Exhibit 10.1
ACER THERAPEUTICS INC.
2018 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on March 1, 2018)
(Approved by the Stockholders on May 14, 2018)
(As Amended and Restated by the Board of Directors on February 18, 2022)
Table of Contents
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SECTION 1. |
ESTABLISHMENT AND PURPOSE. |
The Plan was adopted by the Board of Directors on March 1, 2018, and shall be effective on the date the Plan is approved by the Company’s stockholders (the “Effective Date”), as a successor to the Opexa Therapeutics, Inc. Amended and Restated 2010 Stock Incentive Plan and the Acer Therapeutics Inc. 2013 Stock Incentive Plan (each, a “Predecessor Plan”). The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership and other incentive opportunities.
(a)“Affiliate”
shall mean any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.
(b)“Award”
shall mean any award of an Option, a SAR, a Restricted Share, a Stock Unit or a Cash-Based Award under the Plan.
(c)“Award Agreement”
shall mean the agreement between the Company and the recipient of an Award which contains the terms, conditions and restrictions pertaining to such Award.
(d)“Board of Directors” or “Board”
shall mean the Board of Directors of the Company, as constituted from time to time.
(e)“Cash-Based Award”
shall mean an Award that entitles the Participant to receive a cash-denominated payment.
(f)“Change in Control”
shall mean the occurrence of any of the following events:
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(i) |
A change in the composition of the Board of Directors occurs, as a result of which fewer than one-half of the incumbent directors are directors who either: |
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(A) |
Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or |
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(B) |
Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved (the “continuing directors”); |
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provided, however, that for this purpose, the “original directors” and “continuing directors” shall not include any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board;
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(ii) |
Any “person” (as defined below) who by the acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the “Base Capital Stock”); except that any change in the relative beneficial ownership of the Company’s securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of the Company; |
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(iii) |
The consummation of a merger or consolidation of the Company or a Subsidiary of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the Company (or its successor) and (B) any direct or indirect parent corporation of the Company (or its successor); or |
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(iv) |
The sale, transfer or other disposition of all or substantially all of the Company’s assets. |
For purposes of subsection (f)(i) above, the term “look-back” date shall mean the later of (1) the Effective Date and (2) the date that is 24 months prior to the date of the event that may constitute a Change in Control.
For purposes of subsection (f)(ii) above, the term “person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act, but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.
Any other provision of this Section 2(f) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, and a Change
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in Control shall not be deemed to occur if the Company files a registration statement with the United States Securities and Exchange Commission in connection with a secondary public offering of securities or debt of the Company to the public.
(g)“Code”
shall mean the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
(h)“Committee”
shall mean the Compensation Committee as designated by the Board of Directors, which is authorized to administer the Plan, as described in Section 3 hereof.
(i)“Company”
shall mean Acer Therapeutics Inc., a Delaware corporation.
(j)“Consultant”
shall mean an individual who is a consultant or advisor and who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor (not including service as a member of the Board of Directors) or a member of the board of directors of a Parent or a Subsidiary, in each case who is not an Employee.
(k)“Disability”
shall mean any permanent and total disability as defined by Section 22(e)(3) of the Code.
(l)“Employee”
shall mean any individual who is a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.
(m)“Exchange Act”
shall mean the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(n)“Exercise Price”
shall mean, in the case of an Option, the amount for which one Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price” shall mean, in the case of a SAR, an amount, as specified in the applicable SAR Award Agreement, which is subtracted from the Fair Market Value of one Share in determining the amount payable upon exercise of such SAR.
(o)“Fair Market Value”
with respect to a Share, shall mean the market price of one Share, determined by the Committee as follows:
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(i) |
If the Stock was traded over-the-counter on the date in question, then the Fair Market Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the Pink Quote system; |
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(ii) |
If the Stock was traded on any established stock exchange (such as the New York Stock Exchange, The Nasdaq Global Market or The Nasdaq Global Select Market) or national market system on the date in question, |
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then the Fair Market Value shall be equal to the closing price reported for such date by the applicable exchange or system; or |
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(iii) |
If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. |
In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.
(p)“ISO”
shall mean an employee incentive stock option described in Section 422 of the Code.
(q)“Nonstatutory Option” or “NSO”
shall mean an employee stock option that is not an ISO.
(r)“Option”
shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.
(s)“Outside Director”
shall mean a member of the Board of Directors who is not a common-law employee of, or paid consultant to, the Company, a Parent or a Subsidiary.
(t)“Parent”
shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a Parent commencing as of such date.
(u)“Participant”
shall mean a person who holds an Award.
(v)“Performance Based Award”
shall mean any Restricted Share Award, Stock Unit Award or Cash-Based Award that is subject to attainment of performance goals under Section 20.
(w)“Plan”
shall mean this 2018 Stock Incentive Plan of Acer Therapeutics Inc., as amended from time to time.
(x)“Purchase Price”
shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Committee.
(y)“Restricted Share”
shall mean a Share awarded under the Plan.
(z)“SAR”
shall mean a stock appreciation right granted under the Plan.
(aa)“Section 409A” means Section 409A of the Code.
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(bb)“Service”
shall mean service as an Employee, Consultant or Outside Director, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to ISO status, an Employee’s employment will be treated as terminating three months after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan.
(cc)“Share”
shall mean one share of Stock, as adjusted in accordance with Section 12 (if applicable).
(dd)“Stock”
shall mean the Common Stock, par value $0.0001, of the Company.
(ee)“Stock Unit”
shall mean a bookkeeping entry representing the Company’s obligation to deliver one Share (or distribute cash) on a future date in accordance with the provisions of a Stock Unit Award Agreement.
