View:
As filed with the Securities and Exchange Commission on June 13, 2002
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
A.P. Pharma, Inc.
-----------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-2875566
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
123 Saginaw Drive, Redwood City, California 94063
-------------------------------------------------
(Address of Principal Executive Offices)
2002 Equity Incentive Plan and
------------------------------
Non-Qualified Stock Option Plan
-------------------------------
(Full Title of the Plan)
Michael O'Connell
President and Chief Executive Officer
A.P. Pharma, Inc.
123 Saginaw Drive
Redwood City, California 94063
------------------------------
(Name and Address of Agent for Service)
(650) 366-2626
--------------
(Telephone Number, Including Area Code, of Agent for Service)
Copy to:
Richard A. Peers, Esq.
Heller Ehrman White & McAuliffe
275 Middlefield Road
Menlo Park, California 94025-3506
(650) 324-7000
CALCULATION OF REGISTRATION FEE
=====================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registration
Registered Registered Share (1) Price Fee
- ---------------------------------------------------------------------
Common
Stock, par
value $0.01 750,000 $2.11 $1,582,500.00 $145.59
=====================================================================
(1) Estimated solely for the purpose of computing the amount of
registration fee pursuant to Rule 457(c) under the Securities Act, as
amended, based on the average of the high and low prices of the
Registrant's Common Stock reported on the Nasdaq National Market on
June 12, 2002.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed or to be filed with the Securities
and Exchange Commission (the "Commission") by the Registrant are
incorporated by reference in this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2002;
(c) The description of the Registrant's Common Stock contained in
the registration statement on Form 8-A filed with the Commission
on August 7, 1987 pursuant to Section 12 of the Exchange Act of
1934, as amended (the "Exchange Act"); and
(d) All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all
securities then remaining unsold.
Item 5. Interests of Named Experts and Counsel
Heller Ehrman White & McAuliffe, LLP, counsel to the Company, has
rendered an opinion with respect to the legality of the Common
Stock issuable under the 2002 Equity Incentive Plan and Non-
Qualified Stock Plan. Julian N. Stern, the sole shareholder of a
professional corporation that is a partner of Heller Ehrman White
& McAuliffe, is the Secretary of the Company. Mr. Stern owns
beneficially 179,635 shares and options to purchase 20,000 shares
of the Company's Common Stock.
Item 6. Indemnification of Directors and Officers
The Registrant has the power to indemnify its officers and
directors against liability for certain acts pursuant to Section
145 of the General Corporation Law of the State of Delaware.
Section B of Article VI of the Registrant's Certificate of
Incorporation provides:
"(1) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she
is the legal representative, is or was a director or officer, of
the Corporation or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in
an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or
may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof)
was authorized by the board of directors of the Corporation. The
right to indemnification conferred in this Section B shall be a
contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if
the General Corporation Law of the State of Delaware requires, the
payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while
a director or officer, including, without limitation, service to
an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of
an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified
under this Section or otherwise. The Corporation may, by action
of its Board of Directors, provide indemnification to employees
and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers.
(2) Non-Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Section B shall
not be exclusive of any other rights which any person may have or
hereafter acquire under any statute, provisions of this
Certificate of Incorporation, Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
(3) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or
loss under Delaware General Corporation Law."
Registrant maintains directors' and officers' liability insurance
in the amount of $7,000,000 which covers civil liabilities. Such
insurance helps the Registrant to attract qualified officers and
directors, by providing a means for the Company to pay the costs
and expenses involved in the event civil litigation is brought
against of one of the Registrant's officers or directors.
Item 8. Exhibits
5 Opinion of Heller Ehrman White & McAuliffe LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Heller Ehrman White & McAuliffe LLP
(filed as part of Exhibit 5)
24.1 Power of Attorney (see signature page)
99.1 2002 Equity Incentive Plan
99.2 Non-Qualified Stock Plan
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing
of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redwood
City, State of California, on this 13th day of June, 2002.
A.P. PHARMA, INC.
By: /s/ Michael O'Connell
-----------------------
Michael O'Connell
President and Chief
Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Michael O'Connell
and Gordon Sangster, or either of them, with full power of
substitution, such person's true and lawful attorneys-in-fact and
agents for such person in such person's name, place and stead, in
any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement on Form
S-8 and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Commission, granting
unto said attorneys-in-fact and agents full power and authority to
do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to
effectuate the same as fully, to all intents and purposes, as he
or such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement on Form S-8 has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- ------------------------------------------------------------------
/S/ Michael O'Connell President and Chief June 13, 2002
- ------------------------ Executive Officer -------------
Michael O'Connell (Principal Executive
Officer)
/S/ Gordon Sangster Chief Financial Officer June 13, 2002
- ------------------------ (Principal Financial -------------
Gordon Sangster and Accounting Officer)
/S/ Paul Goddard Chairman of the Board June 13, 2002
- ------------------------ of Directors -------------
Paul Goddard
/S/ Stephen Drury Director June 13, 2002
- ------------------------ -------------
Stephen Drury
/S/ Peter Riepenhausen Director June 13, 2002
- ------------------------ -------------
Peter Riepenhausen
/S/ Toby Rosenblatt Director June 13, 2002
- ------------------------ -------------
Toby Rosenblatt
/S/ Gregory Turnbull Director June 13, 2002
- ------------------------ -------------
Gregory Turnbull
/S/ Dennis Winger Director June 13, 2002
- ------------------------ ------------
Dennis Winger
INDEX TO EXHIBITS
-----------------
Item
No. Description of Item
- ----- -------------------
5 Opinion of Heller Ehrman White &
McAuliffe LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Heller Ehrman White &
McAuliffe LLP
(filed as part of Exhibit 5)
24.1 Power of Attorney (see page II-4)
99.1 2002 Equity Incentive Plan
99.2 Non-Qualified Stock Plan
(continued from previous page)
5
6
EXHIBIT 5
June 13, 2002
10008-0000
A.P. Pharma, Inc.
123 Saginaw Drive
Redwood City, California 94063
Registration Statement on Form S-8
-----------------------------------------
Ladies and Gentlemen:
We have acted as counsel to A.P. Pharma, Inc., a Delaware
corporation (the "Company"), in connection with the Registration
Statement on Form S-8 (the "Registration Statement") which the
Company proposes to file with the Securities and Exchange
Commission on June 13, 2002 for the purpose of registering under
the Securities Act of 1933, as amended, an aggregate of 750,000
shares of its Common Stock, par value $.01 (the "Shares"). Of
the Shares, 250,000 are issuable under the Company's Non-
Qualified Stock Plan (the "Stock Plan") and 500,000 are issuable
under the Company's 2002 Equity Incentive Plan (the "Equity
Plan", and together with the Stock Plan, "the Plans").
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents and
instruments submitted to us as copies.
In rendering our opinion, we have examined the following records,
documents and instruments:
(a) The Certificate of Incorporation of the Company, certified by
the Delaware Secretary of State as of May 29, 2002, and certified
to us by an officer of the Company as being complete and in full
force as of the date of this opinion;
(b) The Bylaws of the Company certified to us by an officer of
the Company as being complete and in full force and effect as of
the date of this opinion;
(c) A certificate of an officer of the Company (i) attaching
records certified to us as constituting all records of
proceedings and actions of the Board of Directors, including any
committee thereof, and stockholders of the Company relating to
the Shares, and the Registration Statement, and (ii) certifying
as to certain factual matters;
(d) The Registration Statement;
(e) The Plans; and
(f) A letter from EquiServe, LP, the Company's transfer agent,
dated June 12, 2002, as to the number of shares of the Company's
Common Stock that were outstanding on June 11, 2002.
This opinion is limited to the federal law of the United States
of America and the General Corporation Law of the State of
Delaware, and we disclaim any opinion as to the laws of any other
jurisdiction. We further disclaim any opinion as to any other
statute, rule, regulation, ordinance, order or other promulgation
of any other jurisdiction or any regional or local governmental
body or as to any related judicial or administrative opinion.
Based upon the foregoing and our examination of such questions of
law as we have deemed necessary or appropriate for the purpose of
this opinion, and assuming that (i) the Registration Statement
becomes and remains effective during the period when the Shares
are offered and issued, (ii) the full consideration stated in the
Plans is paid for each Share and that such consideration in
respect of each Share includes payment of cash or other lawful
consideration at least equal to the par value thereof, (iii)
appropriate certificates evidencing the Shares are executed and
delivered by the Company, and (iv) all applicable securities laws
are complied with, it is our opinion that when issued and sold by
the Company, after payment therefore in the manner provided in
the Plans and the Registration Statement, the Shares will be
legally issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the
Registration Statement and is solely for your benefit. This
opinion may not be relied upon by you for any other purpose, or
relied upon by any other person, firm, corporation or other
entity for any purpose, without our prior written consent. We
disclaim any obligation to advise you of any change of law that
occurs, or any facts of which we may become aware, after the date
of this opinion.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/ Heller Ehrman White & McAuliffe
-----------------------------------
Heller Ehrman White & McAuliffe
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 2002 Equity Incentive
Plan and the Non-Qualified Stock Plan of A.P. Pharma, Inc. of
our report dated February 22, 2002, with respect to the
financial statements and schedule of A.P. Pharma, Inc. included
in its Annual Report (Form 10-K) for the year ended December 31,
2001, filed with the Securities and Exchange Commission.
