Directors’ Compensation and Options
DIRECTORS’ COMPENSATION
For the Year Ended June 30, 2021
|
Name
|
Fees
Earned or Paid in Cash($)
|
|
|
Non-Equity
Incentive Plan Comp-ensation($)
|
Changes
in Pension Value and Non-qualified Deferred Compensation
Earnings($)
|
Non-qualified
Deferred Comp-ensation Earnings ($)
|
All Other Comp- ensation ($)
|
|
|
Christopher
Cox
|
6,200
|
0
|
0
|
0
|
0
|
0
|
0
|
6,200
|
|
Joseph
G. Cremonese
|
18,800
|
0
|
0
|
0
|
0
|
0
|
108,000(1)
|
126,800
|
|
Marcus
Frampton
|
18,800
|
0
|
0
|
0
|
0
|
0
|
0
|
18,800
|
|
Jurgen
Schumacher
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Reinhard
Vogt
|
14,400
|
0
|
758,700(4)
|
0
|
0
|
0
|
207,900(2)
|
981,000
|
|
John
F.F. Watkins (3)
|
10,400
|
0
|
0
|
0
|
0
|
0
|
0
|
10,400
|
(1) Represents amount paid to him and his affiliate pursuant to a
consulting agreement (see Items 12 and 13).
(2) Represents amount paid to him and his affiliate pursuant to a
consulting agreement (see Items 12 and 13).
(3) Mr. Watkins resigned from the Board during fiscal
2021.
(4) Represents the grant date aggregate fair value of 125,000
option shares granted in connection with his consulting
agreement.
The Company paid each Director who is not an employee of the
Company or a subsidiary a quarterly retainer fee of $2,200 and a
meeting fee of $2,000 for each meeting attended for each of fiscal
2021 and fiscal 2020. In addition, the Company reimburses each
Director for out-of-pocket expenses incurred in connection with
attendance at board meetings. During fiscal 2021, total director
compensation to non-employee Directors aggregated $388,900,
including the consulting fees paid to Mr. Cremonese and his
affiliate and Mr. Vogt and his affiliate.
On June 23, 2020, Mr. Cremonese was awarded 20,000 options in
connection with his consulting agreement with an aggregate grant
date fair value of $108,500, all of which remain outstanding. Prior
to that, Mr. Cremonese had been awarded a total of 45,000 stock
options under the Company's 2002 and 2012 Stock Option Plans of
which 5,000 remain unexercised.
On July 20, 2020, Mr. Vogt was awarded 125,000 options in
connection with his consulting agreement with an aggregate grant
date fair value of $758,700, all of which remain unexercised. None
of the other directors have options outstanding.
Executive Officers and Key Personnel
See above for the employment history of Ms. Santos and Mr. Moore.
Robert P. Nichols (age 60), is
the President of the Genie Products Division of the Benchtop
Laboratory Equipment operations and Corporate Secretary and has
been employed by the Company since February 1998. Previously, he
had been since May 2001, the Company’s Vice President of
Engineering.
Karl D. Nowosielski (age 43),
is the President of the Torbal Products Division of the Benchtop
Laboratory Equipment operations and Director of Marketing for the
Company. He was Vice President of Fulcrum, Inc. (the seller of the
Torbal Products Division assets) from 2004 until February
2014.
Daniel Grunes (age 33), is the
Vice President of Research and Development and Operations of the
Company’s Bioprocessing Operations and CEO of Aquila. Prior
to the Company’s acquisition of Aquila, he was the Chief
Executive Officer of aquila biolabs GmbH.
Compensation Discussion and Analysis. The Compensation Committee reviews and recommends
to the Board of Directors the compensation to be paid to each
executive officer. Executive compensation, in all instances except
for the compensation for the Chief Executive Officer
(“CEO”), is based on recommendations from the CEO. The
CEO makes a determination by comparing the performance of each
executive being reviewed with objectives established at the
beginning of each fiscal year and with objectives established
during the business year with regard to the success of the
achievement of such objectives and the successful execution of
management targets and goals.
With respect to the compensation of the CEO, the Committee
considers performance criteria, 50% of which is related to the
direction, by the CEO, of the reporting executives, the
establishment of executive objectives as components for the
successful achievement of Company goals and the successful
completion of programs leading to the successful completion of the
Business Plan for the Company and 50% of which is based on the
achievement by the Company of its financial and personnel goals
tempered by the amount of the income or loss of the Company during
the fiscal year.
The compensation at times includes grants of options under its
stock option plan to the named executives. Each officer is employed
pursuant to a long-term employment agreement, containing terms
proposed by the Compensation Committee and approved as reasonable
by the Board of Directors. The Board is cognizant that as a
relatively small company, the Company has limited resources and
opportunities with respect to recruiting and retaining key
executives. Accordingly, the Company has relied upon long-term
employment agreements and grants of stock options to retain
qualified personnel.
Compensation for each of its executive officers provided by their
employment agreements were based on the foregoing factors and the
operating and financial results of the segments under their
management.
The following table summarizes all compensation paid by the Company
to each of its executive officers for the fiscal years ended June
30, 2021 and 2020.
SUMMARY COMPENSATION TABLE
|
Name
and Principal
Position
(a)
|
|
|
|
|
Non-
Equity Incentive Plan Compensation
($)
(g)
|
Non-
Qualified
Deferred
Compensation
Earnings
($)
(h)
|
Changes
in
Pension
Value
and
Non-Qualified
Deferred
Compensation
Earnings
|
All
Other
Compensation
($)
(i)
|
|
|
Helena
R. Santos,
CEO,
President, CFO
|
191,200
|
100,000
|
0
|
553,600(1)
|
0
|
0
|
0
|
9,600(6)
|
854,400
|
|
Helena
R. Santos,
CEO,
President, CFO
|
185,700
|
50,000
|
0
|
13,100(1)
|
0
|
0
|
0
|
9,400(6)
|
258,200
|
|
|
|
|
|
|
|
|
|
|
|
|
John
A. Moore,
President
of
SBI
|
175,000
|
100,000
|
0
|
553,600(2)
|
0
|
0
|
0
|
7,000(6)
|
835,600
|
|
John
A. Moore,
President
of
SBI
|
145,000
|
50,000
|
0
|
36,000
|
0
|
0
|
0
|
28,900(7)
|
259,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Grunes,
Vice
President of R&D and Operations of Bioprocessig
Operations
|
30,200(3)
|
20,000
|
0
|
23,200(3)
|
0
|
0
|
0
|
10,000(3)
|
83,400
|
|
Daniel
Grunes,
Vice
President of R&D and Operations of Bioprocessig
Operations
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
P. Nichols,
President
of Genie Division
|
167,200
|
0
|
0
|
0
|
0
|
0
|
0
|
6,700(6)
|
173,900
|
|
Robert
P. Nichols,
President
of Genie Division
|
162,300
|
5,000
|
0
|
3,900(4)
|
0
|
0
|
0
|
6,700(6)
|
177,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl
D. Nowosielski
President
of Torbal Division and Director of Marketing
|
176,600
|
0
|
0
|
0
|
0
|
0
|
0
|
7,100(6)
|
183,700
|
|
Karl
D. Nowosielski
President
of Torbal Division and Director of Marketing
|
169,800
|
10,000
|
0
|
6,300(5)
|
0
|
0
|
0
|
7,200(6)
|
193,300
|
|
(1)
|
The amount for 2021 represents compensation expense for stock
options granted on June 23, 2020 valued utilizing the
Black-Scholes-Merton options pricing model disregarding estimates
of forfeitures related to service-based vesting considerations,
which were valued at a total of $1,625,000 of which $553,600 was
expensed in fiscal 2021 and none in 2020. The amounts for 2020
represent compensation expense for the stock options granted on
July 1, 2017 which were valued at a total of $39,200 of which
$13,100 was expensed in fiscal 2020. No expense was necessary in
2021.
|
|
(2)
|
The amount for 2021 represents compensation expense for stock
options granted on June 23, 2020 valued utilizing the
Black-Scholes-Merton options pricing model disregarding estimates
of forfeitures related to service-based vesting considerations,
which were valued at a total of $1,625,000 of which $553,600 was
expensed in fiscal 2021 and none in 2020. The amounts for
2020 represent compensation expense for the stock options granted
from March 2019 through June 2020 valued at $3,000 per month
utilizing the Black-Scholes-Merton options pricing model, of which
$36,000 was expensed in fiscal 2020. No expense was necessary in
2021.
|
|
(3)
|
Upon
the acquisition of Aquila in April 2021, Mr. Grunes, who was
Aquila’s CEO, became the Vice President of R&D and
Operations for the Company’s Bioprocessing Operations. The
Option Awards amounts represent the fiscal year 2021 compensation
expense for stock options granted at the time of the Aquila
acquisition which were valued utilizing the Black-Scholes-Merton
options pricing model disregarding estimates for forfeitures
related to service-based vesting considerations, which were valued
at a total of $409,300 of which $23,200 was expensed in fiscal 2021
and none in fiscal 2020. Other compensation represents retention
bonus paid in accordance with his employment agreement upon
consummation of acquisition.
|
|
|
|
|
|
|
(4)
|
The
amounts represent compensation expense for the July 1, 2017 stock
options granted valued utilizing the Black-Scholes-Merton options
pricing model, disregarding estimates of forfeitures related to
service-based vesting considerations. The options were valued at a
total of $11,800, of which $3,900 was expensed in fiscal 2020. No
expense was necessary in 2021.
|
|
|
(5)
|
The amounts represent compensation expense for the stock options
granted on July 1, 2017, and February 26, 2017, valued utilizing
the Black-Scholes-Merton options pricing model, disregarding
estimates of forfeitures related to service-based vesting
considerations. The stock options were granted as part of his
employment agreement. The options were valued at a total of
$11,800, and $10,500, respectively, of which $6,300 was expensed in
fiscal 2020. No expense was necessary in 2021.
|
|
|
(6)
|
The amounts represent the Company’s matching contribution
under the Company’s 401(k).
|
|
|
(7)
|
The
amounts represent director and chairman fees paid to Mr. Moore
through June 30, 2020. On July 1, 2020 Mr. Moore became an employee
of the Company and thereafter was not paid any director
fees.
|
|
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30,
2021
|
Name
(a)
|
Grant
Date
(b)
|
Estimate
Future
Payouts
Under
Non-Equity
Incentive
Plan
$
(c)
|
Estimated
Future
Payouts
Under
Equity
Incentive
Plan
$
(d)
|
All
Other
Stock
Awards
Number
of
Shares
of
Stock or
Units
(#)
(e)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
(f)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
(g)
|
Grant
Date
Fair
Value
of
Stock
And
Option
Awards
(h)
|
|
Daniel
Grunes
|
4/30/2021
|
0
|
0
|
0
|
56,000
|
10.00
|
409,300
|
|
John A.
