Document:

Exhibit

10.58

 

APPENDIX

D

 

 

MEDIA

ARTS GROUP, INC.

 

2002

STOCK PLAN

 

1.                                       Purposes

of the Plan.  The purposes of this

2002 Stock Plan are:

 

•                                      to

attract and retain the best available personnel for positions of substantial

responsibility,

•                                      to

provide additional incentive to Employees, Directors and Consultants, and

•                                      to

promote the success of the Company’s business

 

Options granted under the Plan may be Incentive Stock

Options or Nonstatutory Stock Options, as determined by the Administrator at

the time of grant.  Stock Purchase

Rights may also be granted under the Plan.

 

2.                                       Definitions.  As used herein, the following definitions

shall apply:

 

(a)                                  “Administrator”

means the Board or any of its Committees as shall be administering the Plan, in

accordance with Section 4 of the Plan.

 

(b)                                 “Applicable

Laws” means the requirements relating to the administration of stock option

plans under U.S. state corporate laws, U.S. federal and state securities laws,

the Code, any stock exchange or quotation system on which the Common Stock is

listed or quoted and the applicable laws of any foreign country or jurisdiction

where Options or Stock Purchase Rights are, or will be, granted under the Plan.

 

(c)                                  “Board”

means the Board of Directors of the Company.

 

(d)                                 “Change

in Control” means the occurrence of any of the following events:

 

(i)                           Any

“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)

becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act),

directly or indirectly, of securities of the Company representing fifty percent

(50%) or more of the total voting power represented by the Company’s then

outstanding voting securities; or

 

(ii)                        The

consummation of the sale or disposition by the Company of all or substantially

all of the Company’s assets;

 

(iii)                     A change in the composition of the

Board occurring within a two-year period, as a result of which fewer than a

majority of the directors are Incumbent Directors.

 

 

  “Incumbent

Directors” means directors who either (A) are Directors as of the

effective date of the Plan, or (B) are elected, or nominated for election,

to the Board with the affirmative votes of at least a majority of the Incumbent

Directors at the time of such election or nomination (but will not include an

individual whose election or nomination is in connection with an actual or

threatened proxy contest relating to the election of directors to the Company);

or

 

(iv)                    The

consummation of a merger or consolidation of the Company with any other

corporation, other than a merger or consolidation which would result in the

voting securities of the Company outstanding immediately prior thereto

continuing to represent (either by remaining outstanding or by being converted

into voting securities of the surviving entity or its parent) at least fifty

percent (50%) of the total voting power represented by the voting securities of

the Company or such surviving entity or its parent outstanding immediately

after such merger or consolidation.

 

(e)                                  “Code”

means the Internal Revenue Code of 1986, as amended.

 

(f)                                    “Committee”

means a committee of Directors appointed by the Board in accordance with

Section 4 of the Plan.

 

(g)                                 “Common

Stock” means the common stock of the Company.

 

(h)                                 “Company”

means Media Arts Group, Inc., a Delaware corporation.

 

(i)                                     “Consultant”

means any natural person, including an advisor, engaged by the Company or a

Parent or Subsidiary to render services to such entity.

 

(j)                                     “Director”

means a member of the Board.

 

(k)                                  “Disability”

means total and permanent disability as defined in Section 22(e)(3) of the

Code.

 

(l)                                     “Employee”

means any person, including Officers and Directors, employed by the Company or

any Parent or Subsidiary of the Company. 

A Service Provider shall not cease to be an Employee in the case of

(i) any leave of absence approved by the Company or (ii) transfers

between locations of the Company or between the Company, its Parent, any

Subsidiary, or any successor.  For

purposes of Incentive Stock Options, no such leave may exceed ninety days,

unless reemployment upon expiration of such leave is guaranteed by statute or

contract.  If reemployment upon

expiration of a leave of absence approved by the Company is not so guaranteed,

then three (3) months following the 91st day of such leave any

Incentive Stock Option held by the Optionee shall cease to be treated as an

Incentive Stock Option and shall be treated for tax purposes as a Non­statutory

Stock Option.  Neither service as a

Director nor payment of a director’s fee by the Company shall be sufficient to

constitute “employment” by the Company.

 

(m)                               “Exchange

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

 

(n)                                 “Fair

Market Value” means, as of any date, the value of Common Stock deter­mined

as follows:

 

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(i)                           If

the Common Stock is listed on any estab­lished stock exchange or a national

market system, 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 stock (or the closing bid, if no sales were

reported) as quoted on such exchange or system on the day of determination, as

reported in The Wall Street Journal

or such other source as the Administrator deems reliable;

 

(ii)                        If

the Common Stock is regularly quoted by a recognized securities dealer but

selling prices are not reported, the Fair Market Value of a Share of Common

Stock shall be the mean between the high bid and low asked prices for the

Common Stock on the day of deter­mination, as reported in The Wall Street Journal or such other

source as the Administrator deems reliable; or

 

(iii)                     In the absence of an established

market for the Common Stock, the Fair Market Value shall be determined in good

faith by the Administrator.

 

(o)                                 “Incentive

Stock Option” means an Option intended to qualify as an incentive stock

option within the meaning of Section 422 of the Code and the regulations

promulgated there­under.

 

(p)                                 “Inside

Director” means a Director who is an Employee.

 

(q)                                 “Nonstatutory

Stock Option” means an Option not intended to qualify as an Incentive Stock

Option.

 

(r)                                    “Notice

of Grant” means a written or electronic notice evidencing certain terms and

conditions of an individual Option or Stock Purchase Right grant.  The Notice of Grant is part of the Option

Agreement.

 

(s)                                  “Officer”

means a person who is an officer of the Company within the meaning of

Section 16 of the Exchange Act and the rules and regulations promulgated

thereunder.

 

(t)                                    “Option”

means a stock option granted pursuant to the Plan.

 

(u)                                 “Option

Agreement” means an agreement between the Company and an Optionee

evidencing the terms and conditions of an individual Option grant.  The Option Agreement is subject to the terms

and conditions of the Plan.

 

(v)                                 “Option

Exchange Program” means a program whereby outstanding Options are

surrendered in exchange for Options with a lower exercise price.

 

(w)                               “Optioned

Stock” means the Common Stock subject to an Option or Stock Purchase Right.

 

(x)                                   “Optionee”

means the holder of an outstanding Option or Stock Purchase Right granted under

the Plan.

 

(y)                                 “Outside

Director” means a Director who is not an Employee.

 

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(z)                                   “Parent”

means a “parent corporation,” whether now or hereafter existing, as defined in

Section 424(e) of the Code.

 

(aa)                            “Plan”

means this 2002 Stock Plan.

 

(bb)                          “Restricted

Stock” means shares of Common Stock acquired pursuant to a grant of Stock

Purchase Rights under Section 11 of the Plan.

 

(cc)                            “Restricted

Stock Purchase Agreement” means a written agreement between the Company and

the Optionee evidencing the terms and restrictions applying to stock purchased

under a Stock Purchase Right.  The

Restricted Stock Purchase Agreement is subject to the terms and conditions of

the Plan and the Notice of Grant.

 

(dd)                          “Rule

16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,

as in effect when discretion is being exercised with respect to the Plan.

 

(ee)                            “Section 16(b)

“ means Section 16(b) of the Exchange Act.

 

(ff)                                “Service

Provider” means an Employee, Director or Consultant.

 

(gg)                          “Share”

means a share of the Common Stock, as adjusted in accordance with

Section 14 of the Plan.

 

(hh)                          “Stock

Purchase Right” means the right to purchase Common Stock pursuant to

Section  11 of the Plan, as evidenced by a Notice of Grant.

 

(ii)                                  “Subsidiary”

means a “subsidiary corporation”, whether now or hereafter exist­ing, as

defined in Section 424(f) of the Code.