/s/ Ernst & Young, LLP
----------------------
Ernst & Young, LLP
Palo Alto, California
June 13, 2002
Exhibit 99.1
2002 Equity Incentive Plan
of
A.P. Pharma, Inc.,
A Delaware corporation
1. Purpose of this Plan
The purpose of this 2002 Equity Incentive Plan of A.P. Pharma, Inc., a
Delaware corporation (the "Company") is to enhance the long-term stockholder
value of the Company by offering opportunities to eligible individuals to
participate in the growth in value of the equity of the Company.
2. Definitions and Rules of Interpretation
2.1 Definitions. This Plan uses the following defined terms:
(a) "Administrator" means the Board, the Committee, or any officer
or employee of the Company to whom the Board or the Committee delegates
authority to administer this Plan.
(b) "Affiliate" means a "parent" or "subsidiary" (as each is
defined in Section 424 of the Code) of the Company and any other entity that
the Board or Committee designates as an "Affiliate" for purposes of this
Plan.
(c) "Applicable Law" means any and all laws of whatever
jurisdiction, within or without the United States, and the rules of any stock
exchange or quotation system on which Shares are listed or quoted, applicable
to the taking or refraining from taking of any action under this Plan,
including the administration of this Plan and the issuance or transfer of
Awards or Award Shares.
(d) "Award" means a Restricted Stock Award or Option granted in
accordance with the terms of the Plan.
(e) "Award Agreement" means the document evidencing the grant of an
Award.
(f) "Award Shares" means Shares covered by an outstanding Award or
purchased under an Award.
(g) "Board" means the board of directors of the Company.
(h) "Change of Control" means any transaction or event that the
Board specifies as a Change of Control under Section 10.4.
(i) "Code" means the Internal Revenue Code of 1986.
(j) "Committee" means a committee composed of Company Directors
appointed in accordance with the Company's charter documents and Section 4.
(k) "Company Director" means a member of the Board.
(l) "Consultant" means an individual who, or an employee of any
entity that, provides bona fide services to the Company or an Affiliate not
in connection with the offer or sale of securities in a capital-raising
transaction, but who is not an Employee.
(m) "Director" means a member of the board of directors of the
Company or an Affiliate.
(n) "Divestiture" means any transaction or event that the Board
specifies as a Divestiture under Section 10.5.
(o) "Employee" means a regular employee of the Company or an
Affiliate, including an officer or Director who is treated as an employee in
the personnel records of the Company or an Affiliate, but not individuals who
are classified by the Company or an Affiliate as: (i) leased from or
otherwise employed by a third party, (ii) independent contractors, or (iii)
intermittent or temporary workers. The Company's or an Affiliate's
classification of an individual as an "Employee" (or as not an "Employee")
for purposes of this Plan shall not be altered retroactively even if that
classification is changed retroactively for another purpose as a result of an
audit, litigation or otherwise. A Recipient shall not cease to be an
Employee due to transfers between locations of the Company, or between the
Company and an Affiliate, or to any successor to the Company or an Affiliate
that assumes the Recipient's Options under Section 10. Neither service as a
Director nor receipt of a director's fee shall be sufficient to make a
Director an "Employee".
(p) "Exchange Act" means the Securities Exchange Act of 1934.
(q) "Executive" means an individual who is subject to Section 16 of
the Exchange Act or who is a "covered employee" under Section 162(m) of the
Code, in either case because of the individual's relationship with the
Company or an Affiliate.
(r) "Expiration Date" means, with respect to an Award, the date
stated in the Award Agreement as the expiration date of the Award or, if no
such date is stated in the Award Agreement, then the last day of the maximum
exercise period for the Award, disregarding the effect of a Recipient's
Termination or any other event that would shorten that period.
(s) "Fair Market Value" means the value of Shares as determined
under Section 17.2.
(t) "Fundamental Transaction" means any transaction or event
described in Section 10.3.
(u) "Grant Date" means the date the Administrator approves the
grant of an Award. However, if the Administrator specifies that an Award's
Grant Date is a future date or the date on which a condition is satisfied,
the Grant Date for such Award is that future date or the date that the
condition is satisfied.
(v) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option under Section 422 of the Code and designated as an
Incentive Stock Option in the Award Agreement for that Option.
(w) "Listed Security" means any Share listed or approved for
listing upon notice of issuance on a national securities exchange or other
market system that meets the requirements of Section 25100(o) of the
California Securities Law of 1968, as amended.
(x) "Nonstatutory Option" means any Option other than an Incentive
Stock Option.
(y) "Objectively Determinable Performance Condition" shall mean a
performance condition (i) that is established (x) at the time an Award is
granted or (y) no later than the earlier of (1) 90 days after the beginning
of the period of service to which it relates, or (2) before the elapse of 25%
of the period of service to which it relates, (ii) that is uncertain of
achievement at the time it is established, and (iii) the achievement of which
is determinable by a third party with knowledge of the relevant facts.
Examples of measures that may be used in Objectively Determinable Performance
Conditions include net order dollars, net profit dollars, net profit growth,
net revenue dollars, revenue growth, individual performance, earnings per
share, return on assets, return on equity, and other financial objectives,
objective customer satisfaction indicators and efficiency measures, each with
respect to the Company and/or an individual business unit.
(z) "Officer" means an officer of the Company as defined in Rule
16a-1 adopted under the Exchange Act.
(aa) "Option" means a right to purchase Shares of the Company
granted under this Plan.
(bb) "Option Price" means the price payable under an Option for
Shares, not including any amount payable in respect of withholding or other
taxes.
(cc) "Option Shares" means Shares covered by an outstanding Option
or purchased under an Option.
(dd) "Plan" means this 2002 Equity Incentive Plan of A.P. Pharma,
Inc.
(ee) "Purchase Price" means the price payable under a Restricted
Stock Award for Shares, not including any amount payable in respect of
withholding or other taxes.
(ff) "Qualified Domestic Relations Order" means a judgment, order,
or decree meeting the requirements of Section 414(p) of the Code.
(gg) "Recipient" means: (i) a person to whom an Award has been
granted, including a holder of a Substitute Award, (ii) a person to whom an
Award has been transferred in accordance with all applicable requirements of
Sections 6.5, 7(h) and 16, and (iii) a person who holds Option Shares subject
to any right of repurchase under Section 15.2.
(hh) "Restricted Stock Award" means an offer by the Company to sell
shares subject to certain restrictions pursuant to the Award Agreement as
described in Section 8.
(ii) "Reverse Vesting" means, with respect to an Option, that an
Option is or was fully exercisable but that, subject to a "reverse" vesting
schedule, the Company has a right to repurchase the Option Shares as
specified in Section 15.2(a), with the Company's right of repurchase expiring
in accordance with the "forward" vesting schedule that would otherwise have
applied to the Option under which the Option Shares were purchased or other
vesting schedule described in the Award Agreement. With respect to a
Restricted Stock Award, Reverse Vesting means that the Company has a right to
repurchase the Award Shares purchased pursuant to the Restricted Stock Award,
as specified in Section 15.2(a), with the Company's right of repurchase
expiring in accordance with the vesting schedule in the Award Agreement.
(jj) "Rule 16b-3" means Rule 16b-3 adopted under Section 16(b) of
the Exchange Act.
(kk) "Securities Act" means the Securities Act of 1933.
(ll) "Share" means a share of the common stock of the Company or
other securities substituted for the common stock under Section 10.
(mm) "Substitute Option" means an Option granted in substitution
for, or upon the conversion of, an option granted by another entity to
purchase equity securities in the granting entity.
(nn) "Substitute Restricted Stock Award" means a Restricted Stock
Award granted in substitution for, or upon the conversion of, a stock award
granted by another entity to purchase equity securities in the granting
entity.
(oo) "Ten Percent Stockholder" means any person who, directly or by
attribution under Section 424(d) of the Code, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company or of any Affiliate on the Grant Date.
(pp) "Termination" means that the Recipient has ceased to be, with
or without any cause or reason, an Employee, Director or Consultant.
However, unless so determined by the Administrator, "Termination" shall not
include a change in status from an Employee, Consultant or Director to
another such status. An event that causes an Affiliate to cease being an
Affiliate shall be treated as the "Termination" of that Affiliate's
Employees, Directors, and Consultants.
2.2 Rules of Interpretation. Any reference to a "Section", without
more, is to a Section of this Plan. Captions and titles are used for
convenience in this Plan and shall not, by themselves, determine the meaning
of this Plan. Except when otherwise indicated by the context, the singular
includes the plural and vice versa. Any reference to a statute is also a
reference to the applicable rules and regulations adopted under that statute.
Any reference to a statute, rule or regulation, or to a section of a statute,
rule or regulation, is a reference to that statute, rule, regulation, or
section as amended from time to time, both before and after the effective
date of this Plan and including any successor provisions.