Moore
|
6/23/2020(*)
|
0
|
0
|
0
|
215,366
|
7.50-9.00
|
1,625,000
|
|
Helena R.
Santos
|
6/23/2020(*)
|
0
|
0
|
0
|
215,366
|
7.50-9.00
|
1,625,000
|
*
Although the grants were communicated on June 23, 2020, the awards
were formally issued on February 23, 2021 upon shareholder approval
of an increase in the number of shares available under the
Company’s 2012 Stock Option Plan.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
Name
(a)
|
Number Of Securities Underlying
Unexercised Options (#) Exercisable
(b)
|
Number Of
Securities
Underlying Unexercised Options(#)
Unexercisable
(c)
|
Equity
Incentive Plan Awards
Number
of Securities Underlying Unexercised Unearned Options
(#)
(d)
|
Option
Exercise
Price($)
(e)
|
Option
Expiration
Date
(f)
|
|
Helena
Santos
|
88,788
|
143,578
|
0
|
3.08-9.00
|
07/2027-06/2031
|
|
John
A. Moore
|
78,220
|
149,732
|
0
|
4.50-11.30
|
03/2029-06/2031
|
|
Robert
Nichols
|
7,500
|
0
|
0
|
3.08
|
12/2023-07/2027
|
|
Karl
Nowosielski
|
24,500
|
0
|
0
|
2.91-4.05
|
02/2024-07/2027
|
|
Daniel
Grunes
|
0
|
56,000
|
0
|
10.00
|
04/30/2031
|
Employment Agreements
The
Company has a three-year employment contract with its CEO,
President and CFO, effective July 1, 2017, which was extended by
mutual agreement for each one-year periods ending June 30, 2021 and
2022. The agreement provided for an annual base salary of $175,000
for the year ended June 30, 2018, with subsequent annual increases
of 3% or percentage increase in Consumer Price Index
(“CPI”), whichever is higher, plus a $25,000 cash bonus
for the year ended June 30, 2018, and a discretionary bonus for
subsequent years. Bonuses totaling $100,000 were awarded for the
year ended June 30, 2021 and $50,000 in 2020. The agreement also
provided for a grant of options to purchase 25,000 shares of the
Company’s stock, which were granted during the year ended
June 30, 2018. No shares were granted during the year ended June
30, 2021, and 215,366 shares were authorized to be granted by the
Board of Directors during the year ended June 30, 2020, which
shares were not available and subject to amendment to the
Company’s 2012 Stock Option Plan which was approved in
February 2021. The
agreement also contains a provision that within one year of a
change of control, if either the Company terminates the employment
for any reason other than for “cause” or the Presidents
terminates her employment for “good reason”, the
President will have the right to receive a lump sum payment equal
to three times the average of her total annual compensation paid
for the last five years preceding such
termination.
The
Company has a three-year employment contract with its President of
the Genie Products Division of the Benchtop Laboratory Equipment
Operations and Corporate Secretary effective July 1, 2017, which
was extended by mutual agreement for each one-year periods ending
June 30, 2021 and 2022. The agreement provides for an annual base
salary of $153,000 for the year ended June 30, 2018, with
subsequent annual increases of 3% or percentage increase in the
CPI, whichever is higher, plus $10,000 cash bonus for the year
ended June 30, 2018, and a discretionary bonus for subsequent
years. No bonus was awarded for the year ended June 30, 2021 and a
$5,000 bonus was awarded in 2020. The agreement also provides for a
grant of options to purchase 7,500 shares of the Company’s
stock, which were granted during the year ended June 30, 2018. No
options were granted during the year ended June 30, 2021 or
2020.
The Company has a three-year employment contract with its President
of Torbal Products Division of the Benchtop Laboratory Equipment
Operations and Director of Marketing effective July 1, 2017, which
was extended by mutual agreement for each one-year periods ending
June 30, 2021 and 2022. The agreement provides for an annual base
salary of $157,000 for the year ended June 30, 2018, with
subsequent annual increases of 4% or percentage increase in the
CPI, whichever is higher, plus $10,000 cash bonus for the year
ended June 30, 2018 and subsequent years, subject to a minimum
increase of 5% in the division’s EBITDA for the related year.
The agreement also provides for a grant of options to purchase
7,500 shares of the Company’s stock, which were granted
during the year ended June 30, 2018. No options were granted during
the year ended June 30, 2021 or 2020. A performance-based bonus of
$10,000 was awarded for the year ended June 30, 2020. No bonus was
awarded for the year ended June 30, 2021.
The
Company has a three-year employment contract with its President of
Scientific Bioprocessing, Inc., effective July 1, 2020. The
agreement provides for an annual base salary of $175,000 for the
year ended June 30, 2021, with subsequent annual increases of 3% or
percentage increase in the CPI, whichever is higher, plus
discretionary bonuses. The agreement also provides for a grant of
options to purchase 215,366 shares which were authorized to be
granted by the Board of Directors during the year ended June 30,
2020 and issued on February 23, 2021, which shares were not
available and subject to amendment to the Company’s 2012
Stock Option Plan which was approved in February 2021. Prior to
July 1, 2020, the officer had a consulting agreement, which
terminated upon becoming an employee of the Company. Consulting
fees paid under this agreement amounted to $145,000 for the year
ended June 30, 2020, plus stock options valued at $36,000 which
were granted as part of the total compensation. Bonuses
amounting to $100,000 were awarded during the year ended June 30,
2021 and a bonus of $50,000 was awarded in during the year ended
June 30, 2020. The employment agreement contains termination
provisions stipulating that if the Company terminates the
employment other than for death, disability, or cause (as such term
is defined therein), or if employee resigns for “good
reason” (as such term is defined there), the Company shall
pay severance payments equal to either one year's salary at the
rate of the compensation at the time of termination is employee is
terminated within 12 months of the date of the agreement or six
months' salary is the employee is terminated after 12 months of the
date of the agreement, continue to pay the regular benefits
provided by the Company for the period equal to the length of the
severance payments and pay a pro rata portion of any bonus achieved
prior to such termination of employment.
On April 30, 2021, the Company entered into an employment agreement
with each of the four managing directors and sellers of Aquila for
an indefinite term, which can be terminated by either party upon
six months’ written notice in accordance with German law. The
agreements, which are identical, stipulate that in calendar year
2021, the employees will receive a salary of 105,000 euros, as well
as a guaranteed bonus of 45,000 euros for a total of 150,000 euros
per year on a pro-rata basis, and in calendar year 2022, they will
receive a salary of 105,000 euros and a bonus of 45,000 euros,
subject to the achievement by Aquila of certain targets. In
addition, the employment agreements included a one time retention
bonus of 10,000 euros upon closing of the acquisition which was
paid in May 2021 by Aquila, and a retention bonus of 25,000 euros
if the Employee does not terminate his employment with the Company
within two years after the agreement date or the Company does not
terminate his employment for good cause.
All of the employment agreements contain confidentiality and
non-competition covenants. The employment agreements for Ms.
Santos, Mr. Nichols and Mr. Nowosielski, contain termination
provisions stipulating that if the Company terminates the
employment other than for death, disability, or cause (as such term
is defined therein), or if the relevant employee resigns for
“good reason” (as such term is defined therein), the
Company shall pay severance payments equal to one year’s
salary at the rate of the compensation at the time of termination,
and continue to pay the regular benefits provided by the Company
for a period of one year from termination. The employment agreement
for Mr. Moore contains termination provisions stipulating that if
the Company terminates the employment other than for death,
disability, or cause (as such term is defined therein), or if Mr.
Moore resigns for “good reason” (as such term is
defined therein), the Company shall pay severance payments equal to
either one year’s salary at the rate of the compensation at
the time of termination if Mr. Moore is terminated within 12 months
of the date of his agreement or six months’ salary if Mr.
Moore is terminated after 12 months of the date of his agreement,
and the Company will continue to pay the regular benefits provided
by the Company for the period equal to the length of the severance
payments and pay a pro rata portion of any bonus achieved prior to
such termination of employment. Ms. Santos’ employment
agreement also contains a provision that within one year of a
change of control, if either the Company terminates her employment
for any reason other than for “cause” or she terminates
her employment for “good reason”, she will have the
right to receive a lump sum payment equal to three times the
average of her total annual compensation paid for the last five
years immediately preceding such termination.
Related Transactions
Mr. Joseph G. Cremonese, a Director since November 2002, through
his affiliate, Laboratory Innovation Company, Ltd., provides
consulting services to the Company under a consulting agreement
expiring on December 31, 2021 at a monthly retainer of $9,000. The
agreement contains confidentiality and non-competition covenants.
The Company paid fees of $108,000 and $76,200 for fiscal 2021 and
fiscal 2020, respectively.
Mr. Reinhard Vogt, a Director since July 2020, through his
affiliate, Societät Reinhard and Noah Vogt AG GmbH, provides
consulting services to the Company under a consulting agreement
expiring on July 20, 2022 at a monthly retainer of 12,500 euros
(approximately $14,000). The agreement contains confidentiality and
non-competition covenants. The Company paid fees of $207,900 in
fiscal 2021 and none in fiscal 2020, and granted him a 125,000
share stock option valued at $758,700 on the grant date using the
Black-Scholes-Merton option pricing model.
Section 16(a) Reporting
The Company believes that, for the fiscal year ended June 30, 2021,
its officers, directors and 10% stockholders timely complied with
all filing requirements of Section 16(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”).
