CERES, INC. STOCK OPTION AGREEMENT
Exhibit
10.5
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the services of selected
Employees, non-employee members of the Board or the board of directors of any Parent or Subsidiary
and consultants and other independent advisors in the service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a Parent or Subsidiary), and
this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation’s grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning assigned to them in the
attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date,
an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option
Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years measured from the
Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless
sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. During Optionee’s lifetime, this option shall be
exercisable only by Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following Optionee’s death.
4. Dates of Exercise. This option shall become exercisable for the Option Shares in
one or more installments as specified in the Grant Notice. As the option becomes exercisable for
such installments, those installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall terminate
(and this option shall cease to be outstanding) prior to the Expiration Date should any of the
following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other than death,
Disability or Misconduct) while this option is outstanding, then Optionee shall have a period of three (3) months (commencing with the date of such cessation of
Service)
during which to exercise this option, but in no event shall this option be exercisable at
any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then the personal
representative of Optionee’s estate or the person or persons to whom the option is
transferred pursuant to Optionee’s will or in accordance with the laws of inheritance shall
have the right to exercise this option. Such right shall lapse, and this option shall cease
to be outstanding, upon the earlier of (i) the expiration of the twelve (12) month period
measured from the date of Optionee’s death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while this option is
outstanding, then Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option. In no event shall
this option be exercisable at any time after the Expiration Date.
Note: Exercise of this option on a date later than three (3) months
following cessation of Service due to Disability will result in loss of favorable
Incentive Option treatment, unless such Disability constitutes Permanent Disability.
In the event that Incentive Option treatment is not available, this option will be
taxed as a Non-Statutory Option upon exercise.
(d) During the limited period of post-Service exercisability, this option may not be
exercised in the aggregate for more than the number of Option Shares in which Optionee is,
at the time of Optionee’s cessation of Service, vested pursuant to the Vesting Schedule
specified in the Grant Notice or the special vesting acceleration provisions of Paragraph 6.
Upon the expiration of such limited exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any vested Option Shares
for which the option has not been exercised. To the extent Optionee is not vested in one or
more Option Shares at the time of Optionee’s cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to those shares.
(e) Should Optionee’s Service be terminated for Misconduct, then this option shall
terminate immediately and cease to remain outstanding.
6. Accelerated Vesting.
(a) In the event of any Corporate Transaction, the Option Shares at the time subject to this
option but not otherwise vested shall automatically vest in full so that this option shall,
immediately prior to the effective date of the Corporate Transaction, become exercisable for all of
the Option Shares as fully vested shares and may be exercised for any or all of those Option Shares
as vested shares. Notwithstanding the foregoing, with respect to any option that is subject to
Section 409A of the Code and payment or settlement of the option is to be accelerated in connection
with the Corporate Transaction, no Corporate Transaction will be deemed to have
occurred for purposes of the Plan and any option agreement unless such event(s) also constitutes a
“change in the ownership”, “change in the effective control” or a “change
in the ownership of a
substantial portion of the assets” of the Corporation as defined under Section 409A of the Code.
In addition, the Option Shares shall not vest on such an accelerated basis if and to the extent:
(i) this option is assumed by the successor corporation (or parent thereof) in the Corporate
Transaction and the Corporation’s repurchase rights with respect to the unvested Option Shares are
assigned to such successor corporation (or parent thereof) or (ii) this option is to be replaced
with a cash incentive program of the successor corporation which preserves the spread existing on
the unvested Option Shares at the time of the Corporate Transaction (the excess of the Fair Market
Value of those Option Shares over the Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same Vesting Schedule applicable to those unvested Option
Shares as set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
(c) If this option is assumed in connection with a Corporate Transaction, then this option
shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided
the aggregate Exercise Price shall remain the same.
(d) Should there occur an Involuntary Termination of Optionee’s Service within twelve (12)
months following a Corporate Transaction in which the Option Shares do not otherwise vest on an
accelerated basis pursuant to Paragraph 6(a), then all the Option Shares subject to this option at
the time of such Involuntary Termination but not otherwise vested shall automatically vest and the
Corporation’s repurchase rights with respect to those shares shall terminate so that this option
shall immediately become exercisable for all the Option shares as fully-vested shares, to the
extent that such acceleration and termination of repurchase rights would not give rise to adverse
tax consequences to the Optionee under Section 409A of the Code. The option shall remain
exercisable for any or all of those vested Option Shares until the earlier of (1) the Expiration
Date or (ii) the expiration of the one (1) year period measured from the date of the Involuntary
Termination.
(e) This Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
7. Adjustment Option Shares. Should any change be made to the Common Stock by reason
of any stock split, stock dividend, merger, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to (i) the total number, kind
and/or class of securities subject to this option and (ii) the Exercise Price
in order to reflect such change and thereby preclude a dilution or enlargement of benefits
hereunder.