 

3.                                       Stock Subject to the Plan.  Subject to the provisions of Section 14

of the Plan, the maximum aggregate number of Shares that may be optioned and

sold under the Plan is 0 Shares plus (a) any Shares which have been

reserved but not issued under the Company’s 1998 Stock Incentive Plan (the “1998

Plan”) as of the date of stockholder approval of this Plan, (b) any Shares

returned to the 1998 Plan as a result of termination of options or repur­chase

of Shares issued under the 1998 Plan and (c) an annual increase to be added on

the first day of the Company’s fiscal year beginning in 2003, equal to the

lesser of (i) 500,000 shares, (ii) 4% of the outstanding shares on

such date or (iii) a lesser amount determined by the Board.  The Shares may be authorized, but unissued,

or reacquired Common Stock.

 

If an Option or Stock

Purchase Right expires or becomes unexercisable without having been exercised

in full, or is surrendered pursuant to an Option Exchange Program, the

unpurchased Shares which were subject thereto shall become available for future

grant or sale under the Plan (unless the Plan has terminated); provided,

however, that Shares that have actually been issued under the Plan, whether

upon exercise of an Option or Right, shall not be returned to the Plan and

shall not become available for future distribution under the Plan, except that

if Shares of Restricted Stock are repurchased by the Company at their original

purchase price, such Shares shall become available for future grant under the

Plan.

 

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4.                                       Administration

of the Plan.

 

(a)                                  Procedure.

 

(i)                           Multiple

Administrative Bodies.  Different

Committees with respect to different groups of Service Providers may administer

the Plan.

 

(ii)                        Section 162(m).  To the extent that the Administrator

determines it to be desirable to qualify Options granted hereunder as

“performance-based compensation” within the meaning of Section 162(m) of

the Code, the Plan shall be administered by a Committee of two or more “outside

directors” within the meaning of Section 162(m) of the Code.

 

(iii)                     Rule 16b-3.  To the extent desirable to qualify

transactions hereunder as exempt under Rule 16b-3, the transactions

contemplated hereunder shall be structured to satisfy the requirements for

exemption under Rule 16b-3.

 

(iv)                    Other

Administration.  Other than as

provided above, the Plan shall be administered by (A) the Board or (B) a

Committee, which committee shall be constituted to satisfy Applicable Laws.

 

(b)                                 Powers

of the Administrator.  Subject to

the provisions of the Plan, and in the case of a Committee, subject to the

specific duties delegated by the Board to such Committee, the Administrator

shall have the authority, in its discre­tion:

 

(i)                           to

determine the Fair Market Value;

 

(ii)                        to

select the Service Providers to whom Options and Stock Purchase Rights may be

granted hereunder;

(iii)                     to determine the number of shares

of Common Stock to be covered by each Option and Stock Purchase Right granted

hereunder;

 

(iv)                    to

approve forms of agreement for use under the Plan;

 

(v)                       to

determine the terms and conditions, not inconsistent with the terms of the

Plan, of any Option or Stock Purchase Right granted hereunder.  Such terms and conditions include, but are

not limited to, the exercise price, the time or times when Options or Stock

Purchase Rights may be exercised (which may be based on performance criteria),

any vesting acceleration or waiver of forfeiture restrictions, and any

restriction or limitation regarding any Option or Stock Purchase Right or the

shares of Common Stock relating thereto, based in each case on such factors as

the Administrator, in its sole discretion, shall determine;

 

(vi)                    to

reduce the exercise price of any Option or Stock Purchase Right to the then

current Fair Market Value if the Fair Market Value of the Common Stock covered

by such Option or Stock Purchase Right shall have declined since the date the

Option or Stock Purchase Right was granted;

 

(vii)                 to institute an Option Exchange

Program;

 

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(viii)              to construe and interpret the terms of

the Plan and awards granted pursuant to the Plan;

 

(ix)                      to

prescribe, amend and rescind rules and regulations relating to the Plan,

including rules and regulations relating to sub-plans established for the

purpose of satisfying applicable foreign laws;

 

(x)                         to

modify or amend each Option or Stock Purchase Right (subject to

Section 16(c) of the Plan), including the discretionary authority to

extend the post-termination exercisability period of Options longer than is

otherwise provided for in the Plan;

 

(xi)                      to

allow Optionees to satisfy withholding tax obligations by electing to have the

Company withhold from the Shares to be issued upon exercise of an Option or

Stock Purchase Right that number of Shares having a Fair Market Value equal to

the minimum amount required to be withheld. 

The Fair Market Value of the Shares to be withheld shall be determined

on the date that the amount of tax to be withheld is to be determined.  All elections by an Optionee to have Shares

withheld for this purpose shall be made in such form and under such conditions

as the Administrator may deem necessary or advisable;

 

(xii)                   to authorize any person to execute

on behalf of the Company any instru­ment required to effect the grant of an

Option or Stock Purchase Right previously granted by the Administrator;

 

(xiii)                to make all other determinations deemed

necessary or advisable for administering the Plan.

 

(c)                                  Effect

of Administrator’s Decision. 

The Administrator’s decisions, determina­tions and interpretations shall

be final and binding on all Optionees and any other holders of Options or Stock

Purchase Rights.

 

5.                                       Eligibility.  Nonstatutory Stock Options and Stock

Purchase Rights may be granted to Service Providers.  Incentive Stock Options may be granted only to Employees.

 

6.                                       Limitations.

 

(a)                                  Each

Option shall be designated in the Option Agreement as either an Incentive Stock

Option or a Nonstatutory Stock Option. 

However, notwithstanding such designa­tion, to the extent that the

aggregate Fair Market Value of the Shares with respect to which Incentive Stock

Options are exercisable for the first time by the Optionee during any calendar

year (under all plans of the Company and any Parent or Subsidiary) exceeds

$100,000, such Options shall be treated as Nonstatutory Stock Options.  For purposes of this Section 6(a),

Incentive Stock Options shall be taken into account in the order in which they

were granted.  The Fair Market Value of

the Shares shall be determined as of the time the Option with respect to such

Shares is granted.

 

(b)                                 Neither

the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee

any right with respect to continuing the Optionee’s relationship as a Service

Provider with the Company, nor shall they interfere in any way with the

Optionee’s right or the Company’s right to terminate such relationship at any

time, with or without cause.

 

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(c)                                  The

following limitations shall apply to grants of Options:

 

(i)                           No

Service Provider shall be granted, in any fiscal year of the Company, Options

to purchase more than 600,000 Shares.

 

(ii)                        In

connection with his or her initial service, a Service Provider may be granted

Options to purchase up to an additional 600,000 Shares, which shall not count

against the limit set forth in subsection (i) above.

 

(iii)                     The foregoing limitations shall be

adjusted proportionately in connection with any change in the Company’s

capitalization as described in Section 14.

 

(iv)                    If

an Option is cancelled in the same fiscal year of the Company in which it was

granted (other than in connection with a transaction described in Section 14),

the cancelled Option will be counted against the limits set forth in

subsections (i) and (ii) above.  For

this purpose, if the exercise price of an Option is reduced, the transaction

will be treated as a cancellation of the Option and the grant of a new Option.

 

7.                                       Term

of Plan.  Subject to Section 20

of the Plan, the Plan shall become effective upon its adoption by the

Board.  It shall continue in effect for

a term of ten (10) years unless terminated earlier under Section 16 of the

Plan.

 

8.                                       Term

of Option.  The term of each Option

shall be stated in the Option Agreement. 

In the case of an Incentive Stock Option, the term shall be ten (10)

years from the date of grant or such shorter term as may be provided in the

Option Agreement.  Moreover, in the case

of an Incentive Stock Option granted to an Optionee who, at the time the

Incentive Stock Option is granted, owns stock representing more than ten

percent (10%) of the total combined voting power of all classes of stock of the

Company or any Parent or Subsidiary, the term of the Incentive Stock Option

shall be five (5) years from the date of grant or such shorter term as may be

provided in the Option Agreement.

 

9.                                       Option

Exercise Price and Consideration.

 

(a)                                  Exercise

Price.  The per share exercise price

for the Shares to be issued pursuant to exercise of an Option shall be

determined by the Administrator, subject to the following:

 

(i)                           In

the case of an Incentive Stock Option

 

(A)                              granted

to an Employee who, at the time the Incentive Stock Option is granted, owns

stock representing more than ten percent (10%) of the voting power of all

classes of stock of the Company or any Parent or Subsidiary, the per Share

exercise price shall be no less than 110% of the Fair Market Value per Share on

the date of grant.

