2002 Employee Stock Purchase Plan

EXHIBIT 10.4


AGRAQUEST, INC.


2002 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------


The following constitute the provisions of the 2002 Employee Stock Purchase Plan of AgraQuest, Inc.


1. Purpose. The purpose of the Plan is to provide employees of the
------- Company and its Designated Parents or Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.


2. Definitions. As used herein, the following definitions shall
----------- apply:


(a) "Administrator" means either the Board or a committee of the
------------- Board that is responsible for the administration of the Plan as is designated from time to time by resolution of the Board.


(b) "Applicable Laws" means the legal requirements relating to the
--------------- administration of employee stock purchase plans, if any, under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to participation in the Plan by residents therein.


(c) "Board" means the Board of Directors of the Company.
-----


(d) "Change in Control" means a change in ownership or control of the
----------------- Company effected through the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities.


(e) "Code" means the Internal Revenue Code of 1986, as amended.
----


(f) "Common Stock" means the common stock of the Company.
------------


(g) "Company" means AgraQuest, Inc., a Delaware corporation.
-------


(h) "Compensation" means an Employee's base salary from the Company
------------ or one or more Designated Parents or Subsidiaries, including such amounts of base salary as are deferred by the Employee (i) under a qualified cash or deferred arrangement described in Section 401(k) of the Code, or (ii) to a plan qualified under Section 125 of the Code. Compensation does


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not include overtime, bonuses, annual awards, other incentive payments, reimbursements or other expense allowances, fringe benefits (cash or noncash), moving expenses, deferred compensation, contributions (other than contributions described in the first sentence) made on the Employee's behalf by the Company or one or more Designated Parents or Subsidiaries under any employee benefit or welfare plan now or hereafter established, and any other payments not specifically referenced in the first sentence.


(i) "Corporate Transaction" means any of the following transactions:
---------------------


(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;


(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital
stock of the Company's subsidiary corporations);


(3) the complete liquidation or dissolution of the Company;


(4) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger; or


(5) acquisition in a single or series of related transactions by
any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any
such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction.


(j) "Designated Parents or Subsidiaries" means the Parents or
---------------------------------- Subsidiaries which have been designated by the Administrator from time to time as eligible to participate in the Plan.


(k) "Effective Date" means the effective date of the Registration
-------------- Statement relating to the Company's initial public offering of its Common Stock. However, should any Designated Parent or Subsidiary become a participating company in the Plan after such date, then such entity shall designate a separate Effective Date with respect to its employee-participants.


(l) "Employee" means any individual, including an officer or
-------- director, who is an employee of the Company or a Designated Parent or Subsidiary for purposes of Section 423 of the Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the individual's


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employer. Where the period of leave exceeds ninety (90) days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the ninety-first (91st) day of such leave, for purposes of determining eligibility to participate in the Plan.


(m) "Enrollment Date" means the first day of each Offer Period.
---------------


(n) "Exchange Act" means the Securities Exchange Act of 1934, as
------------ amended.


(o) "Exercise Date" means the last day of each Purchase Period.
-------------


(p) "Fair Market Value" means, as of any date, the value of Common
----------------- Stock determined as follows:


(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation The
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system on the date of determination (or, if
no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or
closing bid was reported), as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;


(2) If the Common Stock is regularly quoted on an automated
quotation system (including the OTC Bulletin Board) or by a recognized
securities dealer, but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the
high bid and low asked prices for the Common Stock on date of
determination (or, if no such prices were reported on that date, on
the last date such prices were reported), as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;


(3) In the absence of an established market for the Common Stock
of the type described in (1) and (2), above, the Fair Market Value
thereof shall be determined by the Administrator in good faith and in
a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations which requires that consideration be
given to (A) the price at which securities of reasonably comparable
corporations (if any) in the same industry are being traded, or (B) if
there are no securities of reasonably comparable corporations in the
same industry being traded, the earnings history, book value and
prospects of the issuer in light of market conditions generally; or


(4) On the initial Effective Date of the Plan, the Fair Market
Value shall be the price at which the Board, or if applicable, the
Pricing Committee of the Board, and the underwriters agree to offer
the Common Stock to the public in the initial public offering of the
Common Stock.


