View:
As filed with the Securities and Exchange Commission on
August 25, 2004
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
------------------------------
1997 Employee Stock Purchase 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
2775 Sand Hill Road
Menlo Park, California 94025-7019
(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 $0.01 500,000 $1.25 $625,000 $79.19
=====================================================================
(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
August 20, 2004.
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, 2003;
(b) The Registrant's Quarterly Report on Form 10-Q for
the fiscal quarters ended March 31, 2004 and June 30, 2004;
(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 the 1997
Employee Stock Purchase 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 170,335 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 page II-4)
99.1 2002 Equity Incentive Plan
99.2 1997 Employee Stock Purchase 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 of 1933,
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 25th day of August,
2004.
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 August 25, 2004
- ------------------------ Executive Officer ---------------
Michael O'Connell (Principal Executive
Officer)
/S/ Gordon Sangster Chief Financial Officer August 25, 2004
- ------------------------ (Principal Financial ---------------
Gordon Sangster and Accounting Officer)
/S/ Paul Goddard Chairman of the Board August 25, 2004
- ------------------------ of Directors ---------------
Paul Goddard
/S/ Stephen Drury Director August 25, 2004
- ------------------------ ---------------
Stephen Drury
/S/ Peter Riepenhausen Director August 25, 2004
- ------------------------ ---------------
Peter Riepenhausen
/S/ Toby Rosenblatt Director August 25, 2004
- ------------------------ ---------------
Toby Rosenblatt
/S/ Gregory Turnbull Director August 25, 2004
- ------------------------ ---------------
Gregory Turnbull
/S/ Dennis Winger Director August 25, 2004
- ------------------------ ---------------
Dennis Winger
/S/ Robert Zerbe Director August 25, 2004
- ------------------------ ---------------
Robert Zerbe
INDEX TO EXHIBITS
-----------------
Sequentially
Item No. Description of Item Numbered Page
- -------- ------------------- -------------
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 1997 Employee Stock Purchase Plan
(continued from previous page)
5
4
EXHIBIT 5
August 24, 2004
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 August 25, 2004 for the purpose of registering
under the Securities Act of 1933, as amended, an aggregate of
500,000 shares of its Common Stock, par value $.01 (the
"Shares"). Of the Shares, 400,000 are issuable under the
Company's 2002 Equity Incentive Plan (the "Equity Plan") and
100,000 are issuable under the Company's 1997 Employee Stock
Purchase Plan (the "Stock Plan", and together with the Equity
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 April 30, 2004, 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 the Company's transfer agent, dated August 24,
2004, as to the number of shares of the Company's Common Stock
that were outstanding on August 24, 2004.
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 1997 Employee Stock Purchase Plan of our report
dated February 20, 2004, with respect to the consolidated
financial statements of A.P. Pharma, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 2003, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young, LLP
----------------------
Ernst & Young, LLP
Palo Alto, California
August 23, 2004
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 900,000.
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
ADVANCED POLYMER SYSTEMS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. This Advanced Polymer Systems, Inc. 1997 Employee Stock
Purchase Plan is designed to encourage and assist employees of Advanced
Polymer Systems, Inc. and participating subsidiaries to acquire an equity
interest in the Company through the purchase of shares of Company common
stock.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the entity, either the Board or
the committee of the Board, responsible for administering this Plan, as
provided in Section 3.
(b) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
(d) "Company" shall mean Advanced Polymer Systems, Inc., a
Delaware corporation, and Participating Subsidiaries.
(e) "Common Stock" shall mean the Common Stock, $.01 par value,
of the Company.
(f) "Employee" shall mean any individual who is an employee of
the Company or a Participating Subsidiary within the meaning of Section
3401(c) of the Code and the Treasury Regulations thereunder.
(g) "Enrollment Date" shall have the meaning set forth in
Section 6.
(h) "Fair market value" means as of any given date: (i) the
closing price of the Common Stock on the Nasdaq National Market as reported in
the Wall Street Journal; or (ii) if the Common Stock is no longer quoted on
the Nasdaq National Market, but is listed on an established stock exchange or
quoted on any other established interdealer quotation system, the closing
price for the Common Stock on such exchange or system, as reported in the Wall
Street Journal; or (iii) in the absence of an established market for the
Common Stock, the fair market value of the Common Stock as determined by the
Administrator in good faith.