3. Shares Subject to this Plan; Term of this Plan
3.1 Number of Award Shares. Subject to adjustment under Section 10, the
maximum number of Shares that may be issued under this Plan is 500,000.
3.2 Source of Shares. Award Shares may be authorized but unissued
Shares or treasury Shares. If an Award is terminated, expires, or otherwise
becomes unexercisable without having been exercised in full, the unpurchased
Shares that were subject to the Award shall revert to this Plan and shall
again be available for future issuance under this Plan. Shares actually
issued under this Plan shall not be available for regrant even if repurchased
by the Company.
3.3 Term of this Plan
(a) This Plan shall be effective on the date it is approved by the
Board. However, no Award may be exercised unless and until the Company's
stockholders approve this Plan within 12 months after the Board approves this
Plan.
(b) Subject to Section 13, this Plan shall continue in effect for a
period of ten years from the earlier of the date on which the Plan was
adopted by the Board and the date on which the Plan was approved by the
Company's stockholders.
4. Administration
4.1 General
(a) The Board shall have ultimate responsibility for administering
this Plan. The Board may delegate certain of its responsibilities to a
Committee, which shall consist of at least two members of the Board. The
Board or the Committee may further delegate its responsibilities to any
Employee of the Company or any Affiliate. Where this Plan specifies that an
action is to be taken or a determination made by the Board, only the Board
may take that action or make that determination. Where this Plan specifies
that an action is to be taken or a determination made by the Committee, only
the Committee may take that action or make that determination. Where this
Plan references the "Administrator", the action may be taken or determination
made by the Board, the Committee, or other Administrator. However, only the
Board or the Committee may approve grants of Awards to Executives, and an
Administrator other than the Board or the Committee may grant Awards only
within guidelines established by the Board or Committee. Moreover, all
actions and determinations by any Administrator are subject to the provisions
of this Plan.
(b) So long as the Company has registered and outstanding a class
of equity securities under Section 12 of the Exchange Act, the Committee
shall consist of Company Directors who are "Non-Employee Directors" as
defined in Rule 16b-3 and, after the expiration of any transition period
permitted by Treasury Regulations Section 1.162-27(h)(3), who are "outside
directors" as defined in Section 162(m) of the Code.
4.2 Authority of Administrator. Subject to the other provisions of this
Plan, the Administrator shall have the authority:
(a) to grant Awards, including Substitute Awards;
(b) to determine the Fair Market Value of Shares;
(c) to determine the Option Price and the Purchase Price under
Awards;
(d) to select the Recipients;
(e) to determine the times Awards are granted;
(f) to determine the number of Shares subject to each Award;
(g) to determine the types of payment that may be used to purchase
Award Shares;
(h) to determine the types of payment that may be used to satisfy
withholding tax obligations;
(i) to determine the other terms of each Award, including but not
limited to the time or times at which Awards may be exercised, whether and
under what conditions an Award is assignable, and whether an Option is a
Nonstatutory Option or an Incentive Stock Option;
(j) to modify or amend any Award;
(k) to authorize any person to sign any Award Agreement or other
document related
(l) to this Plan on behalf of the Company;
(m) to determine the form of any Award Agreement or other document
related to this Plan, and whether that document, including signatures, may be
in electronic form;
(n) to interpret this Plan and any Award Agreement or document
related to this Plan;
(o) to correct any defect, remedy any omission, or reconcile any
inconsistency in this Plan, any Award Agreement or any other document related
to this Plan;
(p) to adopt, amend, and revoke rules and regulations under this
Plan, including rules and regulations relating to sub-plans and Plan addenda;
(q) to adopt, amend, and revoke rules and procedures relating to
the operation and administration of this Plan to accommodate non-U.S.
Recipients and the requirements of Applicable Law such as: (i) rules and
procedures regarding the conversion of local currency, withholding procedures
and the handling of stock certificates to comply with local practice and
requirements, and (ii) sub-plans and Plan addenda for non-U.S. Recipients;
and
(r) to make all other determinations the Administrator deems
necessary or advisable for the administration of this Plan.
4.3 Scope of Discretion. Subject to the specific provisions and
specific limitations of this Plan, as well as all rights conferred on
specific Recipients by Award Agreements and other agreements, (i) on all
matters for which this Plan confers the authority, right or power on the
Board, the Committee, or other Administrator to make decisions, that body may
make those decisions in its sole and absolute discretion and (ii) in making
those decisions, the Board, Committee or other Administrator need not treat
all persons eligible to receive Awards, all Recipients, all Awards or all
Award Shares the same way.
5. Persons Eligible to Receive Awards
5.1 Eligible Individuals. Awards (including Substitute Awards) may be
granted to, and only to, Employees, Directors and Consultants, including
prospective Employees, Directors and Consultants conditioned on the beginning
of their service for the Company or an Affiliate.
5.2 Section 162(m) Limitation.
(a) Options. So long as the Company is a "publicly held
corporation" within the meaning of Section 162(m) of the Code: (a) no
Employee or prospective Employee may be granted one or more Options within
any fiscal year of the Company to purchase more than 250,000 Shares under
Options, subject to adjustment under Section 10, and (b) Options may be
granted to an Executive only by the Committee (and, notwithstanding Section
4.1(a), not by the Board). If an Option is cancelled without being exercised
or if the Option Price of an Option is reduced, that cancelled or repriced
Option shall continue to be counted against the limit on Shares under this
Section 5.2.
(b) Restricted Stock Awards. Any Restricted Stock Award intended
as "qualified performance-based compensation" within the meaning of Section
162(m) of the Code must vest or become exercisable contingent on the
achievement of one or more Objectively Determinable Performance Conditions,
the Restricted Stock Award may be granted only by the Committee, and the
material terms of the Award, including the maximum amount of the Award and
the Award formula, must be approved by the stockholders of the Company before
the Award Shares under such Restricted Stock Award are issued.
6. Terms and Conditions of Options
The following rules apply to all Options:
6.1 Price. No Option intended as "qualified incentive-based
compensation" within the meaning of Section 162(m) of the Code may have an
Option Price less than 100% of the Fair Market Value of the Shares on the
Grant Date. In no event will the Option Price of any Option be less than the
par value of the Shares issuable under the Option if that is required by
Applicable Law.
6.2 Term. No Option shall be exercisable after its Expiration Date. No
Option may have an Expiration Date that is more than ten years after its
Grant Date.
6.3 Vesting. Options shall be exercisable: (a) on the Grant Date, or
(b) in accordance with a schedule related to the Grant Date, the date the
Recipient's directorship, employment or consultancy begins, or a different
date specified in the Option Agreement. If so provided in the Option
Agreement, an Option may be exercisable subject to the application of Reverse
Vesting to the Option Shares.
6.4 Form of Payment.
(a) The Administrator shall determine the acceptable form and
method of payment for exercising an Option.
(b) Acceptable forms of payment for all Option Shares are cash,
check or wire transfer, denominated in U.S. dollars except as specified by
the Administrator for non-U.S. Employees or non-U.S. sub-plans.
(c) In addition, the Administrator may permit payment to be made
by any of the following methods:
(i) other Shares, or the designation of other Shares, which
(A) in the case of Shares acquired upon exercise of an option (whether or not
under this Plan) have been owned by the Recipient for more than six months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the Option Price of the Shares as to which the Option is
being exercised;
(ii) provided that a public market exists for the Shares,
through a "same day sale" commitment from the Recipient and a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
Dealer") under which the Recipient irrevocably instructs the NASD Dealer
promptly to forward an amount equal to the Option Price directly to the
Company (a "Cashless Exercise").
(iii) one or more full recourse promissory notes bearing
interest at a fair market value rate that is at least sufficient to avoid
imputation of interest under Sections 483, 1274 and 7872 of the Code and with
such other terms as the Administrator specifies, except that Consultants may
not purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares, the portion of the Option Price
equal to the par value of the Shares must be paid in cash or other lawful
consideration, other than the note, if that is required by Applicable Law,
and the Company shall at all times comply with any applicable margin rules of
the Federal Reserve; and
(iv) any combination of the methods of payment permitted by
any paragraph of this Section 6.4.
6.5 Nonassignability of Options. Except as set forth in any Option
Agreement, no Option shall be assignable or otherwise transferable by the
Recipient except by will or by the laws of descent and distribution.
However, Options may be transferred and exercised in accordance with a
Qualified Domestic Relations Order.
6.6 Substitute Options. The Board may cause the Company to grant
Substitute Options in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger) or all or
a portion of the assets of any entity. Any such substitution shall be
effective when the acquisition closes. Substitute Options may be
Nonstatutory Options or Incentive Stock Options. Unless and to the extent
specified otherwise by the Board, Substitute Options shall have the same
terms and conditions as the options they replace, except that (subject to
Section 10) Substitute Options shall be Options to purchase Shares rather
than equity securities of the granting entity and shall have an Option Price
that, as determined by the Board in its sole and absolute discretion,
properly reflects the substitution.