8. Stockholder Rights. The holder of this option shall not have any stockholder
rights with respect to the Option Shares until such person shall have exercised the option, paid
the Exercise Price and become the record holder of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part of the Option Shares for
which this option is at the time exercisable, Optionee (or any other person or persons
exercising the option) must take the following actions:
(i) Execute and deliver to the Corporation a Purchase Agreement for the Option Shares
for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the
following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but only to the extent
authorized by the Plan Administrator in accordance with Paragraph 14.
Should the Common Stock be registered under Section 12 of the 1934 Act at the
time the option is exercised, then the Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any other person or persons
exercising the option) for the requisite period necessary to avoid a charge to the
Corporation’s earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date; or
(D) to the extent the option is exercised for vested Option Shares, through a
special sale and remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently provide irrevocable
instructions (a) to a Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate Exercise
Price payable for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is utilized in
connection with the option exercise, payment of the Exercise Price must accompany
the Purchase Agreement delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Corporation such written representations as may be
requested by the Corporation in order for it to comply with the applicable requirements of
Federal and state securities laws.
(v) Make appropriate arrangements with the Corporation (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, state and local income
and employment tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf
of Optionee (or any other person or persons exercising this option) a certificate for the purchased
Option Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION
SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN
ACCORDANCE WITH THE TERMS SPECIFIED IN THE PURCHASE AGREEMENT.
11. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option Shares upon such exercise shall
be subject to compliance by the Corporation and Optionee with all applicable requirements of law
relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock may be listed for trading at the time of such
exercise and issuance.
(b) The inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common
Stock pursuant to this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such approvals.
(c) Notwithstanding any contrary provision in this agreement, if any provision of the Plan or
this agreement contravenes any regulations or guidance promulgated under Section 409A of the Code
or could cause an option to be subject to the interest and penalties under Section 409A of the
Code, such provision may be modified by the Company without consent of the Optionee to maintain, to
the maximum extent practicable, the original intent of the applicable provision without violating
the provisions of Section 409A of the Code. Moreover,
any discretionary authority that the Board
or Committee may have pursuant to the Plan shall not be applicable to an option that is subject to
Section 409A of the Code, to the extent such discretionary authority will contravene Section 409A
of the Code or the regulations or guidance promulgated thereunder.
12. Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3
and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the
Corporation and its successors and assigns and Optionee, Optionee’s assigns and the legal
representatives, heirs and legatees of Optionee’s estate.
13. Notices. Any notice required to be given or delivered to the Corporation under
the terms of this Agreement shall be in writing and addressed to the Corporation at its principal
corporate offices. Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant
Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
14. Financing. The Plan Administrator may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased Option Shares by
delivering a full-recourse, interest-bearing promissory note secured by those Option Shares,
provided that Optionee is not a member of the Board or an officer of the Corporation. The payment
schedule in effect for any such promissory note shall be established by the Plan Administrator in
its sole discretion.
15. Construction. This Agreement and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All
decisions of the Plan Administrator with respect to any question or issue arising under the Plan or
this Agreement shall be conclusive and binding on all persons having an interest in this option.
16. Governing Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of California without resort to that State’s
conflict-of-laws rules.
17. Stockholder Approval. If the Option Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last
approved by the stockholders, then this option shall be void with respect to such excess shares,
unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
18. Additional Terms Applicable to an Incentive Option. In the event this option is
designated an Incentive Option in the Grant Notice, the following terms and conditions shall also
apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment as an Incentive
Option if (and to the extent) this option is exercised for one or more Option Shares: (i)
more than three (3) months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (ii) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the calendar year in which granted if
(and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option would otherwise first become exercisable in such calendar
year would, when added to the aggregate value (determined as of the respective date or dates
of grant) of the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any Parent or Subsidiary) first become exercisable during
the same calendar year, exceed the ISO Limit (as defined in the Plan). To the extent the
exercisability of this option is deferred by reason of the foregoing limitation, the
deferred portion shall become exercisable in the first calendar year or years thereafter in
which the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b) would
not be contravened, but such deferral shall in all events end immediately prior to the
effective date of a Corporate Transaction in which this option is not to be assumed,
whereupon the option shall become immediately exercisable as a Non-Statutory Option for the
deferred portion of the Option Shares. Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for the first time
in the same calendar year as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be applied on the basis of the
order in which such options are granted. Notwithstanding the foregoing, any Incentive
Option shall become exercisable as of its respective vesting dates and to the extent the ISO
Limit is exceeded, the portion of the option that becomes exercisable because of vesting in
excess of the ISO Limit shall be treated as a Non-Statutory Option under the Federal tax
laws.
