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EXHIBIT 4.1
U.S. MICROBICS, INC.
2005-II EMPLOYEE STOCK INCENTIVE PLAN
AS ADOPTED AUGUST 25, 2005
1.
PURPOSE.
The purpose of this Plan is to provide incentives to attract,
retain
and motivate eligible persons whose present
and potential contributions are
important to the success of the Company,
its Parent and Subsidiaries, by
offering them an opportunity to participate
in the Company's future performance
through awards of Options, Restricted Stock
and Stock Bonuses. Capitalized terms
not defined in the text are defined in
Section 2.
2.
DEFINITIONS.
As used in this Plan, the following terms will have the
following
meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written
agreement between the Company and the
Participant setting forth the terms and
conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means any cause, as defined by applicable law, for the
termination of a Participant's employment
with the Company or a Parent or
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means U.S. Microbics, Inc., a Colorado corporation, or
any
successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent,
partial or total, as determined by the
Board.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may
purchase the Shares issuable upon exercise
of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the
Company's Common Stock determined as
follows:
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(a) if such
Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
The Wall Street Journal;
(b) if such
Common Stock is quoted on the NASDAQ National
Market, its closing price on the NASDAQ National
Market on the date of determination as reported in
The Wall Street Journal;
(c) if such
Common Stock is publicly traded but is not
listed or admitted to trading on a national
securities exchange, the average of the closing bid
and asked prices on the date of determination as
reported by Bloomberg, L.P.;
(d) in the
case of an Award made on the Effective Date,
the price per share at which shares of the Company's
Common Stock are initially offered for sale to the
public by the Company's underwriters in the initial
public offering of the Company's Common Stock
pursuant to a registration statement filed with the
SEC under the Securities Act; or
(e) if none of
the foregoing is applicable, by the Board
in good faith.
"INSIDER" means an officer or director of the Company or any
other
person whose transactions in the Company's
Common Stock are subject to Section
16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant
to
Section 6.
"PARENT" means any corporation (other than the Company) in an
unbroken
chain of corporations ending with the
Company if each of such 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.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the Board, in
its
sole and absolute discretion, from among
the following measures to determine
whether the performance goals applicable to
Awards have been satisfied:
(a) Net
revenue and/or net revenue growth;
(b) Earnings
before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating
income and/or operating income growth;
(d) Net income
and/or net income growth;
(e) Earnings
per share and/or earnings per share growth;
(f) Total
stockholder return and/or total stockholder
return growth;
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(g) Return on
equity;
(h) Operating
cash flow return on income;
(i) Adjusted
operating cash flow return on income;
(j) Economic
value added; and
(k) Individual
confidential business objectives.
"PERFORMANCE
PERIOD" means the period of service determined by the
Board, not to exceed five years, during
which years of service or performance is
to be measured for Restricted Stock Awards
or Stock Bonuses.
"PLAN" means this U.S. Microbics, Inc. 2005-II Employee Stock
Incentive
Plan, as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section
7.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for
issuance under this Plan, as adjusted
pursuant to Sections 3 and 19, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares,
pursuant to Section 8.
"SUBSIDIARY" means any corporation (other than the Company) in
an
unbroken chain of corporations beginning
with the Company if each of the
corporations other than the last
corporation in the unbroken chain 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.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with
respect to a Participant, that the
Participant has for any reason ceased to
provide services as an employee, officer,
director, consultant, independent
contractor, or advisor to the Company or a
Parent or Subsidiary of the Company.
An employee will not be deemed to have
ceased to provide services in the case of
(i) sick leave, (ii) military leave, or
(iii) any other leave of absence
approved by the Company, provided that such
leave is for a period of not more
than 90 days, unless reemployment upon the
expiration of such leave is
guaranteed by contract or statute or unless
provided otherwise pursuant to a
formal policy adopted from time to time by
the Company and issued and
promulgated to employees in writing. In the
case of any employee on an approved
leave of absence, the Board may make such
provisions respecting suspension of
vesting of the Award while on leave from
the employ of the Company or a
Subsidiary as it may deem appropriate,
except that in no event may an Option be
exercised after the expiration of the term
set forth in the Option agreement.