7. Incentive Stock Options
The following rules apply only to Incentive Stock Options and only to the
extent these rules are more restrictive than the rules that would otherwise
apply under this Plan. With the consent of the Recipient, or where this Plan
provides that an action may be taken notwithstanding any other provision of
this Plan, the Administrator may deviate from the requirements of this
Section, notwithstanding that any Incentive Stock Option modified by the
Administrator will thereafter be treated as a Nonstatutory Option.
(a) The Expiration Date of an Incentive Stock Option shall not be
later than ten years from its Grant Date, with the result that no Incentive
Stock Option may be exercised after the expiration of ten years from its
Grant Date.
(b) No Incentive Stock Option may be granted more than ten years
from the date this Plan was approved by the Board.
(c) Options intended to be incentive stock options under Section
422 of the Code that are granted to any single Recipient under all incentive
stock option plans of the Company and its Affiliates, including incentive
stock options granted under this Plan, may not vest at a rate of more than
$100,000 in Fair Market Value of stock (measured on the grant dates of the
options) during any calendar year. For this purpose, an option vests with
respect to a given share of stock the first time its holder may purchase that
share, notwithstanding any right of the Company to repurchase that share.
Unless the Administrator specifies otherwise in the related agreement
governing the option, this vesting limitation shall be applied by, to the
extent necessary to satisfy this $100,000 rule, treating certain stock
options that were intended to be incentive stock options under Section 422 of
the Code as Nonstatutory Options. The stock options or portions of stock
options to be reclassified as Nonstatutory Options are those with the highest
option prices, whether granted under this Plan or any other equity
compensation plan of the Company or any Affiliate that permits that
treatment. This Section 7(c) shall not cause an Incentive Stock Option to
vest before its original vesting date or cause an Incentive Stock Option that
has already vested to cease to be vested.
(d) In order for an Incentive Stock Option to be exercised for any
form of payment other than those described in Section 6.4(b), that right must
be stated in the Option Agreement relating to that Incentive Stock Option.
(e) Any Incentive Stock Option granted to a Ten Percent
Stockholder, must have an Expiration Date that is not later than five years
from its Grant Date, with the result that no such Option may be exercised
after the expiration of five years from the Grant Date.
(f) The Option Price of an Incentive Stock Option shall never be
less than the Fair Market Value of the Shares at the Grant Date. The Option
Price for the Shares covered by an Incentive Stock Option granted to a Ten
Percent Stockholder shall never be less than 110% of the Fair Market Value of
the Shares at the Grant Date.
(g) Incentive Stock Options may be granted only to Employees. If a
Recipient changes status from an Employee to a Consultant, that Recipient's
Incentive Stock Options become Nonstatutory Options if not exercised within
the time period described in Section 7(i).
(h) No rights under an Incentive Stock Option may be transferred by
the Recipient, other than by will or the laws of descent and distribution.
During the life of the Recipient, an Incentive Stock Option may be exercised
only by the Recipient. The Company's compliance with a Qualified Domestic
Relations Order, or the exercise of an Incentive Stock Option by a guardian
or conservator appointed to act for the Recipient, shall not violate this
Section 7(h).
(i) An Incentive Stock Option shall be treated as a Nonstatutory
Option if it remains exercisable after, but is not exercised within, the
three-month period beginning with the Recipient's Termination for any reason
other than the Recipient's death or disability (as defined in Section 22(c)
of the Code). In the case of Termination due to death or disability, an
Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, but is not exercised within, one year after the
Recipient's Termination.
8. Restricted Stock Awards
The following rules apply to all Restricted Stock Awards:
(a) Price; Payment. The Purchase Price for the Award Shares
issuable under a Restricted Stock Award shall be determined by the
Administrator; provided that in no event shall such Purchase Price be less
than the par value of the Award Shares issuable under the Restricted Stock
Award.
(b) Term. No Restricted Stock Award shall be exercisable after its
Expiration Date. No Restricted Stock Award may have an Expiration Date that
is more than ten years after its Grant Date.
(c) Vesting. Restricted Stock Awards shall be exercisable: (a) on
the Grant Date, or (b) in accordance with a schedule related to the Grant
Date, the date the Recipient's directorship, employment or consultancy
begins, or a different date specified in the Award Agreement.
(d) Restriction Period. Subject to this Plan and the Award
Agreement, during a period set by the Administrator, commencing with the
Grant Date of the Restricted Stock Award and ending not less than three (3)
years and not more than ten (10) years from such Grant Date, the Recipient
shall not be permitted to sell, assign, transfer, pledge or otherwise
encumber the Award Shares of a Restricted Stock Award. Within these limits,
the Administrator may provide for the lapse of such restrictions in
installments, but, subject to Sections 10.3 and 10.4, may not accelerate or
waive such restrictions.
(e) Right of Repurchase. If so provided in the Award Agreement,
Award Shares acquired pursuant to a Restricted Stock Award may be subject to
Reverse Vesting.
(f) Form of Payment. The Administrator shall determine the
acceptable form and method of payment for exercising a Restricted Stock
Award.
(i) Acceptable forms of payment for all Award Shares are
cash, check or wire transfer, denominated in U.S. dollars except as specified
by the Administrator for non-U.S. Employees or non-U.S. sub-plans.
(ii) In addition, the Administrator may permit payment to be
made by any of the methods permitted with respect to the exercise of Options
pursuant to Section 6.4.
(g) Nonassignability of Restricted Stock Awards. Except as set
forth in any Award Agreement, no Restricted Stock Award shall be assignable
or otherwise transferable by the Recipient except by will or by the laws of
descent and distribution. However, Restricted Stock Awards may be
transferred and exercised in accordance with a Qualified Domestic Relations
Order.
(h) Substitute Restricted Stock Award. The Board may cause the
Company to grant Substitute Restricted Stock Awards in connection with the
acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity.
Unless and to the extent specified otherwise by the Board, Substitute
Restricted Stock Awards shall have the same terms and conditions as the
options they replace, except that (subject to Section 10) Substitute
Restricted Stock Awards shall be Restricted Stock Awards to purchase Shares
rather than equity securities of the granting entity and shall have a
Purchase Price that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution.
9. Exercise of Awards
9.1 In General. An Award shall be exercisable in accordance with this
Plan, the Award Agreement under which it is granted, and as prescribed by the
Administrator.
9.2 Time of Exercise. Options and Restricted Stock Awards shall be
considered exercised when the Company receives: (a) written notice of
exercise from the person entitled to exercise the Option or Restricted Stock
Award, (b) full payment, or provision for payment, in a form and method
approved by the Administrator, for the Shares for which the Option or
Restricted Stock Award is being exercised, and (c) with respect to
Nonstatutory Options, payment, or provision for payment, in a form approved
by the Administrator, of all applicable withholding taxes due upon exercise.
An Award may not be exercised for a fraction of a Share.
9.3 Issuance of Award Shares. The Company shall issue Award Shares in
the name of the person properly exercising the Award. If the Recipient is
that person and so requests, the Award Shares shall be issued in the name of
the Recipient and the Recipient's spouse. The Company shall endeavor to
issue Award Shares promptly after an Award is exercised. However, until
Award Shares are actually issued, as evidenced by the appropriate entry on
the stock books of the Company or its transfer agent, no right to vote or
receive dividends or other distributions, and no other rights as a
stockholder, shall exist with respect to the Award Shares, even though the
Recipient has completed all the steps necessary to exercise the Award. No
adjustment shall be made for any dividend, distribution, or other right for
which the record date precedes the date the Award Shares are issued, except
as provided in Section 10.
9.4 Termination
(a) In General. Except as provided by the Administrator, including
in an Award zsAgreement, and as otherwise provided in Sections 9.4(b), (c),
(d), (e), (f) and (g), after a Recipient's Termination, the Recipient's
Awards shall be exercisable to the extent (but only to the extent) they are
vested on the date of that Termination and only during the period ending
three months after the Termination, but in no event after the Expiration
Date. To the extent the Recipient does not exercise an Award within the time
specified for exercise, the Award shall automatically terminate. With
respect to Restricted Stock Awards, except to the extent otherwise provided
by the Administrator, including in the Award Agreement and in accordance with
Section 10, upon termination of a Recipient's employment for any reason
during the restriction period provided for in Section 8(d), all Award Shares
of a Restricted Stock Award still subject to such restriction period shall be
forfeited by the Recipient and to the extent previously purchased by the
Recipient shall be repurchased by the Company for an amount equal to the
original Purchase Price.
(b) Leaves of Absence. Unless otherwise provided in the Award
Agreement, no Award may be exercised more than three months after the
beginning of a leave of absence, other than a personal or medical leave
approved by the Administrator with employment guaranteed upon return. Awards
shall not continue to vest during a leave of absence, other than an approved
personal or medical leave with employment guaranteed upon return.
