<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
IMPAX LABORATORIES, INC.
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
IMPAX LABORATORIES, INC.
30831 Huntwood Avenue
Hayward, California 94544
--------------------------------------------------------------------------------
Dear Stockholder:
You are cordially invited to attend the Company's Special Meeting of
Stockholders to be held on Tuesday, October 3, 2000 at 10:00 A.M., Pacific
Standard Time, at the Crowne Plaza Hotel, 1221 Chess Drive, Foster City, CA
94404.
The formal Notice of Meeting and the accompanying Proxy Statement set
forth proposals for your consideration at the Special Meeting. You are being
asked to increase the Company's authorized Common Stock from 50,000,000 to
75,000,000 shares and to increase the aggregate number of shares of Common Stock
that may be issued pursuant to the Company's 1999 Equity Incentive Plan from
2,400,000 to 5,000,000.
At the meeting, the Board of Directors will also report on the affairs
of the Company, and a discussion period will be provided for questions and
comments of general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you are able to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign, date and mail, at your earliest convenience, the enclosed
proxy in the envelope provided for your use.
Thank you for your cooperation.
Very truly yours,
Charles Hsiao, Ph.D.
Chairman and Co-Chief Executive Officer
September 1, 2000
<PAGE>
IMPAX LABORATORIES, INC.
30831 Huntwood Avenue
Hayward, California 94544
--------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON October 3, 2000
--------------------------------------------------------------------------------
To the Stockholders of Impax Laboratories, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Impax
Laboratories, Inc. (the "Company") will be held on Tuesday, October 3, 2000 at
10:00 A.M., Pacific Standard Time, at the Crowne Plaza Hotel, 1221 Chess Drive,
Foster City, CA 94404, for the following purposes:
(1) To consider and act upon a proposal to increase the
Company's authorized Common Stock from 50,000,000 shares to
75,000,000 shares.
(2) To consider and act upon a proposal to increase the number
of shares of Common Stock that may be issued pursuant to the
Company's 1999 Equity Incentive Plan from 2,400,000 shares to
5,000,000 shares.
(3) To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Only stockholders of record at the close of business on August 25, 2000
will be entitled to notice of and to vote at the Special Meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting in
person, each stockholder is urged to complete, date and sign the enclosed form
of proxy and return it promptly in the envelope provided. No postage is required
if the proxy is mailed in the United States. Stockholders who attend the Special
Meeting may revoke their proxy and vote their shares in person.
By Order of the Board of Directors
CORNEL C. SPIEGLER
Secretary
Hayward, California
September 1, 2000
<PAGE>
Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, California 94544
--------------------------------------
PROXY STATEMENT
--------------------------------------
GENERAL INFORMATION
General
This Proxy Statement (first mailed to stockholders on or about August
25, 2000) is furnished to the holders of Common Stock, par value $.01 per share
(the "Common Stock"), Series 1A Convertible Preferred Stock, par value $.01 per
share, Series 1B Convertible Preferred Stock (collectively with the Series 1A
Convertible Preferred Stock, the "Series 1 Preferred"), and Series 2 Convertible
Preferred Stock, par value $.01 per share (the "Series 2 Preferred"), of Impax
Laboratories, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for use at the Special Meeting of
Stockholders (the "Special Meeting"), or at any adjournment thereof, pursuant to
the accompanying Notice of Special Meeting of Stockholders. The Special Meeting
will be held on Tuesday, October 3, 2000 at 10:00 A.M., Pacific Standard
Time, at the Crowne Plaza Hotel, 1221 Chess Drive, Foster City, CA 94404.
At the Special Meeting, stockholders will consider and vote
upon: (i) an increase in the Company's authorized Common Stock from 50,000,000
shares to 75,000,000 shares, and (ii) an increase in the aggregate number of
shares of Common Stock that may be issued pursuant to the Company's 1999 Equity
Incentive Plan from 2,400,000 shares to 5,000,000 shares.
Management currently is not aware of any other matters that will come
before the Special Meeting. If any other matters properly come before the
Special Meeting, the persons designated as proxies intend to vote in accordance
with their best judgment on such matters.
Proxies for use at the Special Meeting are being solicited by the Board
of Directors of the Company. Proxies will be solicited chiefly by mail; however,
certain officers, directors, employees and agents of the Company, none of whom
will receive additional compensation therefor, may solicit proxies by telephone,
telegram or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling, and will
reimburse the reasonable expenses of brokerage firms and others for forwarding
material to beneficial owners of shares of Common Stock, Series 1 Preferred and
Series 2 Preferred (collectively, the "Capital Stock").
Revocability and Voting of Proxy
A form of proxy for use at the Special Meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of a proxy at any time prior to the effective exercise of the
powers conferred by that proxy by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date or by
voting in person at the Special Meeting. Shares of Capital Stock represented by
executed and unrevoked proxies will be voted in accordance with the instructions
specified in such proxies. If no specifications are given, the proxies intend to
vote the shares represented thereby "for" (i) an increase in the Company's
authorized Common Stock from 50,000,000 shares to 75,000,000 shares, and (ii) an
increase in the aggregate number of shares of Common Stock that may be issued
pursuant to the Company's 1999 Equity Incentive Plan from 2,400,000 shares to
5,000,000 shares.
The enclosed Proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Special Meeting:
(i) approval of the Minutes of a prior meeting of Stockholders, if such approval
does not amount to ratification of the action taken at the meeting; (ii) any
proposal omitted from this Proxy Statement and the form of proxy pursuant to
Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934; and (iii)
matters incident to the conduct of the Impax Laboratories, Inc. Special Meeting.
In connection with such matters, the person named in the enclosed proxy will
vote in accordance with their best judgment.
<PAGE>
Record Date and Voting Rights
On July 31, 2000, there were issued and outstanding 25,004,968 shares
of Common Stock, 220,000 shares of Series 1 Preferred and 150,000 shares of
Series 2 Preferred. Only stockholders of record at the close of business on
August 25, 2000 (the "Record Date") are entitled to notice of and to vote at the
Special Meeting or any adjournment thereof.
Each share of Common Stock is entitled to one vote upon each of the
matters to be presented at the Annual Meeting. The holders of shares of Series 1
Preferred and Series 2 Preferred vote, in general, as a single class with the
holders of the Common Stock, on all matters voted on by the stockholders of the
Company, with each holder of Series 1 Preferred or Series 2 Preferred entitled
to the number of shares of Common Stock into which that holder's shares would
then be convertible. At the Record Date, each share of Series 1A Preferred Stock
("Series 1A") was convertible into 50 shares of Common Stock, each share of
Series 1B Preferred Stock ("Series 1B") was convertible into 66.7 shares of
Common Stock and each share of Series 2 Preferred was convertible into 20 shares
of Common Stock. Accordingly, as of the Record Date, the holders of the shares
of Common Stock, Series 1 Preferred and Series 2 Preferred are entitled to cast
a total of 41,841,657 votes.
The affirmative vote of the holders of the majority of the shares
present in person or represented by proxy and entitled to vote at the Special
Meeting is required to (i) increase the Company's authorized Common Stock from
50,000,000 shares to 75,000,000 shares, and (ii) increase the aggregate number
of shares of Common Stock that may be issued pursuant to the Company's 1999
Equity Incentive Plan from 2,400,000 shares to 5,000,000 shares.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum, but will not be counted with
respect to the specific matter being voted upon. As a result, abstentions and
broker non-votes are effectively treated as votes against the proposals, making
it more difficult to obtain the necessary approval for these proposals. "Broker
non-votes" are shares held by brokers or nominees which are present in person or
represented by proxy, but which are not voted on a particular matter because
instructions have not been received from the beneficial owner.
2
<PAGE>
Beneficial Ownership Of Common Stock By Certain Stockholders And Management
The following table sets forth information as of July 31, 2000 (except
as otherwise noted in the footnotes) regarding the beneficial ownership of the
Company's Capital Stock of: (i) each person known by the Company to own
beneficially more that five percent of the outstanding Common Stock, Series 1
Preferred or Series 2 Preferred; (ii) each director; (iii) each executive
officer named in the Summary Compensation Table (see "Executive Compensation");
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise specified, the named beneficial owner has the sole voting and
investment power over the shares listed.
<TABLE>
<CAPTION>
Shares Beneficially Owned +
------------------------------------------------------------------------
Series 1 Series 2
Common Stock Preferred Stock Preferred Stock
---------------------- ---------------------- -----------------------
Name and Address of Beneficial Owner No. of Shares Percent No. of Shares Percent No. of Shares Percent
------------------------------------ ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Barry R. Edwards (1) .............................. 132,313 * -- -- -- --
c/o Impax Laboratories, Inc.
3735 Castor Avenue
Philadelphia, PA 19124
David J. Edwards (2) .............................. 1,667 * -- -- -- --
c/o Fleming Capital Management
Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Nigel Fleming, Ph.D. .............................. -- -- -- -- -- --
2360 Pacific Avenue, #504
San Francisco, CA 94115
Charles Hsiao, Ph.D. (3) .......................... 4,942,974 19.1 -- -- 5,000 3.3
c/o Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, CA 94544
Larry Hsu, Ph.D. (4) .............................. 2,691,383 10.4 -- -- -- --
c/o Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, CA 94544
Brian Keng (5) .................................... -- -- -- -- -- --
c/o China Development
Industrial Bank
3945 Freedom Circle, Suite 1150
Santa Clara, CA 95054
Jason Lin (6) ..................................... 4,269,357 14.6 55,000 25.0 30,000 20.0
c/o Uni-President Enterprises Corp.