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company intended to be presented
at the Company’s Annual Meeting of Stockholders following the
year ending June 30, 2022 must be received by the Secretary of the
Company for inclusion in the appropriate proxy materials no later
than August 20, 2022.
EXPENSES AND SOLICITATION
The entire cost of soliciting proxies will be borne by the Company.
In addition to the use of the mail, proxies may be solicited by
officers, directors and regular employees of the Company personally
or by telephone. No additional compensation will be paid to such
persons for any additional solicitations. The Company will also
request securities brokers, custodians, nominees and fiduciaries
who hold shares of Common Stock of record to forward solicitation
material to the beneficial owners of such shares, and will
reimburse them for their reasonable out-of-pocket expenses in
forwarding such soliciting materials.
|
Bohemia, New York
|
By Order of your Board of Directors,
/s/ Robert P. Nichols
Secretary
|
Exhibit A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION OF SCIENTIFIC INDUSTRIES,
INC.
(Pursuant to Section 242 of the
General Corporation Law of the State of Delaware)
Scientific Industries, Inc. (the
“Corporation”), a corporation organized and existing
under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the “DGCL”),
DOES
HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation (the
“Board”) duly adopted at a meeting proposing and
declaring advisable the amendment to the Certificate of
Incorporation of the Corporation filed on July 2, 1954, as amended
by that certain Certificate of Amendment filed on May 18,
1955, as further amended by
that certain Certificate of Amendment filed on October 8, 1957, as
further amended by that certain Certificate of Amendment filed on
November 1, 1968, as further amended by that certain Certificate of
Amendment filed on October 19, 1970, as further amended by that
certain Certificate of Amendment filed on March 1, 1984, as further
amended by that certain Certificate of Amendment filed on January
28, 1985, and as further amended by that certain Certificate of
Amendment filed on December 19, 1986, as further amended by
that certain Certificate of Amendment filed on March 1,
2021, and as further amended by that
certain Certificate of Amendment filed on June 17, 2021
(collectively, the
“Certificate”), and directing that such amendments be
submitted to the stockholders of the Corporation for
consideration:
RESOLVED, that Article FOUR of the Certificate shall be
amended and restated in its entirety as
follows:
“FOUR:
The number of shares which the Corporation is authorized to issue
is Twenty Million (20,000,000) shares, and the par value of each of
such shares is five cents ($0.05).”
SECOND: That the foregoing amendment was
duly adopted in accordance with Section 242 of the
DGCL.
IN WITNESS
WHEREOF, the Corporation has
caused this Certificate of Amendment to be executed by a duly
authorized officer of the Corporation, on __________,
2022.
|
|
SCIENTIFIC INDUSTRIES, INC.
By: __________________________
Name:
Helena Santos
Title:
President and Chief Executive Officer
|
|
Exhibit B
SCIENTIFIC INDUSTRIES, INC.
2022 EQUITY INCENTIVE PLAN
1. General.
(a) Eligible Stock Award
Recipients. Employees,
Directors and Consultants are eligible to receive Stock
Awards.
(b) Available Stock
Awards. The Plan provides for
the grant of the following types of Stock Awards:
(i) Incentive Stock Options (“ISO”), (ii)
Nonstatutory Stock Options (“NSO”), (iii) Stock
Appreciation Rights (“SAR”), (iv) Restricted Stock
Awards (“RSA”), (v) RSU Awards (“RSU”) and
(vi) Other Stock Awards.
(c) Purpose.
The Plan, through the grant of Stock Awards, is intended to help
the Company secure and retain the services of eligible award
recipients, provide incentives for such persons to exert maximum
efforts for the success of the Company and any Affiliate and
provide a means by which the eligible recipients may benefit from
increases in value of the Common Stock.
2. Administration.
(a) Administration
by the Board. The Board will administer the Plan. The Board
may delegate administration of the Plan to a Committee or
Committees, as provided in Section 2(c).
(b) Powers
of the Board. The Board will have the power, subject to, and
within the limitations of, the express provisions of the
Plan:
(i) To
determine (A) who will be granted Stock Awards; (B) when and how
each Stock Award will be granted; (C) what type of Stock Award will
be granted; (D) the provisions of each Stock Award (which need not
be identical), including when a person will be permitted to
exercise or otherwise receive cash or Common Stock under the Stock
Award; (E) the number of shares of Common Stock subject to, or the
cash value of, a Stock Award; and (F) the Fair Market Value
applicable to a Stock Award.
(ii) To
construe and interpret the Plan and Stock Awards granted under it,
and to establish, amend and revoke rules and regulations for
administration of the Plan and Stock Awards. The Board, in the
exercise of these powers, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it will deem necessary or expedient to
make the Plan or Stock Award fully effective.
(iii) To
settle all controversies regarding the Plan and Stock Awards
granted under it.
(iv) To
accelerate, in whole or in part, the time at which a Stock Award
may be exercised or vest (or the time at which cash or shares of
Common Stock may be issued in settlement thereof).
(v) To
suspend or terminate the Plan at any time. Except as otherwise
provided in the Plan or a Stock Award Agreement, suspension or
termination of the Plan will not impair a Participant’s
rights under the Participant’s then-outstanding Stock Award
without the Participant’s written consent except as provided
in subsection (viii) below.
(vi) To
amend the Plan in any respect the Board deems necessary or
advisable, including, without limitation, by adopting amendments
relating to ISO’s and certain nonqualified deferred
compensation under Section 409A of the Code and/or bringing the
Plan or Stock Awards granted under the Plan into compliance with
the requirements for ISOs or ensuring that they are exempt from, or
compliant with, the requirements for nonqualified deferred
compensation under Section 409A of the Code, subject to the
limitations, if any, of applicable law. If required by applicable
law or listing requirements, and except as provided in
Section 9(a) relating to Capitalization Adjustments, the
Company will seek stockholder approval of any amendment of the Plan
that (A) materially increases the number of shares of Common
Stock available for issuance under the Plan, (B) materially
expands the class of individuals eligible to receive Stock Awards
under the Plan, (C) materially increases the benefits accruing
to Participants under the Plan, (D) materially reduces the price at
which shares of Common Stock may be issued or purchased under the
Plan, (E) materially extends the term of the Plan, or
(F) materially expands the types of Stock Awards available for
issuance under the Plan. Except as otherwise provided in the Plan
or a Stock Award Agreement, no amendment of the Plan will
materially impair a Participant’s rights under an outstanding
Stock Award without the Participant’s written
consent.
(vii) To
submit any amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 422 of the Code regarding
Incentive Stock Options.
(viii) To
approve forms of Stock Award Agreements for use under the Plan and
to amend the terms of any one or more Stock Awards, including, but
not limited to, amendments to provide terms more favorable to the
Participant than previously provided in the Stock Award Agreement,
subject to any specified limits in the Plan that are not subject to
Board discretion; provided
however, that a Participant’s rights under any Stock
Award will not be impaired by any such amendment unless
(A) the Company requests the consent of the affected
Participant, and (B) such Participant consents in writing.
Notwithstanding the foregoing, (1) a Participant’s rights
will not be deemed to have been impaired by any such amendment if
the Board, in its sole discretion, determines that the amendment,
taken as a whole, does not materially impair the
Participant’s rights, and (2) subject to the limitations of
applicable law, if any, the Board may amend the terms of any one or
more Stock Awards without the affected Participant’s consent
(A) to maintain the qualified status of the Stock Award as an
ISO under Section 422 of the Code; (B) to change the terms of an
ISO, if such change results in impairment of the Stock Award solely
because it impairs the qualified status of the Stock Award as an
ISO under Section 422 of the Code; (C) to clarify the manner of
exemption from, or to bring the Stock Award into compliance with,
Section 409A of the Code; or (D) to comply with other applicable
laws.
(ix) Generally,
to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company
and that are not in conflict with the provisions of the Plan or
Stock Awards.
(x) To
adopt such procedures and sub-plans as are necessary or appropriate
to permit participation in the Plan by Employees, Directors or
Consultants who are foreign nationals or employed outside the
United States (provided that Board approval will not be necessary
for immaterial modifications to the Plan or any Stock Award
Agreement that are required for compliance with the laws of the
relevant foreign jurisdiction).
(xi) To
effect, with the consent of any adversely affected Participant, (A)
the reduction of the exercise, purchase or strike price of any
outstanding Stock Award; (B) the cancellation of any outstanding
Stock Award and the grant in substitution therefor of a new (1)
Option or SAR, (2)RSA, (3) RSU Award, (4) Other Stock Award, (5)
cash and/or (6) other valuable consideration determined by the
Board, in its sole discretion, with any such substituted award (x)
covering the same or a different number of shares of Common Stock
as the cancelled Stock Award and (y) granted under the Plan or
another equity or compensatory plan of the Company; or (C) any
other action that is treated as a repricing under generally
accepted accounting principles.
(c) Delegation to
Committee. The Board may
delegate some or all of the administration of the Plan to a
Committee or Committees. If administration of the Plan is delegated
to a Committee, the Committee will have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board that have been delegated to the Committee, including the
power to delegate to a subcommittee of the Committee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board will thereafter be to the
Committee or subcommittee, as applicable). Any delegation of
administrative powers will be reflected in resolutions, not
inconsistent with the provisions of the Plan, adopted from time to
time by the Board or Committee (as applicable). The Committee shall
consist of two or more non-employee directors, each of whom is
intended to be, to the extent required by Rule 16b-3, a
“non-employee director” as
defined in Rule 16b-3 and to satisfy any other independence
requirement under the rules of any national securities exchange on
which shares of Common Stock are listed. The Board may retain the
authority to concurrently administer the Plan with the Committee
and may, at any time, revest in the Board some or all of the powers
previously delegated.
(d) Delegation
to an Officer. The Board may delegate to one or more
Officers the authority to do one or both of the following: (i)
designate Employees who are not Officers to be recipients of
Options and SAR’s (and, to the extent permitted by applicable
law, other Stock Awards) and, to the extent permitted by applicable
law, the terms of such Stock Awards, and (ii) determine the number
of shares of Common Stock to be subject to such Stock Awards
granted to such Employees; provided, however, that the Board
resolutions regarding such delegation will specify the total number
of shares of Common Stock that may be subject to the Stock Awards
granted by such Officer and that such Officer may not grant a Stock
Award to himself or herself. Any such Stock Awards will be granted
on the form of Stock Award Agreement most recently approved for use
by the Committee or the Board, unless otherwise provided in the
resolutions approving the delegation authority. The Board may not
delegate authority to an Officer who is acting solely in the
capacity of an Officer (and not also as a Director) to determine
the Fair Market Value pursuant to Section 13(t)
below.