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(q) "Offer Period" means an Offer Period established pursuant to
------------ Section 4 hereof.


(r) "Parent" means a "parent corporation," whether now or hereafter
------ existing, as defined in Section 424(e) of the Code.


(s) "Participant" means an Employee of the Company or Designated
----------- Parent or Subsidiary who is actively participating in the Plan.


(t) "Plan" means this Employee Stock Purchase Plan.
----


(u) "Purchase Period" means a period of approximately six months,
--------------- commencing on February 1 and August 1 of each year and terminating on the next following July 31 or January 31, respectively; provided, however, that the first Purchase Period shall commence on the Effective Date and shall end on July 31, 2002.


(v) "Purchase Price" shall mean an amount equal to 85% of the Fair
-------------- Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.


(w) "Reserves" means the sum of the number of shares of Common Stock
-------- covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.


(x) "Subsidiary" means a "subsidiary corporation," whether now or
---------- hereafter existing, as defined in Section 424(f) of the Code.


3. Eligibility.
-----------


(a) General. Any individual who is an Employee on a given Enrollment
------- Date shall be eligible to participate in the Plan for the Offer Period commencing with such Enrollment Date.


(b) Limitations on Grant and Accrual. Any provisions of the Plan to
-------------------------------- the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (taking into account stock owned by any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Parent or Subsidiary, or (ii) which permits the Employee's rights to purchase stock under all employee stock purchase plans of the Company and its Parents or Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand U.S. Dollars (U.S.$25,000) worth of stock (determined at the Fair Market Value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. The determination of the accrual of the right to purchase stock shall be made in accordance with Section 423(b)(8) of the Code and the regulations thereunder.


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(c) Other Limits on Eligibility. Notwithstanding Subsection (a),
--------------------------- above, the following Employees shall not be eligible to participate in the Plan for any relevant Offer Period: (i) Employees whose customary employment is 20 hours or less per week; (ii) Employees whose customary employment is for not more than 5 months in any calendar year; (iii) Employees who have been employed for fewer than three business days; and (iv) Employees who are subject to rules or laws of a foreign jurisdiction that prohibit or make impractical the participation of such Employees in the Plan.


4. Offer Periods.
-------------


(a) The Plan shall be implemented through overlapping or consecutive Offer Periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated in accordance with Section 19 hereof. The maximum duration of an Offer Period shall be twenty-seven (27) months. Initially, the Plan shall be implemented through overlapping Offer Periods of twenty-four (24) months' duration commencing each February 1 and August 1 following the Effective Date (except that the initial Offer Period shall commence on the Effective Date and shall end on January 31, 2004).


(b) A Participant shall be granted a separate option for each Offer Period in which he or she participates. The option shall be granted on the Enrollment Date and shall be automatically exercised in successive installments on the Exercise Dates ending within the Offer Period.


(c) If on the first day of any Purchase Period in an Offer Period in which a Participant is participating, the Fair Market Value of the Common Stock is less than the Fair Market Value of the Common Stock on the Enrollment Date of the Offer Period (after taking into account any adjustment during the Offer Period pursuant to Section 18(a)), the Offer Period shall be terminated automatically and the Participant shall be enrolled automatically in the new Offer Period which has its first Purchase Period commencing on that date, provided the Participant is eligible to participate in the Plan on that date and has not elected to terminate participation in the Plan.


(d) Except as specifically provided herein, the acquisition of Common Stock through participation in the Plan for any Offer Period shall neither limit nor require the acquisition of Common Stock by a Participant in any subsequent Offer Period.