301 Chung Cheng Road
Yeong Kang
Tainan Hslen, Taiwan R.O.C.
Michael Markbreiter (7) ........................... 11,667 * -- -- -- --
c/o Kingdon Capital
Management Corp.
152 West 57th Street
New York, NY 10019
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned +
------------------------------------------------------------------------
Series 1 Series 2
Common Stock Preferred Stock Preferred Stock
---------------------- ---------------------- -----------------------
Name and Address of Beneficial Owner No. of Shares Percent No. of Shares Percent No. of Shares Percent
------------------------------------ ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Oh Kim Sun (8) .................................... 5,745,324 20.6 40,000 18.2 10,000 6.7
c/o Chemical Company of
Malaysia Berhad
Wisma Sine Darby
14 Jalan Faja Laut
50708 Kuala Lumpur, Malaysia
May Chu (9) ....................................... 66,716 * -- -- -- --
c/o Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, CA 94544
Mitchell Goldberg (10) ............................ 38,175 * -- -- -- --
c/o Impax Laboratories, Inc.
3735 Castor Avenue
Philadelphia, PA 19124
Cornel C. Spiegler (11) ........................... 67,596 * -- -- -- --
c/o Impax Laboratories, Inc.
3735 Castor Avenue
Philadelphia, PA 19124
Joseph A. Storella (12) ........................... 53,333 * -- -- -- --
c/o Impax Laboratories, Inc.
3735 Castor Avenue
Philadelphia, PA 19124
Bear Stearns Asset Management, Inc. (13) .......... 1,918,554 7.6 -- -- -- --
575 Lexington Avenue
New York, NY 10167
Chemical Company of Malaysia Berhad (14) .......... 5,741,154 20.6 40,000 18.2 10,000 6.7
Wisma Sine Darby
14 Jalan Faja Laut
50708 Kuala Lumpur, Malaysia
Chiin Hsiao Children Irrevocable Trust ............ 2,601,924 10.4 -- -- -- --
c/o Laurie A. Miller, Esquire
3542 Oak Knoll Drive
Redwood City, CA 94062
China Development Industrial Bank (15) ............ 4,602,937 15.6 60,000 27.3 30,000 20.0
c/o Brian Keng
3945 Freedom Circle, Suite 1150
Santa Clara, CA 95054
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned +
--------------------------------------------------------------------------
Series 1 Series 2
Common Stock Preferred Stock Preferred Stock
---------------------- ----------------------- ------------------------
Name and Address of Beneficial Owner No. of Shares Percent No. of Shares Percent No. of Shares Percent
------------------------------------ ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
John Hsiao (16) ................................... 1,658,800 6.6 -- -- -- --
c/o Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, CA 94544
Robert Fleming, Inc. (17) ......................... 4,625,000 15.6 50,000 22.7 75,000 50.0
Fleming US Discovery Fund III, L.P. ............ 3,986,452 13.5 43,093 19.6 64,637 43.1
Fleming US Discovery Offshore Fund III, L. P. .. 638,548 2.1 6,907 3.1 10,363 6.9
c/o Robert Fleming, Inc.
320 Park Avenue, 11th Floor
New York, NY 10022
Kingdon Capital Management (18) ................... 1,882,353 7.5 -- -- -- --
Kingdon Offshore, N.V. ......................... 1,129,412 4.5
Kindon Associates, L.P. ........................ 376,471 1.5
Kingdon Partners, L.P. ......................... 376,470 1.5
152 West 57th Street
New York, NY 10019
Hsu Children Irrevocable Trust .................... 1,334,320 5.3 -- -- -- --
c/o Laurie A. Miller, Esquire
3542 Oak Knoll Drive
Redwood City, CA 94062
Laurie A. Miller, Esquire (19) .................... 4,037,153 16.1 -- -- -- --
3542 Oak Knoll Drive
Redwood City, CA 94062
President (BVI) International Investment
Holdings, Ltd. (20) ............................ 4,269,357 14.6 55,000 25.0 30,000 20.0
c/o Jason Lin
301 Chung Cheng Road
Yeong Kang
Tainan Hslen, Taiwan R.O.C.
All directors and executive officers as a group
(13) .............................................. 18,020,505 52.8 95,000 43.2 45,000 30.0
</TABLE>
----------------
*Less than one percent
+ Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and includes voting or
investment power with respect to the Capital Stock. Shares currently
exercisable or exercisable within 60 days of the date hereof are deemed
outstanding for computing the share ownership and percentage ownership of
the person holding such securities, but are not deemed outstanding for
computing the percentage of any other person.
(1) Includes options to purchase 131,313 shares of common stock which may be
exercised within 60 days.
(2) Consists of options to purchase 1,667 shares of common stock which may be
exercised within 60 days. Mr. David Edwards is an employee of Fleming
Capital Management, a subsidiary of Robert Fleming, Inc. See also Note 19.
(3) Includes 500,370 shares of common stock held in trust for the benefit of
John Hsiao's children, 250,185 shares of common stock held in trust for
5
<PAGE>
the benefit of Richard Hsiao's children, options to purchase 83,395 shares
of common stock which may be exercised within 60 days, 5,000 shares of
Series 2 Preferred which are immediately convertible into 100,000 shares
of common stock and warrants immediately convertible into 667,160 shares
of common stock. Does not include 2,601,924 shares of common stock held in
the Chiin Hsiao Children Irrevocable Trust, as to which shares Dr. Hsiao
does not have voting or dispositive power.
(4) Includes options to purchase 83,395 shares of common stock which may be
exercised within 60 days and warrants immediately convertible into 667,160
shares of common stock. Does not include 1,334,320 shares of common stock
held in the Hsu Children Irrevocable Trust, as to which shares Dr. Hsu
does not have voting or dispositive power.
(5) Mr. Brian Keng is an employee of China Development Industrial Bank. Does
not include shares beneficially owned by China Development Industrial
Bank. See also Note 17.
(6) Because of Mr. Jason Lin's role as President of Uni-President Enterprises
Corporation, he may also be deemed to beneficially own the shares of
Series 1B and Series 2 Preferred Stock owned by Uni-President Enterprises
Corporation. Includes 55,000 shares of Series 1B Preferred Stock which
shares are immediately convertible into 3,669,357 shares of common stock
and 30,000 shares of Series 2 Preferred Stock which shares are immediately
convertible into 600,000 shares of common stock. See also Note 22.
(7) Consists of options to purchase 11,667 shares of common stock which may be
exercised within 60 days. Does not include shares beneficially owned by
Kingdon Capital Management Corporation ("KCMC"), the general partner of M.
Kingdon Offshore, N.V., Kingdon Associates, L.P. and Kingdon Partners,
L.P. (collectively, "Kingdon"), with which Mr. Markbreiter is associated
See also Note 20.
(8) Because Mr. Oh Kim Sun is a substantial stockholder of the Chemical
Company of Malaysia, he may also be deemed to beneficially own the shares
of Series 1B and Series 2 Preferred Stock owned by the Chemical Company of
Malaysia. Includes 40,000 shares of Series 1B Preferred Stock which shares
are immediately convertible into 2,668,623 of common stock, 10,000 shares
of Series 2 Preferred Stock which shares are immediately convertible into
200,000 shares of common stock and options to purchase 4,170 shares of
common stock which may be exercised within 60 days.
(9) Consists of options to purchase 66,716 shares of common stock which may be
exercised within 60 days.
(10) Consists of options to purchase 38,175 shares of common stock which may be
exercised within 60 days.
(11) Includes options to purchase 55,759 shares of common stock which may be
exercised within 60 days and a warrant to purchase 3,500 shares of common
stock immediately exercisable.
(12) Includes options to purchase 52,333 shares of common stock which may be
exercised within 60 days.
(13) The source of this information is the Schedule 13G, dated February 14,
2000 filed with the Securities and Exchange Commission. Such Schedule 13G
reported that Bear Stearns Asset Management, Inc. has sole power to
dispose or direct the disposition of 1,693,554 shares which it
beneficially owned. Includes a warrant to purchase 225,000 shares of
common stock immediately exercisable.
(14) Includes shares of Series 1B Preferred Stock immediately convertible into
2,668,623 shares of common stock and shares of Series 2 Preferred Stock
immediately convertible into 200,000 shares of common stock.
(15) Consists of shares of Series 1B Preferred Stock immediately convertible
into 4,002,937 shares of common stock and shares of Series 2 Preferred
Stock immediately convertible into 600,000 shares of common stock.
6
<PAGE>
(16) Includes a warrant to purchase 266,864 shares of common stock immediately
exercisable. Mr. John Hsiao is an employee of the Company and the brother
of Charles Hsiao, the Chairman and the Co-Chief Executive Officer of the
Company.
(17) Consists of shares of series 1A Preferred Stock immediately convertible
into 2,500,000 shares of common stock, warrants to purchase an aggregate
of 625,000 shares of common stock which may be exercised within 60 days
and shares of Series 2 Preferred Stock immediately convertible into
1,500,000 shares of common stock.
(18) KCMC, the general partner of Kingdon, is deemed to be the beneficial owner
of the 1,882,353 shares of common stock held by Kingdon.
(19) Includes options for 23,518 shares of common stock which may be exercised
within 60 days and 3,936,244 shares of common stock owned by the Chiin
Hsiao Children Irrevocable Trust and the Hsu Children Irrevocable Trust,
for which Laurie A. Miller, who is corporate counsel to Impax, serves as
trustee, and therefore may be deemed to beneficially own the shares held
by the trust. Ms. Miller disclaims beneficial ownership of these shares.