(c) Death or Disability. Unless otherwise provided in the Award
Agreement, if a Recipient's Termination is due to death or disability (as
determined by the Administrator with respect to all Awards other than
Incentive Stock Options and as defined by Section 22(e) of the Code with
respect to Incentive Stock Options), all Awards of that Recipient to the
extent exercisable at the date of that Termination may be exercised for one
year after that Termination, but in no event after the Expiration Date. In
the case of Termination due to death, an Award may be exercised as provided
in Section 16. In the case of Termination due to disability, if a guardian
or conservator has been appointed to act for the Recipient and been granted
this authority as part of that appointment, that guardian or conservator may
exercise the Award on behalf of the Recipient. In the case of a Recipient
who dies or become disabled within three months after Termination, if the
Termination was not due to Cause, the Recipient's Awards may be exercised for
one year after that Termination. To the extent an Award is not so exercised
within the time specified for its exercise, the Award shall automatically
terminate.
(d) Divestiture. If a Recipient's Termination is due to a
Divestiture, the Board may take any one or more of the actions described in
Section 10.3 or 10.4.
(e) Retirement. Unless otherwise provided in the Award Agreement
by the Administrator, if a Recipient's Termination is due to the Recipient's
retirement in accordance with the Company's or an Affiliate's retirement
policy, all Awards of that Recipient to the extent exercisable at the
Recipient's date of retirement may be exercised for one year after the
Recipient's date of retirement, but in no event after the Expiration Date.
To the extent the Recipient does not exercise an Option within the time
specified for exercise, the Award shall automatically terminate.
(f) Severance Programs. Unless otherwise provided in the Award
Agreement by the Administrator, if a Recipient's Termination results from
participation in a voluntary severance incentive program of the Company or an
Affiliate approved by the Board, all Awards of that Employee to the extent
exercisable at the time of that Termination shall be exercisable for one year
after the Recipient's Termination, but in no event after the Expiration Date.
If the Recipient does not exercise an Award within the time specified for
exercise, the Award shall automatically terminate.
(g) Termination for Cause. If a Recipient's Termination is due to
cause, all of the Recipient's Awards shall automatically terminate and cease
to be exercisable at the time of Termination and all Awards exercised after
the first event constituting cause may be rescinded by the Administrator.
"Cause" means dishonesty, fraud, misconduct, disclosure or misuse of
confidential information, conviction of, or a plea of guilty or no contest
to, a felony or similar offense, habitual absence from work for reasons other
than illness, or intentional conduct that could cause significant injury to
the Company or an Affiliate, in each case as determined by the Administrator.
(h) Reverse Vesting. Under any circumstances stated in this
Section 9.4 in which all unvested Options of a Recipient immediately vest,
the Company's repurchase rights shall lapse on all Option Shares held by that
Recipient that are subject to Reverse Vesting.
(i) Consulting or Employment Relationship. Nothing in this Plan or
in any Award Agreement, and no Award or the fact that Award Shares remain
subject to repurchase rights, shall: (a) interfere with or limit the right
of the Company or any Affiliate to terminate the employment or consultancy of
any Recipient at any time, whether with or without cause or reason, and with
or without the payment of severance or any other compensation or payment, or
(b) interfere with the application of any provision in any of the Company's
or any Affiliate's charter documents or Applicable Law relating to the
election, appointment, term of office, or removal of a Director.
10. Certain Transactions and Events
10.1 In General. Except as specifically provided in this Section 10, no
change in the capital structure of the Company, merger, sale or other
disposition of assets or a subsidiary, change of control, issuance by the
Company of shares of any class of securities convertible into shares of any
class, conversion of securities, or other transaction or event shall require
or be the occasion for any adjustments of the type described in this Section
10.
10.2 Changes in Capital Structure. In the event of any stock split,
reverse stock split, recapitalization, combination or reclassification of
stock, stock dividend, spin-off, or similar change to the capital structure
of the Company (not including a Fundamental Transaction or Change of
Control), the Board shall make whatever adjustments it concludes are
appropriate to: (a) the number and type of Awards that may be granted under
this Plan, (b) the number and type of Options that may be granted to any
individual under this Plan, (c) the Purchase Price of any Restricted Stock
Award, (d) the Option Price and number and class of securities issuable under
each outstanding Option, and (e) the repurchase price of any securities
substituted for Option Shares that are subject to repurchase rights. The
specific adjustments shall be determined by the Board in its sole and
absolute discretion. Unless the Board specifies otherwise, any securities
issuable as a result of any such adjustment shall be rounded to the next
lower whole security.
10.3 Fundamental Transactions. If the Company merges with another entity
in a transaction in which the Company is not the surviving entity or if, as a
result of any other transaction or event, other securities are substituted
for the Shares or Shares may no longer be issued (each a "Fundamental
Transaction"), then, notwithstanding any other provision of this Plan, the
Board shall do one or more of the following contingent on the closing or
completion of the Fundamental Transaction: (a) arrange for the substitution
of options or other compensatory awards on equity securities other than
Shares (including, if appropriate, equity securities of an entity other than
the Company) in exchange for Awards, (b) accelerate the vesting and
termination of outstanding Awards, in whole or in part, so that Awards can be
exercised before or otherwise in connection with the closing or completion of
the transaction or event but then terminate, (c) cancel Awards in exchange
for cash payments to Recipients, (d) either arrange for any repurchase rights
of the Company with respect to Award Shares to apply to the securities issued
in substitution for Shares or terminate repurchase rights on Award Shares.
The Board need not adopt the same rules for each Award or each Recipient.
10.4 Changes of Control. The Board may also, but need not, specify that
other transactions or events constitute a "Change of Control". The Board may
do that either before or after the transaction or event occurs. Examples of
transactions or events that the Board may treat as Changes of Control are:
(a) the Company or an Affiliate is a party to a merger, consolidation,
amalgamation, or other transaction in which the beneficial stockholders of
the Company, immediately before the transaction, beneficially own securities
representing 50% or less of the total combined voting power or value of the
Company immediately after the transaction, (b) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the Exchange Act,
acquires securities holding 30% or more of the total combined voting power or
value of the Company, or (c) as a result of or in connection with a contested
election of Company Directors, the persons who were Company Directors
immediately before the election cease to constitute a majority of the Board.
In connection with a Change of Control, notwithstanding any other provision
of this Plan, the Board may take any one or more of the actions described in
Section 10.3. In addition, the Board may extend the date for the exercise of
Awards (but not beyond their original Expiration Date). The Board need not
adopt the same rules for each Award or each Recipient.
10.5 Divestiture. If the Company or an Affiliate sells or otherwise
transfers equity securities of an Affiliate to a person or entity other than
the Company or an Affiliate, or leases, exchanges or transfers all or any
portion of its assets to such a person or entity, then the Board, in its sole
and absolute discretion, may specify that such transaction or event
constitutes a "Divestiture". In connection with a Divestiture,
notwithstanding any other provision of this Plan, the Board may take one or
more of the actions described in Section 10.3 or 10.4 with respect to Awards
or Award Shares held by, for example, Employees, Directors or Consultants for
whom that transaction or event results in a Termination. The Board need not
adopt the same rules for each Award or each Recipient.
10.6 Dissolution. If the Company adopts a plan of dissolution, the Board
may, in its sole and absolute discretion, cause Awards to be fully vested and
exercisable (but not after their Expiration Date) before the dissolution is
completed but contingent on its completion and may cause the Company's
repurchase rights on Award Shares to lapse upon completion of the
dissolution. To the extent not exercised before the earlier of the
completion of the dissolution or their Expiration Date, Awards shall
terminate just before the dissolution is completed. The Board need not adopt
the same rules for each Award or each Recipient.
10.7 Cut-Back to Preserve Benefits. If the Administrator determines that
the net after-tax amount to be realized by any Recipient, taking into account
any accelerated vesting, termination of repurchase rights, or cash payments
to that Recipient in connection with any transaction or event addressed in
this Section 10 would be greater if one or more of those steps were not taken
with respect to that Recipient's Awards or Award Shares, then and to the
extent determined by the Administrator, one or more of those steps shall not
be taken.
11. Withholding and Tax Reporting
11.1 Tax Withholding Alternatives
(a) General. Whenever Award Shares are issued or become free of
restrictions, the Company may require the Recipient to remit to the Company
an amount sufficient to satisfy any applicable tax withholding requirement,
whether the related tax is imposed on the Recipient or the Company. The
Company shall have no obligation to deliver Award Shares or release Award
Shares from an escrow until the Recipient has satisfied those tax withholding
obligations. Whenever payment in satisfaction of Awards is made in cash, the
payment will be reduced by an amount sufficient to satisfy all tax
withholding requirements.
(b) Method of Payment. The Recipient shall pay any required
withholding using the forms of consideration described in Section 6.4(b),
except that, in the discretion of the Administrator, the Company may also
permit the Recipient to use any of the forms of payment described in Section
6.4(c). The Administrator may also permit Award Shares to be withheld to pay
required withholding. If the Administrator permits Award Shares to be
withheld, the Fair Market Value of the Award Shares withheld shall not exceed
the amount determined by the applicable minimum statutory withholding rates,
and shall be determined as of the date that the amount of tax to be withheld
or tendered for this purpose is to be determined.
11.2 Reporting of Dispositions. Any holder of Option Shares acquired
under an Incentive Stock Option shall promptly notify the Administrator in
writing of the sale or other disposition of any of those Option Shares if the
disposition occurs during: (a) the longer of two years after the Grant Date
of the Incentive Stock Option and one year after the date the Incentive Stock
Option was exercised, or (b) such other period as the Administrator has
established.