(i) "Lower Price Enrollment Date" shall have the meaning set
forth in Section 6.
(j) "Option Period" shall have the meaning set forth in Section
7(b).
(k) "Participating Subsidiary" shall mean a Subsidiary which has
been designated by the Administrator as covered by the Plan.
(l) "Plan" shall mean this Advanced Polymer Systems, Inc. 1997
Employee Stock Purchase Plan, as it may be amended from time to time.
(m) "Purchase Date" shall have the meaning set forth in Section
9(a).
(n) "Section" unless the context clearly indicates otherwise,
shall refer to a Section of this Plan.
(o) "Subsidiary" shall mean a "subsidiary corporation" of the
Company, whether now or hereafter existing, within the meaning of Section
424(f) of the Code, but only for so long as it is a "subsidiary corporation."
(p) "Trading Day" means any day on which regular trading occurs
on any established stock exchange or market system on which the Common Stock
is traded.
3. ADMINISTRATION.
(a) Administrator. The Plan shall be administered by the Board
or, upon delegation by the Board, by a committee of the Board (in either case,
the "Administrator"). In connection with the administration of the Plan, the
Administrator shall have the powers possessed by the Board. The Administrator
may act only by a majority of its members. The Administrator may delegate
administrative duties to such employees of the Company as it deems proper, so
long as such delegation is not otherwise prohibited by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or other applicable law. The
Board at any time may terminate the authority delegated to any committee of
the Board pursuant to this Section 3(a) and revest in the Board the
administration of the Plan.
(b) Administrator Determinations Binding. The Administrator may
adopt, alter and repeal administrative rules, guidelines and practices
governing the Plan and the options granted under it as it shall deem advisable
from time to time, may interpret the terms and provisions of the Plan and the
Options granted under it, may correct any defect, omission or inconsistency in
the Plan or in any Option; and may otherwise supervise the administration of
the Plan and the Options granted under it. The Administrator may establish,
under guidelines from the Board, limits on the number of shares which may be
purchased by each participant on an annual or other periodic basis or on the
number of shares which may be purchased on any Purchase Date. All decisions
made by the Administrator under the Plan shall be binding on all persons,
including the Company and all participants in the Plan. No member of the
Administrator shall be liable for any action that he or she has in good faith
taken or failed to take with respect to this Plan.
4. NUMBER OF SHARES.
(a) The Company has reserved for sale under the Plan 500,000
shares of Common Stock. Shares sold under the Plan may be newly issued shares
or shares reacquired in private transactions or open market purchases, but all
shares sold under the Plan, regardless of source, shall be counted against the
500,000 share limitation. If at any Purchase Date, the shares available under
the Plan are less than the number all participants would otherwise be entitled
to purchase on such date, purchases shall be reduced proportionately to
eliminate the deficit. If, at any Purchase Date, the shares which may be
purchased by a participant are restricted on account of a limit on the
aggregate shares which may be purchased per employee, purchases under each
option shall be reduced proportionately. Any funds that cannot be applied to
the purchase of shares due to such reductions shall be refunded to
participants as soon as administratively feasible.
(b) In the event of any reorganization, recapitalization, stock
split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Board may make such adjustment, if any, as it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
5. ELIGIBILITY REQUIREMENTS.
(a) Each Employee of the Company, except those described in the
next paragraph, shall become eligible to participate in the Plan in accordance
with Section 6 on the first Enrollment Date on or following commencement of
his or her employment by the Company or following such period of employment as
is designated by the Administrator from time to time. Participation in the
Plan is entirely voluntary.
(b) The following Employees are not eligible to participate in
the Plan:
(i) Employees who would, immediately upon enrollment
in the Plan, own directly or indirectly, or hold options or rights to acquire
stock possessing, five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or any subsidiary of the
Company; and
(ii) Employees who are customarily employed by the
Company fewer than twenty (20) hours per week or fewer than five (5) months in
any calendar year.
6. ENROLLMENT. Any eligible employee may enroll or re-enroll in the
Plan each year as of the close of the first trading day of: (a) May and
November of each such year; or (b) such other days as may be established by
the Board from time to time (the "Enrollment Dates"); provided, that the first
Enrollment Date shall be April 30, 1997. In order to enroll, an eligible
employee must complete, sign, and submit to the Company an enrollment form.