(20) Consists of shares of Series 1B Preferred Stock immediately convertible
into 3,669,357 shares of common stock and shares of Series 2 Preferred
Stock immediately convertible into 600,000 shares of common stock.
Executive Compensation
The following table summarizes the compensation earned by or paid to
the Company's Chairman, each Co-Chief Executive Officer, the President and Chief
Operating Officer and the Company's other six most highly compensated executive
officers for 1999, 1998 and 1997, including two executive officers who left the
Company in December 1999 and January 2000.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------------------- ------------------
Other Annual Common Stock
Compensation Underlying Options
Name and Principal Position Year Salary ($) Bonus ($) $ (#)
-------------------------------------- ---- ---------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Charles Hsiao, Ph.D. 1999 122,292(1) -- -- 333,580
Chairman and Co-Chief Executive Officer
Barry R. Edwards 1999 167,848 45,550 11,753(2) 370,000
Co-Chief Executive Officer 1998 93,363 10,000 5,472(3) 62,175
Larry Hsu, Ph.D. 1999 122,292(4) -- -- 333,580
President and Chief Operating Officer
Cornel C. Spiegler 1999 150,191 13,761 3,492(5) 20,000
Chief Financial Officer 1998 138,926 1,391 3,522(5) 10,870
1997 135,660 -- 3,259(5) 36,000(9)
Joseph A. Storella 1999 148,027 11,463 5,554(5) 12,000
Vice President Operations 1998 135,922 1,365 5,746(5) 10,000
1997 133,100 -- 5,317(5) 36,000(9)
Marc Feinberg (6) 1999 131,510 8,854 3,233(5)
Vice President, Quality 1998 131,514 1,365 3,269(5)
1997 133,100 -- 3,025(5) 36,000(9)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------------------- ------------------
Other Annual Common Stock
Compensation Underlying Options
Name and Principal Position Year Salary ($) Bonus ($) $ (#)
-------------------------------------- ---- ---------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Pieter Groenewoud (7) 1999 127,116 8,570 3,268(5) 4,000
Vice President, 1998 127,704 1,200 3,280(5) 11,000
Product Development 1997 92,146 -- 3,031(5) 25,000(9)
Mitchell Goldberg 1999 118,145 19,024 1,287(5)
Vice President, Sales 1998 111,237 21,100 1,371(5) 2,175
1997 95,111 -- 813(5) 36,000(9)
May Chu 1999 104,583(8) -- -- 66,716
Vice President, Quality Affairs
</TABLE>
(1) This amount represents Dr. Hsiao's salary for the entire year 1999.
(2) Represents life insurance and long-term disability insurance along with
gross-up tax payments with respect to such insurance payments and $8,958
in car allowance.
(3) Represents life insurance and long-term disability insurance along with
gross-up tax payments with respect to such insurance payments and $3,336
in car allowance.
(4) This amount represents Dr. Hsu's salary for the entire year 1999.
(5) Represents life insurance and long-term disability insurance along with
gross-up tax payments with respect to such insurance payments.
(6) Mr. Feinberg has served as Vice President, Quality Assurance from October
1996 through December 1999.
(7) Mr. Groenewoud has served as Vice President, Product Development since May
1996 through January 2000.
(8) This amount represents Mrs. Chu's salary for the entire year 1999.
(9) Represents cancellation of old options and the issuance of identical
repriced new options having an exercise price of $3.125 per share.
The following table sets forth information on option grants in the fiscal
year ended December 31, 1999 to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total Options
Securities Granted to
Underlying Options Employees in Fiscal Exercise
Name Granted Year Price $/SH Expiration Date
---- ------------------ ------------------- ---------- ---------------
<S> <C> <C> <C> <C>
Charles Hsiao, Ph.D. 333,580(1) 25.6 0.82 (1) 4/2/09
Barry R. Edwards 100,000 7.7 2.1875 2/12/09
270,000 20.7 3.875 12/14/09
Larry Hsu, Ph.D. 333,580(1) 25.6 0.75 (1) 4/2/09
May Chu 66,716(1) 5.1 0.75 (1) 4/2/09
Cornel Spiegler 8,000 * 2.1875 2/12/09
12,000 3.3125 7/20/09
Joseph Storella 12,000 * 2.1875 2/12/09
Pieter Groenewoud 4,000 * 2.1875 2/12/09
Mitchell Goldberg -- -- -- --
Marc Feinberg -- -- -- --
</TABLE>
----------------
* Less than one percent.
(1) These amounts are on as converted basis after giving effect to the
conversion factor of 3.3358 shares of Global Pharmaceutical Corporation
for one share of Impax Pharmaceuticals, Inc.
8
<PAGE>
The following table sets forth information with respect to unexercised
stock options held at December 31, 1999 by the persons named in the Summary
Compensation Table. There were no exercises of options to purchase Common Stock
by such individuals during the fiscal year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at in-the-Money Options at
Fiscal Year End (#) Fiscal Year End ($)
----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C>
Charles Hsiao, Ph.D. .............. -- 333,580 -- 1,310,969(1)
Barry R. Edwards .................. 34,375 15,625 -- (2) -- (2)
-- 12,175 -- 33,481(3)
27,778 72,222 71,181(4) 185,069(4)
-- 270,000 -- 236,250(5)
Larry Hsu, Ph.D. .................. -- 333,580 -- 1,334,320(6)
May Chu ........................... 40,030 80,059 160,120(6) 320,236(6)
Cornel Spiegler ................... 36,000 -- 58,500(7) --
-- 10,870 -- 29,893(3)
2,222 5,778 5,694(4) 14,806(4)
1,667 10,333 2,396(8) 14,854(8)
Joseph Storella .................... 36,000 -- 58,500(7) --
-- 10,000 -- 27,500(3)
3,333 8,667 8,541(4) 22,209(4)
Mitchell Goldberg .................. 33,000 3,000 53,625(7) 4,875(7)
-- 2,175 -- 5,981(3)
Pieter Groenewoud .................. 25,000 -- 40,625(7) --
11,000 -- 11,000(9) --
1,111 2,889 2,847(4) 7,403(4)
Marc Feinberg ...................... 36,000 -- 58,500(7) --
</TABLE>
------------------
(1) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$0.82.
(2) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$5.00.
(3) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$2.00.
(4) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the Exercise price of
$2.1875.
(5) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$3.875.
(6) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$0.75.
(7) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$3.125.
(8) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$3.3125.
(9) Computed based on the difference between the closing price per share of
the Common Stock at $4.75 on December 31, 1999 and the exercise price of
$3.75.
9
<PAGE>
Employment Agreements
At the closing of the merger between Global Pharmaceutical Corporation and
Impax Pharmaceuticals, Inc., effective December 14, 1999, each of Mr. Barry R.
Edwards and Drs. Hsiao and Hsu entered into a new employment agreement with the
Company. Each of these employment agreements has substantially the same terms.
Mr. Edward's and Dr. Hsiao's agreements provide that they will serve as Co-Chief
Executive Officers of the Company and, in the case of Dr. Hsiao, Chairman of the
Board. Dr. Hsu's Agreement provides that he will serve as President and Chief
Operating Officer of the Company. The other material terms of these employment
agreements are described below.
Each employment agreement will be for an initial term of three years, and
will be renewed automatically for successive one-year terms unless terminated by
either party at least six months prior to the expiration of the initial term or
any renewal term. Each of the executives will receive an annual salary of
$175,000, and will be entitled to a bonus based on criteria established by the
Board of the Company. Any bonus paid to one of these three executives must be
similarly paid at the same time to the other two executives.
Any of the executives may be terminated by the Company, either with or
without cause. The executive may terminate his own employment for any reason, or
for good reason. These terms are defined more fully in the employment
agreements. In general, cause means:
o a material breach of the provisions of the employment agreement
relating to proprietary information, trade secrets, confidentiality and
non-competition;
o a material breach of any other provision of the employment agreement
that is not remedied within 30 days of such breach;
o any act of fraud or embezzlement against the Company; or
o any indictment of the executive for a felony or other crime that would
cause injury to the reputation of the Company.
In general, good reason means:
o assignment of duties or a reduction in duties which is inconsistent
with the executive's position;
o a material reduction in executive's salary or benefits not agreed to by
the executive;
o a relocation that would require executive to have commute of more than
50 miles; or
o a change in control of the Company.
In general, a change in control is defined as:
o the acquisition by any person or entity of ownership or control of more
than 50% of the voting power of the Company;
o a sale or disposition of assets totaling more than 50% of the value of
the Company;
o a merger or reorganization in which the Company's stockholders
immediately prior to the merger do not own a least 51% of the voting
power of the Company after the merger;
o any transaction where the Company's stockholders immediately prior to
the transaction do not own at least 51% of the voting power of the
Company after the transaction; or
o any other transaction that the Board determines would materially alter
the structure, ownership or control of the Company.
If the executive is terminated without cause or terminates his employment
for good reason, he will be entitled to receive a payment of all accrued and
unpaid salary and benefits plus salary and benefits for the next six months or,
if less, the remainder of the term of the employment agreement.
The executives have also agreed to keep all proprietary information of the
Company confidential and to assign all proprietary information or intellectual
property developed by the executive during the course of his employment to the
10
<PAGE>
Company. Each executive has also agreed that during the term of the employment
agreement and for a period of two years following the termination of his
employment, he will not engage in a business competitive with that of the
Company or entice any of the Company's customers, suppliers or business partners
to end their relationship with the Company.