 

(B)                                granted

to any Employee other than an Employee described in paragraph (A) immediately

above, the per Share exercise price shall be no less than 100% of the Fair

Market Value per Share on the date of grant.

 

7

 

(ii)                        In

the case of a Nonstatutory Stock Option, the per Share exercise price shall be

determined by the Administrator.  In the

case of a Nonstatutory Stock Option intended to qualify as “performance-based

compensation” within the meaning of Section 162(m) of the Code, the per

Share exercise price shall be no less than 100% of the Fair Market Value per

Share on the date of grant.

 

(iii)                     Notwithstanding the foregoing,

Options may be granted with a per Share exercise price of less than 100% of the

Fair Market Value per Share on the date of grant pursuant to a merger or other

corporate transaction.

 

(b)                                 Waiting

Period and Exercise Dates.  At the

time an Option is granted, the Administrator shall fix the period within which

the Option may be exercised and shall determine any con­ditions that must be

satisfied before the Option may be exercised.

 

(c)                                  Form

of Consideration.  The Administrator

shall determine the acceptable form of consideration for exercising an Option,

including the method of payment.  In the

case of an Incentive Stock Option, the Administrator shall determine the

acceptable form of consideration at the time of grant.  Such consideration may consist entirely of:

 

(i)                           cash;

 

(ii)                        check;

 

(iii)                     promissory note;

 

(iv)                    other

Shares which, in the case of Shares acquired directly or indirectly from the

Company, (A) have been owned by the Optionee for more than six (6)

months on the date of surrender, and (B) have a Fair Market Value on the

date of surrender equal to the aggregate exercise price of the Shares as to

which said Option shall be exercised;

 

(v)                       consideration

received by the Company under a cashless exercise program implemented by the

Company in connection with the Plan;

 

(vi)                    a

reduction in the amount of any Company liability to the Optionee, including any

liability attributable to the Optionee’s participation in any Company-sponsored

deferred compensation program or arrangement;

 

(vii)                 any combination of the foregoing

methods of payment; or

 

(viii)              such other consideration and method of

payment for the issuance of Shares to the extent permitted by Applicable Laws.

 

10.                                 Exercise

of Option.

 

(a)                                  Procedure

for Exercise; Rights as a Stockholder. 

Any Option granted here­under shall be exercisable according to the

terms of the Plan and at such times and under such conditions as determined by

the Administrator and set forth in the Option Agreement.  Unless the

 

8

 

Administrator provides

otherwise, vesting of Options granted hereunder shall be suspended during any

unpaid leave of absence.  An Option may

not be exercised for a fraction of a Share.

 

An Option shall be

deemed exercised when the Company receives: (i) written or electronic

notice of exercise (in accordance with the Option Agreement) from the person

entitled to exercise the Option, and (ii) full payment for the Shares with

respect to which the Option is exercised. 

Full payment may consist of any consideration and method of payment

authorized by the Administrator and permitted by the Option Agreement and the

Plan.  Shares issued upon exercise of an

Option shall be issued in the name of the Optionee or, if requested by the

Optionee, in the name of the Optionee and his or her spouse.  Until the Shares are issued (as evidenced by

the appropriate entry on the books of the Company or of a duly authorized

transfer agent of the Company), no right to vote or receive dividends or any

other rights as a stockholder shall exist with respect to the Optioned Stock,

notwithstanding the exercise of the Option. 

The Company shall issue (or cause to be issued) such Shares promptly

after the Option is exercised.  No

adjustment will be made for a dividend or other right for which the record date

is prior to the date the Shares are issued, except as provided in

Section 14 of the Plan.

 

Exercising an

Option in any manner shall decrease the number of Shares thereafter available,

both for purposes of the Plan and for sale under the Option, by the number of

Shares as to which the Option is exercised.

 

(b)                                 Termination

of Relationship as a Service Provider. 

If an Optionee ceases to be a Service Provider, other than upon the

Optionee’s death or Disability, the Optionee may exercise his or her Option

within such period of time as is specified in the Option Agreement to the

extent that the Option is vested on the date of termination (but in no event

later than the expiration of the term of such Option as set forth in the Option

Agreement).  In the absence of a

specified time in the Option Agreement, the Option shall remain exercisable for

three (3) months following the Optionee’s termination.  If, on the date of termination, the Optionee

is not vested as to his or her entire Option, the Shares covered by the

unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not

exercise his or her Option within the time specified by the Administrator, the

Option shall terminate, and the Shares covered by such Option shall revert to

the Plan.

 

(c)                                  Disability

of Optionee.  If an Optionee ceases

to be a Service Provider as a result of the Optionee’s Disability, the Optionee

may exercise his or her Option within such period of time as is specified in

the Option Agreement to the extent the Option is vested on the date of termi­nation

(but in no event later than the expiration of the term of such Option as set

forth in the Option Agreement).  In the

absence of a specified time in the Option Agreement, the Option shall remain

exercisable for twelve (12) months following the Optionee’s termination.  If, on the date of termina­tion, the

Optionee is not vested as to his or her entire Option, the Shares covered by

the unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not

exercise his or her Option within the time specified herein, the Option shall

terminate, and the Shares covered by such Option shall revert to the Plan.

 

(d)                                 Death

of Optionee.  If an Optionee dies

while a Service Provider, the Option may be exercised following the Optionee’s

death within such period of time as is specified in the Option Agreement to the

extent that the Option is vested on the date of death (but in no event may

 

9

 

the option be exercised

later than the expiration of the term of such Option as set forth in the Option

Agreement), by the Optionee’s designated beneficiary, provided such beneficiary

has been designated prior to Optionee’s death in a form acceptable to the

Administrator.  If no such beneficiary

has been designated by the Optionee, then such Option may be exercised by the

personal representative of the Optionee’s estate or by the person(s) to whom

the Option is transferred pursuant to the Optionee’s will or in accordance with

the laws of descent and distribution. 

In the absence of a specified time in the Option Agreement, the Option

shall remain exercisable for twelve (12) months following Optionee’s death.  If, at the time of death, Optionee is not

vested as to his or her entire Option, the Shares covered by the unvested

portion of the Option shall immediately revert to the Plan.  If the Option is not so exercised within the

time specified herein, the Option shall terminate, and the Shares covered by

such Option shall revert to the Plan.

 

11.                                 Stock

Purchase Rights.

 

(a)                                  Rights

to Purchase.  Stock Purchase Rights

may be issued either alone, in addition to, or in tandem with other awards

granted under the Plan and/or cash awards made outside of the Plan.  After the Administrator determines that it

will offer Stock Purchase Rights under the Plan, it shall advise the offeree in

writing or electronically, by means of a Notice of Grant, of the terms,

conditions and restrictions related to the offer, includ­ing the number of

Shares that the offeree shall be entitled to purchase, the price to be paid,

and the time within which the offeree must accept such offer.  The offer shall be accepted by execution of

a Restricted Stock Purchase Agreement in the form determined by the

Administrator.

 

(b)                                 Repurchase

Option.  Unless the Administrator

determines otherwise, the Restricted Stock Purchase Agreement shall grant the

Company a repurchase option exercisable upon the voluntary or involuntary

termination of the purchaser’s service with the Company for any reason

(including death or Disability).  The

purchase price for Shares repurchased pursuant to the Restricted Stock Purchase

Agreement shall be the original price paid by the purchaser and may be paid by

cancellation of any indebtedness of the purchaser to the Company.  The repurchase option shall lapse at a rate

determined by the Administrator.

 

(c)                                  Other

Provisions.  The Restricted Stock

Purchase Agreement shall contain such other terms, provisions and conditions

not inconsistent with the Plan as may be determined by the Administrator in its

sole discretion.

 

(d)                                 Rights

as a Stockholder.  Once the Stock

Purchase Right is exercised, the purchaser shall have the rights equivalent to

those of a stockholder, and shall be a stockholder when his or her purchase is

entered upon the records of the duly authorized transfer agent of the

Company.  No adjustment will be made for

a dividend or other right for which the record date is prior to the date the

Stock Purchase Right is exercised, except as provided in Section 14 of the

Plan.

 

12.                                 Transferability

of Options and Stock Purchase Rights. 