(ff)“Subsidiary”
shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less than 50% of the total combined voting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
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SECTION 3. |
ADMINISTRATION. |
(a)Committee Composition
. The Plan shall be administered by a Committee appointed by the Board, or by the Board acting as the Committee. The Committee shall consist of two or more directors of the Company. In addition, to the extent required by the Board, the composition of the Committee shall satisfy such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act.
(b)Committee for Non-Officer Grants
. The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan with respect to Employees who are not considered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and may determine all terms of such grants. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee or committees appointed pursuant to the preceding sentence. To the extent permitted by applicable laws, the Board of Directors may also authorize one or more officers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the number of such Awards to be
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received by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officers may so award.
(c)Committee Procedures
. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing (including via email) by all Committee members, shall be valid acts of the Committee.
(d)Committee Responsibilities
. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the following actions:
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(i) |
To interpret the Plan and to apply its provisions; |
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(ii) |
To adopt, amend or rescind rules, procedures and forms relating to the Plan; |
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(iii) |
To adopt, amend or terminate sub-plans established for the purpose of satisfying applicable foreign laws including qualifying for preferred tax treatment under applicable foreign tax laws; |
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(iv) |
To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; |
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(v) |
To determine when Awards are to be granted under the Plan; |
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(vi) |
To select the Participants to whom Awards are to be granted; |
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(vii) |
To determine the type of Award and number of Shares or amount of cash to be made subject to each Award; |
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(viii) |
To prescribe the terms and conditions of each Award, including (without limitation) the Exercise Price and Purchase Price, and the vesting or duration of the Award (including accelerating the vesting of Awards, either at the time of the Award or thereafter, without the consent of the Participant), to determine whether an Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the agreement relating to such Award; |
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(ix) |
To amend any outstanding Award Agreement, subject to applicable legal restrictions and to the consent of the Participant if the Participant’s rights or obligations would be materially impaired; |
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(x) |
To prescribe the consideration for the grant of each Award or other right under the Plan and to determine the sufficiency of such consideration; |
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(xi) |
To determine the disposition of each Award or other right under the Plan in the event of a Participant’s divorce or dissolution of marriage; |
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(xii) |
To determine whether Awards under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business; |
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(xiii) |
To correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement; |
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(xiv) |
To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; and |
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(xv) |
To take any other actions deemed necessary or advisable for the administration of the Plan. |
Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Awards under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Participants and all persons deriving their rights from a Participant. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan or any Award under the Plan.
(a)General Rule
. Only Employees, Consultants and Outside Directors shall be eligible for the grant of Awards. Only common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs.
(b)Ten-Percent Stockholders
. An Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.
(c)Attribution Rules
. For purposes of Section 4(b) above, in determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for such Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its stockholders, partners or beneficiaries.
(d)Outstanding Stock
. For purposes of Section 4(b) above, “outstanding stock” shall include all stock actually issued and outstanding immediately after the grant. “Outstanding
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stock” shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person.
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SECTION 5. |
STOCK SUBJECT TO PLAN. |
(a)Basic Limitation
. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The aggregate number of Shares authorized for issuance as Awards under the Plan (other than Inducement Awards as set forth in Section 15) shall not exceed the sum of (x) 500,000 Shares, plus (y) the sum of the number of Shares subject to outstanding awards under the Predecessor Plans on the Effective Date that are subsequently forfeited or terminated for any reason before being exercised or settled, plus the number of Shares subject to vesting restrictions under the Predecessor Plans on the Effective Date that are subsequently forfeited, plus the number of reserved Shares not issued or subject to outstanding grants under the Predecessor Plans on the Effective Date, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than 10 years, beginning on January 1, 2019, and ending on (and including) January 1, 2028, in an amount equal to the lesser of (i) four percent (4%) of the outstanding Shares on the last day of the immediately preceding fiscal year or (ii) if the Board acts prior to the first day of the fiscal year, such lesser amount (including zero) that the Board determines for purposes of the annual increase for that fiscal year. Notwithstanding the foregoing, the number of Shares that may be delivered in the aggregate pursuant to the exercise of ISOs granted under the Plan shall not exceed 1,135,170 Shares plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan pursuant to Section 5(d). The limitations of this Section 5(a) shall be subject to adjustment pursuant to Section 12. The number of Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.
(b)Award Limitations.
No Participant eligible for an Award may receive Options or SARs, excluding Inducement Awards, under the Plan in any calendar year that relate to an aggregate of more than 250,000 Shares, and no more than two (2) times this amount in the first year of employment (subject to adjustment under Section 12). The maximum aggregate number of Shares that may be subject to Restricted Shares or Stock Units, excluding Inducement Awards, granted to a Participant in any calendar year is 250,000 Shares and no more than two (2) times this amount in the first year of employment (subject to adjustment under Section 12) and the maximum aggregate amount of cash that may be payable to a Participant in any calendar year as Cash-Based Awards is $2.0 million.
(c)Additional Shares
. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any reason before being exercised or settled, or an Award is settled in cash without the delivery of Shares to the holder, then any Shares subject to the Award shall again become available for Awards under the Plan. Only the number of Shares (if any) actually issued in settlement of Awards (and not forfeited) shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the Plan. Any Shares withheld to satisfy the grant price or Exercise Price or tax
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withholding obligation pursuant to any Award shall again become available for Awards under the Plan. Notwithstanding the foregoing provisions of this Section 5(d), Shares that have actually been issued shall not again become available for Awards under the Plan, except for Shares that are forfeited and do not become vested.