In addition to the terms previously described, Mr. Edwards' employment
agreement provides that he will receive an option to purchase 270,000 shares of
common stock at the prevailing market price at the time the option is granted.
The shares covered by this option vest and are exercisable on the following
schedule: (i) first year - 0%; (ii) second year - 10%; (iii) third year - 40%;
(iv) fourth year - 50%.
Cornel C. Spiegler has entered into a three-year employment agreement with
the Company for the position of Chief Financial Officer and Vice President -
Administration, effective September 1995. Mr. Spiegler's employment agreement
provides for a base annual salary of $125,000, which may be increased annually
at the discretion of the Board of Directors, as well as stock options and a
customary benefits package.
At the Company's option, the term of Mr. Spiegler's employment agreement
may be extended for one additional year. The employment agreement of Mr.
Spiegler prohibits him from (i) competing with the Company for one year
following termination of employment with the Company and (ii) disclosing
confidential information or trade secrets in any unauthorized manner. If Mr.
Spiegler is discharged without cause (as defined in his agreement), the Company
will continue to pay him at his then current salary of the longer of six months
or the remainder of the agreed upon employment period.
In connection with his employment agreement in December 1995 the Company
granted Mr. Spiegler an option to purchase 36,000 shares of Common Stock at
$8.50 per share. One-third of the option vested on September 27, 1996 and the
remaining two-thirds vested in monthly installments over the 24-month period
beginning on September 27, 1996, in each case based on Mr. Spiegler's continued
employment during that time. In conjunction with the repricing of all of the
Company's stock options, Mr. Spiegler's options were cancelled effective
December 19,1997 and replaced with identical repriced new options having an
exercise price of $3.125 per share.
At various times during 1996 and 1997, Joseph Storella and Mitchell
Goldberg entered into three-year employment agreements with the Company for the
position of Vice President -Operations and Vice President - Sales, respectively.
Messrs. Storella's and Goldberg's employment agreements provide for a base
annual salary of $130,000 and $110,000, respectively, which may be increased
annually at the discretion of the Board of Directors, as well as stock options
and a customary benefits package. Under Mr. Goldberg's employment agreement, he
received a sign-on bonus of $10,000. In addition, he was eligible for certain
performance-based bonuses in 1997 in the amount of $5,000 per quarter in the
event the Company reached certain projected sales goals, which amount was to be
proportionally increased in the event that such goals are exceeded, and $10,000
per quarter in 1998 in the event that such projections were met. In January,
1998, Mr. Goldberg was paid a sales bonus of $10,000 regarding the 1997 sales
performance. In April 1998, Mr. Goldberg was paid a sales bonus of $10,000
regarding the quarter ended March 31, 1998 sales performance.
The term of each of Messrs. Storella's and Goldberg's employment agreement
may be extended. The employment agreements of Messrs. Storella and Goldberg
prohibit them from (i) competing with the Company for one year following
termination of employment with the Company and (ii) disclosing confidential
information or trade secrets in any unauthorized manner. If Mr. Goldberg is
discharged without cause (as defined in his agreement), the Company shall
continue to pay Mr. Goldberg his then current salary for the lesser of six
months or the remainder of the agreed upon employment period. If Mr. Storella is
discharged without cause (as defined in his agreement), the Company shall
continue to pay him his then current salary for a period of six months.
In 1996, in connection with his employment agreement, the Company granted
Mr. Storella an option to purchase 36,000 shares of Common Stock at $9.13 per
share. One-third of the option vested on May 20, 1997 and the remaining
two-thirds vests in monthly installments over the 24-month period beginning on
May 20, 1997, in each case based on Mr. Storella's continued employment during
that time. In conjunction with the repricing of all the Company's stock options,
Mr. Storella's options were cancelled effective December 19, 1997 and replaced
with identical repriced new options having an exercise price of $3.125 per
share. In 1999, Mr. Storella's employment agreement was extended for another two
11
<PAGE>
years through May 2002. This agreement provides for an annual salary of $145,000
for the period May 19, 1999 through May 18, 2000, and of $150,500 from May 19,
2000 through May 19, 2001. In connection with his employment agreement, Mr.
Storella was granted an option to purchase 12,000 shares of Common Stock at
$2.1875 per share. The terms of this agreement are substantially the same terms
as the previous employment agreement.
In 1997, in connection with his employment agreement, the Company granted
Mr. Goldberg an option to purchase 36,000 shares of Common Stock at $8.50 per
share. One-third of the option vested on March 17, 1998 and the remaining
two-thirds vests in monthly installments over the 24-month period beginning on
March 17, 1997, in each case based on Mr. Goldberg's continued employment during
that time. In conjunction with the repricing of all of the Company's stock
options, Mr. Goldberg's options were cancelled effective December 19, 1997 and
replaced with identical repriced new options having an exercise price of $3.125
per share.
12
<PAGE>
PROPOSAL NO. 1 - APPROVAL OF AN INCREASE IN AUTHORIZED COMMON STOCK
In August, 2000, the Board of Directors unanimously approved an
amendment to the Company's restated certificate of incorporation that, if
enacted, would permit the Company to issue up to 75 million shares of Common
Stock. The Board directed that the amendment be voted on by stockholders.
The Company is currently permitted to issue up to an aggregate of 50
million shares of Common Stock. As of July 31, 2000, 25,004,968 shares of Common
Stock were issued and outstanding. Approximately 2,487,652 additional shares
were reserved for issuance under the Company's compensation and benefit plans,
an additional 16,841,657 shares were reserved for issuance upon conversion of
the Series 1 Preferred, Series 2 Preferred and approximately 3,490,370 shares
were reserved for issuance upon conversion of warrants. Accordingly, as of July
31, 2000, excluding the shares reserved for future issuance, the Company could
issue 2,175,353 shares of Common Stock.
The Board of Directors has determined that it is in the best interest of
the Company to increase the authorized Common Stock of the Company. An increased
authorized capital would give the Company flexibility to issue as needed shares
of its Common Stock for possible stock splits, acquisitions, financings and
other corporate purposes. The Company currently does not have any plans to issue
any of the additional shares of Common Stock. The Board generally will be able
to issue shares from time to time without obtaining the approval of
stockholders. However, Nasdaq rules require stockholder approval of issuances of
common stock under certain circumstances including when the number of shares to
be issued equals or exceeds 20% of the voting power outstanding (for the Company
currently, issuance of more than approximately 8,368,331 shares of Common
Stock).
Newly authorized shares would have the same rights as the presently
authorized shares, including the right to cast one vote per share and to receive
dividends (if any) paid by the Company. Although the authorization would not, in
itself, have any effect on stockholder rights, issuance of additional shares of
Common Stock for other than a stock split or dividend could, under certain
circumstances, have a dilutive effect on voting rights and earnings per share.
Stockholders do not have preemptive rights.
While the issuance of shares in certain instances may have the effect
of forestalling a hostile takeover, the Board does not intend or view the
increase in authorized Common Stock as an anti-takeover measure, nor is the
Company aware of any proposed or contemplated transaction of this type.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE TO 75,000,000 THE
SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE.
13
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF AMENDMENT TO THE IMPAX LABORATORIES, INC. 1999
EQUITY INCENTIVE PLAN
On December 13, 1999, the Company's stockholders approved the Impax
Laboratories, Inc. 1999 Equity Incentive Plan (the "Plan"). The Plan provides
for the granting of options, among other awards, to purchase shares of the
Company's Common Stock to officers, directors, employees and consultants of the
Company. Options may be issued under the Plan which qualify as "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as options that do not qualify as incentive stock
options ("non-statutory options"). The Plan provides that up to 2,400,000 shares
of the Company's Common Stock may be issued under the Plan. The Company has
granted options exercisable for 2,125,549 of the shares available for issuance
under the Plan.
The Company's Board of Directors has approved amending the Plan to
increase the aggregate number of the Company's shares which may be issued under
the plan by 2,600,000 shares, from 2,400,000 shares to 5,000,000 shares. The
amendment to the Plan is subject to approval by the stockholders of the Company.
The Company's Board of Directors unanimously recommends that stockholders vote
"for" approval of the amendment to the Plan because it believes that the
amendment to the Plan will advance the interest of the Company and its
stockholders by strengthening the ability of the Company to attract, retain and
motivate its officers, directors, employees and consultants.
Set forth below is a summary of the provisions of the Plan, as amended,
and information regarding the federal income tax consequences of the Plan. This
summary is qualified in its entirety by the detailed provisions of the Plan set
forth as Appendix "A" to this Proxy Statement.
General
The Impax Laboratories, Inc. ("the Company") 1999 Equity Incentive Plan
(the "Plan") was adopted by the Board of Directors of the Company and approved
by the Company's stockholders on December 13, 1999.
The purpose of the Plan is to attract, retain and motivate key
personnel by providing a means whereby the Company may grant (i) incentive stock
options, (ii) nonstatutory stock options, (iii) stock appreciation rights and/or
(iv) stock bonus awards to officers, employees, directors and consultants of the
Company and its affiliates.
The Board believes that the Plan serves the best interests of the
Company and its stockholders by permitting the Company to establish a flexible
vehicle through which the Company can offer equity-based compensation incentives
to eligible personnel with a view toward promoting the long-term financial
success of the Company and enhancing stockholder value. The primary features of
the Plan are summarized below.
Number of Shares and Adjustments
The number of shares of Common Stock, $.01 par value, of the Company as
to which options may be granted under the Plan is 5,000,000 (the "Shares"). This
number may be adjusted in the sole discretion of the Board to give effect to any
stock split, stock dividend, combination, recapitalization or similar
transaction with respect to the Common Stock. Shares subject to awards under the
Plan that are canceled, expired, terminated, forfeited, settled in cash or
withheld to satisfy the applicable purchase price or tax withholding obligations
shall again be available for issuance under the Plan.
