EXHIBIT
10.1
PACIFIC BIOMETRICS,
INC.
2005 STOCK INCENTIVE
PLAN
SECTION
1. PURPOSE
The purpose of this Pacific Biometrics, Inc.
2005 Stock Incentive Plan (the “ Plan
”) is to enhance the long-term stockholder value of Pacific
Biometrics, Inc., a Delaware corporation (the “
Company ”), by offering opportunities to
employees, directors, officers, consultants, agents, advisors and
independent contractors of the Company and its Subsidiaries (as
defined in Section 2) to participate in the Company’s growth
and success, and to encourage them to remain in the service of the
Company and its Subsidiaries and to acquire and maintain stock
ownership in the Company.
SECTION
2. DEFINITIONS
For purposes of the Plan, the following terms
shall be defined as set forth below:
“ Award ” means an
award or grant made pursuant to the Plan, including, without
limitation, awards or grants of Options and Stock Awards, or any
combination of the foregoing.
“ Board ” means the
Board of Directors of the Company.
“ Cause ” means
dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information, trade secrets or other intellectual
property, or conviction or confession (including a plea of no
contest) of a crime punishable by law (except minor violations), or
conduct that adversely affects the Company’s business or
reputation, in each case as determined by the Plan Administrator in
its sole discretion, and its determination as to whether an action
constitutes Cause shall be conclusive and binding.
“
Code ” means the Internal Revenue Code of
1986, as amended from time to time.
“
Common Stock ” means the Company common
stock, $.01 par value per share.
“
Corporate Transaction ” means any of the
following events:
(a) Consummation of any merger or consolidation of
the Company in which the Company is not the continuing or surviving
corporation, or pursuant to which shares of the Common Stock are
converted into cash, securities or other property, if following
such merger or consolidation the holders of the Company’s
outstanding voting securities immediately prior to such merger or
consolidation own less than 50% of the outstanding voting
securities of the surviving corporation;
(b) Consummation of any sale, lease, exchange or
other transfer in one transaction or a series of related
transactions of all or substantially all of the Company’s
assets other than a transfer of the Company’s assets to a
majority-owned subsidiary corporation of the Company; or
(c) Approval by the holders of the Common Stock of
any plan or proposal for the liquidation or dissolution of the
Company.
Ownership of voting securities shall take into
account and shall include ownership as determined by applying Rule
13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan)
under the Exchange Act.
“Disability ” means “disability” as that
term is defined for purposes of Section 22(e)(3) of the Code. As of
the date of adoption of this Plan, such terms means the inability
to engage in any substantial gainful activity by reason of any
medically determinable mental or physical impairment which can be
expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12
months.
“ Employee ” means
any person, including officers and directors, employed by the
Company (or one of its parent corporations or subsidiary
corporations), with the status of employment determined based upon
such minimum number of hours or periods worked as shall be
determined by the Plan Administrator in its discretion, subject to
any requirements of the Code. For purposes of this provision,
“parent corporation” and “subsidiary
corporation” shall have the meanings attributed to those
terms for purposes of Section 422 of the Code.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“ Fair Market Value
” shall be the fair market value of the Common Stock, as of
any date, as determined by the Plan Administrator as
follows:
(a) if the Common Stock is listed on any
established stock exchange or a national market system, including
without limitation the National Market tier of The Nasdaq Stock
Market (“ Nasdaq ”), the Fair Market
Value shall be the closing sales price for such stock (or if no
sales were reported, the closing sales price on the last preceding
trading date), as quoted on such system or exchange, or the system
or exchange with the greatest volume of trading in Common Stock,
for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the
Plan Administrator deems reliable;
(b) If the Common Stock is quoted on the Nasdaq
system (but not on the National Market tier thereof), on the OTC
Bulletin Board or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value
shall be the closing sales price for such stock for the Common
Stock on the Grant Date, as reported in The Wall Street Journal or
such other source as the Plan Administrator deems reliable;
or
(c) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good
faith by the Plan Administrator.
“ Grant Date ”
means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan
Administrator as the date an Award is to be granted.
“ Holder ” means
(a) the person to whom an Award is granted, (b) for a
Holder who has died, the personal representative of the
Holder’s estate, the person(s) to whom the Holder’s
rights under the Award have passed by will or by the applicable
laws of descent and distribution, or the beneficiary designated in
accordance with Section 10, or (c) the person(s) to whom an
Award has been transferred in accordance with Section
10.
“ Incentive Stock Option
” means an Option to purchase Common Stock granted under
Section 7 with the intention that it qualify as an “incentive
stock option” as that term is defined in Section 422 of the
Code.
“ Nonqualified Stock
Option ” means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock
Option.
“ Option ” means
the right to purchase Common Stock granted under Section
7.
“ Plan Administrator
” means the Board or any committee of the Board designated to
administer the Plan under Section 3.1.
“ Restricted Stock
” means shares of Common Stock granted under Section 9, the
rights of ownership of which are subject to restrictions prescribed
by the Plan Administrator.
“ Securities Act ”
means the Securities Act of 1933, as amended.
“ Stock Award ”
means an Award granted under Section 9.
