishes a shorter
period of time.

 

6.4                               Vesting.  To
ensure the Company achieves the purposes and receives the benefits contemplated
in this Plan, any Option granted under this Plan shall, unless the condition of
this Section 6.4 is waived or modified in the Option Agreement or by
action of the Administrator, be exercisable according to the following
schedule:

 

 

	
  Period of Optionee’s
  Continuous

  Service Relationship With the

  Company or Related Entity

  From The Grant Date

  	
   

  	
  Portion of Total Option

  That Is Exercisable

  
	
  Less than 1 year

  	
   

  	
  0%

  
	
  Completion of 1 year

  	
   

  	
  25%

  
	
  Each additional month

  	
   

  	
  An additional 1/48th

  
	
  After 4 years

  	
   

  	
  100%

  

 

For
purposes of calculating an “additional month,” the Administrator will measure
from the anniversary date of the one-year period (or other applicable date) and
go to the same date of the following month (or if there is not the same date in
the following month, then to the last day of the following month).

 

6.5                               Exercise.  The
Recipient may exercise Options by delivering written notice to the Administrator
of the number of shares sought to be exercised, together with payment of the
Exercise Price.  The Administrator may
specify the form of such notice and the manner of its delivery.  Subject to any vesting schedule in the
Option Agreement and to any additional holding period required by law, the
Optionee may exercise each Option in whole or in part, except that only whole
shares of Common Stock will be issued pursuant to the exercise of any Option.

 

6.6                               Payment of Exercise Price.  An
Optionee must pay the Exercise Price in full at the time of exercise.  Payment of the Exercise Price shall be in
cash, by bank certified or cashier’s check or by personal check (unless at the
time of exercise the Administrator in a particular case determines not to
accept a personal check).  The
Administrator may determine in its complete discretion, as of the Grant Date
for ISOs or at any time before exercise for NQSOs, that alternative forms of
payment will be permitted, including but not limited to installment payments on
such terms as the Administrator may determine or various cashless exercise
arrangements.  Unless otherwise provided
by the Administrator, an Option may not be exercised by tender to the Company,
or attestation to the ownership, of shares of Common Stock unless the shares
either have been owned by the Optionee for more than six months (and were not
used for another Option exercise by attestation during that period) or were not
acquired, directly or indirectly, from the Company.

 

6

 

SECTION 7.                            Provisions applicable to
ISOs Only.  ISOs
are subject to the following terms and conditions, in addition to the
provisions of Section 6:

 

7.1.1                     Greater than 10%
Shareholders.  If the Company grants ISOs to an employee who
owns more than 10% of the total combined voting power of all classes of stock
of the Company, with stock ownership to be determined in light of the
attribution rules set forth in Code § 424(d), the term of such ISO may not
exceed five years and the Exercise Price may be not less than 110% of the Fair
Market Value of the Common Stock on the ISO’s Grant Date.  To the extent an Option purports to be an ISO
but exceeds these limits, the Option will be deemed to be a NQSO.

 

7.1.2                     Limitation on Value.  The
aggregate Fair Market Value of all shares available under ISOs (under this Plan
and any other incentive stock option plan of the Company or a Related Entity)
that are exercisable for the first time in any calendar year may not exceed
$100,000. For purposes of this limit, Fair Market Value is measured as of the
Grant Date of the applicable Option. To the extent Options are granted as ISOs
but exceed the $100,000 threshold, the Options beyond the $100,000 threshold
(starting with the most recent grants) shall be treated as NQSOs.  If the Code is amended to provide for a
different limitation from that set forth in this Section 7.1.2, then that
different limitation will be deemed incorporated into this Plan, effective as
of the date and with respect to those Options as dictated by the applicable
amendment to the Code.  If an Option is
treated as possessing both ISOs and NQSOs by virtue of the limitation of this Section 7.1.2,
then upon exercise the Optionee may designate whether the portion being
exercised constitutes ISOs or NQSOs (or both). 
In the absence of a designation by the Optionee, the Optionee will be
deemed to have first exercised the ISO portion of the Option.  The Plan Administrator may direct that
separate certificates be issued to reflect the exercise of ISOs versus the
exercise of NQSOs.

 

SECTION 8.                            Employment with Related
Entities.  For purposes of this Plan, being engaged in employment or other service
relationship with a Related Entity constitutes employment or other service
relationship with the Company.  In
particular, the provisions of Section 9, below, shall apply by using the
terms “Company” and “Related Entity” interchangeably.  A transfer between the Company and one or
more Related Entities will not constitute a termination of employment or other
service relationship with the Company (provided that pursuant to Section 9.5,
a change in status from an employee to a non-employee worker will constitute a
termination of employment for federal tax purposes with respect to ISOs).