Shares of common stock available for issuance under the Plan may be
either authorized and unissued or held by the Company in its treasury.
Subject to adjustment to reflect stock dividends and other capital
changes, the maximum number of shares of common stock with respect to which
stock options or SARs may be granted under the Plan to any employee for any
calendar year will be 300,000 Shares.
14
<PAGE>
Administration of the Plan
The Board of Directors of the Company administers the Plan. The Board
is permitted by the Plan to delegate its authority under the Plan, except with
respect to awards to non-employee directors, to a Committee of the Board
consisting of at least two directors appointed by and serving at the pleasure of
the Board. Subject to the provisions of the Plan, and except with respect to
awards to non-employee directors, the Committee will have the authority to grant
awards under the Plan, to interpret the provisions of the Plan, to fix and
interpret the provisions of agreements governing awards made under the Plan, to
supervise the administration of the Plan, and to take such other actions as may
be necessary or desirable in order to carry out the provisions of the Plan. The
plan will be administered by the Board of Directors with respect to awards to
non-employee directors. The Board of Directors has delegated its authority to
administer the Plan to the Stock Option Committee of the Board of Directors.
Eligibility
The Plan authorizes the grant of incentive stock options, nonstatutory
stock options, stock appreciation rights (commonly known as SARs), and stock
bonus awards to any member of the Company's Board of Directors, any officer or
other employee of the Company or its affiliates or any consultant who performs
or will perform services for the Company or its affiliates.
The Company may also, from time to time, assume outstanding awards
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either granting an award under the Plan in
replacement of the award assumed by the Company or treating the assumed award as
if it had been granted under the Plan.
The following table sets forth the number of Options granted pursuant
to the Plan to each of the persons and groups of persons set forth in the table:
<TABLE>
<CAPTION>
Number of Options
Name and Position Granted Under the Plan
---------------------------------------------------------------------------------- --------------------------------
<S> <C>
Charles Hsiao, Ph.D., Chairman, Co-Chief Executive Officer 333,580
Barry R. Edwards, Co-Chief Executive Officer 270,000
Larry Hsu, Ph.D., Chief Operating Officer 333,580
Cornel C. Spiegler, Chief Financial Officer 0
Joseph A. Storella, Vice President Operations 0
May Chu, Vice President, Quality Affairs 66,716
All executive officers 1,043,876
All directors who are not executive officers 38,679
All employees including officers who are not executive officers 923,572
</TABLE>
Terms and Conditions of Options
Each option granted under the Plan is required to be set forth in
writing in an Award Agreement, duly executed by the Company and by the person
receiving the option.
Under the Plan, the Administrator may grant stock options that are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code (commonly known as ISOs) and stock options
which do not qualify as incentive stock options (commonly known as nonstatutory
stock options). ISOs may only be granted to employees of the company or its
affiliates that qualify as "subsidiaries" within the meaning of Section 424 of
the Code.
The exercise price for Common Stock covered by an ISO may not be less
than 100% of the fair market value of the Common Stock on the date of grant (or,
in the case of a grant to an employee who is a "10% stockholder" of the Company
or certain subsidiaries, 110% of the fair market value). The exercise price for
Common Stock covered by a nonstatutory stock option may not be less than the par
value of the Common Stock on the date of grant. All options will, unless sooner
terminated, expire ten years (or, in the case of an incentive stock option
granted to a 10% stockholder, five years) from the date of grant.
15
<PAGE>
Vesting and Exercise of Option
The Board may establish such vesting and other conditions and
restrictions on the exercise of an option and/or upon the issuance of Common
Stock in connection with the exercise of an option as it deems appropriate.
Subject to satisfaction of applicable withholding requirements, once vested and
exercisable, an option may be exercised by transmitting to the Company: (i) a
notice specifying the number of shares to be purchased and (ii) payment of the
exercise price. The exercise price of an option may be paid in cash and/or such
other form of payment as the Company may permit.
Rights as a Stockholder
No person to whom an option has been granted (a "Participant") will
have rights as a stockholder with respect to any shares covered by such option
until after due exercise of the option and tender of the full purchase price for
the shares being purchased.
Assignability and Transferability of Options
Options granted under the Plan shall not be transferable or assignable
by a Participant, and may not be made subject to execution, attachment or
similar process, otherwise then by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of a Participant only
by the Participant. Notwithstanding the foregoing, the Board may determine at
the time of grant or thereafter that a nonstatutory stock option is transferable
in whole or in part to such persons, under such circumstances, and subject to
such conditions as the Board may prescribe.
Stock Appreciation Rights
The Board may award stock appreciation rights to eligible personnel
upon such terms and conditions as it deems appropriate. A stock appreciation
right is an award entitling the Participant, upon exercise, to receive an
amount, in cash or shares of Common Stock or a combination thereof, as
determined by the Board in its sole discretion, determined with reference to the
appreciation, if any, in the fair market value of Common Stock during the period
beginning on the date the stock appreciation right is granted and ending on the
date the stock appreciation right is exercised.
Stock appreciation rights may be awarded under the Plan in conjunction
with an option ("tandem SARs") or independent of any option ("stand-alone
SARs"). Tandem SARs awarded in conjunction with a nonstatutory stock option may
be awarded either at or after the time the nonstatutory stock option is granted.
Tandem SARs awarded in conjunction with an incentive stock option may only be
awarded at the time the incentive stock option is granted.
A tandem SAR shall be exercisable only at the time and to the same
extent and subject to the same conditions as the related option is exercisable.
The exercise of a tandem SAR shall cancel the related option to the extent of
the shares of Common Stock with respect to which the stock appreciation right is
exercised, and vice versa. Tandem SARs may be exercised only when the fair
market value of the Common Stock to which it relates exceeds the option exercise
price. The Board may impose such additional service or vesting conditions upon
the exercise of a stock appreciation right (tandem or stand-alone) as it deems
appropriate.
A stock appreciation right may be exercised by giving written notice to
the Company identifying the stock appreciation right that is being exercised,
specifying the number of shares covered by the exercise and containing such
other information or statements as the Board may require. The Board may
establish such rules and procedures as it deems appropriate for the exercise of
stock appreciation rights under the Plan. Upon the exercise of a stock
appreciation right, the Participant shall be entitled to receive an amount (in
cash and/or shares of Common Stock as determined by the Board) equal to the
product of (i) the number of shares with respect to which the stock appreciation
right is being exercised and (ii) the difference between the fair market value
of a share of the Common Stock on the date the stock appreciation right is
exercised and the fair market value of a share of Common Stock on the date the
stock appreciation right is granted.
Stock appreciation rights shall not be transferable by a Participant
other than upon the Participant's death to a beneficiary designated by the
16
<PAGE>
Participant in a manner acceptable to the Board, or, if no designated
beneficiary shall survive the Participant, pursuant to the Participant's will or
by the laws of descent and distribution. All stock appreciation rights shall be
transferable, to the extent permitted above, only with the underlying option.
Effect of Termination of Employment on Service
The Plan generally provides that, unless otherwise determined by the
Administrator, following a participant's termination of employment or service:
o for any reason other than the death, disability or cause (as defined
in the Plan), the Participant will have 30 days to exercise all then
exercisable options or SARs; and
o as the result of death or disability, the Participant (or his or her
beneficiary) will have one year to exercise all then exercisable
options or SARs, provided that, in each instance, no options or SARs
may be exercised beyond the expiration of its stated term.
However, following a Participant's termination of employment or
service, as the result of cause, any option or SAR held by the Participant
(whether or not otherwise then exercisable) shall immediately terminate.
"Cause" means (i) in the case where there is no employment or
consulting agreement between the Participant and the Company or its Affiliates
or where such an agreement exists but does not define "Cause" (or words of like
import), a termination classified by the Company as a termination due to the
Participant's dishonesty, fraud, insubordination, willful misconduct, refusal to
perform services or materially unsatisfactory performance of his or her duties,
or (i) in the case where there is an employment or consulting agreement between
the Participant and the Company or its Affiliates, a termination that is or
would be deemed for "cause" (or words of like import) under such agreement.
Stock Bonus Awards
The Plan allows the Administrator to grant stock bonus awards in
consideration for past services actually rendered to the Company or its
affiliates on such terms and conditions it deems appropriate. Shares subject to
stock bonus awards may, but need not, be subject to a vesting schedule.
Generally, unless otherwise determined by the Administrator, any
unvested shares of Common Stock received pursuant to a stock bonus award shall
be forfeited upon a Participant's termination of employment or service with the
Company or its affiliates.
Non-Employee Director Stock Option Awards
Under the Plan, each non-employee director of the Company will be
automatically granted a nonstatutory stock option to purchase 2,000 shares of
Common Stock upon his or her commencement of service as a non-employee director
of the Company. In addition, each non-employee director of the Company will
automatically be granted a nonstatutory stock option to purchase 2,000 shares
of Common Stock under the plan on the day following each annual meeting of
stockholders of the Company that occurs at least one year after his or her
commencement of service as a non-employee director of the Company. The options
will have a ten-year term and an exercise price equal to the fair market value
of the Common Stock on the date of grant. The options granted upon a
non-employee director's demand commencement of service will vest as to
one-third on each anniversary of the date of grant, provided that the director
remains in service during the vesting period. The options granted to
non-employee directors on an annual basis will generally become one-third
vested on each of the first three anniversaries of the grant date.