Unless determined otherwise by the Administrator, an Option or Stock

Purchase Right may not be sold, pledged, assigned, hypothecated, transferred,

or disposed of in any manner other than by will or by the laws of descent or

distribution and may be exercised, during the lifetime of the Optionee, only by

the Optionee.  If the Administrator

makes an Option or Stock

 

10

 

Purchase Right transferable, such Option or Stock

Purchase Right shall contain such additional terms and conditions as the

Administrator deems appropriate.

 

13.                                 Formula

Option Grants to Outside Directors. 

All grants of Options to Outside Directors pursuant to this Section

shall be automatic and nondiscretionary and shall be made strictly in

accordance with the following provisions:

 

(a)                                  All

Options granted pursuant to this Section shall be Nonstatutory Stock Options

and, except as otherwise provided herein, shall be subject to the other terms

and conditions of the Plan.

 

(b)                                 No

person shall have any discretion to select which Outside Directors shall be

granted Options under this Section or to determine the number of Shares to be

covered by such Options.

 

(c)                                  Each

person who first becomes an Outside Director following the effective date of

this Plan, as determined in accordance with Section 7 hereof, shall be

auto­matically granted an Option to purchase [5,000] Shares (the “First

Option”) or the date on which such person first becomes an Outside Director,

whether through election by the stock­holders of the Company or appointment by

the Board to fill a vacancy; provided, however, that an Inside Director who

ceases to be an Inside Director but who remains a Director shall not receive a

First Option.

 

(d)                                 Each

Outside Director shall be automatically granted an Option to purchase

5,000 Shares (a “Subsequent Option”) on the date of each Annual Meeting of

Stockholders beginning with the 2002 Annual Meeting.

 

(e)                                  Notwithstanding

the provisions of subsections (c) and (d) hereof, any exercise of an

Option granted before the Company has obtained stockholder approval of the Plan

in accordance with Section 20 hereof shall be conditioned upon obtaining

such stock­holder approval of the Plan in accordance with Section 20

hereof.

 

(f)                                    The

terms of each Option granted pursuant to this Section shall be as follows:

 

(i)                           the

term of the Option shall be ten (10) years.

 

(ii)                        the

exercise price per Share shall be 85% of the Fair Market Value per Share on the

date of grant of the Option.

 

(iii)                     subject to Section 14 hereof,

the First Option shall vest and become exercisable immediately.

 

(iv)                    subject

to Section 14 hereof, the Subsequent Option shall vest and become

exercisable immediately.

 

14.                                 Adjustments

Upon Changes in Capitalization, Merger or Change in Control.

 

(a)                                  Changes

in Capitalization.  Subject to any

required action by the stockholders of the Company, the number of shares of

Common Stock that have been authorized for issuance

 

11

 

under the Plan but as to

which no Options or Stock Purchase Rights have yet been granted or which have

been returned to the Plan upon cancellation or expiration of an Option or Stock

Purchase Right, the number of Shares that may be added annually to the Plan

pursuant to Section 3(i), the number of shares which may be granted

pursuant to the automatic grant provisions of Section 13 and the number of

shares of Common Stock as well as the price per share of Common Stock covered

by each such outstanding Option or Stock Purchase Right, shall be

proportionately adjusted for any increase or decrease in the number of issued

shares of Common Stock resulting from a stock split, reverse stock split, stock

dividend, combination or reclassification of the Common Stock, or any other

increase or decrease in the number of issued shares of Common Stock effected

without receipt of consideration by the Company; 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 Board,

whose determination in that respect shall be final, binding and

conclusive.  Except as expressly

provided herein, no issuance by the Company of shares of stock of any class, or

securities convertible into shares of stock of any class, shall affect, and no

adjust­ment by reason thereof shall be made with respect to, the number or

price of shares of Common Stock subject to an Option or Stock Purchase Right.

 

(b)                                 Dissolution

or Liquidation.  In the event of the

proposed dissolution or liquida­tion of the Company, the Administrator shall

notify each Optionee as soon as practicable prior to the effective date of such

proposed transaction.  The Administrator

in its discretion may provide for an Optionee to have the right to exercise his

or her Option until ten (10) days prior to such transaction as to all of the

Optioned Stock covered thereby, including Shares as to which the Option would

not otherwise be exercisable.  In

addition, the Administrator may provide that any Company repurchase option

applicable to any Shares purchased upon exercise of an Option or Stock Purchase

Right shall lapse as to all such Shares, provided the proposed dissolution or

liquidation takes place at the time and in the manner contemplated.  To the extent it has not been previously

exercised, an Option or Stock Purchase Right will terminate immediately prior

to the consummation of such proposed action.

 

(c)                                  Merger

or Change in Control.  In the event

of a merger of the Company with or into another corporation, or a Change in

Control, each outstanding Option and Stock Purchase Right shall be assumed or

an equivalent option or right substituted by the successor corporation or a

Parent or Subsidiary of the successor corporation.  With respect to Options granted to an Outside Director pursuant

to Section 13 that are assumed or substituted for, if following such assumption

or substitution the Optionee’s status as a Director or a director of the

successor corporation, as applicable, is terminated other than upon a voluntary

resignation by the Optionee, then the Optionee shall fully vest in and have the

right to exercise the Option as to all of the Optioned Stock, including Shares

as to which it would not otherwise be vested or exercisable.

 

In the event that

the successor corporation refuses to assume or substitute for the Option or

Stock Purchase Right, the Optionee shall fully vest in and have the right to

exercise the Option or Stock Purchase Right as to all of the Optioned Stock,

including Shares as to which it would not otherwise be vested or exercisable.  If an Option or Stock Purchase Right becomes

fully vested and exercisable in lieu of assumption or substitution in the event

of a merger or sale of assets, the Administrator shall notify the Optionee in

writing or electronically that the Option or Stock Purchase Right shall be

fully vested and exercisable for a period of fifteen (15) days from the date of

 

12

 

such notice, and the

Option or Stock Purchase Right shall terminate upon the expiration of such

period.

 

For the purposes

of this subsection (c), the Option or Stock Purchase Right shall be considered

assumed if, following the merger or Change in Control, the option or right

confers the right to purchase or receive, for each Share of Optioned Stock

subject to the Option or Stock Purchase Right immediately prior to the merger

or Change in Control, the consideration (whether stock, cash, or other

securities or property) received in the merger or Change in Control by holders

of Common Stock for each Share held on the effective date of the transaction

(and if holders were offered a choice of consideration, the type of

consideration chosen by the holders of a majority of the outstanding Shares);

provided, however, that if such consideration received in the merger or Change

in Control is not solely common stock of the successor corporation or its

Parent, the Administrator may, with the consent of the successor corporation,

provide for the consideration to be received upon the exercise of the Option or

Stock Purchase Right, for each Share of Optioned Stock subject to the Option or

Stock Purchase Right, to be solely common stock of the successor corporation or

its Parent equal in fair market value to the per share consideration received

by holders of Common Stock in the merger or Change in Control.

 

15.                                 Date

of Grant.  The date of grant of an

Option or Stock Purchase Right shall be, for all purposes, the date on which

the Administrator makes the determination granting such Option or Stock

Purchase Right, or such other later date as is determined by the

Administrator.  Notice of the

determination shall be provided to each Optionee within a reasonable time after

the date of such grant.

 

16.                                 Amendment

and Termination of the Plan.

 

(a)                                  Amendment

and Termination.  The Board may at

any time amend, alter, suspend or terminate the Plan.

 

(b)                                 Stockholder

Approval.  The Company shall obtain

stockholder approval of any Plan amendment to the extent necessary and

desirable to comply with Applicable Laws.

 

(c)                                  Effect

of Amendment or Termination.  No

amendment, alteration, suspension or termination of the Plan shall impair the

rights of any Optionee, unless mutually agreed otherwise between the Optionee

and the Administrator, which agreement must be in writing and signed by the

Optionee and the Company.  Termination

of the Plan shall not affect the Administrator’s ability to exercise the powers

granted to it hereunder with respect to Options granted under the Plan prior to

the date of such termination.

 

17.                                 Conditions

Upon Issuance of Shares.