 

SECTION 9.                            Termination of Relationship
with Company. 
Except as provided otherwise in the applicable Option Agreement, all
Options that are unvested automatically expire upon termination of an Optionee’s
employment or other service relationship with the Company for any reason.  And except as provided otherwise in the
applicable Option Agreement, the effect of a termination of employment or other
service relationship upon vested Options is as follows:

 

9.1                               Termination For Cause.

 

9.1.1                     Effect Upon Options.  If
the Company terminates an Optionee’s employment or other service relationship
for Cause, then, as of the Company’s first discovery of any of the grounds for
termination for Cause, any Option held by that Optionee shall automatically
terminate.  If an Optionee is suspended
pending an investigation of whether or not the Optionee will be terminated for
Cause, then all of the Optionee’s rights under any Option will also be
suspended during the period of investigation.

 

9.1.2                     Definition of Cause. 
Termination for “Cause” means the Optionee’s (a) willful refusal to
perform his obligations to the Company, (b) willful misconduct contrary to
the interests of the Company, (c) commission of a serious criminal act
whether denominated a felony, misdemeanor or otherwise, or (d) engaging in activities
directly in competition or antithetical to the best interests of the
Company.  To the extent an Optionee is a
party to an employment agreement or offer letter of employment with the Company
that defines

 

7

 

“cause” or a similar term,
then the meaning set forth in that agreement shall also be considered “Cause”
for purposes of this Plan.

 

9.2                               Termination Because of Total
Disability.  If an Optionee’s employment or other service
relationship with the Company terminates because of a “Total Disability,” as
defined below, then the Optionee’s vested Options (determined as of the
termination) shall not expire (and any ISOs will not cease to be treated as
ISOs) until the sooner of (i) the end of the 12-month period following such
termination or (ii) the normal expiration date of the Option. For purposes of
this Plan, Total Disability means a mental or physical impairment that
(a) causes an individual to be unable to engage in any substantial gainful
activity, after reasonable accommodation, and (b) is expected to result in
death or has lasted or is expected to last for a continuous period of
12 months or more.  The status of
Total Disability will be determined by the Administrator and, if requested by
the affected Optionee, two independent physicians, and shall be deemed to exist
on the first day after the Administrator (and the two independent physicians,
if applicable) reach the conclusion.  The
application of this Section 9.2 will not accelerate the vesting of
Options.

 

9.3                               Termination Because of, or
Shortly Before, Death.  If an Optionee dies (a) while still engaged
in a service relationship with the Company or (b) within the 60-day period (or
12-month period in the case of Total Disability) following cessation of such
relationship, then any vested Options may be exercised at any time prior to (i)
the end of the 12-month period following the death or (ii) the regular
expiration date applicable to the Option, whichever is earlier.  The application of this Section 9.3 will
not accelerate the vesting of Options. 
The vested portion of the Option (determined as of the Optionee’s date
of death) may be exercised by the personal representative or the person to whom
the Optionee’s rights pass by will or by the laws of descent and distribution.

 

9.4                               Other Terminations.  If an
Optionee’s relationship with the Company terminates for a reason other than
Cause, death, or Total Disability, the Optionee may exercise outstanding
Options until the earlier of (a) the end of the 60-day period following
termination of an Optionee’s employment or other service relationship with the
Company, or (b) the expiration date stated in the Option Agreement, after which
all unexercised Options will expire. 
However, the Administrator may extend the exercise period, in its the
sole discretion, provided that ISOs exercised beyond the three-month period
following termination of an Optionee’s employment with the Company will be
treated as NQSOs.  Unless provided
otherwise in an individual Option Agreement, an Optionee’s change in status
from being an employee to a non-employee worker (such as a consultant) will not
constitute a termination of the Optionee’s employment with the Company for
purposes of applying the provisions of this Section 9.4 to any ISOs held
by the Optionee, provided that the Optionee’s exercise of any ISO beyond the
three-month period following the change of the Optionee’s status from being an
employee to a non-employee worker will be treated as the exercise of a NQSO.

 

9.5                               Military Leave, Sick Leave
and Bona Fide Leave of Absence.  To the extent determined by the
Administrator, an Optionee’s employment or other working relationship with the
Company may be deemed to continue while the Optionee is on military leave, sick
leave or other bona fide leave of absence. 
However, with respect to ISOs, employment will not be deemed to continue
beyond the first 90 days of leave, unless the individual’s reemployment rights
are guaranteed by statute or by contract.