(d)Substitution and Assumption of Awards
. The Committee may make Awards under the Plan by assumption, substitution or replacement of stock options, stock appreciation rights, stock units or similar awards granted by another entity (including a Parent or Subsidiary), if such assumption, substitution or replacement is in connection with an asset acquisition, stock acquisition, merger, consolidation or similar transaction involving the Company (and/or its Parent or Subsidiary) and such other entity (and/or its affiliate). The terms of such assumed, substituted or replaced Awards shall be as the Committee, in its discretion, determines is appropriate, notwithstanding limitations on Awards in the Plan. Any such substitute or assumed Awards shall not count against the Share limitation set forth in Section 5(a) (nor shall Shares subject to such Awards be added to the Shares available for Awards under the Plan as provided in Section 5(d) above), except that Shares acquired by exercise of substitute ISOs will count against the maximum number of Shares that may be issued pursuant to the exercise of ISOs under the Plan.
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SECTION 6. |
RESTRICTED SHARES. |
(a)Restricted Share Award Agreement
. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Share Award Agreement between the Participant and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Share Award Agreements entered into under the Plan need not be identical.
(b)Payment for Awards
. Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services.
(c)Vesting
. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Share Award Agreement. A Restricted Share Award Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.
(d)Voting and Dividend Rights
. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Share Award Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.
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(e)Restrictions on Transfer of Shares
. Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or other restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Restricted Share Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
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SECTION 7. |
TERMS AND CONDITIONS OF OPTIONS. |
(a)Stock Option Award Agreement
. Each grant of an Option under the Plan shall be evidenced by a Stock Option Award Agreement between the Participant and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Award Agreement. The Stock Option Award Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Award Agreements entered into under the Plan need not be identical.
(b)Number of Shares
. Each Stock Option Award Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 12.
(c)Exercise Price
. Each Stock Option Award Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, except as otherwise provided in Section 4(b), and the Exercise Price of an NSO shall not be less than 100% of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, Options may be granted with an Exercise Price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to the foregoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee in its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 8.
(d)Withholding Taxes
. As a condition to the exercise of an Option, the Participant shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Participant shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.
(e)Exercisability and Term
. Each Stock Option Award Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Award Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant (five years for ISOs granted to Employees described in Section 4(b)). A Stock Option Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee in its sole discretion shall
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determine when all or any installment of an Option is to become exercisable and when an Option is to expire.
(f)Exercise of Options
. Each Stock Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors or administrators of the Participant’s estate or any person who has acquired such Option(s) directly from the Participant by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
(g)Effect of Change in Control
. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.
(h)No Rights as a Stockholder
. A Participant shall have no rights as a stockholder with respect to any Shares covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 12.
(i)Modification, Extension and Renewal of Options
. Within the limitations of the Plan, the Committee may modify, extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price, or in return for the grant of a different Award for the same or a different number of Shares, without stockholder approval. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Participant, materially impair his or her rights or obligations under such Option. In addition, notwithstanding any other provision of the Plan, and except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), in no event shall the Committee reduce the exercise price of an outstanding Option, or cancel any outstanding Option having a per Share exercise price greater than the Fair Market Value of a Share in exchange for cash, another Award or an Option with an exercise price that is less than the exercise price of the original Option, without shareholder approval.
(j)Restrictions on Transfer of Shares
. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
(k)Buyout Provisions
. The Committee may at any time (i) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (ii) authorize a Participant
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to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.
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SECTION 8. |
PAYMENT FOR SHARES. |
(a)General Rule
. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(h) below.
(b)Surrender of Stock
. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by surrendering, or attesting to the ownership of, Shares which have already been owned by the Participant or his or her representative. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Participant shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.
(c)Services Rendered
. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary. If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of the Award) of the value of the services rendered by the Participant and the sufficiency of the consideration to meet the requirements of Section 6(b).
(d)Cashless Exercise
. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.
(e)Exercise/Pledge
. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of the aggregate Exercise Price.
(f)Net Exercise
. To the extent that a Stock Option Award Agreement so provides, by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of the Option shall be reduced by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate Exercise Price (plus tax withholdings, if applicable) and any remaining balance of the aggregate Exercise Price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by the Participant in cash or any other form of payment permitted under the Stock Option Agreement.
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(g)Promissory Note
. To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a full-recourse promissory note.
(h)Other Forms of Payment
. To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules.
(i)Limitations under Applicable Law
. Notwithstanding anything herein or in a Stock Option Award Agreement or Restricted Share Award Agreement to the contrary, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.
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SECTION 9. |
STOCK APPRECIATION RIGHTS. |
(a)SAR Award Agreement
. Each grant of a SAR under the Plan shall be evidenced by a SAR Award Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Award Agreements entered into under the Plan need not be identical.
(b)Number of Shares
. Each SAR Award Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Section 12.
(c)Exercise Price
. Each SAR Award Agreement shall specify the Exercise Price. The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, SARs may be granted with an Exercise Price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to the foregoing in this Section 9(c), the Exercise Price under any SAR shall be determined by the Committee in its sole discretion.
(d)Exercisability and Term
. Each SAR Award Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Award Agreement shall also specify the term of the SAR. A SAR Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.
(e)Effect of Change in Control
. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common
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Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company.
(f)Exercise of SARs
. Upon exercise of a SAR, the Participant (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (i) Shares, (ii) cash or (iii) a combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price.