 

(a)                                  Legal

Compliance.  Shares shall not be

issued pursuant to the exercise of an Option or Stock Purchase Right unless the

exercise of such Option or Stock Purchase Right and the issuance and delivery

of such Shares shall comply with Applicable Laws and shall be further subject to

the approval of counsel for the Company with respect to such compliance.

 

(b)                                 Investment

Representations.  As a condition to

the exercise of an Option or Stock Purchase Right, the Company may require the

person exercising such Option or Stock

 

13

 

Purchase Right 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.

 

18.                                 Inability

to Obtain Authority.  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.

 

19.                                 Reservation

of Shares.  The Company, during the

term of this Plan, will at all times reserve and keep available such number of

Shares as shall be sufficient to satisfy the requirements of the Plan.

 

20.                                 Stockholder

Approval.  The Plan shall be subject

to approval by the stockholders of the Company within twelve (12) months after

the date the Plan is adopted.  Such

stockholder approval shall be obtained in the manner and to the degree required

under Applicable Laws.

 

14Exhibit

10.1

 

 BIOSITE INCORPORATED

 

2002 NONQUALIFIED

 

STOCK INCENTIVE

PLAN

ARTICLE 1            INTRODUCTION.

The Plan was adopted by the Board on November 7, 2002,

to be effective on that date.

The purpose of the Plan is to promote the long-term

success of the Company and the creation of stockholder value by

(a) encouraging Participants to focus on critical long-range objectives,

(b) encouraging the attraction and retention of Participants with

exceptional qualifications and (c) linking Participants directly to stockholder

interests through increased stock ownership. 

The Plan seeks to achieve this purpose by providing for Awards in the

form of Restricted Shares, Stock Units, Options (which shall only include

nonstatutory stock options) or stock appreciation rights.

The Plan shall be governed by, and construed in

accordance with, the laws of the State of California.

ARTICLE 2            ADMINISTRATION.

2.1           Committee

Composition.  The Plan shall be

administered by the Committee.  Except

as provided below, the Committee shall consist exclusively of directors of the

Company, who shall be appointed by the Board. 

In addition, the composition of the Committee shall satisfy:

(a)         Such

requirements, if any, as the Securities and Exchange Commission may establish

for administrators acting under plans intended to qualify for exemption under

Rule 16b–3 (or its successor) under the Exchange Act; and

(b)         Such

requirements as the Internal Revenue Service may establish for outside

directors acting under plans intended to qualify for exemption under

section 162(m)(4)(C) of the Code.

The Board may act on its own behalf with respect to

Outside Directors and may also appoint one or more separate committees composed

of one or more officers of the Company who need not be directors of the Company

and who need not satisfy the foregoing requirements, who may administer the

Plan with respect to Participants who are not “covered employees” under

section 162(m)(3) of the Code and who are not required to report pursuant

to § 16(a) of the Exchange Act.

2.2           Committee

Responsibilities.  The Committee

shall (a) select the Participants who are to receive Awards under the

Plan, (b) determine the type, number, vesting requirements and other features

and conditions of such Awards, (c) interpret the Plan and (d) make all

other decisions relating to the operation of the Plan.  The Committee may adopt such rules or

guidelines as it deems appropriate to implement the Plan.  The Committee’s determinations under the

Plan shall be final and binding on all persons.

ARTICLE 3            SHARES AVAILABLE FOR GRANTS.

3.1           Basic

Limitation.  Common Shares issued

pursuant to the Plan may be authorized but unissued shares or treasury

shares.  The aggregate number of Common

Shares available for Restricted Shares, Stock Units, Options and SARs awarded

under the Plan shall not exceed five hundred fifty thousand (550,000).  The limitation of this Section 3.1

shall be subject to adjustment pursuant to Article 10.

1

 

3.2           Additional

Shares.  If Stock Units, Options or

SARs are forfeited or if Options or SARs terminate for any other reason before

being exercised, then the corresponding Common Shares shall again become

available for Awards under the Plan.  If

Restricted Shares are forfeited before any dividends have been paid with

respect to such Shares, then such Shares shall again become available for

Awards under the Plan.  If Stock Units

are settled, then only the number of Common Shares (if any) actually issued in

settlement of such Stock Units shall reduce the number available under

Section 3.1 and the balance shall again become available for Awards under

the Plan.  If SARs are exercised, then

only the number of Common Shares (if any) actually issued in settlement of such

SARs shall reduce the number available under Section 3.1 and the balance

shall again become available for Awards under the Plan.

3.3           Dividend

Equivalents.  Any dividend

equivalents distributed under the Plan shall not be applied against the number

of Restricted Shares, Stock Units, Options or SARs available for Awards,

whether or not such dividend equivalents are converted into Stock Units.

ARTICLE 4            ELIGIBILITY AND PARTICIPATION.

4.1           Eligibility.  Only Eligible Employees and consultants (who

are natural persons) of the Company, Parent or Subsidiary shall be eligible for

designation as Participants by the Committee, provided, however, that Officers

and members of the Board shall not be eligible for designation as Participants

by the Committee or the Board and shall not be eligible to receive any Awards

under this Plan.

4.2           Participation.  Only persons eligible to participate in this

Plan as provided in Section 4.1 above and who are designated as Participants by

the Committee and are granted specific Awards by the Committee  under this Plan shall participate in this

Plan.

ARTICLE 5            OPTIONS.

5.1           Stock

Option Agreement.  Each grant of an

Option under the Plan shall be evidenced by a Stock Option Agreement between

the Optionee and the Company.  Such

Option shall be subject to all applicable terms of the Plan and may be subject

to any other terms that are not inconsistent with the Plan.  The provisions of the various Stock Option

Agreements entered into under the Plan need not be identical.  Options may be granted in consideration of a

cash payment or in consideration of a reduction in the Optionee’s other

compensation.  A Stock Option Agreement

may provide that a new Option will be granted automatically to the Optionee

when he or she exercises a prior Option and pays the Exercise Price in the form

described in Section 6.2.

5.2           Number

of Shares.  Each Stock Option

Agreement shall specify the number of Common Shares subject to the Option and

shall provide for the adjustment of such number in accordance with

Article 10.

5.3           Exercise

Price.  Each Stock Option Agreement

shall specify the Exercise Price provided that the Exercise Price under an NSO

shall in no event be less than the par value of the Common Shares subject to

such NSO.  In the case of an NSO, a

Stock Option Agreement may specify an Exercise Price that varies in accordance

with a predetermined formula while the NSO is outstanding.

5.4           Exercisability

and Term.  Each Stock Option

Agreement shall specify the date when all or any installment of the Option is

to become exercisable.  The Stock Option

Agreement shall also specify the term of the Option.  A Stock Option Agreement may provide for accelerated

exercisability in the event of the Optionee’s death, disability or retirement

or other events and may provide for expiration prior to the end of its term in

the event of the termination of the Optionee’s service.

Options may be awarded in combination with SARs, and

such an Award may provide that the Options will not be exercisable unless the

related SARs are forfeited.  NSOs may

also be awarded in combination with Restricted Shares or Stock Units, and such

an Award may provide that the NSOs will not be exercisable unless the related

Restricted Shares or Stock Units are forfeited.

2

 

5.5           Effect

of Change in Control.  The Committee

may determine, at the time of granting an Option or thereafter, that such

Option shall become fully exercisable as to all Common Shares subject to such

Option in the event that a Change in Control occurs with respect to the Company.

5.6           Modification

or Assumption of Options.  Within

the limitations of the Plan, the Committee may modify, extend or assume

outstanding options.  The foregoing

notwithstanding, no modification of an Option shall, without the consent of the

Optionee, alter or impair his or her rights or obligations under such Option.

ARTICLE 6            PAYMENT FOR OPTION SHARES.

6.1           General

Rule.  The entire Exercise Price of

Common Shares issued upon exercise of Options shall be payable in cash at the

time when such Common Shares are purchased, except as follows.  The Exercise Price may be paid in such form

permitted in the Stock Option Agreement for such Options and the Committee may,

in its discretion at any time accept payment in any form(s) described in this

Article 6.