If a non-employee director's service terminates for any reason (other
than death or disability) or no reason, then any option held by the non-employee
director, to the extent not then exercisable, shall thereupon terminate. Any
option held by the non-employee director which is exercisable at the time of
such termination of service shall remain exercisable during the ninety (90) day
period following such termination or, if sooner, until the expiration of the
stated term of the option and, to the extent not exercised within such period,
shall thereupon terminate. In the event a non-employee director's service
17
<PAGE>
terminates due to his or her death or disability, the non-employee director (or
his or her beneficiary) will have one year to exercise all the then exercisable
non-employee director stock option awards.
Adjustments Upon Changes in Common Stock
Upon the occurrence of any of the following events, a Participant's
rights with respect to any option which have not previously been exercised in
full will be adjusted as set forth below:
Capitalization. If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares or if the Company issues any
shares of Common Stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of an option will
be appropriately increased or decreased proportionately, and appropriate
adjustments will be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
Dissolution or Liquidation of the Company. In the event of a
dissolution or liquidation of the Company, then Awards outstanding under the
Plan shall terminate if not exercised (if applicable) immediately prior to, or
simultaneous with, such event.
Asset Sales, Merger, Consolidations or Reverse Merger. In the event of
(i) a sale of all or substantially all of the assets of the Company, (ii) a
merger in which the Company is not the surviving corporation or (iii) a reverse
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation shall
assume any awards outstanding under the Plan or shall substitute similar awards
(including an award to acquire the same consideration paid to the stockholders
in such a transaction for those awards outstanding under the Plan). In the event
any surviving corporation or acquiring corporation refuses to assume such awards
or to substitute similar awards for those awards outstanding under the Plan,
then the vesting of all outstanding awards (and, if applicable, the time during
which such awards may be exercised) shall be accelerated in full, and the awards
shall terminate if not exercised (if applicable) at or prior to such event.
Amendment and Termination of the Plan
The Board may amend or terminate the Plan, provided, however, that no
such action may adversely affect the rights of a Participant under any
outstanding award without the consent of the Participant. Except as otherwise
previously discussed, any amendment which would increase the number of shares of
Common Stock for which awards may be granted under the Plan (in the aggregate or
on an individual basis) or modify the class of employees eligible to receive
awards under the Plan shall be subject to the approval of the stockholders of
the Company. The Board may amend the terms of any Award Agreement at any time
and from time to time, provided, however, that any amendment which would
adversely affect the rights of the Participant may not be made without the
consent of the Participant.
Applicability of ERISA
The Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974, as amended.
Federal Income Tax Consequences Of The Plan
The following information is not intended to be a complete discussion
of the federal income tax consequences of participation of the Plan and is
qualified in its entirety by reference to the Code, and the regulations adopted
pursuant thereto. The provisions of the Code described in this section include
current tax law only and do not reflect any proposals to revise current tax law.
Each Participant who acquires shares of Common Stock under the Plan should
consult his or her own tax advisor with respect to his or her individual tax
position and the effect of any legislative revisions on such position.
The federal income tax consequences applicable to officers, directors,
and other persons subject to potential liability under Section 16(b) of the
Exchange Act and the rules thereunder may be different than the federal income
tax consequences applicable to persons who are not subject to Section 16(b) of
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the Exchange Act. The federal income tax consequences of such rules on officers,
directors and other persons subject to Section 16(b) are described generally
herein. However, such description is not intended to be complete and persons
subject to Section 16(b) should consult their own tax advisors for more specific
information.
Incentive Stock Options. Generally, under the Code, an optionee will
not realize taxable income by reason of the grant or exercise of an ISO (see,
however, discussion of alternative minimum tax below) granted pursuant to the
Plan. If an optionee exercises an ISO and does not dispose of the shares until
the later of (i) two years from the date the option was granted and (ii) one
year from the date of exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and the Company will not be entitled to any deduction. The reduced rate of
tax (20%) on certain net capital gains added to the Code by the Taxpayer Relief
Act of 1997 requires a holding period of more than 18 months. If an optionee
disposes of the shares within the period of two years from the date of grant or
one year from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and the
Company will receive a corresponding deduction, in an amount equal to the excess
of (i) the lesser of (a) the amount, if any, realized on the disposition and (b)
the fair market value of the shares on the date the option was exercised over
(ii) the option price. Any additional gain realized on the disposition will be
long-term or short-term capital gain and any loss will be long-term or
short-term capital loss. The optionee will be considered to have disposed of a
share if he sells, exchanges, makes a gift of or transfers legal title to the
share (except transfers, among others, by pledge, on death or to a spouse). If
the disposition is by sale or exchange, the optionee's tax basis will equal the
amount paid for the share plus any ordinary income realized as a result of the
disqualifying disposition.
The exercise of an ISO may subject the optionee to the alternative
minimum tax. The amount by which the fair market value of the shares purchased
at the time of the exercise exceeds the option exercise price is an adjustment
for purposes of computing the so-called alternative minimum tax. In the event of
a disqualifying disposition of the shares in the same taxable year as exercise
of the ISO, no adjustment is then required for purposes of the alternative
minimum tax, but regular income tax, as described above, may result from such
disqualifying disposition.
An optionee who surrenders shares as payment of the exercise price of
his ISO generally will not recognize gain or loss on his surrender of such
shares. The surrender of shares previously acquired upon exercise of an ISO in
payment of the exercise price of another ISO, is, however, a "disposition" of
such stock. If the ISO holding period requirements described above have not been
satisfied with respect to such stock, such disposition will be a disqualifying
disposition that may cause the optionee to recognize ordinary income as
discussed above.
Under the Code, all of the shares received by an optionee upon exercise
of an ISO by surrendering shares will be subject to the ISO holding period
requirements. Of those shares, a number of shares (the "Exchange Shares") equal
to the number of shares surrendered by the optionee will have the same tax basis
for capital gains purposes (increased by any ordinary income recognized as a
result of a disqualifying disposition of the surrendered shares if they were ISO
shares) and the same capital gains holding period as the shares surrendered. For
purposes of determining ordinary income upon a subsequent disqualifying
disposition of the Exchange Shares, the amount paid for such shares will be
deemed to be the fair market value of the shares surrendered. The balance of the
shares received by the optionee will have a tax basis (and a deemed purchase
price) of zero and a capital gains holding period beginning on the date of
exercise. The ISO holding period for all shares will be the same as if the
option had been exercised for cash.
Nonstatutory Stock Options. Generally, there will be no federal income
tax consequences to either the optionee or the Company on the grant of
nonstatutory stock options pursuant to the Plan. On the exercise of a
nonstatutory stock option, the optionee has taxable ordinary income equal to the
excess of the fair market value of the shares acquired on the exercise date over
the option price of the shares. The Company will be entitled to a federal income
tax deduction (subject to the limitations contained in Section 162(m)) in an
amount equal to such excess, provided that the Company complies with applicable
reporting rules.
Upon the sale of stock acquired by exercise of a nonstatutory stock
option, optionees will realize long-term or short-term capital gain or loss
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depending upon their holding period for such stock. Under current law, net
capital gains (net long term capital gain less net short term capital loss) is
subject to a maximum rate of 28%. The reduced rate of tax on certain net capital
gains added to the Code by the Taxpayer Relief Act of 1997 requires a holding
period of more than 18 months. Capital losses are deductible only to the extent
of capital gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
nonstatutory stock option will not recognize gain or loss with respect to the
shares so delivered unless such shares were acquired pursuant to the exercise of
an ISO and the delivery of such shares is a disqualifying disposition. See
"Incentive Stock Options." The optionee will recognize ordinary income on the
exercise of the nonstatutory stock option as described above. Of the shares
received in such an exchange, that number of shares equal to the number of
shares surrendered have the same tax basis and capital gains holding period as
the shares surrendered. The balance of shares received will have a tax basis
equal to their fair market value on the date of exercise and the capital gains
holding period will begin on the date of exercise.
Stock Appreciation Rights. A participant who is awarded a stock
appreciation right will not have taxable income upon the grant of such stock
appreciation right and the Company will not be entitled to a tax deduction by
reason of such grant. Upon the exercise of a stock appreciation right, a
participant will recognize fully taxable ordinary income equal to the amount of
cash and the fair market value of any shares received. The Company may generally
claim a deduction at that time equal to the amount recognized as ordinary income
by the Participant.
Limitation on the Company's Deduction. In general, the Company is
entitled to a deduction in such amount and at such time as ordinary income is
recognized by a participant under the Plan. Section 162(m) of the Code will
generally limit to $1,000,000 the Company's federal income tax deduction for
compensation paid in any year to each of its Chief Executive Officer and its
four highest paid executive officers, to the extent that such compensation is
not performance based.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMMENDS A VOTE "FOR" APPROVAL THEREOF.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the Annual
Meeting of Stockholders of the Company to be held in 2001 must be received by
the Company no later than December 18, 2000 for inclusion in the Board of
Directors' proxy statement and form of proxy relating to that meeting. Any such
proposal must also comply with the proxy rules under the Securities Exchange Act
of 1934, including Rule 14a-8. Any notice of a stockholder proposal for
consideration at the 2001 Annual Meeting that is submitted to the Company
outside the processes of Rule 14a-8 will be considered untimely for purposes of
Rule 14a-4(c)(1) if it is submitted after March 3, 2001. Rule 14(a)-4(c)(1)
provides that discretionary voting authority may be exercised with respect to
such untimely proposals.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Special Meeting. However, if any other business properly comes before the
Special Meeting, it is the intention of the persons named in the enclosed proxy
to vote on such matters in accordance with their best judgment.