5. Participation.
-------------


(a) All Employees eligible to participate in the Plan as of the first Enrollment Date of the Plan shall automatically become a Participant in the initial Offer Period and be eligible to make a direct payment for shares of the Common Stock on the Exercise Date of the first Purchase Period of the initial Offer Period in an amount equal to the lesser of the aggregate Purchase Price for seven hundred fifty (750) shares of the Common Stock (such number of shares shall not be subject to adjustment pursuant to Section 18 hereof to reflect the one-for-two reverse stock split which occurs prior to the Effective Date) or ten percent (10%) of the Compensation that he or she receives during the first Purchase Period of the initial Offer Period, unless a change of status notice in the form of Exhibit C to this Plan (or such


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other form (including electronic forms) as determined by the Administrator from time to time) is filed to the contrary or the Participant withdraws from the Plan as provided in Section 10. No subscription agreement need be filed by the Participant with the Company in order to participate in the initial Offer Period.


(b) After the initial Offer Period, an eligible Employee may become a Participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan (or such other form (including electronic forms) as determined by the Administrator from time to time) and filing it with the designated payroll office of the Company at least five (5) business days prior to the Enrollment Date for the Offer Period in which such participation will commence, unless a later time for filing the subscription agreement is set by the Administrator for all eligible Employees with respect to a given Offer Period.


(c) No payroll deductions shall be made for Participants during the first Purchase Period of the initial Offer Period, unless a change of status notice in the form of Exhibit C to this Plan (or such other form (including electronic forms) as determined by the Administrator from time to time) authorizing the commencement of payroll deductions is filed by the Participant with the Company after a registration statement on Form S-8 has been filed with the Securities Exchange Commission with respect to the shares being offered under the Plan. If so elected, the rate of payroll deductions during the first Purchase Period of the initial Offer Period may exceed the maximum permitted rate under Section 6(a) to make-up for missed payroll deductions that would otherwise have been made prior to the filing of the Form S-8 with respect to the Plan. Payroll deductions for a Participant in the initial Offer Period shall commence at the rate elected by the Participant under Section 6(a) with the first partial or full payroll period beginning on the first day of the second Purchase Period of the initial Offer Period and shall end on the last complete payroll period during the initial Offer Period, unless a change of status notice in the form of Exhibit B (or such other form (including electronic forms) as determined by the Administrator from time to time) is filed to the contrary or the Participant withdraws from the Plan as provided in Section 10. No direct payment for shares shall be permitted after the first Purchase Period of the initial Offer Period. Therefore, Participants in the initial Offer Period must file the change of status notice in the form of Exhibit C to this Plan (or such other form (including electronic forms) as determined by the Administrator from time to time) prior to the commencement of the second Purchase Period of the initial Offer Period to assure maximum participation rights under the Plan.


(d) For Offer Periods, other than the initial Offer Period, payroll deductions for a Participant shall commence with the first partial or full payroll period beginning on the Enrollment Date and shall end on the last complete payroll period during the Offer Period, unless sooner terminated by the Participant as provided in Section 10.


6. Payroll Deductions.
------------------


(a) At the time a Participant files a subscription agreement, the Participant shall elect to have payroll deductions made during the Offer Period in amounts between one percent (1%) and not exceeding ten percent (10%) of the Compensation which the Participant receives during the Offer Period.


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(b) All payroll deductions made for a Participant shall be credited to the Participant's account under the Plan and will be withheld in whole percentages only. A Participant may not make any additional payments into such account.


(c) A Participant may discontinue participation in the Plan as provided in Section 10, or may increase or decrease the rate of payroll deductions during the Offer Period by completing and filing with the Company a change of status notice in the form of Exhibit B to this Plan (or such other form (including electronic forms) as determined by the Administrator from time to time) authorizing an increase or decrease in the payroll deduction rate. During the first Purchase Period of the initial Offer Period, a Participant may discontinue participation in the Plan as provided in Section 10 or initiate payroll deductions by completing and filing with the Company a change of status notice in the form of Exhibit C to this Plan (or such other form (including electronic forms) as determined by the Administrator from time to time). Any increase or decrease in the rate of a Participant's payroll deductions shall be effective with the first full payroll period commencing five (5) business days after the Company's receipt of the change of status notice unless the Company elects to process a given change in participation more quickly. A Pa ...