Any enrollment form received by the Company by the 20th day of the month
preceding an Enrollment Date (or by the Enrollment Date in the case of
employees hired after such 20th day or in the case of the first Enrollment
Date), or such other date established by the Administrator from time to time,
will be effective on that Enrollment Date. In addition, the Administrator may
re-enroll existing participants in the Plan on any Enrollment Date (the "Lower
Price Enrollment Date") on which the fair market value of the Common Stock is
lower than the fair market value on such participant's existing Enrollment
Date. A participant may elect not to re-enroll on a Lower Price Enrollment
Date by filing a written statement with the Company declaring such election
prior to the Lower Price Enrollment Date.
7. GRANT OF OPTION ENROLLMENT.
(a) Enrollment or re-enrollment by a participant in the Plan on
an Enrollment Date will constitute the grant by the Company to the participant
of an option to purchase shares of Common Stock from the Company under the
Plan. Any participant whose option expires and who has not withdrawn from the
Plan will automatically be re-enrolled in the Plan and granted a new option on
the Enrollment Date immediately following the date on which the option
expires.
(b) Except as provided in Section 10, each option granted under
the Plan shall have the following terms:
(i) the option will have a term of not more than
twenty-four (24) months or such shorter option period as may be established by
the Board from time to time (the "Option Period"). Notwithstanding the
foregoing, however, whether or not all shares have been purchased thereunder,
the option will expire on the earlier to occur of: (A) the completion of the
purchase of shares on the last Purchase Date occurring within twenty-four (24)
months after the Enrollment Date for such option, or such shorter option
period as may be established by the Board before an Enrollment Date for all
options to be granted on such date; or (B) the date on which the employee's
participation in the Plan terminates for any reason;
(ii) payment for shares purchased under the option
will be made only through payroll withholding in accordance with Section 8;
(iii) purchase of shares upon exercise of the option
will be effected only on the Purchase Dates established in accordance with
Section 9;
(iv) the option, if not altered, amended or revoked
by the Company prior to the relevant Purchase Date, may be accepted only by
(x) there having been withheld from the compensation of the employee in
accordance with the terms of the Plan amounts sufficient to purchase the
Common Stock intended to be purchased under the option, and (y) the employee
being employed by the Company and not having withdrawn from the Plan on the
relevant Purchase Date.
(v) the price per share under the option will be
determined as provided in Section 9;
(vi) the maximum number of shares available for
purchase under an option for each one percent (1%) of compensation designated
by an employee in accordance with Section 8 will, unless otherwise established
by the Board before an Enrollment Date for all options to be granted on such
date, be determined by dividing $25,000 by the fair market value of a share of
Common Stock on the Enrollment Date, dividing the result by the maximum number
of percentage points that an employee may designate under Section 8 at the
time such option is granted, and multiplying the result by the number of
calendar years included in whole or in part in the period from grant to
expiration of the option;
(vii) the option (taken together with all other
options then outstanding under this and all other similar stock purchase plans
of the Company and any subsidiary of the Company, collectively "Options") will
in no event give the participant the right to purchase shares at a rate per
calendar year which accrues in excess of $25,000 of fair market value of such
shares, less the fair market value of any shares accrued and already purchased
during such year under Options which have expired or terminated, determined at
the applicable Enrollment Dates; and
(viii) the option will in all respects be subject to
the terms and conditions of the Plan, as interpreted by the Administrator from
time to time.