 

8

 

SECTION 10.                     Options Not Transferable. 
Options are personal to the Optionee during the Optionee’s lifetime and
may not be transferred, assigned, pledged, attached or otherwise disposed of in
any manner, except by will or the laws of descent and distribution, and
provided further that to the extent authorized by the Administrator, on a case
by case basis, an Optionee may transfer NQSOs into a revocable trust created by
the Optionee for the benefit of the Optionee’s descendants, to an immediate
family member, or to a partnership in which only immediate family members or
such trusts are partners.  Any attempt to
transfer, assign, pledge, attach or otherwise dispose of any Option contrary to
this Section 10 will be null and void.

 

SECTION 11.                     Changes in Company’s Capital
Structure.

 

11.1                        Adjustments Upon Changes in Capitalization.  In
the event of any merger, consolidation, reorganization, stock split, stock
dividend or other event causing a capital adjustment affecting the number of
outstanding shares of Common Stock (“Capitalization Change”), the Administrator
will make corresponding adjustments to preserve the relative value of
Options.  To that end the Administrator
will make adjustments, as necessary, in: (a) the aggregate number or kind
of shares for which Options may be granted under this Plan; (b) the number
or kind of shares covered by any outstanding Options under this Plan; and
(c) other terms of this Plan or outstanding Options that merit a change in
conjunction with the Capitalization Change. 
Any fractional shares resulting from an adjustment will be
disregarded.  In the event the Company
issues additional shares of Common Stock for consideration (including non-cash
consideration), neither the total amount of shares subject to this Plan, nor
the amount of shares subject to any outstanding Option, will be adjusted.  The Administrator’s determination as to what
adjustments should be made and the extent of the adjustments will be final,
binding and conclusive.

 

11.2                        Effect of Sale, Merger or Exchange.

 

11.2.1              Termination of Options. 
Subject to Section 11.2.2, upon the occurrence of a “Sales Event”
(as defined below) any unexercised Options will expire and cease to be
effective, provided that Optionees will have advance notice and an opportunity
prior to the Sales Event to exercise any vested Options.  In the alternative, at the complete
discretion of the Administrator, the Company may (at its discretion)
(i) determine to cash out some or all of the unexercised, vested Options
by paying each affected Optionee an amount equal to the Fair Market Value of a
share of Common Stock (as determined for purposes of the Sales Event),
multiplied by the number of shares of Common Stock available under the vested
portion of the Optionee’s Option, reduced by the aggregate Exercise Price
associated with that portion of the Option, or (ii) continue some or all
of the Options, subject to the same terms and conditions (including the vesting
schedule, if any) that applied prior to the Sales Event, modified as deemed
appropriate by the Administrator in conjunction with the Sales Event.  For purposes of this Plan a “Sales Event”
will include (a) a complete liquidation of the Company, (b) a sale of the
Company’s stock after which  voting
control of the Company is held by persons who were not shareholders of the
Company prior to the sale or a sale of substantially all of the Company’s
assets, or (c) a merger, consolidation, reorganization or other similar event
(other than an initial public offering) in which the Company is not the
surviving entity.  Unless provided
otherwise in the applicable Option Agreements, or pursuant to an action of the
Board, the vesting schedules applicable to outstanding Options will not
accelerate in connection with a Sales Event.

 

11.2.2              Conversion on Stock for
Stock Exchange.  If pursuant to a Sales Event the shareholders
of the Company receive capital stock of another corporation (“Exchange Stock”)
in exchange for their shares of Common Stock, then the Company and the
corporation issuing the Exchange Stock may (at their discretion) provide that
any unexercised Options under this Plan will be converted into options to
purchase shares of Exchange Stock. The number of shares and exercise price of
options for Exchange Stock will be determined by adjusting the number of shares
and Exercise Price of the unexercised Options in the same proportion as used
for determining the number of shares of Exchange Stock that the shareholders of
Common Stock receive in the transaction. 
Other than the potential changes to the Exercise Price and number of
shares of the outstanding

 

9

 

Options, all of the terms
and conditions relating to the converted Options under this Plan shall apply to
options for the Exchange Stock, unless otherwise determined by the
Administrator.