(g)Modification, Extension or Assumption of SARs
. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of Shares and at the same or a different Exercise Price, or in return for the grant of a different Award for the same or a different number of Shares, without stockholder approval. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, materially impair his or her rights or obligations under such SAR. In addition, notwithstanding any other provision of the Plan, and except in connection with a corporate transaction involving the Company(including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), in no event shall the Committee reduce the exercise price of an outstanding SAR, or cancel any outstanding SAR having a per Share exercise price greater than the Fair Market Value of a Share in exchange for cash, another Award or a SAR with an exercise price that is less than the exercise price of the original SAR, without shareholder approval.
(h)Buyout Provisions
. The Committee may at any time (i) offer to buy out for a payment in cash or cash equivalents a SAR previously granted, or (ii) authorize a Participant to elect to cash out a SAR previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.
(a)Stock Unit Award Agreement
. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Award Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Award Agreements entered into under the Plan need not be identical.
(b)Payment for Awards
. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.
(c)Vesting Conditions
. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Award Agreement. A Stock Unit Award Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or retirement or other
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events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.
(d)Voting and Dividend Rights
. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach.
(e)Form and Time of Settlement of Stock Units
. Settlement of vested Stock Units may be made in the form of (i) cash, (ii) Shares or (iii) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. A Stock Unit Award Agreement may provide that vested Stock Units may be settled in a lump sum or in installments. A Stock Unit Award Agreement may provide that the distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date, subject to compliance with Section 409A. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12.
(f)Death of Participant
. Any Stock Unit Award that becomes payable after the Participant’s death shall be distributed to the Participant’s beneficiary or beneficiaries. Each recipient of a Stock Unit Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. If no beneficiary was designated or if no designated beneficiary survives the Participant, then any Stock Units Award that becomes payable after the Participant’s death shall be distributed to the Participant’s estate.
(g)Creditors’ Rights
. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Award Agreement.
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SECTION 11. |
CASH-BASED AWARDS |
The Committee may, in its sole discretion, grant Cash-Based Awards to any Participant in such number or amount and upon such terms, and subject to such conditions, as the
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Committee shall determine at the time of grant and specify in an applicable Award Agreement. The Committee shall determine the maximum duration of the Cash-Based Award, the amount of cash which may be payable pursuant to the Cash-Based Award, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Committee shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Committee. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in Shares, as the Committee determines.
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SECTION 12. |
ADJUSTMENT OF SHARES. |
(a)Adjustments
. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make appropriate and equitable adjustments in:
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(i) |
The number of Shares available for future Awards under Section 5; |
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(ii) |
The limitations set forth in Sections 5(a) and (b); |
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(iii) |
The number of Shares covered by each outstanding Award; and |
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(iv) |
The Exercise Price under each outstanding Option and SAR. |
(b)Dissolution or Liquidation
. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.
(c)Reorganizations
. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Subject to compliance with Section 409A, such agreement shall provide for:
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(i) |
The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; |
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(ii) |
The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; |
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(iii) |
The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; |
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(iv) |
Immediate vesting, exercisability or settlement of outstanding Awards followed by the cancellation of such Awards (whether or not then vested or exercisable) upon or immediately prior to the effectiveness of such transaction; or |
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(v) |
Settlement of the intrinsic value of the outstanding Awards (whether or not then vested or exercisable) in cash or cash equivalents or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Awards or the underlying Shares) followed by the cancellation of such Awards (whether or not then vested or exercisable) (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment); in each case without the Participant’s consent. Any acceleration of payment of an amount that is subject to Section 409A will be delayed, if necessary, until the earliest time that such payment would be permissible under Section 409A without triggering any additional taxes applicable under Section 409A. |
The Company will have no obligation to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
(d)Reservation of Rights
. Except as provided in this Section 12, a Participant shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. In the event of any change affecting the Shares or the Exercise Price of Shares subject to an Award, including a merger or other reorganization, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of up to 30 days prior to the occurrence of such event.
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SECTION 13. |
DEFERRAL OF AWARDS. |
(a)Committee Powers
. Subject to compliance with Section 409A, the Committee (in its sole discretion) may permit or require a Participant to:
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(i) |
Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books; |
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(ii) |
Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or |
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(iii) |
Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been delivered to such Participant. |
(b)General Rules
. A deferred compensation account established under this Section 13 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13.
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SECTION 14. |
AWARDS UNDER OTHER PLANS. |
The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under the Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5.
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SECTION 15. |
INDUCEMENT AWARDS POOL |
(a)Inducement Share Reserve
. An additional pool of 200,000 Shares (the “Inducement Shares”) is reserved under the Plan to be used exclusively for the grant of Awards in compliance with NASDAQ Marketplace Rule 5635(c)(4) and the related guidance under NASDAQ IM 5635-1 (the “Inducement Awards”). The number of Inducement Shares shall be subject to adjustment pursuant to Section 12, as applicable. For purposes of clarity, the Inducement Shares that may be awarded are in addition to and shall not reduce the number of Shares reserved under Section 5(a) for Awards other than Inducement Awards. The Shares underlying any Inducement Awards that are forfeited, canceled, held back upon exercise of an Inducement Award or settlement of an Inducement Award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, settled without the issuance of Shares or otherwise terminated (other than by exercise) shall be added back to the number of Inducement Shares available for grant under this Section 15 based on the number of Shares forfeited, canceled, held back, reacquired, settled without the issuance of Shares or otherwise terminated (other than by exercise), but shall not affect the number of Shares available for Awards under Section 5(a).