(e) Effect
of Board’s Decision. All determinations,
interpretations and constructions made by the Board in good faith
will not be subject to review by any person and will be final,
binding and conclusive on all persons.
3. Shares
Subject to the Plan.
(a) Share
Reserve.
(i) Subject
to Section 9(a) relating to Capitalization Adjustments, the
aggregate number of shares of Common Stock that may be issued
pursuant to Stock Awards from and after the Effective Date will not
exceed the sum of (i) 1,750,000 shares, plus such number of shares,
not to exceed 1,184,757, which are currently subject to the
outstanding options granted under the Company’s 2012 Stock
Option Plan, but which are not subsequently required to be issued
thereunder because of the termination or expiration of such options
without their having been exercised (collectively, the “Share Reserve”).
(ii) For
clarity, the Share Reserve in this Section 3(a) is a
limitation on the number of shares of Common Stock that may be
issued pursuant to the Plan. Accordingly, this Section 3(a) does
not limit the granting of Stock Awards except as provided in
Section 7(a).
(b) Reversion
of Shares to the Share Reserve. If a Stock Award or any
portion thereof (i) expires or otherwise terminates without
all of the shares covered by such Stock Award having been issued or
(ii) is settled in cash (i.e., the Participant receives cash
rather than stock), such expiration, termination or settlement will
not reduce (or otherwise offset) the number of shares of Common
Stock that may be available for issuance under the Plan. If any
shares of Common Stock issued pursuant to a Stock Award are
forfeited back to or repurchased by the Company because of the
failure to meet a contingency or condition required to vest such
shares in the Participant, then the shares that are forfeited or
repurchased will revert to and again become available for issuance
under the Plan. Any shares reacquired by the Company in
satisfaction of tax withholding obligations on a Stock Award or as
consideration for the exercise or purchase price of a Stock Award
will again become available for issuance under the
Plan.
(c) Incentive
Stock Option Limit. Subject to the Share Reserve and
Section 9(a) relating to Capitalization Adjustments, the
aggregate maximum number of shares of Common Stock that may be
issued pursuant to the exercise of ISOs will be
1,750,000.
(d) Source
of Shares. The stock issuable under the Plan will be shares
of authorized but unissued or reacquired Common Stock, including
shares repurchased by the Company on the open market or
otherwise.
4. Eligibility.
(a) Eligibility
for Specific Stock Awards. ISOs may be granted only to
employees of the Company or a “parent corporation” or
“subsidiary corporation” thereof (as such terms are
defined in Sections 424(e) and 424(f) of the Code). Stock
Awards other than ISOs may be granted to Employees, Directors and
Consultants; provided,
however, that Stock Awards may not be granted to Employees,
Directors and Consultants who are providing Continuous Service only
to any “parent” of the Company, as such term is defined
in Rule 405, unless (i) the stock underlying such Stock Awards
is treated as “service recipient stock” under Section
409A of the Code (for example, because the Stock Awards are granted
pursuant to a corporate transaction such as a spin off
transaction), (ii) the Company, in consultation with its legal
counsel, has determined that such Stock Awards are otherwise exempt
from Section 409A of the Code, or (iii) the Company, in
consultation with its legal counsel, has determined that such Stock
Awards comply with the distribution requirements of Section 409A of
the Code.
(b) Ten
Percent Stockholders. A Ten Percent Stockholder will not be
granted an ISO unless the exercise price of such Option is at least
110% of the Fair Market Value on the date of grant and the Option
is not exercisable after the expiration of five years from the
date of grant.
(c) Consultants. A Consultant will
not be eligible for the grant of a Stock Award if, at the time of
grant, either the offer or sale of the Company’s securities
to such Consultant is not exempt under Rule 701 because of the
nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or because
of any other provision of Rule 701, unless the Company
determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the
Securities Act as well as comply with the securities laws of all
other relevant jurisdictions.
5. Provisions Relating to Options and Stock
Appreciation Rights.
Each
Stock Option or SAR will be in such form and will contain such
terms and conditions as the Board deems appropriate. All Options
will be separately designated ISOs or NSO at the time of grant,
and, if certificates are issued, a separate certificate or
certificates will be issued for shares of Common Stock purchased on
exercise of each type of Option. If an Option is not specifically
designated as an ISO, or if an Option is designated as an ISO but
some portion or all of the Option fails to qualify as an ISO under
the applicable rules, then the Option (or portion thereof) will be
a NSO. The provisions of separate Options or SARs need not be
identical; provided,
however, that each Stock Award Agreement will conform to
(through incorporation of provisions hereof by reference in the
applicable Stock Award Agreement or otherwise) the substance of
each of the following provisions:
(a) Term.
Subject to the provisions of Section 4(b) regarding Ten Percent
Stockholders, no Option or SAR will be exercisable after the
expiration of 10 years from the date of its grant or such shorter
period specified in the Stock Award Agreement.
(b) Exercise
Price. Subject to the provisions of Section 4(b) regarding
Ten Percent Stockholders, the exercise or strike price of each
Option or SAR will be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option or SAR on the date the
Stock Award is granted. Notwithstanding the foregoing, an Option or
SAR may be granted with an exercise or strike price lower than 100%
of the Fair Market Value of the Common Stock subject to the Stock
Award if such Stock Award is granted pursuant to an assumption of
or substitution for another option or stock appreciation right
pursuant to a Corporate Transaction and in a manner consistent with
the provisions of Section 409A of the Code and, if applicable,
Section 424(a) of the Code. Each SAR will be denominated in shares
of Common Stock equivalents.
(c) Purchase
Price for Options. The purchase price of Common Stock
acquired pursuant to the exercise of an Option may be paid, to the
extent permitted by applicable law and as determined by the Board
in its sole discretion, by any combination of the methods of
payment set forth below. The Board will have the authority to grant
Options that do not permit all of the following methods of payment
(or otherwise restrict the ability to use certain methods) and to
grant Options that require the consent of the Company to use a
particular method of payment. The permitted methods of payment are
as follows:
(i) by
cash, check, bank draft, electronic funds transfer or money order
payable to the Company;
(ii) subject
to Company and/or Board consent at the time of exercise and
provided that at the time of exercise the Common Stock is publicly
traded, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the
issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales
proceeds. This manner of payment is also known as a
“broker-assisted exercise”, “same day
sale”, or “sell to cover”;
(iii) subject
to Company and/or Board consent at the time of exercise and
provided that at the time of exercise the Common Stock is publicly
traded, by delivery to the Company (either by actual delivery or
attestation) of already-owned shares of Common Stock that are owned
free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of
exercise. “Delivery” for these purposes, in the sole
discretion of the Company and/or the Board, at the time Participant
exercises their Option, will include delivery to the Company of
Participant’s attestation of ownership of such shares of
Common Stock in a form approved by the Company. Participant may not
exercise their option by delivery to the Company of Common Stock if
doing so would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s
stock;
(iv) subject to Company and/or Board consent at the
time of exercise, and provided that the Option is a NSO, by a
“net exercise” arrangement pursuant to which the
Company will reduce the number of shares of Common Stock issued
upon exercise of the Option by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate
exercise price plus, to the extent permitted by the Company
and/or Board at the time of exercise, the aggregate withholding
obligations in respect of the Option exercise; provided,
further that Participant must pay any remaining balance of the
aggregate exercise price not satisfied by the “net
exercise” in cash or other permitted form of payment.
Shares of Common Stock will no longer be subject to the Option and
will not be exercisable thereafter to the extent that (A) shares
issuable upon exercise are used to pay the exercise price pursuant
to the “net exercise,” (B) shares are delivered to the
Participant as a result of such exercise, and (C) shares are
withheld to satisfy tax withholding
obligations;
(v) according
to a deferred payment or similar arrangement with the Optionholder;
provided, however, that
interest will compound at least annually and will be charged at the
minimum rate of interest necessary to avoid (A) the imputation
of interest income to the Company and compensation income to the
Optionholder under any applicable provisions of the Code, and
(B) the classification of the Option as a liability for
financial accounting purposes; or
(vi) in
any other form of legal consideration that may be acceptable to the
Board.
(d) Exercise
and Payment of a SAR. To exercise any outstanding SAR, the
Participant must provide written notice of exercise to the Company
in compliance with the provisions of the SAR Agreement evidencing
such SAR. The appreciation distribution payable on the exercise of
a SAR will be not greater than an amount equal to the excess of (A)
the aggregate Fair Market Value (on the date of the exercise of the
SAR) of a number of shares of Common Stock equal to the number of
Common Stock equivalents in which the Participant is vested under
such SAR, and with respect to which the Participant is exercising
the SAR on such date, over (B) the aggregate strike price of the
number of Common Stock equivalents with respect to which the
Participant is exercising the SAR on such date. The appreciation
distribution may be paid in Common Stock, in cash, in any
combination of the two or in any other form of consideration, as
determined by the Board and contained in the Stock Award Agreement
evidencing such SAR.
(e) Transferability
of Options and SARs. The Board may, in its sole discretion,
impose such limitations on the transferability of Options and SARs
as the Board will determine. In the absence of such a determination
by the Board to the contrary, the following restrictions on the
transferability of Options and SARs will apply:
(i) Restrictions
on Transfer. An Option or SAR will not be transferable
except by will or by the laws of descent and distribution (or
pursuant to subsections (ii) and (iii) below), and will be
exercisable during the lifetime of the Participant only by the
Participant. The Board may permit transfer of the Option or SAR in
a manner that is not prohibited by applicable tax and securities
laws. Except as explicitly provided in the Plan, neither an Option
nor a SAR may be transferred for consideration.
(ii) Domestic
Relations Orders. Subject to the approval of the Board or a
duly authorized Officer, an Option or SAR may be transferred
pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation
instrument as permitted by Treasury Regulation 1.421-1(b)(2). If an
Option is an ISO, such Option may be deemed to be a NSO as a result
of such transfer.