8. PAYROLL AND TAX WITHHOLDING; USE BY COMPANY.
(a) Each participant shall elect to have amounts withheld from
his or her compensation paid by the Company during the Option Period, at a
rate equal to any whole percentage up to a maximum of ten percent (10%), or
such lesser percentage as the Board may establish from time to time before an
Enrollment Date. Compensation includes regular salary payments, annual and
quarterly bonuses, hire-on bonuses, cash recognition awards, commissions,
overtime pay, shift premiums, and elective contributions by the participant to
qualified employee benefit plans, but excludes all other payments including,
without limitation, long-term disability or workers compensation payments, car
allowances, employee referral bonuses, relocation payments, expense
reimbursements (including but not limited to travel, entertainment, and moving
expenses), salary gross-up payments, and non-cash recognition awards. The
participant shall designate a rate of withholding in his or her enrollment
form and may elect to increase or decrease the rate of contribution effective
as of any Enrollment Date, by delivery to the Company, not later than ten (10)
days before such Enrollment Date, of a written notice indicating the revised
withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant, as soon as
administratively feasible after the withholding occurs. The Company shall be
entitled to use the withholdings for any corporate purpose, shall have no
obligation to pay interest on withholdings to any participant, and shall not
be obligated to segregate withholdings.
(c) Upon disposition of shares acquired by exercise of an
option, the participant shall pay, or make provision adequate to the Company
for payment of, all federal, state, and other tax (and similar) withholdings
that the Company determines, in its discretion, are required due to the
disposition, including any such withholding that the Company determines in its
discretion is necessary to allow the Company to claim tax deductions or other
benefits in connection with the disposition. A participant shall make such
similar provisions for payment that the Company determines, in its discretion,
are required due to the exercise of an option, including such provisions as
are necessary to allow the Company to claim tax deductions or other benefits
in connection with the exercise of the option.
9. PURCHASE OF SHARES.
(a) On the last Trading Day immediately preceding an Enrollment
Date (other than the first Enrollment Date), or on such other days as may be
established by the Board from time to time prior to an Enrollment Date for all
options to be granted on such Enrollment Date (each a "Purchase Date"), the
Company shall apply the funds then credited to each participant's payroll
withholdings account to the purchase of whole shares of Common Stock. The
cost to the participant for the shares purchased under any option shall be not
less than eighty-five percent (85%) of the lower of:
(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or
(ii) the fair market value of the Common Stock on the
date such option is exercised.
(b) Any funds in an amount less than the cost of one share of
Common Stock left in a participant's payroll withholdings account on a
Purchase Date shall be carried forward in such account for application on the
next Purchase Date.
(c) Notwithstanding the terms of Section 9(a), no funds credited
to any employee's payroll withholdings account shall be used to purchase
Common Stock on any date prior to the date that the Plan has been approved by
the stockholders of the Company, as noted in Section 21. If such approval is
not forthcoming within one year from the date that the Plan was approved by
the Board of Directors, all amounts withheld shall be distributed to the
participants as soon as administratively feasible.
10. WITHDRAWAL FROM THE PLAN. A participant may withdraw from the
Plan in full (but not in part) at any time, effective after written notice
thereof is received by the Company. Unless the Administrator elects to permit
a withdrawing participant to invest funds credited to his or her withholding
account on the Purchase Date immediately following notice of withdrawal, all
funds credited to a participant's payroll withholdings account shall be
distributed to him or her without interest within sixty (60) days after notice
of withdrawal is received by the Company. Any eligible employee who has
withdrawn from the Plan may enroll in the Plan again on any subsequent
Enrollment Date in accordance with the provisions of Section 6.
11. TERMINATION OF EMPLOYMENT. Participation in the Plan terminates
immediately when a participant ceases to be employed by the Company for any
reason whatsoever (including death or disability) or otherwise becomes
ineligible to participate in the Plan. As soon as administratively feasible
after termination, the Company shall pay to the participant or his or her
beneficiary or legal representative, all amounts credited to the participant's
payroll withholdings account; provided, however, that if a participant ceases
to be employed by the Company because of the commencement of employment with a
Subsidiary of the Company that is not a Participating Subsidiary, funds then
credited to such participant's payroll withholdings account shall be applied
to the purchase of whole shares of Common Stock at the next Purchase Date and
any funds remaining after such purchase shall be paid to the participant.
12. DESIGNATION OF BENEFICIARY.
(a) Each participant may designate one or more beneficiaries in
the event of death and may, in his or her sole discretion, change such
designation at any time. Any such designation shall be effective upon receipt
in written form by the Company and shall control over any disposition by will
or otherwise.
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in cash to
the designated beneficiaries or, in the absence of a designation, to the
executor, administrator, or other legal representative of the participant's
estate. Such payment shall relieve the Company of further liability with
respect to the Plan on account of the deceased participant. If more than one
beneficiary is designated, each beneficiary shall receive an equal portion of
the account unless the participant has given express contrary written
instructions.