 

11.3                        No Restriction on Ability to Accomplish Corporate
Changes.  This Plan and Options granted hereunder will
not in anyway limit the right or power of the Company, or its stockholders, to
make or authorize any or all adjustments in connection with recapitalizations,
reorganizations or other changes in the Company’s structure or its business, or
any merger or consolidation of the Company, or any issuance of stock or of
options, warrants or rights to purchase stock or bonds, debentures, preferred
or prior preference stocks whose rights are superior to or affect the Common
Stock or rights of holders thereof or which are convertible into or
exchangeable for Common Stock, the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
corporate act or proceeding, whether of a similar character or otherwise.

 

SECTION 12.                     Securities Regulation and
Other Required Approvals.  The
Company shall not issue shares subject to an Option unless the exercise,
issuance and delivery of such shares comply with all relevant provisions of
law, including any applicable state securities laws, the Securities Act, the
Exchange Act, any relevant securities rules and regulations, and the
requirements of any stock exchange upon which the shares may then be
listed.  The issuance of shares shall be
further subject to the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from registration for
the issuance and sale of any shares under this Plan.

 

12.1                        Effect of Lack of Authority.  The
Company will use its best efforts to obtain from the appropriate regulatory
agencies any requisite authorization in order to issue the number of shares of
its Common Stock as needed to satisfy the requirements of this Plan.  The Company’s inability to obtain the
authority that Company’s counsel deems to be necessary for the lawful issuance
of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance of such
shares.

 

12.2                        Section 16(b) Compliance; Bifurcation of Plan.  In
the event the Company registers any of its equity securities pursuant to Section 12(b)
or 12(g) of the Exchange Act, this Plan and the Options granted under this Plan
shall comply in all respects with Rule 16b-3 under the Exchange Act (or any
successor rule).  If any Plan provision
is later found not to be in compliance with Rule16b-3, the provision shall be
deemed null and void, or if possible construed in favor of its meeting the
requirements of Rule 16b-3. 
Notwithstanding anything in this Plan to the contrary, the
Administrator, in its absolute discretion, may bifurcate this Plan so as to
restrict, limit or condition the use of any provision of this Plan to Optionees
who are officers and directors subject to Section 16(b) of the Exchange
Act without so restricting, limiting or conditioning other Optionees.  This provision shall not obligate the Company
to undertake registration of any of the Options or shares of Common Stock.

 

12.3                        Representations and Warranties.  As a
condition to granting any Option, the Company may require the recipient to make
any representation or warranty to the Company as may be required, in the
judgment of the Company, including executing and delivering to the Company an
agreement as may from time to time be necessary to comply with federal and
state securities laws.  At the election
of the Company, a stop-transfer order against any shares of stock may be placed
on the official stock books and records of the Company, and a legend may be
stamped on stock certificates indicating that the stock may not be pledged,
sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation.

 

12.4                        Legends on Option Agreements and Stock Certificates. 
Unless an appropriate registration statement is filed pursuant to the
Securities Act, with respect to the shares of Common Stock issued under this
Plan, each certificate representing such Common Stock shall be endorsed with
the following legend or its equivalent:

 

10

 

The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the ”Act) and may not be sold,
assigned, offered or otherwise transferred unless (a) there is an
effective registration statement under the Act, or (b) the Company
receives an opinion of legal counsel for the holder of these securities
(concurred in by legal counsel for the Company) stating that the transaction is
exempt from registration or the Company otherwise satisfies itself that the
transaction is exempt from registration.

 

In addition to this legend,
each Option Agreement and each certificate representing shares of Common Stock
acquired through an Option shall be endorsed with all legends, if any, which
are required by applicable state securities laws and the Administrator.

 

SECTION 13.                     Withholding Tax Requirement.  The
Company will have the right to retain and withhold from any payment of cash, or
shares of Common Stock, the amount of taxes required by any government to be
withheld. The Company may require an individual receiving cash or shares of
Common Stock under this Plan to advance or reimburse the Company for any such
taxes required to be withheld and may withhold any distribution in whole or in
part until the Company is so reimbursed. 
In lieu of withholding or reimbursement, the Company has the right to
withhold from any other cash amounts due or to become due from the Company to
the individual in an amount equal to the taxes, or to retain and withhold a
number of shares having a market value not less than the amount of the taxes
required to be withheld as reimbursement for any taxes and cancel (in whole or
in part) any shares so withheld.

 

SECTION 14.                     Status of Shareholder.  No
Optionee, nor any party to which an Optionee’s rights and privileges may pass,
will have any of the rights or privileges of a shareholder of the Company with
respect to the shares related to an Option unless, until and to the extent the
Option has been properly exercised for shares.