6.2           Surrender

of Stock.  To the extent that this

Section 6.2 is applicable, payment for all or any part of the Exercise

Price may be made with Common Shares which have already been owned by the

Optionee for more than six months.  Such

Common Shares shall be valued at their Fair Market Value on the date when the

new Common Shares are purchased under the Plan.

6.3           Exercise/Sale.  To the extent that this Section 6.3 is

applicable, payment may be made by the delivery (on a form prescribed by the

Company) of an irrevocable direction to a securities broker approved by the

Company to sell Common Shares and to deliver all or part of the sales proceeds

to the Company in payment of all or part of the Exercise Price and any

withholding taxes.

6.4           Exercise/Pledge.  To the extent that this Section 6.4 is

applicable, payment may be made by the delivery (on a form prescribed by the

Company) of an irrevocable direction to pledge Common Shares to a securities

broker or lender approved by the Company, as security for a loan, and to

deliver all or part of the loan proceeds to the Company in payment of all or

part of the Exercise Price and any withholding taxes.

6.5           Promissory

Note.  To the extent that this

Section 6.5 is applicable, payment may be made with a full-recourse

promissory note with interest at a rate to be determined by the Company;

provided that the par value of the Common Shares shall be paid in cash.

6.6           Other

Forms of Payment.  To the extent

that this Section 6.6 is applicable, payment may be made in any other form

that is consistent with applicable laws, regulations and rules.

ARTICLE 7            STOCK APPRECIATION RIGHTS.

7.1           SAR

Agreement.  Each grant of an SAR

under the Plan shall be evidenced by an SAR Agreement between the Optionee and

the Company.  Such SAR shall be subject

to all applicable terms of the Plan and may be subject to any other terms that

are not inconsistent with the Plan.  The

provisions of the various SAR Agreements entered into under the Plan need not

be identical.  SARs may be granted in

consideration of a reduction in the Optionee’s other compensation.

7.2           Number

of Shares.  Each SAR Agreement shall

specify the number of Common Shares to which the SAR pertains and shall provide

for the adjustment of such number in accordance with Article 10.  SARs granted to any Optionee in a single

calendar year shall in no event pertain to more than 250,000 Common Shares,

subject to adjustment in accordance with Article 10.

7.3           Exercise

Price.  Each SAR Agreement shall

specify the Exercise Price.  An SAR

Agreement may specify an Exercise Price that varies in accordance with a

predetermined formula while the SAR is outstanding.

3

 

7.4           Exercisability

and Term.  Each SAR Agreement shall

specify the date when all or any installment of the SAR is to become

exercisable.  The SAR Agreement shall

also specify the term of the SAR.  An

SAR Agreement may provide for accelerated exercisability in the event of the

Optionee’s death, disability or retirement or other events and may provide for

expiration prior to the end of its term in the event of the termination of the

Optionee’s service.  SARs may also be

awarded in combination with Options, Restricted Shares or Stock Units, and such

an Award may provide that the SARs will not be exercisable unless the related

Options, Restricted Shares or Stock Units are forfeited.  An SAR may be included in an NSO at the time

of grant or thereafter.  An SAR granted

under the Plan may provide that it will be exercisable only in the event of a

Change in Control.

7.5           Effect

of Change in Control.  The Committee

may determine, at the time of granting an SAR or thereafter, that such SAR

shall become fully exercisable as to all Common Shares subject to such SAR in

the event that a Change in Control occurs with respect to the Company.

7.6           Exercise

of SARs.  The exercise of an SAR

shall be subject to the restrictions imposed by Rule 16b–3 (or its

successor) under the Exchange Act, if applicable.  If, on the date when an SAR expires, the Exercise Price under

such SAR is less than the Fair Market Value on such date but any portion of

such SAR has not been exercised or surrendered, then such SAR shall

automatically be deemed to be exercised as of such date with respect to such

portion.  Upon exercise of an SAR, the

Optionee (or any person having the right to exercise the SAR after his or her

death) shall receive from the Company (a) Common

Shares, (b) cash or (c) a

combination of Common Shares and cash, as the Committee shall determine.  The amount of cash and/or the Fair Market

Value of Common Shares received upon exercise of SARs shall, in the aggregate,

be equal to the amount by which the Fair Market Value (on the date of

surrender) of the Common Shares subject to the SARs exceeds the Exercise Price.

7.7           Modification

or Assumption of SARs.  Within the

limitations of the Plan, the Committee may modify, extend or assume outstanding

SARs or may accept the cancellation of outstanding SARs (whether granted by the

Company or by another issuer) in return for the grant of new SARs for the same

or a different number of shares and at the same or a different exercise

price.  The foregoing notwithstanding,

no modification of an SAR shall, without the consent of the Optionee, alter or

impair his or her rights or obligations under such SAR.

ARTICLE 8            RESTRICTED SHARES AND STOCK

UNITS.

8.1           Time,

Amount and Form of Awards.  Awards

under the Plan may be granted in the form of Restricted Shares, in the form of

Stock Units, or in any combination of both. 

Restricted Shares or Stock Units may also be awarded in combination with

NSOs or SARs, and such an Award may provide that the Restricted Shares or Stock

Units will be forfeited in the event that the related NSOs or SARs are

exercised.

8.2           Payment

for Awards.  To the extent that an

Award is granted in the form of newly issued Restricted Shares, the Award

recipient, as a condition to the grant of such Award, shall be required to pay

the Company in cash an amount equal to the par value of such Restricted Shares.  To the extent that an Award is granted in

the form of Restricted Shares from the Company’s treasury or in the form of

Stock Units, no cash consideration shall be required of the Award recipients.

8.3           Vesting

Conditions.  Each Award of

Restricted Shares or Stock Units shall become vested, in full or in

installments, upon satisfaction of the conditions specified in the Stock Award

Agreement.  A Stock Award Agreement may

provide for accelerated vesting in the event of the Participant’s death, disability

or retirement or other events.  The Committee

may determine, at the time of making an Award or thereafter, that such Award

shall become fully vested in the event that a Change in Control occurs with

respect to the Company.

8.4           Form

and Time of Settlement of Stock Units. 

Settlement of vested Stock Units may be made in the form of (a) cash, (b) Common

Shares or (c) any combination of both, as determined

by the Committee.  The actual number of

Stock Units eligible for settlement may be larger or smaller than the number

included in the original Award, based on predetermined performance

factors.  Methods of converting Stock

Units into cash may include (without limitation) a method based on the average

Fair Market Value of Common Shares over a series of trading days.  Vested Stock Units may be settled in a lump

sum or in installments.  The

distribution may occur or commence when all vesting conditions applicable to

the Stock Units have been satisfied or have lapsed, or it may be deferred to

any later 

4

 

date.  The amount of a deferred distribution may be

increased by an interest factor or by dividend equivalents.  Until an Award of Stock Units is settled,

the number of such Stock Units shall be subject to adjustment pursuant to

Article 10.

8.5           Death

of Recipient.  Any Stock Units Award

that becomes payable after the recipient’s death shall be distributed to the

recipient’s beneficiary or beneficiaries. 

Each recipient of a Stock Units Award under the Plan shall designate one

or more beneficiaries for this purpose by filing the prescribed form with the

Company.  A beneficiary designation may

be changed by filing the prescribed form with the Company at any time before

the Award recipient’s death.  If no

beneficiary was designated or if no designated beneficiary survives the Award

recipient, then any Stock Units Award that becomes payable after the

recipient’s death shall be distributed to the recipient’s estate.

8.6           Creditors’

Rights.  A holder of Stock Units

shall have no rights other than those of a general creditor of the

Company.  Stock Units represent an

unfunded and unsecured obligation of the Company, subject to the terms and

conditions of the applicable Stock Award Agreement.

ARTICLE 9            VOTING AND DIVIDEND RIGHTS.

9.1           Restricted

Shares.  The holders of Restricted

Shares awarded under the Plan shall have the same voting, dividend and other

rights as the Company’s other stockholders. 

A Stock Award Agreement, however, may require that the holders of

Restricted Shares invest any cash dividends received in additional Restricted

Shares.  Such additional Restricted

Shares shall be subject to the same conditions and restrictions as the Award

with respect to which the dividends were paid. 

Such additional Restricted Shares shall not reduce the number of Common

Shares available under Article 3.