13. ASSIGNMENT.
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No
participant may create a lien on any funds, securities, rights, or other
property held by the Company for the account of the participant under the
Plan, except to the extent that there has been a designation of beneficiaries
in accordance with the Plan, and except to the extent permitted by the laws of
descent and distribution if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan
shall be exercisable only during the participant's lifetime and only by him or
her, except that a participant may direct the Company in the enrollment form
to issue share certificates to the participant and his or her spouse in
community property, to the participant jointly with one or more other persons
with right of survivorship, or to certain forms of trusts approved by the
Administrator.
14. ADMINISTRATIVE ASSISTANCE. If the Administrator in its discretion
so elects, it may retain a brokerage firm, bank, or other financial
institution to assist in the purchase of shares, delivery of reports, or other
administrative aspects of the Plan. If the Administrator so elects, each
participant shall (unless prohibited by the laws of the nation of his or her
employment or residence) be deemed upon enrollment in the Plan to have
authorized the establishment of an account on his or her behalf at such
institution. Shares purchased by a participant under the Plan shall be held
in the account in the name in which the share certificate would otherwise be
issued pursuant to Section 13(b).
15. COSTS. All costs and expenses incurred in administering the Plan
shall be paid by the Company, except that any stamp duties or transfer taxes
applicable to participation in the Plan may be charged to the account of such
participant by the Company. Any brokerage fees for the purchase of shares by
a participant shall be paid by the Company, but brokerage fees for the resale
of shares by a participant shall be borne by the participant.
16. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to the Plan so that the Plan
qualifies as an "employee stock purchase plan" within the meaning of Section
423 of the Code and the related Treasury Regulations. Any provision of the
Plan which is inconsistent with Section 423 of the Code shall without further
act or amendment by the Company or the Board be reformed to comply with the
requirements of Section 423. This Section 16 shall take precedence over all
other provisions of the Plan.
17. APPLICABLE LAW. The Plan shall be governed by the substantive
laws (excluding the conflict of laws rules) of the State of California.
18. MODIFICATION AND TERMINATION.
(a) The Board may amend, alter, or terminate the Plan at any
time, including amendments to outstanding options. No amendment shall require
stockholder approval, except:
(i) for an increase in the number of shares reserved
for purchase under the Plan;
(ii) to the extent required for the Plan to comply
with Section 423 of the Code;
(iii) to the extent required by other applicable laws,
regulations or rules; or
(iv) to the extent the Board otherwise concludes that
stockholder approval is advisable.
(b) In the event the Plan is terminated, the Board may elect to
terminate all outstanding options either immediately or upon completion of the
purchase of shares on the next Purchase Date, or may elect to permit options
to expire in accordance with their terms (and participation to continue
through such expiration dates). If the options are terminated prior to
expiration, all funds contributed to the Plan that have not been used to
purchase shares shall be returned to the participants as soon as
administratively feasible.
(c) In the event of the sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, or the dissolution or liquidation of the Company, each option
outstanding under the Plan shall be assumed by any purchaser of all or
substantially all of the assets of the Company or by a successor by merger to
the Company (or the parent company of such purchaser or successor) in
compliance with Section 424 of the Code, unless otherwise provided by the
Board in its sole discretion, in which event, a Purchase Date shall occur
immediately before the effective date of such event.
19. RIGHTS AS AN EMPLOYEE. Nothing in the Plan shall be construed to
give any person the right to remain in the employ of the Company or to affect
the Company's right to terminate the employment of any person at any time with
or without cause.
20. RIGHTS AS A SHAREHOLDER; DELIVERY OF CERTIFICATES. Unless
otherwise determined by the Board, certificates evidencing shares purchased on
any Purchase Date shall be delivered to a participant only if he or she makes
a written request to the Administrator. Participants shall be treated as the
owners of their shares effective as of the Purchase Date.
21. BOARD AND SHAREHOLDER APPROVAL. The Plan was approved by the
Board of Directors on March 5, 1997, and by the holders of a majority of the
votes cast at a duly held shareholders' meeting on June 18, 1997, at which a
quorum of the voting power of the Company was represented in person or by
proxy.