 

SECTION 15.                     Rights and Relationships.

 

15.1                        This Plan.  This Plan is purely voluntary on
the part of the Company.  The adoption or
continuance of this Plan will not be deemed to constitute a commitment to
Eligible Participants by the Company to continue this Plan.

 

15.2                        No Employment Contract.  Nothing in this Plan, nor in any Option
granted pursuant to this Plan, shall give any Optionee any right to continued
employment with the Company or a Related Entity, or to interfere in any way
with the right of the Company (or Related Entity) to terminate the Optionee’s
employment or service relationship with the Company at any time.

 

15.3                        Other Agreements.  To the extent required by the
Administrator, each person who receives shares as a result of any Option shall
agree to enter into and be bound by the shareholders agreement then in effect,
if any, or other similar agreement between the Company and its shareholders
relating to the repurchase by the shareholders and/or the Company of
outstanding shares of Common Stock.  In
addition, as required by the Administrator, shares available through Options
may be subject to restrictions on the transfer of the shares or commitments
regarding the Company’s repurchase of the Optionee’s shares, which restrictions
or commitments may be a condition of the delivery of certificates representing
shares to the Optionee.

 

SECTION 16.                     Amendment and Termination.

 

16.1                        Board Action.  The Board may at any time
suspend, amend or terminate this Plan, provided that the approval of the
Company’s shareholders is necessary within 12 months before or after the
adoption by the Board of any amendment which will (a) increase the number
of shares reserved for the issuance of Options under this Plan; or
(b) permit the granting of Options to a class of persons other than those
presently permitted to receive Options under this Plan.

 

11

 

16.2                        Automatic Termination. 
Unless sooner terminated by the Board, this Plan shall terminate ten
years from the earlier of (a) the date on which this Plan is adopted by
the Board or (b) the date on which this Plan is approved by the
shareholders of the Company.

 

16.3                        Effect.  No Option may be granted after
the termination or during any suspension of this Plan. In addition, no
amendment, suspension or termination of this Plan shall adversely affect
Options granted on or prior to the date thereof, without the consent of the
Optionees, unless expressly provided for in this Plan or a particular Option
Agreement.

 

SECTION 17.                     Applicable Law.  This
Plan shall be governed and construed in accordance with the laws of the State
of Oregon.

 

SECTION 18.                     Effectiveness of This Plan.  This
Plan shall become effective upon adoption by the Board, so long as it is
approved by the Company’s shareholders any time within 12 months before or
after the adoption of this Plan.

 

12<Page>

                                                                   Exhibit 10.34

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
     PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)  November 10, 2004
                                                 -------------------------------

                            REEBOK INTERNATIONAL LTD.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              MA                         1-9340                 04-2678061
--------------------------------------------------------------------------------
 (State or other jurisdiction          (Commission             (IRS Employer
      of incorporation)               File Number)          Identification No.)

          1895 J.W. FOSTER BOULEVARD
            CANTON, MASSACHUSETTS                             02021
--------------------------------------------------------------------------------
   (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code  (781) 401-5000
                                                   -----------------------------

--------------------------------------------------------------------------------
         (Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

/ / Written communications pursuant to Rule 425 under the Securities Act (17
    CFR 230.425)

/ / Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
    240.14a-12)

/ / Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
    Act (17 CFR 240.14d-2(b))

/ / Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
    Act (17 CFR 240.13e-4(c))

================================================================================

<Page>

ITEM 1.01   ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

     On November 10, 2004 Reebok International Ltd. (the "Company") provided to
Terry Pillow, President and Chief Executive Officer of the Company's wholly
owned subsidiary The Ralph Lauren Footwear Co., Inc. ("Ralph Lauren Footwear"),
a pledge of financial protection in the event that Mr. Pillow's employment were
to be terminated within 24 months following a change of control in Ralph Lauren
Footwear. Pursuant to such pledge, Mr. Pillow would receive of a lump sum
payment equal to 200% of his then-current base salary and target bonus. In
addition, Mr. Pillow would be able to participate in his then-current accident,
life, and health insurance benefits for an additional 24 months or, in the
alternative, to receive a lump sum payment sufficient for him to secure
comparable benefits.

<Page>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date: February 25, 2005

                                                REEBOK INTERNATIONAL LTD.

                                                By: /s/ Kenneth I. Watchmaker
                                                    ----------------------------
                                                    Kenneth I. Watchmaker
                                                    Executive Vice President and
                                                    Chief Financial Officer

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