(iii) Beneficiary
Designation. Subject to the approval of the Board or a duly
authorized Officer, a Participant may, by delivering written notice
to the Company, in a form approved by the Company (or the
designated broker), designate a third party who, upon the death of
the Participant, will thereafter be entitled to exercise the Option
or SAR and receive the Common Stock or other consideration
resulting from such exercise. In the absence of such a designation,
upon the death of the Participant, the executor or administrator of
the Participant’s estate will be entitled to exercise the
Option or SAR and receive the Common Stock or other consideration
resulting from such exercise. However, the Company may prohibit
designation of a beneficiary at any time, including due to any
conclusion by the Company that such designation would be
inconsistent with the provisions of applicable laws.
(f) Vesting
Generally. The total number of shares of Common Stock
subject to an Option or SAR may vest and therefore become
exercisable in periodic installments that may or may not be equal.
The Option or SAR may be subject to such other terms and conditions
on the time or times when it may or may not be exercised (which may
be based on the satisfaction of performance goals or other
criteria) as the Board may deem appropriate. The vesting provisions
of individual Options or SARs may vary. The provisions of this
Section 5(f) are subject to any Option or SAR provisions
governing the minimum number of shares of Common Stock as to which
an Option or SAR may be exercised.
(g) Termination of Continuous
Service. Except as
otherwise provided in the applicable Stock Award Agreement or other
agreement between the Participant and the Company, if a
Participant’s Continuous Service terminates (other than for
Cause and other than upon the Participant’s death or
Disability), the Participant may exercise his or her Option or SAR
(to the extent that the Participant was entitled to exercise such
Stock Award as of the date of termination of Continuous Service)
within the period of time ending on the earlier of (i) the
date three months following the termination of the
Participant’s Continuous Service (or such longer or shorter
period specified in the applicable Stock Award Agreement, which
period will not be less than 30 days if necessary to comply
with applicable laws unless such termination is for Cause) and
(ii) the expiration of the term of the Option or SAR as set
forth in the Stock Award Agreement. If, after termination of
Continuous Service, the Participant does not exercise his or her
Option or SAR (as applicable) within the applicable time frame, the
Option or SAR will terminate.
(h) Extension of Termination
Date. If the exercise of
an Option or SAR following the termination of the
Participant’s Continuous Service (other than for Cause and
other than upon the Participant’s death or Disability) would
be prohibited at any time solely because the issuance of shares of
Common Stock would violate the registration requirements under the
Securities Act, then the Option or SAR will terminate on the
earlier of (i) the expiration of a total period of time (that
need not be consecutive) equal to the applicable post-termination
exercise period after the termination of the Participant’s
Continuous Service during which the exercise of the Option or SAR
would not be in violation of such registration requirements, and
(ii) the expiration of the term of the Option or SAR as set
forth in the applicable Stock Award Agreement. In addition, unless otherwise provided in a
Participant’s Stock Award Agreement, if the sale of any
Common Stock received upon exercise of an Option or SAR following
the termination of the Participant’s Continuous Service
(other than for Cause) would violate the Company’s insider
trading policy, then the Option or SAR will terminate on the
earlier of (i) the expiration of the period of time (that need
not be consecutive) equal to the applicable post-termination
exercise period after the termination of the Participant’s
Continuous Service during which the sale of the Common Stock
received upon exercise of the Option or SAR would not be in
violation of the Company’s insider trading policy, and
(ii) the expiration of the term of the Option or SAR as set
forth in the applicable Stock Award Agreement.
(i) Disability
of Participant. Except as otherwise provided in the
applicable Stock Award Agreement or other agreement between the
Participant and the Company, if a Participant’s Continuous
Service terminates as a result of the Participant’s
Disability, the Participant may exercise his or her Option or SAR
(to the extent that the Participant was entitled to exercise such
Option or SAR as of the date of termination of Continuous Service),
but only within such period of time ending on the earlier of
(i) the date 12 months following such termination of
Continuous Service (or such longer or shorter period specified in
the Stock Award Agreement, which period will not be less than
six months if necessary to comply with applicable laws unless
such termination is for Cause), and (ii) the expiration of the
term of the Option or SAR as set forth in the Stock Award
Agreement. If, after termination of Continuous Service, the
Participant does not exercise his or her Option or SAR within the
applicable time frame, the Option or SAR (as applicable) will
terminate.
(j) Death
of Participant. Except as otherwise provided in the
applicable Stock Award Agreement or other agreement between the
Participant and the Company, if (i) a Participant’s
Continuous Service terminates as a result of the
Participant’s death, or (ii) the Participant dies within the
period (if any) specified in the Stock Award Agreement for
exercisability after the termination of the Participant’s
Continuous Service (for a reason other than death), then the Option
or SAR may be exercised (to the extent the Participant was entitled
to exercise such Option or SAR as of the date of death) by the
Participant’s estate, by a person who acquired the right to
exercise the Option or SAR by bequest or inheritance or by a person
designated to exercise the Option or SAR upon the
Participant’s death, but only within the period ending on the
earlier of (i) the date 18 months following the date of death
(or such longer or shorter period specified in the Stock Award
Agreement, which period will not be less than six months if
necessary to comply with applicable laws unless such termination is
for Cause), and (ii) the expiration of the term of such Option
or SAR as set forth in the Stock Award Agreement. If, after the
Participant’s death, the Option or SAR is not exercised
within the applicable time frame, the Option or SAR (as applicable)
will terminate.
(k) Termination for
Cause. Except as explicitly
provided otherwise in a Participant’s Stock Award Agreement
or other individual written agreement between the Company or any
Affiliate and the Participant, if a Participant’s Continuous
Service is terminated for Cause, the Option or SAR will terminate
immediately upon such Participant’s termination of Continuous
Service, and the Participant will be prohibited from exercising his
or her Option or SAR (whether vested or unvested) from and after
the date of such termination of Continuous
Service.
(l) Non-Exempt
Employees. If an Option or SAR is granted to an Employee who
is a non-exempt employee for purposes of the Fair Labor Standards
Act of 1938, as amended, the Option or SAR will not be first
exercisable for any shares of Common Stock until at least six
months following the date of grant of the Option or SAR (although
the Stock Award may vest prior to such date). Consistent with the
provisions of the Worker Economic Opportunity Act, (i) if such
non-exempt Employee dies or suffers a Disability, (ii) upon a
Corporate Transaction in which such Option or SAR is not assumed,
continued, or substituted, (iii) upon a Change in Control, or (iv)
upon the Participant’s retirement (as such term may be
defined in the Participant’s Stock Award Agreement, in
another agreement between the Participant and the Company, or, if
no such definition, in accordance with the Company's then current
employment policies and guidelines), the vested portion of any
Options and SARs may be exercised earlier than six months following
the date of grant. The foregoing provision is intended to operate
so that any income derived by a non-exempt employee in connection
with the exercise or vesting of an Option or SAR will be exempt
from his or her regular rate of pay. To the extent permitted and/or
required for compliance with the Worker Economic Opportunity Act to
ensure that any income derived by a non-exempt employee in
connection with the exercise, vesting or issuance of any shares
under any other Stock Award will be exempt from the
employee’s regular rate of pay, the provisions of this
Section 5(l) will apply to all Stock Awards and are hereby
incorporated by reference into such Stock Award
Agreements.
(m) Early
Exercise of Options. An Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the
Option as to any part or all of the shares of Common Stock subject
to the Option prior to the full vesting of the Option. Subject to
the “Repurchase Limitation” in Section 8(l),
any unvested shares of Common Stock so purchased may be subject to
a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate. Provided that
the “Repurchase Limitation” in Section 8(l)
is not violated, the Company will not be required to exercise its
repurchase right until at least six months (or such longer or
shorter period of time required to avoid classification of the
Option as a liability for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise
specifically provides in the Option Agreement.
(n) Right
of Repurchase. Subject to the
“Repurchase Limitation” in Section 8(l), the
Option or SAR may include a provision whereby the Company may elect
to repurchase all or any part of the vested shares of Common Stock
acquired by the Participant pursuant to the exercise of the Option
or SAR.
(o) Right
of First Refusal. The Option or SAR may include a provision
whereby the Company may elect to exercise a right of first refusal
following receipt of notice from the Participant of the intent to
transfer all or any part of the shares of Common Stock received
upon the exercise of the Option or SAR. Such right of first refusal
will be subject to the “Repurchase Limitation” in
Section 8(l). Except as expressly provided in this
Section 5(o) or in the Stock Award Agreement, such right of
first refusal will otherwise comply with any applicable provisions
of the bylaws of the Company.
6. Provisions of Stock Awards Other than Options
and SARs.
(a) Restricted
Stock Awards. Each Restricted Stock Award Agreement will be
in such form and will contain such terms and conditions as the
Board will deem appropriate. To the
extent consistent with the Company’s bylaws, at the
Board’s election, shares of Common Stock underlying a
Restricted Stock Award may be (i) held in book entry form
subject to the Company’s instructions until any restrictions
relating to the Restricted Stock Award lapse; or
(ii) evidenced by a certificate, which certificate will be
held in such form and manner as determined by the Board. The terms
and conditions of Restricted Stock Award Agreements may change from
time to time, and the terms and conditions of separate Restricted
Stock Award Agreements need not be identical. Each Restricted Stock
Award Agreement will conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:
(i) Consideration.
A Restricted Stock Award may be awarded in consideration for
(A) cash, check, bank draft or money order payable to the
Company, (B) past services to the Company or an Affiliate, or
(C) any other form of legal consideration (including future
services) that may be acceptable to the Board, in its sole
discretion, and permissible under applicable law.
(ii) Vesting.
Subject to the “Repurchase Limitation” in
Section 8(l), shares of Common Stock awarded under the
Restricted Stock Award Agreement may be subject to forfeiture to
the Company in accordance with a vesting schedule to be determined
by the Board.
(iii) Termination
of Participant’s Continuous Service. If a
Participant’s Continuous Service terminates, the Company may
receive through a forfeiture condition or a repurchase right, any
or all of the shares of Common Stock held by the Participant that
have not vested as of the date of termination of Continuous Service
under the terms of the Restricted Stock Award
Agreement.