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APPENDIX A
IMPAX LABORATORIES, INC.
1999 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Plan is to attract, retain and motivate key
personnel by providing a means whereby the Company may grant (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights and/or
(iv) Stock Bonuses to officers, employees, directors and consultants of the
Company and its Affiliates. In addition, Non-Employee Directors shall receive
automatic grants of Nonstatutory Stock Options under the Plan.
2. Administration.
2.1 Administration by Board. The Board shall administer the Plan unless and
to the extent that the Board delegates its power and authority to a Committee as
provided in Section 2.3.
2.2 Power of Board. Subject to the provisions of the Plan, the Board,
acting in its sole discretion, shall have the following power and authority:
2.2.1 to determine to which of the eligible individuals, and the time or
times at which, Awards shall be granted;
2.2.2 to determine the number of shares of Common Stock subject to Awards
granted under the Plan and, where applicable, the price to be paid for the
shares of Common Stock subject to each Award;
2.2.3 to determinate the terms and conditions of each Award (which need
not be identical);
2.2.4 to interpret the terms of the Plan and Awards granted under it, and
to establish, amend and revoke rules and regulations for its administration
(and, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Award Agreement, in a manner and to the
extent it deemed necessary or desirable);
2.2.5 to accelerate the exercisability or vesting of any Award;
2.2.6 to amend the terms of the Plan or any Award;
2.2.7 to adopt forms of Award Agreements for use under the Plan;
2.2.8 to allow Participants to satisfy the minimum withholding tax
obligations by electing to have the Company withhold from the shares covered by
an Award that number of shares having a Fair Market Value equal to the amount
required to be withheld; and
2.2.9 to make all determinations deemed necessary or advisable for the
administration of the Plan.
2.3 Delegation. Except with regard to Awards to Non-Employee Directors,
the Board may delegate any or all of its powers and authority relating to the
administration of the Plan (but not the power to amend or terminate the Plan) to
a Committee of two (2) or more members of the Board. If and to the extent that
administrative responsibility is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers and
authority theretofore possessed by the Board, including the power to delegate to
a subcommittee any of the administrative powers the Committee is authorized to
exercise (and, as appropriate, references in the Plan to the Board shall be
deemed to be the Committee or subcommittee). If a Committee is appointed, then,
unless the Board determines otherwise, its members shall consist solely of
individuals who qualify as "non-employee directors" under Rule 16b-3 promulgated
under Section 16 of the Exchange Act and as "outside directors" under Section
162(m) of the Code. If for any reason the Committee does not satisfy the
"non-employee director" requirements of Rule 16b-3 or the "outside director"
requirements of Section 162(m) of the Code, such non-compliance shall not affect
the validity of the awards, interpretations or other actions of the Committee.
The Board may delegate nondiscretionary administrative duties to such employees
of the Company as it deems proper.
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2.4 Indemnification. The Company shall indemnify and hold harmless to the
fullest extent permitted by law each member of the Board and the Committee and
any employee or director of the Company to whom any duty or power relating to
the administration or interpretation of the Plan is delegated from and against
any loss, cost, liability (including any sum paid in settlement of a claim with
the approval of the Board), damage and expense (including legal and other
expenses incident thereto) arising out of or incurred in connection with the
Plan, unless and except to the extent attributable to such person's fraud or
wilful misconduct.
2.5 Decisions. All decisions, determinations and interpretations of the
Board shall be final, binding and conclusive on all persons.
3. Share Reserve. Subject to adjustment pursuant to Section 11, the
aggregate number of shares of Common Stock that may be issued pursuant to the
Plan is 5,000,000 shares. If any Option or Stock Appreciation Right expires or
is terminated without being exercised in whole or in part, the unexercised or
released shares from such Option or Stock Appreciation Right shall be available
for future issuance under the Plan. Shares that are subject to an Award that is
forfeited or cancelled or that are withheld in order to pay the purchase price
for shares of Common Stock covered by any Award or to satisfy the tax
withholding obligations associated with any Award under the Plan shall be
available for future issuance under the Plan. Shares of Common Stock available
for issuance under the Plan may be authorized and unissued, held by the Company
in its treasury or otherwise acquired for purposes of the Plan. No fractional
shares of Common Stock shall be issued under the Plan. Subject to adjustment
pursuant to Section 11, the maximum number of shares of Common Stock with
respect to which Options or Stock Appreciation Rights may be granted during any
calendar year to any employee may not exceed 300,000 shares.
4. Eligibility. Awards may be granted under the Plan to officers,
employees, directors and consultants of the Company or its Affiliates. Incentive
Stock Options may be granted only to employees of the Company or its Affiliates.
Non-Employee Directors shall receive automatic grants of Nonstatutory Stock
Options pursuant to Section 8 of the Plan. The Company may also, from time to
time, assume outstanding awards granted by another company, whether in
connection with an acquisition of such other company or otherwise, by either (i)
granting an Award under the Plan in replacement of the award assumed by the
Company, or (ii) treating the assumed award as if it had been granted under the
Plan.
5. Options.
5.1 Option Grant. Subject to the provisions hereof, the Board may grant
Incentive Stock Options and Nonstatutory Stock Options to eligible personnel on
such terms and conditions as the Board deems appropriate.
5.2 Exercise Price. The exercise price of an Option shall not be less than
the par value of the Common Stock, provided that (i) the exercise price of an
Incentive Stock Option shall not be less than the Fair Market Value of the
Common Stock on the date the Option is granted, and (ii) the exercise price of
an Incentive Stock Option granted to a Ten Percent Stockholder shall not be less
than 110% of the Fair Market Value of the Common Stock on the date the Option is
granted.
5.3 Option Term. No Option granted under the Plan may be exercisable (if
at all) more than ten (10) years after the date the Option is granted (or, in
the case of an Incentive Stock Option granted to a Ten Percent Stockholder, five
(5) years).
5.4 Vesting and Exercise of Options. The Board may establish such vesting
and other conditions and restrictions on the exercise of an Option and/or upon
the issuance of Common Stock in connection with the exercise of an Option as it
deems appropriate. Subject to satisfaction of applicable withholding
requirements, once vested and exercisable, an Option may be exercised by
transmitting to the Company: (i) a notice specifying the number of shares to be
purchased and (ii) payment of the exercise price. The exercise price of an
Option may be paid in cash and/or such other form of payment as the Company may
permit.
5.5 Rights as a Stockholder. No shares of Common Stock shall be issued in
respect of the exercise of an Option until full payment of the exercise price
and the applicable tax withholding obligation with respect to such exercise has
been made or provided for. The holder of an Option shall have no rights as a
stockholder with respect to any shares covered by an Option until the date such
shares are issued. Except as otherwise provided herein, no adjustments shall be
made for dividend distributions or other rights for which the record date is
prior to the date such shares are issued.
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5.6 Buy Out and Settlement. The Board, on behalf of the Company, may at
any time offer to buy out any Option on such terms and conditions as the Board
shall establish.
5.7 Options Non-Transferable. Options granted under the Plan shall not be
transferable or assignable by a Participant, and may not be made subject to
execution, attachment or similar process, otherwise than by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of a
Participant only by the Participant. Notwithstanding the foregoing, the Board
may determine at the time of grant or thereafter that a Nonstatutory Stock
Option is transferable in whole or part to such persons, under such
circumstances, and subject to such conditions as the Board may prescribe.
5.8 Assumed Options. In the event the Company assumes an option granted by
another company, the exercise price and the number and nature of shares issuable
upon exercise of such assumed option shall be adjusted appropriately as
determined by the Board. In the event the Company elects to grant a new Option
rather than assuming an existing option, such new Option need not be granted at
Fair Market Value on the date of grant and may instead be granted with a
similarly adjusted exercise price.
5.9 Replacement Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options, the Board shall have the
authority (but not an obligation) to include as part of any Award Agreement a
provision entitling the Participant to a replacement Option in the event the
Participant exercises the Option evidenced by the Award Agreement, in whole or
in part, by surrendering other shares of Common Stock in accordance with the
Plan and the terms and conditions of the Award Agreement.
6. Stock Appreciation Rights.
6.1 Stock Appreciation Right Grant. Subject to the provisions hereof, the
Board may award Stock Appreciation Rights to eligible personnel upon such terms
and conditions as it deems appropriate. A Stock Appreciation Right is an Award
entitling the Participant, upon exercise, to receive an amount, in cash or
shares of Common Stock or a combination thereof, as determined by the Board in
its sole discretion, determined with reference to the appreciation, if any, in
the fair market value of Common Stock during the period beginning on the date
the Stock Appreciation Right is granted and ending on the date the Stock
Appreciation Right is exercised.
6.2 Types of Stock Appreciation Rights. Stock Appreciation Rights may be
awarded under the Plan in conjunction with an Option ("tandem SARs") or
independent of any Option ("stand-alone SARs"). Tandem SARs awarded in
conjunction with a Nonstatutory Stock Option may be awarded either at or after
the time the Nonstatutory Stock Option is granted. Tandem SARs awarded in
conjunction with an Incentive Stock Option may only be awarded at the time the
Incentive Stock Option is granted.
6.3 Exercisability. Except as otherwise provided herein, a tandem SAR shall
be exercisable only at the same time and to the same extent and subject to the
same conditions as the related Option is exercisable. The exercise of a tandem
SAR shall cancel the related Option to the extent of the shares of Common Stock
with respect to which the Stock Appreciation Right is exercised, and vice versa.