The Board will have sole discretion to
determine whether a Participant has
ceased to provide services and the
effective date on which the Participant
ceased to provide services (the
"TERMINATION DATE").
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"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
3.
SHARES SUBJECT TO THE PLAN.
3.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 3.2 and 19,
the
total aggregate number of Shares reserved
and available for grant and issuance
pursuant to this Plan will be 50,000,000
plus Shares that are subject to: (a)
issuance upon exercise of an Option but
cease to be subject to such Option for
any reason other than exercise of such
Option; (b) an Award granted hereunder
but forfeited or repurchased by the Company
at the original issue price; and (c)
an Award that otherwise terminates without
Shares being issued. At all times the
Company shall reserve and keep available a
sufficient number of Shares as shall
be required to satisfy the requirements of
all outstanding Options granted under
this Plan and all other outstanding but
unvested Awards granted under this Plan.
3.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding
shares is changed by a stock dividend,
recapitalization, stock split, reverse
stock split, subdivision, combination,
reclassification or similar change in the
capital structure of the Company without
consideration, then (a) the number of
Shares reserved for issuance under this
Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding
Options, and (c) the number of Shares
subject to other outstanding Awards will be
proportionately adjusted, subject to
any required action by the Board or the
stockholders of the Company and
compliance with applicable securities laws;
provided, however, that fractions of
a Share will not be issued but will either
be replaced by a cash payment equal
to the Fair Market Value of such fraction
of a Share or will be rounded up to
the nearest whole Share, as determined by
the Board.
4.
ELIGIBILITY.
ISOs (as defined in Section 6 below) may be granted only to
employees
(including officers and directors who are
also employees) of the Company or of a
Parent or Subsidiary of the Company. All
other Awards may be granted to
employees, officers, directors,
consultants, independent contractors and
advisors of the Company or any Parent or
Subsidiary of the Company; provided
such consultants, contractors and advisors
render bona fide services not in
connection with the offer and sale of
securities in a capital-raising
transaction.
5.
ADMINISTRATION.
5.1 BOARD AUTHORITY. This Plan will be administered by the
Board.
Subject to the general purposes, terms and
conditions of this Plan, the Board
will have full power to implement and carry
out this Plan. Without limitation,
the Board will have the authority to:
(a)
construe
and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe,
amend and rescind rules and regulations
relating to this Plan or any Award;
(c) select
persons to receive Awards;
(d) determine
the form and terms of Awards;
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(e) determine
the number of Shares or other consideration
subject to Awards;
(f) determine
whether Awards will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, other Awards under this Plan
or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant
waivers of Plan or Award conditions;
(h) determine
the vesting, ability to exercise and
payment of Awards;
(i) correct
any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award or any
Award Agreement;
(j) determine
whether an Award has been earned; and
(k) make all
other determinations necessary or advisable
for the administration of this Plan.
5.2 BOARD DISCRETION. Any determination made by the Board with
respect
to any Award will be made at the time of
grant of the Award or, unless in
contravention of any express term of this
Plan or Award, at any later time, and
such determination will be final and
binding on the Company and on all persons
having an interest in any Award under this
Plan. The Board may delegate to one
or more officers of the Company the
authority to grant an Award under this Plan
to Participants who are not Insiders of the
Company.
6.
OPTIONS.
The Board may grant Options to eligible persons and will
determine
whether such Options will be Incentive
Stock Options within the meaning of the
Code ("ISO") or Nonqualified Stock Options
("NQSOS"), the number of Shares
subject to the Option, the Exercise Price
of the Option, the period during which
the Option may be exercised, and all other
terms and conditions of the Option,
subject to the following:
6.1 FORM OF OPTION GRANT. Each Option granted under this Plan will
be
evidenced by an Award Agreement that will
expressly identify the Option as an
ISO or an NQSO (hereinafter referred to as
the "STOCK OPTION AGREEMENT"), and
will be in such form and contain such
provisions (which need not be the same for
each Participant) as the Board may from
time to time approve, and which will
comply with and be subject to the terms and
conditions of this Plan.