12. Compliance with Law
12.1 Applicable Law. The grant of Awards and the issuance and subsequent
transfer of Award Shares shall be subject to compliance with all Applicable
Law, including all applicable securities laws. Awards may not be exercised,
and Award Shares may not be transferred, in violation of Applicable Law.
Thus, for example, Awards may not be exercised unless: (a) a registration
statement under the Securities Act is then in effect with respect to the
related Award Shares, or (b) in the opinion of legal counsel to the Company,
those Award Shares may be issued in accordance with an applicable exemption
from the registration requirements of the Securities Act and any other
applicable securities laws. The failure or inability of the Company to
obtain from any regulatory body the authority considered by the Company's
legal counsel to be necessary or useful for the lawful issuance of any Award
Shares or their subsequent transfer shall relieve the Company of any
liability for failing to issue those Award Shares or permitting their
transfer. As a condition to the exercise of any Award or the transfer of any
Award Shares, the Company may require the Recipient to satisfy any
requirements or qualifications that may be necessary or appropriate to comply
with or evidence compliance with any Applicable Law.
13. Amendment or Termination of this Plan or Outstanding Awards
13.1 Amendment and Termination. The Board may at any time amend,
suspend, or terminate this Plan.
13.2 Stockholder Approval. The Company shall obtain the approval of the
Company's stockholders for any amendment to this Plan if stockholder approval
is necessary or desirable to comply with any Applicable Law or with the
requirements applicable to the grant of Awards intended to be Incentive Stock
Options. The Board may also, but need not, require that the Company's
stockholders approve any other amendments to this Plan.
13.3 Effect. No amendment, suspension, or termination of this Plan, and
no modification of any Award even in the absence of an amendment, suspension,
or termination of this Plan, shall impair any existing contractual rights of
any Recipient unless the affected Recipient consents to the amendment,
suspension, termination, or modification. However, no such consent shall be
required if the Administrator determines, in its sole and absolute
discretion, that the amendment, suspension, termination, or modification:
(a) is required or advisable in order for the Company, the Plan or the Award
to satisfy Applicable Law or to meet the requirements of any accounting
standard; or (b) in connection with any transaction or event described in
Section 10, is in the best interests of the Company or its stockholders. The
Administrator may, but need not, take the tax consequences to affected
Recipients into consideration in acting under the preceding sentence.
Termination of this Plan shall not affect the Administrator's ability to
exercise the powers granted to it under this Plan with respect to Awards
granted before the termination, or Award Shares issued under such Awards,
even if those Award Shares are issued after the termination.
14. Reserved Rights
14.1 Nonexclusivity of this Plan. This Plan shall not limit the power of
the Company or any Affiliate to adopt other incentive arrangements including,
for example, the grant or issuance of stock options, stock, or other equity-
based rights under other plans or independently of any plan.
14.2 Unfunded Plan. This Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Recipients, any such accounts
will be used merely as a convenience. The Company shall not be required to
segregate any assets on account of this Plan, the grant of Awards, or the
issuance of Award Shares. The Company and the Administrator shall not be
deemed to be a trustee of stock or cash to be awarded under this Plan. Any
obligations of the Company to any Recipient shall be based solely upon
contracts entered into under this Plan, such as Award Agreements. No such
obligation shall be deemed to be secured by any pledge or other encumbrance
on any assets of the Company. Neither the Company nor the Administrator
shall be required to give any security or bond for the performance of any
such obligation.
15. Special Arrangements Regarding Award Shares
15.1 Escrows and Pledges. To enforce any restrictions on Award Shares
including restrictions related to Reverse Vesting, the Administrator may
require their holder to deposit the certificates representing Award Shares,
with stock powers or other transfer instruments approved by the Administrator
endorsed in blank, with the Company or an agent of the Company to hold in
escrow until the restrictions have lapsed or terminated. The Administrator
may also cause a legend or legends referencing the restrictions to be placed
on the certificates. Any Recipient who delivers a promissory note as partial
or full consideration for the purchase of Award Shares will be required to
pledge and deposit, with the Company, some or all of the Award Shares as
collateral to secure the payment of the note. However, the Administrator may
require or accept other or additional forms of collateral to secure the note
and, in any event, the Company will have full recourse against the maker of
the note, notwithstanding any pledge or other collateral, unless stated
otherwise in the Award Agreement and the note.
15.2 Repurchase Rights
(a) Reverse Vesting. If an Option or Restricted Stock Award is
subject to Reverse Vesting, the Company shall have the right, during the
seven months after the Recipient's Termination, to repurchase any or all of
the Award Shares that were unvested as of the date of that Termination, for a
price equal to the lower of: (i) the Option Price or Purchase Price for such
Shares, minus the amount of any cash dividends paid or payable with respect
to the Award Shares for which the record date precedes the repurchase, and
(ii) the Fair Market Value of those Option Shares as of the date of the
Termination. The repurchase price shall be paid in cash or, if the Option
Shares were purchased in whole or in part for a promissory note, cancellation
of indebtedness under that note, or a combination of those means. The
Company may assign this right of repurchase.
(b) Procedure. The Company or its assignee may choose to give the
Recipient a written notice of exercise of its repurchase rights under this
Section 15.2. However, the Company's failure to give such a notice shall not
affect its rights to repurchase Award Shares. The Company must, however,
tender the repurchase price during the period specified in this Section 15.2
for exercising its repurchase rights in order to exercise such rights.
15.3 Market Standoff. If requested by the Company or a representative of
its underwriters in connection with a public offering of any securities of
the Company registered under the Securities Act, Recipients or certain
Recipients shall be prohibited from selling some or all of their Award Shares
during a period not to exceed 180 days after the effective date of any
registration statement of the Company.
15.4 Dividends. Dividends on Award Shares that are subject to any
restrictions, including Reverse Vesting, shall be subject to the same
restriction, including those set forth in this Section 15, as the Award
Shares on which the dividends were paid.
16. Beneficiaries
A Recipient may file a written designation of one or more beneficiaries
who are to receive the Recipient's rights under the Recipient's Awards after
the Recipient's death. A Recipient may change such a designation at any time
by written notice. If a Recipient designates a beneficiary, the beneficiary
may exercise the Recipient's Awards after the Recipient's death. If a
Recipient dies when the Recipient has no living beneficiary designated under
this Plan, the Company shall allow the executor or administrator of the
Recipient's estate to exercise the Award or, if there is none, the person
entitled to exercise the Option under the Recipient's will or the laws of
descent and distribution. In any case, no Award may be exercised after its
Expiration Date.
17. Miscellaneous
17.1 Governing Law. This Plan and all determinations made and actions
taken under this Plan shall be governed by the substantive laws, but not the
choice of law rules, of the State of Delaware.
17.2 Determination of Value. Fair Market Value shall be determined as
follows:
(a) Listed Stock. If the Shares are traded on any established
stock exchange or quoted on a national market system, Fair Market Value shall
be the closing sales price for the Shares as quoted on that stock exchange or
system for the date the value is to be determined (the "Value Date") as
reported in The Wall Street Journal or a similar publication. If no sales
are reported as having occurred on the Value Date, Fair Market Value shall be
that closing sales price for the last preceding trading day on which sales of
Shares are reported as having occurred. If no sales are reported as having
occurred during the five trading days before the Value Date, Fair Market
Value shall be the closing bid for Shares on the Value Date. If Shares are
listed on multiple exchanges or systems, Fair Market Value shall be based on
sales or bids on the primary exchange or system on which Shares are traded or
quoted.
17.3 Reservation of Shares. During the term of this Plan, the Company
will at all times reserve and keep available such number of Shares as are
still issuable under this Plan.
17.4 Electronic Communications. Any Award Agreement, notice of exercise
of an Award, or other document required or permitted by this Plan may be
delivered in writing or, to the extent determined by the Administrator,
electronically. Signatures may also be electronic if permitted by the
Administrator.
17.5 Notices. Unless the Administrator specifies otherwise, any notice
to the Company under any Option Agreement or with respect to any Awards or
Award Shares shall be in writing (or, if so authorized by Section 17.4,
communicated electronically), shall be addressed to the Secretary of the
Company, and shall only be effective when received by the Secretary of the
Company.
(Footnote continued)
Exhibit 99.2
A.P. PHARMA, INC.
NON-QUALIFIED STOCK PLAN
------------------------
SECTION 1. PURPOSE; DEFINITIONS.
(a) Purpose. The purposes of the Plan are:
(i) to provide to certain persons who are not
employees of the Company a material inducement to become
executives of, or consultants to, A.P. Pharma, Inc., a Delaware
corporation, its subsidiaries or affiliates by providing an
opportunity to acquire stock in the Company; and
(ii) to encourage selected employees, excluding
officers and directors, to improve operations and increase
profits of the Company.
(b) Definitions. For purposes of the Plan, the following
terms have the following meanings:
(i) "Award" means any award under the Plan, including
any Option, Restricted Stock or Stock Purchase Right Award.