(iv) Transferability.
Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement will be transferable by the Participant only upon
such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board will determine in its sole
discretion, so long as Common Stock awarded under the Restricted
Stock Award Agreement remains subject to the terms of the
Restricted Stock Award Agreement.
(v) Dividends. A
Restricted Stock Award Agreement may provide that any dividends
paid on Restricted Stock will be subject to the same vesting and
forfeiture restrictions as apply to the shares subject to the
Restricted Stock Award to which they relate.
(b) Restricted Stock Unit
Awards. Each RSU Award Agreement will be in such form and
will contain such terms and conditions as the Board will deem
appropriate. The terms and conditions of RSU Award Agreements may
change from time to time, and the terms and conditions of separate
RSU Award Agreements need not be identical. Each RSU Award
Agreement will conform to (through incorporation of the provisions
hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:
(i) Consideration.
At the time of grant of a RSU Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery
of each share of Common Stock subject to the RSU Award. The
consideration to be paid (if any) by the Participant for each share
of Common Stock subject to a RSU Award may be paid in any form of
legal consideration that may be acceptable to the Board, in its
sole discretion, and permissible under applicable
law.
(ii) Vesting. At the time of the grant of a RSU Award, the Board
may impose such restrictions on or conditions to the vesting of the
RSU Award as it, in its sole discretion, deems
appropriate.
(iii) Payment. A RSU Award may be settled by the delivery of
shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the
Board and contained in the RSU Award Agreement.
(iv) Additional
Restrictions. At
the time of the grant of a RSU Award, the Board, as it deems
appropriate, may impose such restrictions or conditions that delay
the delivery of the shares of Common Stock (or their cash
equivalent) subject to a RSU Award to a time after the vesting of
such RSU Award.
(v) Dividend
Equivalents. Dividend equivalents may be credited in respect of
shares of Common Stock covered by a RSU Award, as determined by the
Board and contained in the RSU Award Agreement. At the sole
discretion of the Board, such dividend equivalents may be converted
into additional shares of Common Stock covered by the RSU Award in
such manner as determined by the Board. Any additional shares
covered by the RSU Award credited by reason of such dividend
equivalents will be subject to all of the same terms and conditions
of the underlying RSU Award Agreement to which they
relate.
(vi) Termination of
Participant’s Continuous Service. Except as otherwise provided in the applicable RSU
Award Agreement, such portion of the RSU Award that has not vested
will be forfeited upon the Participant’s termination of
Continuous Service.
(vii) Compliance with Section 409A of the
Code. Notwithstanding anything to the contrary set forth
herein, any RSU Award granted under the Plan that is not exempt
from the requirements of Section 409A of the Code will contain
such provisions so that such RSU Award will comply with the
requirements of Section 409A of the Code. Such restrictions,
if any, will be determined by the Board and contained in the RSU
Award Agreement evidencing such RSU Award. For example, such
restrictions may include, without limitation, a requirement that
any Common Stock that is to be issued in a year following the year
in which the RSU Award vests must be issued in accordance with a
fixed pre-determined schedule.
(c) Other
Stock Awards. Other
forms of Stock Awards valued in whole or in part by reference to,
or otherwise based on, Common Stock, including the appreciation in
value thereof (e.g., options or stock rights with an exercise price
or strike price less than 100% of the Fair Market Value of the
Common Stock at the time of grant) may be granted either alone or
in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section
6. Subject to the provisions of the
Plan, the Board will have sole and complete authority to determine
the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or
the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock
Awards.
7. Covenants
of the Company.
(a) Availability
of Shares. The Company will keep available at all times the
number of shares of Common Stock reasonably required to satisfy
then-outstanding Stock Awards.
(b) Securities
Law Compliance. The Company will seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of the Stock
Awards; provided, however,
that this undertaking will not require the Company to register
under the Securities Act the Plan, any Stock Award or any Common
Stock issued or issuable pursuant to any such Stock Award. If,
after reasonable efforts and at a reasonable cost, the Company is
unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company will be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained. A Participant will not be
eligible for the grant of a Stock Award or the subsequent issuance
of cash or Common Stock pursuant to the Stock Award if such grant
or issuance would be in violation of any applicable securities
law.
(c) No
Obligation to Notify or Minimize Taxes. The Company will have no duty or
obligation to any Participant to advise such holder as to the time
or manner of exercising such Stock Award. Furthermore, the Company
will have no duty or obligation to warn or otherwise advise such
holder of a pending termination or expiration of a Stock Award or a
possible period in which the Stock Award may not be exercised. The
Company has no duty or obligation to minimize the tax consequences
of a Stock Award to the holder of such Stock Award.
8. Miscellaneous.
(a) Use
of Proceeds from Sales of Common Stock. Proceeds from the sale of shares
of Common Stock pursuant to Stock Awards will constitute general
funds of the Company.
(b) Corporate
Action Constituting Grant of Stock Awards. Corporate action
constituting a grant by the Company of a Stock Award to any
Participant will be deemed completed as of the date of such
corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter
evidencing the Stock Award is communicated to, or actually received
or accepted by, the Participant. In the event that the corporate
records (e.g., Board consents, resolutions or minutes) documenting
the corporate action constituting the grant contain terms (e.g.,
exercise price, vesting schedule or number of shares) that are
inconsistent with those in the Stock Award Agreement or related
grant documents as a result of a clerical error in the papering of
the Stock Award Agreement or related grant documents, the corporate
records will control and the Participant will have no legally
binding right to the incorrect term in the Stock Award Agreement or
related grant documents.
(c) Stockholder
Rights. No Participant will be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any
shares of Common Stock subject to a Stock Award unless and until
(i) such Participant has satisfied all requirements for
exercise of, or the issuance of shares of Common Stock under, the
Stock Award pursuant to its terms, and (ii) the issuance of
the Common Stock subject to the Stock Award has been entered into
the books and records of the Company.
(d) No
Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or
any other instrument executed thereunder or in connection with
any Stock Award granted
pursuant thereto will confer upon any Participant any right
to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or will affect the
right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to
the terms of such Consultant’s agreement with the Company or
an Affiliate, or (iii) the service of a Director pursuant to
the bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may be.
(e) Change
in Time Commitment. In the event a Participant’s
regular level of time commitment in the performance of his or her
services for the Company and any Affiliates is reduced (for
example, and without limitation, if the Participant is an Employee
of the Company and the Employee has a change in status from a
full-time Employee to a part-time Employee or takes an extended
leave of absence) after the date of grant of any Stock Award to the
Participant, the Board has the right in its sole discretion to (x)
make a corresponding reduction in the number of shares subject to
any portion of such Stock Award that is scheduled to vest or become
payable after the date of such change in time commitment, and (y)
in lieu of or in combination with such a reduction, extend the
vesting or payment schedule applicable to such Stock Award. In the
event of any such reduction, the Participant will have no right
with respect to any portion of the Stock Award that is so reduced
or extended.
(f) Incentive
Stock Option Limitations. To the extent that the aggregate
Fair Market Value (determined at the time of grant) of Common Stock
with respect to which ISOs are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the
Company and any Affiliates) exceeds $100,000 (or such other limit
established in the Code) or otherwise does not comply with the
rules governing ISOs, the Options or portions thereof that exceed
such limit (according to the order in which they were granted) or
otherwise do not comply with such rules will be treated as
Nonstatutory Stock Options, notwithstanding any contrary provision
of the applicable Option Agreement(s).
(g) Investment
Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock
Award, (i) to give written assurances satisfactory to the
Company as to the Participant’s knowledge and experience in
financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and
that the Participant is capable of evaluating, alone or together
with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written
assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention
of selling or otherwise distributing the Common Stock. The
foregoing requirements, and any assurances given pursuant to such
requirements, will be inoperative if (A) the issuance of the
shares upon the exercise or acquisition of Common Stock under the
Stock Award has been registered under a then currently effective
registration statement under the Securities Act, or (B) as to
any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting
the transfer of the Common Stock.
(h) Withholding Obligations. Unless
prohibited by the terms of a Stock
Award Agreement, the Company may, in its sole discretion, satisfy
any federal, state or local tax withholding obligation relating to
a Stock Award by any of the
following means or by a combination of such means: (i) causing
the Participant to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or
otherwise issuable to the Participant in connection with the
Stock Award; provided,
however, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law (or such lesser amount as may
be necessary to avoid classification of the Stock Award as a
liability for financial accounting purposes);
(iii) withholding cash from a Stock Award settled in cash;
(iv) withholding payment from any amounts otherwise payable to the
Participant; or (v) by such other method as may be set forth
in the Stock Award Agreement.
(i) Electronic
Delivery. Any reference herein to a “written”
agreement or document will include any agreement or document
delivered electronically or posted on the Company’s intranet
(or other shared electronic medium controlled by the Company to
which the Participant has access).
(j) Deferrals.
To the extent permitted by applicable law, the Board, in its sole
discretion, may determine that the delivery of Common Stock or the
payment of cash, upon the exercise, vesting or settlement of all or
a portion of any Stock Award may be deferred and may establish
programs and procedures for deferral elections to be made by
Participants. Deferrals by Participants will be made in accordance
with Section 409A of the Code. Consistent with Section 409A of the
Code, the Board may provide for distributions while a Participant
is still an employee or otherwise providing services to the
Company. The Board is authorized to make deferrals of Stock Awards
and determine when, and in what annual percentages, Participants
may receive payments, including lump sum payments, following the
Participant’s termination of Continuous Service, and
implement such other terms and conditions consistent with the
provisions of the Plan and in accordance with applicable
law.