(b)Inducement Award Rules
. Notwithstanding anything to the contrary in the Plan, an Inducement Award may be granted only to an Employee as an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of
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NASDAQ Marketplace Rule 5635(c)(4) and the related guidance under NASDAQ IM 5635-1 and only if such individual has not previously been an Employee or has experienced a bona fide period of interruption of employment with the Company and its Affiliates prior to grant of the Inducement Award. In addition, notwithstanding any other provision of the Plan to the contrary, all such Inducement Awards must be granted by the Committee. No Inducement Award may be an ISO.
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SECTION 16. |
PAYMENT OF DIRECTOR’S FEES IN SECURITIES. |
(a)Effective Date
. No provision of this Section 16 shall be effective unless and until the Board has determined to implement such provision.
(b)Elections to Receive NSOs, SARs, Restricted Shares or Stock Units
. An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, SARs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Alternatively, the Board may mandate payment in any of such alternative forms. Such NSOs, SARs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 16 shall be filed with the Company on the prescribed form.
(c)Number and Terms of NSOs, SARs, Restricted Shares or Stock Units
. The number of NSOs, SARs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, SARs, Restricted Shares or Stock Units shall also be determined by the Board.
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SECTION 17. |
LEGAL AND REGULATORY REQUIREMENTS. |
Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the United States Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable. The Company shall not be liable to a Participant or other persons as to: (a) the non-issuance or sale of Shares as to which the Company has not obtained from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares under the Plan; and (b) any tax consequences expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Award granted under the Plan.
(a)Withholding Taxes
. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the
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Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.
(b)Share Withholding
. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the maximum legally required tax withholding.
(c)Section 409A
. Each Award that provides for “nonqualified deferred compensation” within the meaning of Section 409A shall be subject to such additional rules and requirements as specified by the Committee from time to time in order to comply with Section 409A. If any amount under such an Award is payable upon a “separation from service” (within the meaning of Section 409A) to a Participant who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s separation from service, or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. In addition, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A.
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SECTION 19. |
TRANSFERABILITY. |
Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly provides otherwise, no Award granted under the Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to Shares issued under such Award), other than by will or the laws of descent and distribution; provided, however, that an ISO may be transferred or assigned only to the extent consistent with Section 422 of the Code. Any purported assignment, transfer or encumbrance in violation of this Section 19 shall be void and unenforceable against the Company.
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SECTION 20. |
PERFORMANCE BASED AWARDS. |
The number of Shares or other benefits granted, issued, retainable and/or vested under an Award may be made subject to the attainment of performance goals. The Committee may utilize any performance criteria selected by it in its sole discretion to establish performance goals; provided, however, that in the case of any Performance Based Award, the following conditions shall apply:
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(a) |
The amount potentially available under a Performance Based Award shall be subject to the attainment of pre-established, objective performance goals relating to a specified period of service based on one or more of the following performance criteria: (A) cash flow, (B) earnings per share, (C) earnings before interest, taxes and amortization, (D) return on equity, (E) |
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total stockholder return, (F) share price performance, (G) return on capital, (H) return on assets or net assets, (I) revenue, (J) income or net income, (K) operating income or net operating income, (L) operating profit or net operating profit, (M) operating margin or profit margin, (N) return on operating revenue, (O) return on invested capital, (P) market segment shares, (Q) costs, (R) expenses, (S) initiation or completion of research activities, (T) initiation or completion of development programs, (U) other milestones with respect to research activities or development programs, (V) regulatory body approval, (W) implementation or completion of critical projects, (X) commercial milestones or (Y) other milestones with respect to the growth of the Company’s business or the development or commercialization of any product or service (“Qualifying Performance Criteria”), any of which may be measured either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group or index, in each case as specified by the Committee in the Award; |
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(a) |
Unless specified otherwise by the Committee at the time the performance goals are established or otherwise within the time prescribed by Section 162(m) of the Code, the Committee shall appropriately adjust the method of evaluating performance under a Qualifying Performance Criteria for a performance period as follows: (A) to exclude asset write-downs, (B) to exclude litigation or claim judgments or settlements, (C) to exclude the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (D) to exclude accruals for reorganization and restructuring programs, (E) to exclude any extraordinary nonrecurring items as determined under generally accepted accounting principles and/or described in managements’ discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, (F) to exclude the dilutive effects of acquisitions or joint ventures, (G) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture, (H) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends, (I) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; and (J) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles, in each case in compliance with Section 162(m) of the Code; |
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(a) |
The Committee shall establish the applicable performance goals in writing and an objective method for determining the Award earned by a Participant if the goals are attained, while the outcome is substantially uncertain and not later than the 90th day of the performance period (but in no event after 25% of the period of service with respect to which the performance goals relate has elapsed), and shall determine and certify in writing, for each Participant, the extent to which the performance goals have been met prior to payment or vesting of the Award; and |
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(a) |
The Committee may not in any event increase the amount of compensation payable under the Plan upon the attainment of the pre-established performance goals to a Participant who is a “covered employee” within the meaning of Section 162(m) of the Code. |
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SECTION 21. |
NO EMPLOYMENT RIGHTS. |
No provision of the Plan, nor any Award granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee or Consultant. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason, with or without notice.
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SECTION 22. |
DURATION AND AMENDMENTS. |
(a)Term of the Plan
. The Plan, as set forth herein, shall come into existence on the date of its adoption by the Board of Directors; provided, however, that no Award may be granted hereunder prior to the Effective Date. The Board of Directors may suspend or terminate the Plan at any time. No ISOs may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board of Directors, or (ii) the date the Plan is approved the stockholders of the Company.
(b)Right to Amend the Plan
. The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Award granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of the Participant. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.
(c)Effect of Termination
. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan shall not affect Awards previously granted under the Plan.