(ii) "Award Agreement" means, with respect to each
Award, the signed written agreement between the Company and the
Plan participant setting forth the terms and conditions of the
Award.
(iii) "Board" means the Board of Directors of the
Company.
(iv) "Change in Control" has the meaning set forth in
Section 8(a).
(v) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
(vi) "Commission" means the Securities and Exchange
Commission and any successor agency.
(vii) "Committee" means the Committee referred to in
Section 2, or the Board in its capacity as administrator of the
Plan in accordance with Section 2.
(viii) "Company" means A.P. Pharma, Inc., a Delaware
corporation.
(ix) "Disability" means permanent and total disability
as determined by the Committee for purposes of the Plan.
(x) "Non-Employee Director" has the meaning set forth
in Rule 16b-3 under the Exchange Act, and any successor
definition adopted by the Commission.
(xi) "Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, and any successor
statute.
(xii) "Fair Market Value" means as of any given date (a)
if the Stock is listed on any established stock exchange or a
national market system, the closing sales price for the Stock or
the closing bid if no sales were reported, as quoted on such
system or exchange, as reported in the Wall Street Journal; or
(b) in the absence of an established market for the Stock, the
fair market value of the Stock as determined by the Committee in
good faith.
(xiii) "Non-Qualified Stock Option" means an Option that
is not an Incentive Stock Option, within the meaning of Section
422 of the Code.
(xiv) "Option" means an option granted under Section 5.
(xv) "Plan" means this A.P. Pharma, Inc. Non-Qualified
Stock Plan, as amended from time to time.
(xvi) "Restricted Stock" means an Award of Stock subject
to restrictions, as more fully described in Section 6.
(xvii) "Restriction Period" means the period determined
by the Committee under Section 6(b).
(xviii) "Rule 16b-3" means Rule 16b-3 under Section 16(b)
of the Exchange Act, as amended from time to time, and any
successor rule.
(xix) "Stock" means the Common Stock of the Company, and
any successor security.
(xx) "Stock Purchase Right" means an Award granted
under Section 7.
(xxi) "Subsidiary" has the meaning set forth in Section
424 of the Code.
(xxii) "Tax Date" means the date defined in Section 9(f).
(xxiii) "Termination" means, for purposes of the Plan,
with respect to a participant, that the participant has ceased
to be, for any reason, employed by, or a consultant to, the
Company, a subsidiary or an affiliate; provided, that for
purposes of this definition, unless otherwise determined by the
President of the Company, in his sole discretion, Termination
shall not include a change in status from an employee of, to a
consultant to, the Company or any subsidiary or affiliate, or
vice versa.
SECTION 2. ADMINISTRATION.
(a) Committee. The Plan shall be administered by the Board
or, upon delegation by the Board, by a committee of Non-Employee
Directors appointed by the Board. In connection with the
administration of the Plan, the Committee shall have the powers
possessed by the Board. The Committee may act only by a
majority of its members, except that the Committee may from time
to time select another committee or one or more other persons to
be responsible for any matters for which Non-Employee Director
are not required pursuant to Rule 16b-3. The Board at any time
may abolish the Committee and revest in the Board the
administration of the Plan.
(b) Authority. The Committee shall grant Awards only to
persons who (i) are not at the time of the Award employees of
the Company for the purpose of providing a material inducement
to such persons to become employees of or consultants to the
Company or (ii) are employees, but not officers and directors of
the Company. In particular and without limitation, the
Committee, subject to the terms of the Plan, shall:
(i) select the persons to whom Awards may be granted;
determine whether and to what extent Awards are to be granted
under the Plan;
(ii) determine the number of shares to be covered by
each Award granted under the Plan;
(iii) determine the terms and conditions of any Award
granted under the Plan and any related loans to be made by the
Company, based upon factors determined by the Committee; and
(iv) determine to what extent and under what
circumstances any Award payments may be deferred by a
participant.
(c) Committee Determinations Binding. The Committee may
adopt, alter and repeal administrative rules, guidelines and
practices governing the Plan as it from time to time shall deem
advisable, may interpret the terms and provisions of the Plan,
any Award and any Award Agreement and may otherwise supervise
the administration of the Plan. Any determination made by the
Committee pursuant to the provisions of the Plan with respect to
any Award shall be made in its sole discretion at the time of
the grant of the Award or, unless in contravention of any
express term of the Plan or Award, at any later time. All
decisions made by the Committee under the Plan shall be binding
on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
(a) Number of Shares. The total number of shares of Stock
reserved and available for issuance pursuant to Awards under
this Plan shall be 250,000 shares. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury
shares or shares reacquired in private transactions or open
market purchases, but all shares issued under the Plan,
regardless of source shall be counted against the 250,000 share
limitation. If any Option terminates or expires without being
exercised in full or if any shares of Stock subject to an Award
are forfeited, or if an Award otherwise terminates without
issuance in full being made to the participant in the form of
Stock, the shares not issued under such Option or Award shall
again be available for issuance in connection with Awards. Any
Award under this Plan shall be governed by the terms of the Plan
and any applicable Award Agreement.
(b) Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or
other change in corporate structure affecting the Stock, such
substitution or adjustments shall be made in the aggregate
number of shares of Stock reserved for issuance under the Plan,
in the number and exercise price of shares subject to
outstanding Options, and in the number of shares subject to
other outstanding Awards, as may be determined to be appropriate
by the Committee, in its sole discretion; provided, however,
that the number of shares subject to any Award shall always be a
whole number.
SECTION 4. ELIGIBILITY.
Awards may be granted only to persons (i) not employed by the
Company at the time of the Award and who the Company wishes to
attract as an officer or other employee of, or consultant to,
the Company, its subsidiaries and affiliates as a material
inducement to accepting employment or consultancy with the
Company or (ii) who are employees of the Company but are not
officers or directors of the Company at the time of the Award.
SECTION 5. STOCK OPTIONS.
(a) Type. Any Option granted under the Plan shall be in such
form as the Committee may from time to time approve; provided,
that only Non-Qualified Stock Options may be granted under the
Plan.
(b) Terms and Conditions. Options granted under the Plan
shall be subject to the following terms and conditions:
(i) Option Term. The term of each Option shall be
fixed by the Committee, but no Option shall be exercisable more
than ten (10) years after the date the Option is granted.
(ii) Grant Date. The Company may grant Options under
the Plan at any time and from time to time before the Plan
terminates. The Committee shall specify the date of grant or,
if it fails to, the date of grant shall be the date the intended
optionee is first treated as an employee or consultant for
payroll purposes.
(iii) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be equal to at least 85%
of the Fair Market Value on the date of grant.
(iv) Exercisability. Subject to the other provisions
of the Plan, an Option shall be exercisable in its entirety at
grant or at such times and in such amounts as are specified in
the Award Agreement evidencing the Option. Except to the extent
otherwise provided in the Award Agreement, in the event of
Termination prior to the Option being exercisable in full, any
such unexercisable portion shall expire as of such Termination.
The Committee, in its absolute discretion, at any time may waive
any limitations respecting the time at which an Option first
becomes exercisable in whole or in part.
(v) Method of Exercise; Payment. To the extent the
right to purchase shares has accrued, Options may be exercised,
in whole or in part, from time to time, by written notice from
the optionee to the Company stating the number of shares being
purchased, accompanied by payment of the exercise price for the
shares.
SECTION 6. RESTRICTED STOCK.
(a) Price. The Committee may grant to a participant
Restricted Stock. The grantee shall pay the par value per share
as consideration therefor.
(b) Restrictions. Subject to the provisions of the Plan and
the Award Agreement, during the Restriction Period set by the
Committee, commencing with and not exceeding ten (10) years from
the date of such Award, the participant shall not be permitted
to sell, assign, transfer, pledge or otherwise encumber shares
of Restricted Stock. Within these limits, the Committee may
provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions, in whole or in part,
based on service, performance or such other factors or criteria
as the Committee may determine.
(c) Dividends. Unless otherwise determined by the Committee,
with respect to dividends on shares of Restricted Stock,
dividends payable in cash shall be automatically reinvested in
additional Restricted Stock, and dividends payable in Stock
shall be paid in the form of Restricted Stock.
(d) Termination. Except to the extent otherwise provided in
the Award Agreement and pursuant to Section 6(b), in the event
of a Termination during the Restriction Period, all shares still
subject to restriction shall be forfeited by the participant.
SECTION 7. STOCK PURCHASE RIGHTS.
(a) Price. The Committee may grant Stock Purchase Rights
which shall enable the recipients to purchase Stock at a price
equal to not less than 85% of its Fair Market Value on the date
of grant.
(b) Exercisability. Stock Purchase Rights shall be
exercisable for a period determined by the Committee not
exceeding 30 days from the date of the grant.
SECTION 8. CHANGE IN CONTROL.