9.2           Stock

Units.  The holders of Stock Units

shall have no voting rights.  Prior to

settlement or forfeiture, any Stock Unit awarded under the Plan may, at the

Committee’s discretion, carry with it a right to dividend equivalents.  Such right entitles the holder to be

credited with an amount equal to all cash dividends paid on one Common Share

while the Stock Unit is outstanding. 

Dividend equivalents may be converted into additional Stock Units.  Settlement of dividend equivalents may be

made in the form of cash, in the form of Common Shares, or in a combination of

both.  Prior to distribution, any

dividend equivalents which are not paid shall be subject to the same conditions

and restrictions as the Stock Units to which they attach.

ARTICLE 10          PROTECTION AGAINST DILUTION.

10.1         Adjustments.  In the event of a subdivision of the

outstanding Common Shares, a declaration of a dividend payable in Common

Shares, a declaration of a dividend payable in a form other than Common Shares

in an amount that has a material effect on the price of Common Shares, a

combination or consolidation of the outstanding Common Shares (by

reclassification or otherwise) into a lesser number of Common Shares, a

recapitalization, a spinoff or a similar occurrence, the Committee shall make

such adjustments as it, in its sole discretion, deems appropriate in one or

more of (a) the number of Options, SARs, Restricted Shares and Stock Units

available for future Awards under Article 3, (b) the limitations set

forth in Sections 5.2 and 7.2, (c) the number of NSOs to be granted

to Outside Directors under Section 4.2, (d) the number of Stock Units

included in any prior Award which has not yet been settled, (e) the number

of Common Shares covered by each outstanding Option and SAR or (f) the

Exercise Price under each outstanding Option and SAR.  Except as provided in this Article 10, a Participant shall

have no rights by reason of any issue by the Company of stock of any class or

securities convertible into stock of any class, any subdivision or

consolidation of shares of stock of any class, the payment of any stock

dividend or any other increase or decrease in the number of shares of stock of

any class.

10.2         Reorganizations.  In the event that the Company is a party to

a merger or other reorganization, outstanding Options, SARs, Restricted Shares

and Stock Units shall be subject to the agreement of merger or

reorganization.  Such agreement may

provide, without limitation, for the assumption of outstanding Awards by the

surviving corporation or its parent, for their continuation by the Company (if

the Company is a surviving corporation), for accelerated vesting and

accelerated expiration, or for settlement in cash.

5

 

ARTICLE 11          AWARDS UNDER OTHER PLANS.

The Company may grant awards under other plans or

programs.  Such awards may be settled in

the form of Common Shares issued under this Plan.  Such Common Shares shall be treated for all purposes under the

Plan like Common Shares issued in settlement of Stock Units and shall, when

issued, reduce the number of Common Shares available under Article 3.

ARTICLE 12          LIMITATION ON RIGHTS.

12.1         Retention

Rights.  Neither the Plan nor any

Award granted under the Plan shall be deemed to give any individual a right to

remain an employee, consultant or director of the Company, a Parent or a

Subsidiary.  The Company and its Parents

and Subsidiaries reserve the right to terminate the service of any employee,

consultant or director at any time, with or without cause, subject to

applicable laws, the Company’s certificate of incorporation and by-laws and a

written employment agreement (if any).

12.2         Stockholders’

Rights.  A Participant shall have no

dividend rights, voting rights or other rights as a stockholder with respect to

any Common Shares covered by his or her Award prior to the issuance of a stock

certificate for such Common Shares.  No

adjustment shall be made for cash dividends or other rights for which the

record date is prior to the date when such certificate is issued, except as

expressly provided in Articles 8, 9 and 10.

12.3         Regulatory

Requirements.  Any other provision

of the Plan notwithstanding, the obligation of the Company to issue Common

Shares under the Plan shall be subject to all applicable laws, rules and

regulations and such approval by any regulatory body as may be required.  The Company reserves the right to restrict,

in whole or in part, the delivery of Common Shares pursuant to any Award prior

to the satisfaction of all legal requirements relating to the issuance of such

Common Shares, to their registration, qualification or listing or to an

exemption from registration, qualification or listing.

ARTICLE 13          LIMITATION ON PAYMENTS.

13.1         Excise

Tax.   If any acceleration of the

vesting of a Participant’s Awards under this Plan  (“Acceleration”) would (i) constitute a “parachute payment”

within the meaning of Section 280G of the Internal Revenue Code of 1986, as

amended (the “Code”), and (ii) but for this sentence, be subject to the excise

tax imposed by Section 4999 of the Code (the “Excise Tax”), then such

Acceleration shall be reduced to the Reduced Amount.  The “Reduced Amount” shall be whichever of the following which

would provide the largest after-tax benefit to the Participant: (i) the largest

portion of the Acceleration that would result in no portion of the Acceleration

being subject to the Excise Tax or (ii) the largest portion, up to and

including the total, of the Acceleration, whichever amount, after taking into

account all applicable federal, state and local employment taxes, income taxes,

and the Excise Tax (all computed at the highest applicable marginal rate),

results in Participant’s receipt, on an after-tax basis, of the greater amount

of the Acceleration notwithstanding that all or some portion of the Payment may

be subject to the Excise Tax. In the event that the Acceleration is to be

reduced, such Acceleration shall be cancelled in the reverse order of the date

of grant of the Participant’s Awards unless the Participant elects in writing a

different order for cancellation.

The accounting

firm engaged by the Company for general audit purposes as of the day prior to

the effective date of the transaction triggering the Acceleration (“Triggering

Transaction”) shall perform the foregoing calculations.  If the accounting firm so engaged by the

Company is serving as accountant or auditor for the individual, entity or group

effecting the Triggering Transaction, the Company shall appoint a nationally

recognized accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with

respect to the determinations by such accounting firm required to be made

hereunder.

13.2         Calculations.  The accounting firm engaged to make the

determinations hereunder shall provide its calculations, together with detailed

supporting documentation, to the Corporation and Participant within fifteen

(15) calendar days after the date on which Participant’s right to Acceleration

arises (if requested at that time by 

6

 

the

Company or Participant) or at such other time as requested by the Company or

Participant.  If the accounting firm

determines that no Excise Tax is payable with respect to an Acceleration, either

before or after the application of the Reduced Amount, it shall furnish the

Company and Participant with an opinion reasonably acceptable to Participant

that no Excise Tax will be imposed with respect to such Acceleration.  Any good faith determination of the

accounting firm made hereunder shall be final, binding and conclusive upon the

Company and Participant.

13.3         Related

Corporations.  For purposes of this

Article 13, the term “Company” shall include affiliated corporations to

the extent determined by the Auditors in accordance with

section 280G(d)(5) of the Code.

ARTICLE 14          WITHHOLDING TAXES.

14.1         General.  To the extent required by applicable

federal, state, local or foreign law, a Participant or his or her successor

shall make arrangements satisfactory to the Company for the satisfaction of any

withholding tax obligations that arise in connection with the Plan.  The Company shall not be required to issue

any Common Shares or make any cash payment under the Plan until such

obligations are satisfied.

14.2         Share

Withholding.  The Committee may

permit a Participant to satisfy all or part of his or her withholding or income

tax obligations by having the Company withhold all or a portion of any Common

Shares that otherwise would be issued to him or her or by surrendering all or a

portion of any Common Shares that he or she previously acquired.  Such Common Shares shall be valued at their

Fair Market Value on the date when taxes otherwise would be withheld in cash.  Any payment of taxes by assigning Common Shares

to the Company may be subject to restrictions, including any restrictions

required by rules of the Securities and Exchange Commission.

ARTICLE 15          ASSIGNMENT OR TRANSFER OF AWARDS.

15.1         General.  An Award granted under the Plan shall not be

anticipated, assigned, attached, garnished, optioned, transferred or made

subject to any creditor’s process, whether voluntarily, involuntarily or by

operation of law, except as approved by the Committee.  However, this Article 15 shall not

preclude a Participant from designating a beneficiary who will receive any

outstanding Awards in the event of the Participant’s death, nor shall it

preclude a transfer of Awards by will or by the laws of descent and

distribution.