(k) Compliance
with Section 409A of the Code. To the extent that the Board
determines that any Stock Award granted hereunder is subject to
Section 409A of the Code, the Stock Award Agreement evidencing
such Stock Award will incorporate the terms and conditions
necessary to avoid the consequences specified in
Section 409A(a)(1) of the Code. To the extent applicable, the
Plan and Stock Award Agreements will be interpreted in accordance
with Section 409A of the Code. Notwithstanding anything to the
contrary in the Plan (and unless the Stock Award Agreement
specifically provides otherwise), if the shares of Common Stock are
publicly traded, and if a Participant holding a Stock Award that
constitutes “deferred compensation” under Section 409A
of the Code is a “specified employee” for purposes of
Section 409A of the Code, no distribution or payment of any amount
that is due because of a “separation from service” (as
defined in Section 409A of the Code without regard to alternative
definitions thereunder) will be issued or paid before the date that
is six months following the date of such Participant’s
“separation from service” (as defined in Section 409A
of the Code without regard to alternative definitions thereunder)
or, if earlier, the date of the Participant’s death, unless
such distribution or payment can be made in a manner that complies
with Section 409A of the Code, and any amounts so deferred will be
paid in a lump sum on the day after such six month period elapses,
with the balance paid thereafter on the original
schedule.
(l) Repurchase
Limitation. The terms of any repurchase right will be
specified in the Stock Award Agreement. The repurchase price for
vested shares of Common Stock will be the Fair Market Value of the
shares of Common Stock on the date of repurchase. The repurchase
price for unvested shares of Common Stock will be the lower of
(i) the Fair Market Value of the shares of Common Stock on the
date of repurchase or (ii) their original purchase price.
However, the Company will not exercise its repurchase right until
at least six months (or such longer or shorter period of time
necessary to avoid classification of the Stock Award as a liability
for financial accounting purposes) have elapsed following delivery
of shares of Common Stock subject to the Stock Award, unless
otherwise specifically provided by the Board.
9. Adjustments
upon Changes in Common Stock; Other Corporate
Events.
(a) Capitalization
Adjustments. In the event of a Capitalization Adjustment,
the Board will appropriately and proportionately adjust:
(i) the class(es) and maximum number of securities subject to
the Plan pursuant to Section 3(a), (ii) the class(es) and
maximum number of securities that may be issued pursuant to the
exercise of ISOs pursuant to Section 3(c), and (iii) the
class(es) and number of securities and price per share of stock
subject to outstanding Stock Awards. The Board will make such
adjustments, and its determination will be final, binding and
conclusive.
(b) Dissolution
or Liquidation. Except as otherwise provided in the Stock
Award Agreement, in the event of a dissolution or liquidation of
the Company, all outstanding Stock Awards (other than Stock Awards
consisting of vested and outstanding shares of Common Stock not
subject to a forfeiture condition or the Company’s right of
repurchase) will terminate immediately prior to the completion of
such dissolution or liquidation, and the shares of Common Stock
subject to the Company’s repurchase rights or subject to a
forfeiture condition may be repurchased or reacquired by the
Company notwithstanding the fact that the holder of such Stock
Award is providing Continuous Service, provided, however, that the Board may,
in its sole discretion, cause some or all Stock Awards to become
fully vested, exercisable and/or no longer subject to repurchase or
forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is
completed but contingent on its completion.
(c) Corporate
Transaction.
The following provisions will apply to Stock Awards in the event of
a Corporate Transaction unless otherwise provided in the instrument
evidencing the Stock Award or any other written agreement between
the Company or any Affiliate and the Participant or unless
otherwise expressly provided by the Board at the time of grant of a
Stock Award. In the event of a Corporate Transaction, then,
notwithstanding any other provision of the Plan, the Board may take
one or more of the following actions with respect to Stock Awards,
contingent upon the closing or completion of the Corporate
Transaction:
(i) arrange
for the surviving corporation or acquiring corporation (or the
surviving or acquiring corporation’s parent company) to
assume or continue the Stock Award or to substitute a similar stock
award for the Stock Award (including, but not limited to, an award
to acquire the same consideration paid to the stockholders of the
Company pursuant to the Corporate Transaction);
(ii) arrange
for the assignment of any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to the
Stock Award to the surviving corporation or acquiring corporation
(or the surviving or acquiring corporation’s parent
company);
(iii) accelerate
the vesting, in whole or in part, of the Stock Award (and, if
applicable, the time at which the Stock Award may be exercised) to
a date prior to the effective time of such Corporate Transaction as
the Board determines (or, if the Board does not determine such a
date, to the date that is five days prior to the effective
date of the Corporate Transaction), with such Stock Award
terminating if not exercised (if applicable) at or prior to the
effective time of the Corporate Transaction; provided, however, that the Board may
require Participants to complete and deliver to the Company a
notice of exercise before the effective date of a Corporate
Transaction, which exercise is contingent upon the effectiveness of
such Corporate Transaction;
(iv) arrange
for the lapse, in whole or in part, of any reacquisition or
repurchase rights held by the Company with respect to the Stock
Award;
(v) cancel
or arrange for the cancellation of the Stock Award, to the extent
not vested or not exercised prior to the effective time of the
Corporate Transaction, in exchange for such cash consideration
(including no consideration) as the Board, in its sole discretion,
may consider appropriate; and
(vi) make
a payment, in such form as may be determined by the Board equal to
the excess, if any, of (A) the value of the property the
Participant would have received upon the exercise of the Stock
Award immediately prior to the effective time of the Corporate
Transaction, over (B) any exercise price payable by such
holder in connection with such exercise. For clarity, this payment
may be zero ($0) if the value of the property is equal to or less
than the exercise price. Payments under this provision may be
delayed to the same extent that payment of consideration to the
holders of the Company’s Common Stock in connection with the
Corporate Transaction is delayed as a result of escrows, earn outs,
holdbacks or any other contingencies.
The
Board need not take the same action or actions with respect to all
Stock Awards or portions thereof or with respect to all
Participants. The Board may take different actions with respect to
the vested and unvested portions of a Stock Award.
(d) Change
in Control. A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change
in Control as may be provided in the Stock Award Agreement for such
Stock Award or as may be provided in any other written agreement
between the Company or any Affiliate and the Participant, but in
the absence of such provision, no such acceleration will
occur.
10. Plan
Term; Earlier Termination or Suspension of the
Plan.
(a) Plan
Term. The Board may suspend or terminate the Plan at any
time. Unless terminated sooner by the Board, the Plan will
automatically terminate on the day before the 10th anniversary of
the earlier of (i) the date the Plan is adopted by the Board,
or (ii) the date the Plan is approved by the stockholders of
the Company. No Stock Awards may be granted under the Plan while
the Plan is suspended or after it is terminated.
(b) No
Impairment of Rights. Suspension or termination of the Plan
will not impair rights and obligations under any Stock Award
granted while the Plan is in effect except with the written consent
of the affected Participant or as otherwise permitted in the
Plan.
11. Effective
Date of Plan.
This
Plan will become effective on the Effective Date.
12. Choice
of Law.
The
laws of the State of Delaware will govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to that state’s conflict of laws
rules.
13. Definitions. As
used in the Plan, the following definitions will apply to the
capitalized terms indicated below:
(a) “Affiliate”
means, at the time of determination, any “parent” or
“majority-owned subsidiary” of the Company, as such
terms are defined in Rule 405. The Board will have the
authority to determine the time or times at which
“parent” or “majority-owned subsidiary”
status is determined within the foregoing definition.
(b) “Board”
means the Board of Directors of the Company.
(c) “Capitalization
Adjustment” means any change that is made in, or other
events that occur with respect to, the Common Stock subject to the
Plan or subject to any Stock Award after the Effective Date without
the receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, large
nonrecurring cash dividend, stock split, reverse stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure, or any similar equity restructuring
transaction, as that term is used in Statement of Financial
Accounting Standards Board Accounting Standards Codification Topic
718 (or any successor thereto). Notwithstanding the foregoing, the
conversion of any convertible securities of the Company will not be
treated as a Capitalization Adjustment.
(d) “Cause” will
have the meaning ascribed to such term in any written agreement
between the Participant and the Company defining such term and, in
the absence of such agreement, such term means, with respect to a
Participant, the occurrence of any of the following events:
(i) such Participant’s commission of any felony or any
crime involving fraud, dishonesty or moral turpitude under the laws
of the United States or any state thereof; (ii) such
Participant’s attempted commission of, or participation in, a
fraud or act of dishonesty against the Company, or any of its
employees or directors; (iii) such Participant’s
intentional, material violation of any contract or agreement
between the Participant and the Company, the Company’s
employment policies, or of any statutory or other duty owed to the
Company; (iv) such Participant’s unauthorized use or
disclosure of the Company’s confidential information or trade
secrets; or (v) such Participant’s gross misconduct. The
determination that a termination of the Participant’s
Continuous Service is either for Cause or without Cause will be
made by the Company, in its sole discretion. Any determination by
the Company that the Continuous Service of a Participant was
terminated with or without Cause for the purposes of outstanding
Stock Awards held by such Participant will have no effect upon any
determination of the rights or obligations of the Company or such
Participant for any other purpose.
(e) “Change
in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or
more of the following events:
(i) any
Exchange Act Person becomes the Owner, directly or indirectly, of
securities of the Company representing more than 50% of the
combined voting power of the Company’s then outstanding
securities other than by virtue of a merger, consolidation or
similar transaction. Notwithstanding the foregoing, a Change in
Control will not be deemed to occur (A) on account of the
acquisition of securities of the Company directly from the Company,
(B) on account of the acquisition of securities of the Company by
an investor, any affiliate thereof or any other Exchange Act Person
that acquires the Company’s securities in a transaction or
series of related transactions the primary purpose of which is to
obtain financing for the Company through the issuance of equity
securities or (C) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding
voting securities as a result of a repurchase or other acquisition
of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the acquisition
of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional
voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control will be
deemed to occur;
(ii) there is
consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either
(A) outstanding voting securities representing more than 50%
of the combined outstanding voting power of the surviving Entity in
such merger, consolidation or similar transaction or (B) more
than 50% of the combined outstanding voting power of the parent of
the surviving Entity in such merger, consolidation or similar
transaction, in each case in
substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to
such transaction; or
(iii) there
is consummated a sale, lease, exclusive license or other
disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an
Entity, more than 50% of the combined voting power of the voting
securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to
such sale, lease, license or other disposition.