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation’s Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
D. Common Stock shall mean the Corporation’s common stock.
E. Corporate Transaction shall be deemed to have occurred when:
(i) Any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act, whether or not the Corporation is then subject to the terms of the Exchange
Act), directly or indirectly, of securities of the Corporation representing twenty (20%)
percent or more of the combined voting power of the Corporation’s then-outstanding
securities; or
(ii) The following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who constitute the Board as of December 31,
2009 and any new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including, but not limited to, a
consent solicitation, relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election by the Corporation’s
shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or recommended;
or
(iii) There is consummated a merger or consolidation of the Corporation, other than (A)
a merger or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the Corporation or any
Subsidiary, at least sixty (60%) percent of the combined voting power of the securities of
the Corporation or such surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which no Person is or
becomes the beneficial owner, directly or indirectly, of securities of the Corporation (not
including in the securities beneficially owned by such Person any securities acquired
directly from the Corporation or its affiliates other than in connection with the securities acquired directly from the Corporation or its
affiliates other than in connection with the acquisition by the Corporation or its
affiliates of a business) representing twenty (20%) percent or more of the combined voting
power of the Corporation’s then outstanding securities; or
(iv) The shareholders of the Corporation approve a plan of complete liquidation or
dissolution of the Corporation or there is consummated an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation’s assets,
other than a sale or disposition by the Corporation of all or substantially all of the
Corporation’s assets to an entity, at least sixty (60%) percent of the combined voting power
of the voting securities of which are owned by shareholders of the Corporation in
substantially the same proportions as their ownership of the Corporation immediately prior
to such sale.
F. Corporation shall mean Ceres, Inc., a Delaware corporation, and any successor
corporation to all or substantially all of the assets or voting stock of Ceres, Inc. which shall by
appropriate action adopt the Plan.
G. Disability shall mean the inability of Optionee to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment and shall be
determined by the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances. Disability shall be deemed to constitute
Permanent Disability in the event that such Disability is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or more.
H. Employee shall mean an individual who is in the employ of the Corporation (or any
Parent or Subsidiary), subject to the control and direction of the employer entity as to both the
work to be performed and the manner and method of performance.
I. Exercise Date shall mean the date on which the option shall have been exercised in
accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price payable per Option Share as specified
in the Grant Notice.
K. Expiration Date shall mean the date on which the option expires as specified in the
Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock on the date
in question, as the price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock Exchange nor
traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the
Plan Administrator after taking into account such factors as the Plan Administrator shall
deem appropriate.
▇. ▇▇▇▇▇ Date shall mean the date of grant of the option as specified in the Grant
Notice.
▇. ▇▇▇▇▇ Notice shall mean the Notice of Grant of Stock Option accompanying the
Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced
hereby.
O. Incentive Option shall mean an option which satisfies the requirements of Code
Section 422.
P. Involuntary Termination shall mean the termination of Optionee’s Service which
occurs by reason of:
(i) Optionee’s dismissal or discharge by the Corporation for reasons other than
Misconduct, or
(ii) Optionee’s voluntary resignation following (A) a change in Optionee’s position
with the Corporation (or Parent or subsidiary employing Optionee) which materially reduces
the Optionee’s level of responsibility, (B) a reduction in Optionee’s level of compensation
(including base salary, fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) in the aggregate or
(C) a relocation of Optionee’s place of employment by more than fifty (50) miles from
Optionee’s place of employment immediately prior to the Corporate Transaction, provided and
only if such change, reduction or relocation is effected by the Corporation without Optionee
consent;
provided, however, that in no circumstances shall an event constitute an
Involuntary Termination if it would create an inappropriate acceleration of payment that
could give rise to adverse tax consequences to an Optionee under Section 409A of the Code.
Q. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by Optionee, any unauthorized use or disclosure by Optionee of confidential information
or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by Optionee adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may
consider as grounds for the dismissal or discharge of Optionee or any other individual in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
S. Non-Statutory Option shall mean an option not intended to satisfy the requirements
of Code Section 422.
T. Option Shares shall mean the number of shares of Common Stock subject to the
option.
U. Optionee shall mean the person to whom the option is granted as specified in the
Grant Notice.
V. Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.
W. Person shall mean any person, entity or “group” within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (i) the
Corporation or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or any of its Subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation.
X.
Plan shall mean the Corporation’s 2010 Stock Option/Stock Issuance Plan, as may be amended from time to time.
Y. Plan Administrator shall mean either the Board or a committee of the Board acting
in its capacity as administrator of the Plan.
Z. Purchase Agreement shall mean the stock purchase agreement in substantially the
form of Exhibit B to the Grant Notice.
AA. Service shall mean the Optionee’s performance of services for the Corporation (or
any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of
directors or an independent consultant.
AB. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.
AC. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
AD. Vesting Schedule shall mean the vesting schedule specified in the Grant Notice
pursuant to which the Optionee is to vest in the Option Shares in a series of installments over his
or her period of Service.