15.2         Trusts.  Neither this Article 15 nor any other

provision of the Plan shall preclude a Participant from transferring or

assigning Restricted Shares to (a) the trustee of a trust that is

revocable by such Participant alone, both at the time of the transfer or

assignment and at all times thereafter prior to such Participant’s death, or

(b) the trustee of any other trust to the extent approved in advance by

the Committee in writing.  A transfer or

assignment of Restricted Shares from such trustee to any person other than such

Participant shall be permitted only to the extent approved in advance by the

Committee in writing, and Restricted Shares held by such trustee shall be

subject to all of the conditions and restrictions set forth in the Plan and in

the applicable Stock Award Agreement, as if such trustee were a party to such

Agreement.

ARTICLE 16          FUTURE OF THE PLAN.

16.1         Term

of the Plan.  The Plan, as set forth

herein, was adopted on November 7, 2002, and became effective November 7,

2002.  The Plan shall remain in effect

until it is terminated under Section 16.2.

16.2         Amendment

or Termination.  The Board may, at

any time and for any reason, amend or terminate the Plan.  An amendment of the Plan shall be subject to

the approval of the Company’s stockholders only to the extent required by

applicable laws, regulations or rules or applicable stock exchange rules.  No Awards shall be granted under the Plan

after the termination thereof.  The

termination of the Plan, or any amendment thereof, shall not affect any Award

previously granted under the Plan.

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ARTICLE 17          DEFINITIONS.

17.1         “Award”

means any award of an Option, an SAR, a Restricted Share or a Stock Unit under

the Plan.

17.2          “Board”

means the Company’s Board of Directors, as constituted from time to time.

17.3          “Change

in Control” shall mean the occurrence of any of the following events:

(a)         The

consummation of a merger or consolidation of the Company with or into another

entity or any other corporate reorganization, if more than 50% of the combined

voting power of the continuing or surviving entity’s securities outstanding

immediately after such merger, consolidation or other reorganization is owned

by persons who were not stockholders of the Company immediately prior to such

merger, consolidation or other reorganization;

(b)         A

change in the composition of the Board, as a result of which fewer than

one-half of the incumbent directors are directors who either:

(A)          Had been directors of the Company

24 months prior to such change; or

(B)           Were elected, or nominated for

election, to the Board with the affirmative votes of at least a majority of the

directors who had been directors of the Company 24 months prior to such

change and who were still in office at the time of the election or nomination;

or

(c)         Any

“person” (as such term is used in sections 13(d) and 14(d) of the Exchange

Act) by the acquisition or aggregation of securities is or becomes the

beneficial owner, directly or indirectly, of securities of the Company

representing 50% or more of the combined voting power of the Company’s

then outstanding securities ordinarily (and apart from rights accruing under

special circumstances) having the right to vote at elections of directors (the

“Base Capital Stock”); except that any change in the relative beneficial

ownership of the Company’s securities by any person resulting solely from a

reduction in the aggregate number of outstanding shares of Base Capital Stock,

and any decrease thereafter in such person’s ownership of securities, shall be

disregarded until such person increases in any manner, directly or indirectly,

such person’s beneficial ownership of any securities of the Company.

The term “Change in Control” shall not include a

transaction, the sole purpose of which is to change the state of the Company’s

incorporation.

17.4          “Code”

means the Internal Revenue Code of 1986, as amended.

17.5          “Committee”

means a committee of the Board, as described in Article 2.

17.6         “Common

Share” means one share of the common stock of the Company.

17.7         “Company”

means Biosite Incorporated, a Delaware corporation.

17.8         “Eligible

Employee” means a common–law employee of the Company, a Parent or a

Subsidiary.

17.9         “Exchange

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

17.10       “Exercise

Price,” in the case of an Option, means the amount for which one Common

Share may be purchased upon exercise of such Option, as specified in the

applicable Stock Option Agreement.  ”Exercise Price,” in the case of

an SAR, means an amount, as specified in the applicable SAR Agreement, which is

subtracted from the Fair Market Value of one Common Share in determining the

amount payable upon exercise of such SAR.

8

 

17.11       “Fair

Market Value” means the market price of Common Shares, determined by the

Committee as follows:

(a)         If

the Common Shares were traded over-the-counter on the date in question but was

not traded on the Nasdaq Stock Market or the Nasdaq National Market, then the

Fair Market Value shall be equal to the mean between the last reported

representative bid and asked prices quoted for such date by the principal

automated inter-dealer quotation system on which the Common Shares are quoted

or, if the Common Shares are not quoted on any such system, by the “Pink

Sheets” published by the National Quotation Bureau, Inc.;

(b)         If

the Common Shares were traded over-the-counter on the date in question and were

traded on the Nasdaq Stock Market or the Nasdaq National Market, then the Fair

Market Value shall be equal to the last-transaction price quoted for such date

by the Nasdaq Stock Market or the Nasdaq National Market;

(c)         If

the Common Shares were traded on a stock exchange on the date in question, then

the Fair Market Value shall be equal to the closing price reported by the

applicable composite transactions report for such date; and

(d)         If

none of the foregoing provisions is applicable, then the Fair Market Value

shall be determined by the Committee in good faith on such basis as it deems

appropriate.

Whenever possible, the determination of Fair Market

Value by the Committee shall be based on the prices reported in the Western

Edition of The Wall Street Journal. 

Such determination shall be conclusive and binding on all persons.

17.12       “ISO”

means an incentive stock option described in section 422(b) of the Code.

17.13       “NSO”

means a stock option not described in section 422 or 423 of the Code.

17.14       “Officer”

means a person who is an officer of the Company within the meaning of Section

16 of the Exchange Act and the rules and regulations promulgated there

thereunder and also means a person who holds a Vice President or higher

position with the Company.

17.15       “Option”

means a nonstatutory stock option granted under the Plan and entitling the

holder to purchase one Common Share. 

The term “Option” shall not include an incentive stock option described

section 422 of the Code.

17.16       “Optionee”

means an individual or estate who holds an Option or SAR.

17.17       “Outside

Director” shall mean a member of the Board who is not a common-law employee

of the Company, a Parent or a Subsidiary.

17.18       “Parent”

means any corporation (other than the Company) in an unbroken chain of

corporations ending with the Company, if each of the corporations other than

the Company owns stock possessing 50% or more of the total combined voting

power of all classes of stock in one of the other corporations in such

chain.  A corporation that attains the

status of a Parent on a date after the adoption of the Plan shall be considered

a Parent commencing as of such date.

17.19       “Participant”

means an individual or estate who holds an Award as provided in Section 4.2.

17.20       “Plan”

means this Biosite Incorporated 2002 Nonqualified Stock Incentive Plan, as

amended from time to time.

17.21       “Restricted Share”

means a Common Share awarded under the Plan.

17.22       “SAR”

means a stock appreciation right granted under the Plan.

9

 

17.23       “SAR

Agreement” means the agreement between the Company and an Optionee which

contains the terms, conditions and restrictions pertaining to his or her SAR.

17.24       “Stock

Award Agreement” means the agreement between the Company and the recipient

of a Restricted Share or Stock Unit which contains the terms, conditions and

restrictions pertaining to such Restricted Share or Stock Unit.

17.25       “Stock

Option Agreement” means the agreement between the Company and an Optionee

which contains the terms, conditions and restrictions pertaining to his or her

Option.

17.26       “Stock

Unit” means a bookkeeping entry representing the equivalent of one Common

Share, as awarded under the Plan.

17.27       “Subsidiary”

means any corporation (other than the Company) in an unbroken chain of

corporations beginning with the Company, if each of the corporations other than

the last corporation in the unbroken chain owns stock possessing 50% or more of

the total combined voting power of all classes of stock in one of the other

corporations in such chain.  A

corporation that attains the status of a Subsidiary on a date after the

adoption of the Plan shall be considered a Subsidiary commencing as of such

date.

ARTICLE 18          EXECUTION.

To record the adoption of

the Plan by the Board, the Company has caused its duly authorized officer to

affix the corporate name and seal hereto.

	

  BIOSITE

  INCORPORATED

  
	

   

  
	

   

  
	

   

  
	

  By     /s/ 

  KIM D. BLICKENSTAFF

  

 

 

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