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SECTION 23. |
AWARDS TO NON-U.S. PARTICIPANTS. |
Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, currency or tax policy or custom. The Committee also may impose conditions on the exercise, vesting or settlement of Awards in order to minimize the Company’s obligation with respect to tax equalization for Participants on assignments outside their home country. The Committee may, in its sole discretion, adjust the value of any Awards or any amounts due to Participants hereunder to reflect any foreign currency conversions or fluctuations in foreign currency exchange rates; provided, however, that none of the Company or any Parent, Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuations between a Participant’s local currency and the United States Dollar that may affect the value of any Awards or of any amounts due to a Participant hereunder.
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SECTION 24. |
CANCELLATION OR CLAWBACK OF AWARDS. |
The Committee shall have full authority to implement any policies and procedures necessary to comply with Section 10D of the Exchange Act and any other regulatory regimes. Notwithstanding anything to the contrary contained herein, any Awards granted under the Plan (including any amounts or benefits arising from such Awards) shall be subject to any clawback or recoupment arrangements or policies the Company has in place from time to time, pursuant to which the Committee may, to the extent permitted by applicable law and stock exchange rules or the applicable Company arrangement or policy, and shall, to the extent required, cancel or require reimbursement of any Awards granted to a Participant or any Shares issued or cash received upon vesting, exercise or settlement of any such Awards or sale of Shares underlying such Awards.
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SECTION 25. |
GOVERNING LAW. |
The Plan and each Award Agreement and all disputes or controversies arising out of or relating thereto shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of any state.
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SECTION 26. |
SUCCESSORS AND ASSIGNS. |
The terms of the Plan shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by Section 12(c).
To record the adoption of the Plan by the Board of Directors, the Company has caused its authorized officer to execute the same.
ACER THERAPEUTICS INC.
By /s/ Harry S. Palmin
Name Harry S. Palmin
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Title |
Chief Financial Officer and Chief Operating Officer |
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Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made and entered into effective as of February 21, 2022, by and between Acer Therapeutics Inc., a Delaware corporation (the “Company”), and Adrian W. Quartel (“Key Employee”). The Company and Key Employee are hereinafter collectively referred to as the “Parties.”
W I T N E S S E T H:
A.The Company desires assurance of the association and services of Key Employee in order to retain Key Employee’s skills, abilities, background and knowledge, and is willing to engage Key Employee’s services on the terms and conditions set forth in this Agreement.
B.Key Employee desires to be in the employ of the Company and is willing to accept such employment on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the employment by the Company, the compensation and other remuneration paid and to be paid by the Company and received and to be received by Key Employee for such employment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Key Employee, it is agreed by and between the Parties hereto as follows:
1.Duties. As the Company’s Chief Medical Oficer, Key Employee will perform such duties as are ordinary, customary and necessary in Key Employee’s role. Key Employee will report directly to the Chief Executive Officer who will be primarily responsible for evaluating Key Employee’s performance. The Company may change Key Employee’s duties, compensation, benefits and place of employment from time to time as it deems necessary. In addition, during Key Employee’s employment with the Company, Key Employee shall devote Key Employee’s best efforts and Key Employee’s full business time, skill and attention to the performance of Key Employee’s duties on behalf of the Company.
2.Salary and Bonus. Key Employee will be compensated for full-time service (pro-rated for any part-time service) at a base rate of $425,000 per year, less all deductions and withholdings, to be paid in accordance with the Company’s standard payroll practices, as they may be changed from time to time. In addition, Key Employee shall be eligible to receive an annual discretionary bonus with a target (the “Target Bonus”) of forty percent (40%) of Key Employee’s base salary per 12‑month period (pro-rated for any partial period of less than 12 months), based upon a determination by the CEO and, where applicable, the Company’s Board of Directors (the “Board”) of the achievement of objectives to be set from time to time by the Board, provided that Key Employee must remain employed through the payment date in order to earn the bonus. The measurement period for this purpose will end on approximately December 31 of each year. The annual discretionary bonus, if otherwise earned subject to continued employment through the payment date, will be paid as soon as practicable after the achievement of objectives for the measurement period has been determined, but in no event will such bonus be paid after March 15 following the last day of the measurement period. The Company may modify Key Employee’s compensation and benefits from time to time at its sole discretion.
3.Other Benefits. The Company will provide Key Employee with participation in Company-sponsored employee benefits programs on the same basis as such benefits are generally available to its employees, as determined from time to time by the Board. The Company may, from time to time, change, amend, add to, or terminate these benefits at any time in its sole discretion.
4.Employee Nondisclosure and Developments Agreement. As a condition to and in consideration for employment, Key Employee must enter into the Employee Nondisclosure and Developments Agreement (the “NDA”) in the form used by the Company.
5.At-Will Employment. Key Employee’s employment with Company is “at-will.” This means that either Key Employee or the Company may terminate Key Employee’s employment at any time, with or without cause, and with or without notice. Any contrary representations or agreements which may have been made to Key Employee are superseded by this Agreement. The “at-will” nature of Key Employee’s employment described in this Agreement shall constitute the entire agreement between Key Employee and the Company concerning the nature and duration of Key Employee’s employment. Though Key Employee’s duties, compensation, benefits and place of employment may change over time and Key Employee may be subject to incremental discipline that does not include a termination, none of these events change the agreement that Key Employee is an “at-will” employee. In addition, the fact that the rate of Key Employee’s salary or other compensation is stated in units of years or months, and that Key Employee’s vacation and sick leave accrue annually or monthly, does not alter the at-will nature of the employment, and does not mean and should not be interpreted to mean that Key Employee is guaranteed employment to the end of any period of time or for any period of time. The “at-will” term of Key Employee’s employment with the Company can only be changed in a writing signed by Key Employee and an authorized officer of the Company.