“ Subsidiary ”
means any entity that is directly or indirectly controlled by the
Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity
that may become a direct or indirect parent of the
Company.
“ Successor Corporation
” has the meaning set forth under Section 11.2.
SECTION
3. ADMINISTRATION
3.1
Plan
Administrator . The
Plan shall be administered by the Board, or a committee or
committees (which term includes subcommittees) appointed by, and
consisting of two or more members of, the Board. If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the Plan
Administrator and the membership of any committee acting as Plan
Administrator, with respect to any persons subject or likely to
become subject to Section 16 of the Exchange Act, the provisions
regarding (a) “outside directors” as contemplated
by Section 162(m) of the Code, (b) “nonemployee
directors” as contemplated by Rule 16b-3 under the Exchange
Act, and (c) any requirements as to “independent
directors” pursuant to rules of any securities exchange on
which the Common Stock is quoted or listed for trading. The Board
may delegate the responsibility for administering the Plan with
respect to designated classes of eligible persons to different
committees consisting of two or more members of the Board, subject
to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine,
subject to removal by the Board at any time.
3.2
Administration and
Interpretation by the Plan Administrator
. Except for the terms and
conditions explicitly set forth in the Plan, the Plan Administrator
shall have exclusive authority, in its discretion, to determine all
matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number
of shares of Common Stock subject to an Award, all terms,
conditions, restrictions and limitations, if any, of an Award and
the terms of any document, agreement or instrument that evidences
the Award. The Plan Administrator shall also have exclusive
authority to interpret the Plan and may from time to time adopt,
and change, rules and regulations of general application for the
Plan’s administration. The Plan Administrator’s
interpretation of the Plan and its rules and regulations, and all
actions taken and determinations made by the Plan Administrator
pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company’s officers as it
so determines.
3.3
Replacement of
Options . Without
limiting the authority granted to the Plan Administrator under
Section 3.2, the Plan Administrator, in its sole discretion, shall
have the authority, among other things, to (a) grant Options
subject to the condition that Options previously granted at a
higher or lower exercise price under the Plan be canceled or
exchanged in connection with such grant (the number of shares
covered by the new Options, the exercise price, the term and the
other terms and conditions of the new Option, shall be determined
in accordance with the Plan and may be different from the
provisions of the canceled or exchanged Options), and
(b) amend or modify outstanding and unexercised Options, with
the consent of the Holder, to, among other things, reduce the
exercise price per share, establish the exercise price at the
then-current Fair Market Value or accelerate or defer the exercise
date, vesting schedule or expiration date of any Option.
SECTION
4. STOCK SUBJECT TO THE PLAN
4.1
Authorized Number of
Shares . Subject to
adjustment from time to time as provided in Section 11.1, a maximum
of 3,000,000 shares of Common Stock shall be available for issuance
under the Plan. Shares issued under the Plan shall be drawn from
authorized and unissued shares or shares now held or subsequently
acquired by the Company.
4.2
Reuse of
Shares . Any shares
of Common Stock that have been made subject to an Award that cease
to be subject to the Award (other than by reason of exercise or
payment of the Award to the extent it is exercised for or settled
in shares) shall again be available for issuance in connection with
future grants of Awards under the Plan.
SECTION
5. ELIGIBILITY
Awards may be granted under the Plan to those
Employees, officers and directors of the Company and its
Subsidiaries as the Plan Administrator from time to time selects.
Awards may also be made to consultants, agents, advisors and
independent contractors who provide services to the Company and its
Subsidiaries, as the Plan Administrator from time to time selects.
In granting Awards to consultants, agents, advisors and independent
contractors, the Plan Administrator shall give consideration to the
requirements set forth in the instructions to the use of Form S-8
registration statement under the Securities Act. A member of the
Board may be eligible to participate in or receive or hold Awards
under this Plan; provided, however, that no member of the Board
shall vote with respect to the granting of an Award to himself or
herself.
SECTION
6. AWARDS
6.1
Form and Grant of
Awards . The Plan
Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan.
Such Awards may include, but are not limited to, Incentive Stock
Options, Nonqualified Stock Options and Stock Awards. Awards may be
granted singly or in combination. An eligible person may receive
one or more grants of Awards as the Plan Administrator shall from
time to time determine, and such determinations may be different as
to different Holders and may vary as to different grants, even when
made simultaneously.
6.2
Number of
Shares . The maximum
number of shares that may be issued pursuant to the grant of an
Award shall be as established by the Plan Administrator. Provided,
however, to the extent required for compliance with the exclusion
from the limitation on deductibility of compensation under Section
162(m) of the Code, the Plan Administrator shall not grant Awards
to any person in any one fiscal year of the Company in an amount
that exceeds, in the aggregate, 1,000,000 shares of Common Stock
(subject to adjustment as provided in Section 11).
6.3
Acquired Company
Awards .
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for
awards issued under other plans, or assume under the Plan awards
issued under other plans, if the other plans are or were plans of
other acquired entities (“ Acquired Entities
”) (or the parent of the Acquired Entity) and the new Award
is substituted, or the old award is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization
or liquidation (the “ Acquisition
Transaction ”). In the event that a written
agreement pursuant to which the Acquisition Transaction is
completed is approved by the Board and said agreement sets forth
the terms and conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator,
except as may be required for compliance with Rule 16b-3 under the
Exchange Act, and the persons holding such Awards shall be deemed
to be Holders.