Notwithstanding
the foregoing definition or any other provision of this Plan, (A)
the term Change in Control will not include a sale of assets,
merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company, (B) the definition of Change
in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant
will supersede the foregoing definition with respect to Stock
Awards subject to such agreement; provided, however, that if no
definition of Change in Control or any analogous term is set forth
in such an individual written agreement, the definition set forth
herein will apply, and (C) if at any time the Company’s
Certificate of Incorporation provides definitions of various
analogous transactions that would be deemed a liquidation event for
the Company, then such definition will apply as if it were the
definition set forth herein except as is otherwise expressly
provided in an individual written agreement between the Company or
any Affiliate and the Participant.
(f) “Code”
means the Internal Revenue Code of 1986, as amended, including any
applicable regulations and guidance thereunder.
(g) “Committee”
means a committee of two or more Directors to whom authority has
been delegated by the Board in accordance with
Section 2(c).
(h) “Common
Stock” means the common stock of the
Company.
(i) “Company”
means Scientific Industries, Inc.,
Inc., a Delaware corporation.
(j) “Consultant”
means any person, including an advisor, who is (i) engaged by
the Company or an Affiliate to render consulting or advisory
services and is compensated for such services, or
(ii) serving as a member of the board of directors of an
Affiliate and is compensated for such services. However, service solely as a Director, or
payment of a fee for such service, will not cause a Director to be
considered a “Consultant” for purposes of the
Plan.
(k) “Continuous
Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director
or Consultant, is not interrupted or terminated. A change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Director or Consultant or a change in
the Entity for which the Participant renders such service, provided
that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, will
not terminate a Participant’s Continuous Service;
provided, however, that if
the Entity for which a Participant is rendering services ceases to
qualify as an Affiliate, as determined by the Board in its sole
discretion, such Participant’s Continuous Service will be
considered to have terminated on the date such Entity ceases to
qualify as an Affiliate. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or to a
Director will not constitute an interruption of Continuous Service.
To the extent permitted by law, the Board or the chief executive
officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service will be considered interrupted
in the case of (i) any leave of absence approved by the Board or
chief executive officer, including sick leave, military leave or
any other personal leave, or (ii) transfers between the Company, an
Affiliate, or their successors. Notwithstanding the foregoing, a
leave of absence will be treated as Continuous Service for purposes
of vesting in a Stock Award only to such extent as may be provided
in the Company’s leave of absence policy, in the written
terms of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.
(l) “Corporate
Transaction” means the consummation, in a single
transaction or in a series of related transactions, of any one or
more of the following events:
(i) a
sale or other
disposition of all or substantially all, as determined by the Board
in its sole discretion, of the consolidated assets of the Company
and its Subsidiaries;
(ii) a
sale or other disposition of more than 50% of the outstanding securities of the
Company;
(iii) a
merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or
(iv) a
merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the
merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.
(m) “Director”
means a member of the Board.
(n) “Disability”
means, with respect to a Participant, the inability of such
Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than
twelve (12) months as provided in Sections 22(e)(3)
and 409A(a)(2)(c)(i) of the Code, and will be determined by the
Board on the basis of such medical evidence as the Board deems
warranted under the circumstances.
(o) “Effective
Date” means the effective date of this Plan, which is
the earlier of (i) the date that this Plan is first approved
by the Company’s stockholders, and (ii) the date this
Plan is adopted by the Board.
(p) “Employee”
means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an
“Employee” for purposes of the
Plan.
(q) “Entity”
means a corporation, partnership, limited liability company or
other entity.
(r) “Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
(s) “Exchange Act
Person” means any
natural person, Entity or “group” (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that
“Exchange Act Person” will not include
(i) the Company or any Subsidiary of the Company,
(ii) any employee benefit plan of the Company or any
Subsidiary of the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any
Subsidiary of the Company, (iii) an underwriter temporarily
holding securities pursuant to a registered public offering of such
securities, (iv) an Entity Owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company;
or (v) any natural person, Entity
or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act) that, as of the Effective Date, is the
Owner, directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the
Company’s then outstanding securities.
(t) “Fair
Market Value” means, as of any date, unless otherwise
required by any applicable provision of the Code, as of any date,
the closing sales price of a share of the Common Stock on the
applicable date: (i) as reported on the principal national
securities exchange on which it is then traded or (ii) if not
traded on any such national securities exchange, the closing price
of a share of Common Stock as reported by an automated quotation
system sponsored by the National Association of Securities Dealers,
Inc. If the Common Stock is not readily tradable on a national
securities exchange, or any automated quotation system sponsored by
the National Association of Securities Dealers, Inc., its Fair
Market Value shall be set in good faith by the Committee, taking
into account all factors that the Committee deems relevant, and
shall be determined by the reasonable application of a reasonable
valuation method within the meaning of Section 409A of the
Code.
(u) “Good
Reason” will have the
meaning ascribed to such term in any written agreement between the
Participant and the Company defining such term and, in the absence
of such agreement, such term means, with respect to a Participant,
a material and unreasonable diminution of such Participant’s
duties (as determined by the Board in its sole discretion) without
such Participant’s consent; provided, however, that the
following shall not constitute Good Reason: (i) a change of title;
(ii) a reduction in such Participant’s duties by virtue of
the Company undergoing a Change in Control and/or being made part
of a larger entity or group of entities; and/or (iii) cessation of such
Participant’s service, if any, on the Board or a committee
thereof. For such Participant to receive the benefits under the
applicable written agreement between such Participant and the
Company as a result of a voluntary resignation for Good Reason,
unless otherwise provided in such agreement, all of the following
requirements must be satisfied: (A) such Participant must provide
notice to the Company of such Participant’s intent to assert
Good Reason within thirty (30) days of the initial existence of the
condition set forth in the previous sentence; (B) the Company will
have thirty (30) days (the “Company Cure
Period”) from the date of such notice to remedy the
condition and, if it does so, such Participant may withdraw such
Participant’s resignation or such Participant may resign with
no benefits under the applicable written agreement; and (C) any
termination of such Participant’s Continuous Service under
this provision must occur within ten (10) days of the earlier of
expiration of the Company Cure Period or written notice from the
Company that it will not undertake to cure the applicable
condition. Unless otherwise set forth in the applicable
written agreement, should the Company remedy the condition as set
forth above and then such condition arises again, such Participant
may assert Good Reason again subject to all of the conditions set
forth herein. Unless otherwise set forth in the applicable written
agreement, the term “Company” for purposes of
“Good Reason” will be interpreted to include any
Affiliate of the Company to which such Participant provides
services, if appropriate, as determined by the Board in its sole
discretion.
(v) “Incentive
Stock Option” or “ISO” means an
option granted pursuant to Section 5 of the Plan that is intended
to be, and that qualifies as, an “incentive stock
option” within the meaning of Section 422 of the
Code.
(w) “Nonstatutory
Stock Option” or “NSO” means an
option granted pursuant to Section 5 of the Plan that does not
qualify as an ISO.
(x) “Officer”
means any person designated by the Company as an
officer.
(y) “Option”
means an ISO or an NSO to purchase shares of Common Stock granted
pursuant to the Plan.
(z) “Option
Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of
an Option grant. Each Option Agreement will be subject to the terms
and conditions of the Plan.
(aa) “Optionholder”
means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding
Option.
(bb) “Other Stock
Award” means an award
based in whole or in part by reference to the Common Stock which is
granted pursuant to the terms and conditions of Section
6(c).
(cc) “Other Stock
Award Agreement” means
a written agreement between the
Company and a holder of an
Other Stock Award evidencing the terms and conditions of an Other
Stock Award grant. Each Other Stock Award Agreement will be subject
to the terms and conditions of the Plan.
(dd) “Own,”
“Owned,”
“Owner,”
“Ownership”
A
person or Entity will be deemed
to “Own,” to have “Owned,” to be the
“Owner” of, or to have acquired “Ownership”
of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to
vote or to direct the voting, with respect to such
securities.
(ee) “Participant”
means a person to whom a Stock Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding
Stock Award.
(ff) “Plan”
means this 2022 Equity
Incentive Plan.
(gg) “Restricted
Stock Award” means an
award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section 6(a).
(hh) “Restricted
Stock Award Agreement”
means a written agreement between the Company and a holder of a
Restricted Stock Award evidencing the terms and conditions of a
Restricted Stock Award grant. Each Restricted Stock Award Agreement
will be subject to the terms and conditions of the
Plan.
(ii) “Restricted
Stock Unit Award” or
“RSU
Award” means a right to receive shares of Common Stock
which is granted pursuant to the terms and conditions of
Section 6(b).
(jj) “Restricted
Stock Unit Award Agreement” or
“RSU
Award Agreement” means a written agreement between
the Company and a holder of a RSU Award evidencing the terms and
conditions of a RSU Award grant. Each RSU Award Agreement will be
subject to the terms and conditions of the Plan.
(kk) “Rule
405” means Rule 405 promulgated under the Securities
Act.
(ll) “Rule
701” means Rule 701 promulgated under the Securities
Act.
(mm) “Securities
Act” means the Securities Act of 1933, as
amended.
(nn) “Stock
Appreciation Right” or “SAR” means a
right to receive the appreciation on Common Stock that is granted
pursuant to the terms and conditions of Section 5.
(oo) “Stock
Appreciation Right Agreement” or “SAR Agreement”
means a written agreement between the Company and a holder of a
Stock Appreciation Right evidencing the terms and conditions of a
Stock Appreciation Right grant. Each Stock Appreciation Right
Agreement will be subject to the terms and conditions of the
Plan.
(pp) “Stock
Award” means any right to
receive Common Stock granted under the Plan, including an ISO, a
Nonstatutory Stock Option, a Restricted Stock Award, a RSU Award, a
Stock Appreciation Right or any Other Stock
Award.
(qq) “Stock Award
Agreement” means a
written agreement between the Company and a Participant evidencing
the terms and conditions of a Stock Award grant. Each Stock Award
Agreement will be subject to the terms and conditions of the
Plan.
(rr) “Subsidiary”
means, with respect to the Company, (i) any corporation of
which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation will have or might
have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership, limited liability company or other
entity in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or
capital contribution) of more than 50%.
(ss) “Ten
Percent Stockholder” means a person who Owns (or is
deemed to Own pursuant to Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Affiliate.
SCIENTIFIC INDUSTRIES, INC.