6.2 DATE OF GRANT. The date of grant of an Option will be the date
on
which the Board makes the determination to
grant such Option, unless otherwise
specified by the Board. The Stock Option
Agreement and a copy of this Plan will
be delivered to the Participant within a
reasonable time after the granting of
the Option.
6.3 EXERCISE PERIOD. Options may be exercisable within the times
or
upon the events determined by the Board as
set forth in the Stock Option
Agreement governing such Option; provided,
however, that no Option will be
exercisable after the expiration of ten
(10) years from the date the Option is
granted; and provided further that no ISO
granted to a person who directly or by
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attribution owns more than ten percent
(10%) of the total combined voting power
of all classes of stock of the Company or
of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be
exercisable after the expiration of
five (5) years from the date the ISO is
granted. The Board also may provide for
Options to become exercisable at one time
or from time to time, periodically or
otherwise, in such number of Shares or
percentage of Shares as the Board
determines.
6.4 EXERCISE PRICE. The Exercise Price of an Option will be
determined
by the Board when the Option is granted and
may be not less than 85% of the Fair
Market Value of the Shares on the date of
grant; provided that: (a) the Exercise
Price of an ISO will be not less than 100%
of the Fair Market Value of the
Shares on the date of grant; and (b) the
Exercise Price of any ISO granted to a
Ten Percent Stockholder will not be less
than 110% of the Fair Market Value of
the Shares on the date of grant. Payment
for the Shares purchased may be made in
accordance with Section 9 of this Plan.
6.5 METHOD OF EXERCISE. Options may be exercised only by delivery
to
the Company of a written stock option
exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the
Board, (which need not be the same for
each Participant), stating the number of
Shares being purchased, the
restrictions imposed on the Shares
purchased under such Exercise Agreement, if
any, and such representations and
agreements regarding Participant's investment
intent and access to information and other
matters, if any, as may be required
or desirable by the Company to comply with
applicable securities laws, together
with payment in full of the Exercise Price
for the number of Shares being
purchased.
6.6
TERMINATION. Notwithstanding the exercise periods set forth in
the
Stock Option Agreement, exercise of an
Option will always be subject to the
following:
(a) If the Participant's service is Terminated for any reason
except death or Disability, then the
Participant may exercise such Participant's
Options only to the extent that such
Options would have been exercisable upon
the Termination Date no later than three
(3) months after the Termination Date
(or such shorter or longer time period not
exceeding five (5) years as may be
determined by the Board, with any exercise
beyond three (3) months after the
Termination Date deemed to be an NQSO), but
in any event, no later than the
expiration date of the Options.
(b) If the Participant's service is Terminated because of
Participant's death or Disability (or the
Participant dies within three (3)
months after a Termination other than for
Cause or because of Participant's
Disability), then Participant's Options may
be exercised only to the extent that
such Options would have been exercisable by
Participant on the Termination Date
and must be exercised by Participant (or
Participant's legal representative or
authorized assignee) no later than twelve
(12) months after the Termination Date
(or such shorter or longer time period not
exceeding five (5) years as may be
determined by the Board, with any such
exercise beyond (i) three (3) months
after the Termination Date when the
Termination is for any reason other than the
Participant's death or Disability, or (ii)
twelve (12) months after the
Termination Date when the Termination is
for Participant's death or Disability,
deemed to be an NQSO), but in any event no
later than the expiration date of the
Options.
(c) Notwithstanding the provisions in paragraph 6.6(a) above,
if a Participant's service is Terminated
for Cause, neither the Participant, the
Participant's estate nor such other person
who may then hold the Option shall be
entitled to exercise any Option with
respect to any Shares whatsoever, after
Termination, whether or not after
Termination the Participant may receive
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payment from the Company or Subsidiary for
vacation pay, for services rendered
prior to Termination, for services rendered
for the day on which Termination
occurs, for salary in lieu of notice, or
for any other benefits. For the purpose
of this paragraph, Termination shall be
deemed to occur on the date when the
Company dispatches notice or advice to the
Participant that his service is
Terminated.
6.7 LIMITATIONS ON EXERCISE. The Board may specify a reasonable
minimum
number of Shares that may be purchased on
any exerc