SECTION
7. AWARDS OF OPTIONS
7.1
Grant of
Options . The Plan
Administrator is authorized under the Plan, in its sole discretion,
to issue Options as Incentive Stock Options or as Nonqualified
Stock Options, which shall be appropriately designated.
7.2
Option Exercise
Price . The exercise
price for shares purchased under an Option shall be as determined
by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date.
7.3
Term of
Options . The term
of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant
Date.
7.4
Vesting / Exercisability of
Options . The Plan
Administrator shall establish and set forth in each agreement that
evidences an Option the time at which or the installments in which,
if any, the Option shall vest and become exercisable. In the
absence of a defined vesting schedule in the agreement evidencing
the Option, the Option covered by such agreement will vest and
become exercisable quarterly over a period of three years from the
Grant Date, with 1/12 of the Option vesting and becoming
exercisable on each quarterly anniversary of the Grant Date. The
Plan Administrator, in its absolute discretion, may waive or
accelerate any vesting requirement contained in outstanding and
unexercised Options.
7.5
Exercise of
Options . Options
shall be exercised in accordance with the following terms and
conditions:
(a)
Procedure
. To the extent that an Option has
vested and is currently exercisable, an Option may be exercised
from time to time by written notice to the Company, in accordance
with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is
being exercised and accompanied by payment in full of the exercise
price. The Plan Administrator may determine at any time that an
Option may not be exercised as to less than 100 shares at any one
time (or the lesser number of remaining shares covered by the
Option). Only whole shares shall be issued pursuant to the exercise
of any Option.
(b)
Payment of Exercise
Price .
(1) The exercise price for shares purchased under
an Option shall be paid in full to the Company by delivery of
consideration equal to the product of the Option exercise price and
the number of shares being purchased. Such consideration must be
paid in any combination of cash and/or bank-certified or
cashier’s check (or personal check if determined acceptable
by the Plan Administrator in its sole discretion), either at the
time the Option is granted or within three days after notice of
exercise is tendered to the Company.
(2) In addition, to the extent permitted by the
Plan Administrator in its sole discretion, the exercise price for
shares purchased under an Option may be paid, either singly or in
combination with one or more of the alternative forms of payment
authorized by this Section 7.5, by (y) delivery of a
full-recourse promissory note or (z) such other consideration
as the Plan Administrator may permit. The terms of any such
promissory note, including the interest rate, terms of and security
for repayment, and maturity, will be subject to the Plan
Administrator’s discretion. Any such promissory note shall
bear interest at a rate specified by the Plan Administrator but in
no case less than the rate required to avoid imputation of interest
(taking into account any exceptions to the imputed interest rules)
for federal income tax purposes.
(3) If and so long as the Common Stock is
registered under Section 12 of the Exchange Act, then, to the
extent permitted by applicable laws and regulations (including, but
not limited to, federal tax and securities laws and regulations)
and unless the Plan Administrator determines otherwise, an Option
also may be exercised by (a) delivery of shares of Common
Stock (which shares, if tendered by an affiliate of the Company,
shall have been held by the Holder for at least six months) having
a Fair Market Value equal to the aggregate exercise price (such
payment in stock may occur in the context of a single exercise of
an option or successive and simultaneous exercises, sometimes
referred to as “pyramiding,” which provides that,
rather than physically exchanging certificates for a series of
exercises, bookkeeping entries will be made pursuant to which the
Holder is permitted to retain his existing stock certificate and a
new stock certificate is issued for the net shares), or
(b) delivery of a properly executed exercise notice together
with irrevocable instructions to (i) a brokerage firm
acceptable to the Company to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the Option
exercise price and any withholding tax obligations that may arise
in connection with such exercise, and (ii) the Company to
deliver the certificates for such purchased shares directly to such
brokerage firm, all in accordance with the requirements of the
Federal Reserve Board.
7.6
Rights as
Stockholder . Until
the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such shares, no right to vote
or receive dividends or any other rights as a stockholder shall
exist with respect to shares of Common Stock acquired on exercise
of an Option, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate
promptly upon proper exercise of the Option and payment in full of
the aggregate exercise price. In the event that the exercise of an
Option is treated in part as the exercise of a Nonqualified Stock
Option (pursuant to the provisions of Section 8.1), the Company
shall issue a stock certificate evidencing the shares treated as
acquired upon the exercise of an Incentive Stock Option and a
separate stock certificate evidencing the shares treated as
acquired upon the exercise of a Nonqualified Stock Option, and
shall identify each such certificate accordingly in its stock
transfer records. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of
this Plan.
7.7
Post-Termination
Exercises . The Plan
Administrator shall establish and set forth in each agreement that
evidences an Option whether the Option will continue to be
exercisable, and the terms and conditions of such exercise, if a
Holder ceases to be employed by, or to provide services to, the
Company or its Subsidiaries, which provisions may be waived or
modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option
will be exercisable accordi