(a) Definition of "Change in Control". For purposes of
Section 8(b), a "Change in Control" means the occurrence of any
one of the following:
(i) Any "person", as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, a
subsidiary, an affiliate, or a Company employee benefit plan,
including any trustee of such plan acting as trustee) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 51% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) The dissolution or liquidation (partial or total)
of the Company or a sale of assets involving 51% or more of the
assets of the Company, any merger or reorganization of the
Company, whether or not another entity is the survivor, in a
transaction pursuant to which the holders, as a group, of all of
the shares of the Company outstanding prior to the transaction
hold, as a group, less than 51% of the shares of the Company
outstanding after the transaction, or any other event which the
Board determines, in its discretion, would materially alter the
structure of the Company or its ownership.
(b) Impact of Event. In the event of a "Change in Control" as
defined in Section 8(a), acceleration provisions no more
favorable to participants than the following shall apply:
(i) Any Options outstanding as of the date such Change
in Control is determined to have occurred and not then
exercisable and vested shall become fully exercisable and
vested; and
(iii) The restrictions and limitations applicable to any
Restricted Stock and Stock Purchase Rights shall lapse, and such
Restricted Stock shall become fully vested.
SECTION 9. GENERAL PROVISIONS.
(a) Award Grants. Any Award may be granted either alone or in
addition to other Awards granted under the Plan. Subject to the
terms and restrictions set forth elsewhere in the Plan, the
Committee shall determine the consideration, if any, payable by
the participant for any Award and, in addition to those set
forth in the Plan, any other terms and conditions of the Awards.
The Committee may condition the grant or payment of any Award
upon the attainment of specified performance goals or such other
factors or criteria, including vesting based on continued
employment or consulting, as the Committee shall determine.
Performance objectives may vary from participant to participant
and among groups of participants and shall be based upon such
Company, subsidiary, group or division factors or criteria as
the Committee may deem appropriate, including, but not limited
to, earnings per share or return on equity. The other
provisions of Awards also need not be the same with respect to
each recipient.
(b) Award Agreement. As soon as practicable after the date of
an Award grant, the Company and the participant shall enter into
a written Award Agreement identifying the date of grant, and
specifying the terms and conditions of the Award. Options are
not exercisable until after execution of the Award agreement by
the Company and the Plan participant, but a delay in execution
of the agreement shall not affect the validity of an Option
grant.
(c) Certificates. All certificates for shares of Stock or
other securities delivered under the Plan shall be subject to
such stock transfer orders, legends and other restrictions as
the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any market in which
the Stock is then traded and any applicable federal, state or
foreign securities law.
(d) Termination. Unless otherwise provided in the applicable
Award Agreement or by the Committee, in the event of Termination
for any reason other than death, retirement or Disability,
Awards held at the date of Termination (and only to the extent
then exercisable or payable, as the case may be) may be
exercised in whole or in part at any time within three (3)
months after the date of Termination, or such lesser period
specified in the Award Agreement (but in no event after the
expiration date of the Award), but not thereafter. If
Termination is due to retirement or to death or Disability,
Awards held at the date of Termination (and only to the extent
then exercisable or payable, as the case may be) may be
exercised in whole or in part by the participant in the case of
retirement or Disability, by the participant's guardian or legal
representative or by the person to whom the Award is transferred
by will or the laws of descent and distribution, at any time
within two (2) years from the date of Termination or any lesser
period specified in the Award Agreement (but in no event after
the expiration of the Award).
(e) Delivery of Purchase Price. If and only to the extent
authorized by the Committee, participants may make all or any
portion of any payment due to the Company
(i) with respect to the consideration payable for an
Award,
(ii) upon exercise of an Award, or
(iii) with respect to federal, state, local or foreign
tax payable in connection with an Award, by delivery of (x)
cash, (y) check, or (z) any property other than cash (including
a promissory note of the participant or shares of Stock or
securities) so long as, if applicable, such property constitutes
valid consideration for the Stock under, and otherwise complies
with, applicable law. No promissory note under the Plan shall
have a term (including extensions) of more than five years or
shall be of a principal amount exceeding 90% of the purchase
price paid by the borrower.
(f) Tax Withholding. Any shares or other securities so
withheld or tendered will be valued by the Committee as of the
date they are withheld or tendered; provided, however, that
Stock shall be valued at Fair Market Value on such date. The
value of the shares withheld or tendered may not exceed the
required federal, state, local and foreign withholding tax
obligations as computed by the Company. Unless the Committee
permits otherwise, the participant shall pay to the Company in
cash, promptly when the amount of such obligations becomes
determinable (the "Tax Date"), all applicable federal, state,
local and foreign withholding taxes that the Committee in its
discretion determines to result (i) from the lapse of
restrictions imposed upon an Award, (ii) upon exercise of an
Award, or (iii) from a transfer or other disposition of shares
acquired upon exercise or payment of an Award, or otherwise
related to the Award or the shares acquired in connection with
an Award.
A participant who has received an Award or payment under an
Award may, to the extent, if any, authorized by the Committee in
its discretion, make an election to (x) deliver to the Company a
promissory note of the participant on the terms set forth in
Section 9(e), or (y) tender any such securities to the Company
to pay the amount of tax that the Committee in its discretion
determines to be required to be withheld by the Company subject
to any limitations imposed by Section 16(b) of the Exchange Act
or other applicable law.
(g) No Transferability. Unless otherwise provided for in the
applicable Award Agreement or by the Committee, no Award shall
be assignable or otherwise transferable by the participant other
than by will or by the laws of descent and distribution, and
during the life of a participant, an Award shall be exercisable,
and any elections with respect to an Award may be made, only by
the participant or participant's guardian or legal
representative.
(h) Adjustment of Awards; Waivers. The Committee may adjust
the performance goals and measurements applicable to Awards (i)
to take into account changes in law and accounting and tax
rules, (ii) to make such adjustments as the Committee deems
necessary or appropriate to reflect the inclusion or exclusion
of the impact of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships, and
(iii) to make such adjustments as the Committee deems necessary
or appropriate to reflect any material changes in business
conditions. In the event of hardship or other special
circumstances of a participant and otherwise in its discretion,
the Committee may waive in whole or in part any or all
restrictions, conditions, vesting, or forfeiture with respect to
any Award granted to such participant.
(i) Non Competition. The Committee may condition its
discretionary waiver of a forfeiture, the acceleration of
vesting at the time of Termination of a participant holding any
unexercised or unearned Award, the waiver of restrictions on any
Award, or the extension of the expiration period to a period not
longer than that provided by the Plan upon such participant's
agreement (and compliance with such agreement) to (i) not engage
in any business or activity competitive with any business or
activity conducted by the Company and (ii) be available for
consultations at the request of the Company's management, all on
such terms and conditions (including conditions in addition to
clauses (i) and (ii)) as the Committee may determine.
(j) Dividends. The reinvestment of dividends in additional
Stock or Restricted Stock at the time of any dividend payment
pursuant to Section 6(c) shall only be permissible if sufficient
shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Awards).
(k) Regulatory Compliance. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee
shall determine that (i) the listing, registration or
qualification of the shares of Stock upon any securities
exchange or for trading in any securities market or under any
state or federal law, (ii) the consent or approval of any
government or regulatory body or (iii) an agreement by the
participant with respect thereto, is necessary or desirable,
then such Award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free
of any conditions not acceptable to the Committee.
(l) Rights as Shareholder. Unless the Plan or the Committee
expressly specifies otherwise, an optionee shall have no rights
as a shareholder with respect to any shares covered by an Award
until the stock certificates representing the shares are
actually delivered to the optionee. Subject to Sections 3(b)
and 6(c), no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the
certificates are delivered.
(m) Beneficiary Designation. The Committee, in its
discretion, may establish procedures for a participant to
designate a beneficiary to whom any amounts payable in the event
of the participant's death are to be paid.
(n) Additional Plans. Nothing contained in the Plan shall
prevent the Company, a subsidiary or an affiliate from adopting
other or additional compensation arrangements for its employees
and consultants.
(o) No Employment Rights. The adoption of the Plan shall not
confer upon any employee any right to continued employment nor
shall it interfere in any way with the right of the Company, a
subsidiary or an affiliate to terminate the employment of any
employee at any time.
(p) Rule 16b-3. Notwithstanding any provision of the Plan,
the Plan shall always be administered, and Awards shall always
be granted and exercised, in such a manner as to conform to the
provisions of Rule 16b-3.
(q) Governing Law. The Plan and all Awards shall be governed
by and construed in accordance with the laws of the State of
California.
(r) Use of Proceeds. All cash proceeds to the Company under
the Plan shall constitute general funds of the Company.
(s) Unfunded Status of Plan. The Plan shall constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or arrangements
to meet the obligations created under the Plan to deliver Stock
or make payments; provided, however, that unless the Committee
otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of
the Plan.
(t) Assumption by Successor. The obligations of the Company
under the Plan and under any outstanding Award may be assumed by
any successor corporation, which for purposes of the Plan shall
be included within the meaning of "Company".
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan or any Award,
but no amendment, alteration or discontinuance shall be made
which would impair the rights of a participant under an
outstanding Award without the participant's consent.
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is adopted by the
Board.
SECTION 12. TERM OF PLAN.
No Award shall be granted on or after October 24, 2010, but
Awards granted prior to October 24, 2010 may extend beyond that
date.
(Footnote continued)