6.Severance Payment. Without limiting the provisions of the foregoing Section, assuming Key Employee’s employment with the Company shall have been continuous from Key Employee’s start date through the occurrence of the applicable event, and provided Key Employee executes and delivers to the Company, within twenty-one (21) days (or, to the extent required by law, forty-five (45) days) following the termination date (with any revocation periods having expired without any revocations by Key Employee), a separation agreement that includes a general release of claims against the Company and persons affiliated with the Company substantially in the form attached hereto as Exhibit A (the “Release”), then:
a.In the event of any Termination without Cause (as defined below) or any Constructive Termination (as defined below) which occurs during the period commencing one (1) month prior to a Change in Control (as defined below) and terminating twelve (12) months after such Change in Control (the “Change in Control Period”), Key Employee will be entitled to the following:
i.a lump sum payment (paid on the sixtieth (60th) day following such termination of employment) equal to the sum of (A) Key Employee’s then current base salary rate calculated for a period of twelve (12) months and (B) one (1) times the Target Bonus calculated for a period of twelve (12) months (i.e., no proration); and
ii.if Key Employee elects to continue Key Employee’s health insurance coverage under COBRA, then the Company will reimburse Key Employee for the same portion of Key Employee’s monthly premiums over such twelve (12) month period under COBRA (or, if applicable, such lesser period as is available to Key Employee under COBRA) as the Company is then paying (relative to health insurance coverage) for active employees; and
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b.In the event of any Termination without Cause or any Constructive Termination which occurs outside of a Change in Control Period, Key Employee will be entitled to the following:
i.a lump sum payment (paid on the sixtieth (60th) day following such termination of employment) equal to Key Employee’s then current base salary rate calculated for a period of twelve (12) months; and
ii.if Key Employee elects to continue Key Employee’s health insurance coverage under COBRA, then the Company will reimburse Key Employee for the same portion of Key Employee’s monthly premiums over such twelve (12) month period under COBRA as the Company is then paying (relative to health insurance coverage) for active employees; and
iii.the vesting arrangements with respect to any equity-based compensation (e.g., any stock options and any shares of restricted stock) other than any equity-based incentive awards that are earned based upon achievement of performance measures during a performance period (which shall remain subject to the terms of the applicable award agreement), will thereupon accelerate such that Key Employee will be vested in an additional twelve (12) months’ worth of vesting beyond the date of such Termination without Cause or Constructive Termination, with the Company’s standard post-termination exercise period as set forth in such equity award.
The following definitions shall apply for purposes of this Section:
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A “Change in Control” has the meaning set forth in the Company’s 2018 Stock Incentive Plan. |
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“Constructive Termination” means Key Employee’s election in a written notice to the Company to terminate any employment relationship where such notice is delivered within ninety (90) days after any of the following: (i) a material reduction in Key Employee’s level of duties or responsibilities or the nature of Key Employee’s functions; (ii) a material reduction in Key Employee’s base salary or potential total cash compensation (consisting of base salary and target bonus); (iii) a relocation of Key Employee’s principal place of employment by more than fifty (50) miles, if the new location is both (A) more than fifty (50) miles from Key Employee’s principal residence and (B) farther from Key Employee’s principal residence than Key Employee’s principal place of employment immediately before such relocation; or (iv) any material breach of Key Employee’s employment agreement by the Company; provided, that in all cases such action is not cured within thirty (30) days following written notice and, if the Company has not cured such action within the cure period, termination of employment occurs within thirty (30) days after the end of such cure period. |
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“Termination without Cause” means the termination by the Company of any employment relationship with Key Employee for any reason other than: (i) commission by Key Employee of any act of fraud or embezzlement with regard to the Company or one or more of its parent or subsidiary corporations; (ii) any material, intentional and unauthorized use or disclosure of material confidential information or trade secrets of the Company or one or more of its parent or subsidiary corporations by Key Employee (other than in the good-faith performance of Key Employee’s duties); (iii) a violation of the NDA or any other agreement entered into with the Company; (iv) any other intentional misconduct by Key Employee with regard to the Company or one or more of its parent or subsidiary corporations (including severe absenteeism other than as a result of physical or mental incapacity) which adversely affects the business or affairs of the Company or one or more of its parent or subsidiary corporations in a material manner; or (v) Key Employee’s failure to attempt in good faith to either perform duties consistent with Key Employee’s position with the Company or one or more of its parent or subsidiary corporations or to follow the reasonable requests of the Company’s Board, so long as Key Employee has been provided with an opportunity for a period of at least ten (10) business days following written notice to Key Employee to cure such failure (provided such conduct constituting Cause is capable of cure) and Key Employee fails to so cure, each as reasonably determined by the Company; provided, however, that clause (v) shall no longer apply following a Change in Control. |
7.Separation for Any Other Reason. In the event that Key Employee’s employment is terminated in any instance not addressed by Section 6 (including, without limitation, a termination by the Company other than a Termination without Cause, a resignation by Key Employee other than for a Constructive Termination, in the event of Key Employee’s death, or in the event Key Employee is unable to perform the essential functions of Key Employee’s job position, with or without accommodation, due to mental or physical disability), Key Employee shall not be entitled to any compensation or any other sum (other than accrued but unpaid base salary, accrued vacation pay and such other benefits if any as may be required by applicable law).
8.Code Section 409A. The intent of the Parties is that payments and benefits under this Agreement and any equity-based compensation (e.g., any stock options and any shares of restricted stock) comply with, or be exempt from, Section 409A of the Internal Revenue Code (the “Code”) and, accordingly, to the maximum extent permitted, this Agreement and any equity-based compensation shall be interpreted to be in compliance therewith or exempt therefrom. If Key Employee notifies the Company (with specificity as to the reason therefor) that Key Employee believes that any provision of this Agreement or any equity-based compensation (or of any award of compensation) would cause Key Employee to incur any additional tax or interest under Code Section 409A and the Company concurs with such belief or the Company independently makes such determination, the Company shall, after consulting with Key Employee, reform such provision to try to comply with Code Section 409A through good-faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good-faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Key Employee and the Company of the applicable provision without violating the provisions of Code Section 409A.
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a.A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “nonqualified deferred compensation” under Code Section 409A unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If Key Employee is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment that is considered nonqualified deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of Key Employee’s “separation from service” and (B) the date of Key Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 8 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Key Employee in a lump sum with interest at the prime rate as published in The Wall Street Journal on the first business day following the end of the Delay Period, and any remaining payments and benefits due under this letter shall be paid or provided in accordance with the normal payment dates specified for them herein.
b.With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of Key Employee’s taxable year following the taxable year in which the expense occurred.
c.For purposes of Code Section 409A, Key Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. In no event may Key Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered nonqualified deferred compensation.
9.Excess Parachute Payments and Limitations. If any payment or distribution made to Key Employee in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) (a “Payment”) or portion thereof would constitute a “parachute payment” within the meaning of Section 280G of the Code and, but for this sentence, would be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”) (all such Payments (or portions thereof) being hereinafter referred to as the “Total Payments”), then such Total Payments shall be whichever of the following amounts, after taking into account all applicable federal, state and local employment taxes, income taxes and the Excise Tax, that results in Key Employee’s receipt, on an after-tax basis, of the greater amount: (a) the net amount of the Total Payments that would result in no portion of the Total Payments being subject to the Excise Tax; or (b) the net amount of the
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Total Payments without reduction (notwithstanding that all or some portion of the Total Payments may be subject to the Excise Tax). If a reduction in the Total Payments is necessary so that the Total Payments equal the amount described in clause (a) above, reduction shall occur in the following order: (i) the cancellation of acceleration of vesting of any equity awards for which the exercise price exceeds the then fair market value of the underlying equity (the “GAP”) that have a ninety (90) day or less exercise period, starting with such equity awards with the largest amount of GAP, (ii) reduction of cash payments (in reverse order of the date otherwise due), (iii) reduction of employee benefits (in reverse order of the date otherwise due), and (iv) the cancellation of vesting of any equity awards not covered in clause (i) above, provided, that such cancellation will first apply to equity awards that are “fully valued” under Section 280G of the Code (including those subject to present value adjustments) and thereafter, to equity awards valued on an acceleration of vesting basis, and provided, further, within each category, the cancellation shall be in a manner as providing Key Employee with the highest net amount; provided, however, that to the extent permitted by Code Section 409A and Sections 280G and 4999 of the Code, if a different reduction procedure would be permitted without violating Code Section 409A or losing the benefit of the reduction under Sections 280G and 4999 of the Code, Key Employee may designate a different order of reduction. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (x) no portion of the Total Payments the receipt or enjoyment of which Key Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account; (y) no portion of the Total Payments shall be taken into account which, in the written opinion of Wolf & Company, P.C. or such accounting or consulting firm with particular expertise regarding excise taxes under Section 4999 of the Code selected by the Board in good faith prior to the applicable Change in Control (the “Accounting Firm”), does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation; and (z) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
10.Miscellaneous. Key Employee agrees to abide by all applicable laws and regulations and all Company policies and procedures as they are established. Violation of such laws, regulations, policies, procedures or the NDA may lead to immediate termination of employment. The terms of this Agreement and Key Employee’s employment with the Company shall be governed in all aspects by the laws of the State of Delaware; provided, however, if Key Employee lives and works primarily in the State of California, the laws of the State of California shall govern. This Agreement may be executed in more than one counterpart, and signatures transmitted via facsimile or PDF shall be deemed equivalent to originals.
11.Integrated Agreement. This Agreement supersedes any prior agreements, representations or promises of any kind, whether written, oral, express or implied between the Parties with respect to the subject matters herein. Likewise, the terms of this Agreement and the NDA incorporated herein by reference shall constitute the full, complete and exclusive agreement between Key Employee and the Company with respect to the subject matters herein. This
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Agreement may only be changed by a writing, signed by Key Employee and an authorized officer of the Company.
12.Withholding. Any payments or other compensation provided to Key Employee or for Key Employee’s benefit will be subject to (and thus reduced by) all applicable deductions and withholdings.
13.Severability. If any term herein is held to be invalid, void or unenforceable, the remainder of the terms herein shall remain in full force and effect and shall in no way be affected, and the Parties shall use their best efforts to find an alternative way to achieve the same result.
14.Successors.
a.This Agreement is personal to Key Employee and, without the prior written consent of the Company, shall not be assignable by Key Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Key Employee’s legal representatives.
b.This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
15.Amendment. No amendment or other modification of this Agreement shall be effective unless made in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.
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THE COMPANY:
ACER THERAPEUTICS INC.
By:_/s/ Chris Schelling______________
Chris Schelling
CEO & Founder
Date: _February 15, 2022____________ |
KEY EMPLOYEE:
By:_/s/ Adrian W. Quartel____________
Printed Name: Adrian W. Quartel
Date:_February 16, 2022________________ |
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ACER THERAPEUTICS INC.