Tandem SARs may be exercised only when the Fair Market Value of the Common Stock
to which it relates exceeds the Option exercise price. The Board may impose such
additional service or vesting conditions upon the exercise of a Stock
Appreciation Right (tandem or stand-alone) as it deems appropriate.
6.4 Exercise. A Stock Appreciation Right may be exercised by giving written
notice to the Company identifying the Stock Appreciation Right that is being
exercised, specifying the number of shares covered by the exercise and
containing such other information or statements as the Board may require. The
Board may establish such rules and procedures as it deems appropriate for the
exercise of Stock Appreciation Rights under the Plan. Upon the exercise of a
Stock Appreciation Right, the Participant shall be entitled to receive an amount
(in cash and/or shares of Common Stock as determined by the Board) equal to the
product of (i) the number of shares with respect to which the Stock Appreciation
Right is being exercised and (ii) the difference between the Fair Market Value
of a share of Common Stock on the date the Stock Appreciation Right is exercised
and the Fair Market Value of a share of Common Stock on the date the Stock
Appreciation Right is granted.
6.5 SARs Non-Transferable. Stock Appreciation Right shall not be
transferable by a Participant other than upon the Participant's death to a
beneficiary designated by the Participant in a manner acceptable to the Board,
or, if no designated beneficiary shall survive the Participant, pursuant to the
Participant's will or by the laws of descent and distribution. All Stock
Appreciation Rights shall be exercisable during the Participant's lifetime only
by the Participant. A Tandem SAR shall be transferable, to the extent permitted
above, only with the underlying Option.
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7. Stock Bonus Awards. Subject to the provisions hereof, the Board may
grant Stock Bonus Awards to eligible personnel upon such terms and conditions as
the Board deems appropriate. The terms and conditions of Stock Bonus Awards may
change from time to time, and the terms and conditions of each Award Agreement
need not be identical.
7.1 Consideration. A Stock Bonus shall be awarded in consideration for
past or future services rendered to the Company or its Affiliates.
7.2 Vesting. Shares of Common Stock awarded pursuant to a Stock Bonus may,
but need not, be subject to a vesting schedule determined by the Board.
7.3 Transferability. Shares of Common Stock received pursuant to a Stock
Bonus Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Award Agreement, as the Board shall determine
in its discretion, so long as such shares remain subject to the terms of the
Award Agreement.
8. Non-Employee Director Stock Option Awards. Subject to the provisions
hereof and without further action by the Board, during the term of the Plan: (i)
each Non-Employee Director then in service shall be granted a Nonstatutory Stock
Option to purchase 2,000 shares of Common Stock on the trading day following the
Effective Date, and (ii) each Non-Employee Director then in service shall be
granted a Nonstatutory Stock Option to purchase 2,000 shares of Common Stock on
the trading day following each annual meeting of the Company's stockholders that
occurs at least one year after his or her commencement of service as a
Non-Employee Director. Unless otherwise determined by the Board, each Option
granted pursuant to this Section 8 shall be subject to the following terms and
conditions:
8.1 Exercise Price. The purchase price per share shall be equal to the
Fair Market Value of the Common Stock on the date the Option is granted.
8.2 Vesting Conditions. Each Option shall vest and become exercisable in
annual one-third increments on the first, second and third anniversaries of the
date the Option is granted, provided that the Participant remains in the
continuous service on the Board through each applicable anniversary date.
8.3 Effect of Termination of Service. If a Non-Employee Director's service
terminates for any reason (other than death or Disability) or no reason, then
any Option held by the Non- Employee Director, to the extent not then
exercisable, shall thereupon terminate. Any Option held by the Non-Employee
Director which is exercisable at the time of such termination of service shall
remain exercisable during the ninety (90) day period following such termination
or, if sooner, until the expiration of the stated term of the Option and, to the
extent not exercised within such period, shall thereupon terminate. The
provisions of Section 9.1.1 shall apply in the event a Non-Employee Director's
service terminates due to his or her death or Disability.
8.4 Capital Transactions; Change in Control. The provisions of Section 11
shall apply.
8.5 Expiration. Except as otherwise provided herein, if not previously
exercised, each Option shall expire on the tenth anniversary of the date the
Option is granted.
9. Termination of Employment or Service. Except as specifically provided
in Section 8, and unless otherwise determined by the Board at grant or, if no
rights of the Participant are thereby reduced, thereafter, and subject to
earlier termination in accordance with the provisions hereof, the following
rules apply with regard to Awards held by a Participant (other than Awards
covered by Section 8) at the time of his or her termination of employment or
other service with the Company and its Affiliates:
9.1 Stock Options and Stock Appreciation Rights.
9.1.1 If a Participant's employment or service terminates due to his or
her death or Disability, then (i) any Option or Stock Appreciation Right held by
the Participant which is not then exercisable shall terminate, and (ii) any such
Option or Stock Appreciation Right may be exercised, to the extent otherwise
exercisable on the date his or her employment or service terminates, by the
Participant (or, in the event of death, his or her legal representative) at any
time within one year from the date his or her employment or service terminates,
but in no event after expiration of the stated term, and, to the extent not
exercised within such time period, shall thereupon terminate.
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9.1.2 If a Participant's employment or service is terminated by the
Company or its Affiliates for Cause or if, at the time of a Participant's
termination, grounds for termination for Cause exist, then, notwithstanding
anything to the contrary contained herein, any Option or Stock Appreciation
Right held by the Participant (whether or not otherwise vested) shall
immediately terminate and cease to be exercisable. "Cause" means (i) in the case
where there is no employment or consulting agreement between the Participant and
the Company or its Affiliates or where such an agreement exists but does not
define "Cause" (or words of like import), a termination classified by the
Company as a termination due to the participant's dishonesty, fraud,
insubordination, willful misconduct, refusal to perform services or materially
unsatisfactory performance of his or her duties, or (ii) in the case where there
is an employment or consulting agreement between the Participant and the Company
or its Affiliates, a termination that is or would be deemed for "cause" (or
words of like import) under such agreement.
9.1.3 If a Participant's employment or service terminates for any reason
(other than death, Disability or Cause or at a time when Cause exists) or no
reason, then any Option or Stock Appreciation Right held by the Participant, to
the extent not then exercisable, shall thereupon terminate. Any Option or Stock
Appreciation Right held by the Participant which is exercisable at the time of
such termination of employment or service shall remain exercisable during the
thirty (30) day period following such termination of employment or service or,
if sooner, until the expiration of the stated term of the Option or Stock
Appreciation Right and, to the extent not exercised within such period, shall
thereupon terminate.
9.2 Stock Bonuses. If a Participant's employment or service terminates,
then any shares of Common Stock held by the Participant which have not vested as
of the date of termination under the terms of the Award Agreement shall be
forfeited.
10. Miscellaneous.
10.1 No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Award granted pursuant thereto shall confer upon any
Participant or other holder of Awards any right to continue to be employed by or
serve the Company or an Affiliate in the capacity in effect at the time the
Award was granted or shall affect the right of the Company or an Affiliate to
terminate such employment or service.
10.2 Investment Assurances. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to reflect conditions imposed
under an Award or to comply with applicable securities laws, including, but not
limited to, legends restricting the transfer of the stock.
10.3 Withholding Obligations. As a condition to the exercise of any Award
or the delivery of any shares of Common Stock pursuant to any Award or the lapse
of restrictions on any Award, or in connection with any other event that gives
rise to a federal or other governmental tax withholding obligation on the part
of the Company relating to an Award, (i) the Company may deduct or withhold (or
cause to be deducted or withheld) from any payment or distribution to a
Participant whether or not pursuant to the Plan or (ii) the Company shall be
entitled to require that the Participant remit cash to the Company (through
payroll deduction or otherwise), in each case in an amount sufficient in the
opinion of the Company to satisfy such withholding obligation. If the event
giving rise to the withholding obligation involves a transfer of shares of
Common Stock, then, unless the applicable Award Agreement provides otherwise, at
the discretion of the Board, the Participant may satisfy the withholding
obligation described under this Section 10.3 by electing to have the Company
withhold shares of Common Stock (which withholding shall be at a rate not in
excess of the statutory minimum rate) or by tendering previously owned shares of
Common Stock, in each case having a Fair Market Value equal to the amount of tax
to be withheld (or by any other mechanism as may be required or appropriate to
conform with local tax and other rules).
11. Adjustments upon Changes in Common Stock.
11.1 Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan shall be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
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and the maximum number of securities that may be awarded to any employee, and
the outstanding Awards shall be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Awards. The Board, the determination of which shall be final, binding and
conclusive, shall make such adjustments. The conversion of any convertible
securities of the Company shall not be treated as a transaction "without receipt
of consideration" by the Company.
11.2 Change in Control -- Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then Awards outstanding under the
Plan shall terminate if not exercised (if applicable) immediately prior to, or
simultaneous with, such event.
11.3 Change in Control -- Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale of all or substantially all of the assets of
the Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation shall assume any Awards outstanding under
the Plan or shall substitute similar awards (including an award to acquire the
same consideration paid to the stockholders in the transaction described in this
Section 11.3 for those Awards outstanding under the Plan). In the event any
surviving corporation or acquiring corporation refuses to assume such Awards or
to substitute similar awards for those Awards outstanding under the Plan, then
the vesting of all outstanding Awards (and, if applicable, the time during which
such Awards may be exercised) shall be accelerated in full, and the Awards shall
terminate if not exercised (if applicable) at or prior to such event.
12. Amendment and Termination. The Board may amend or terminate the Plan,
provided, however, that no such action may adversely affect the rights of a
Participant under any outstanding Award without the consent of the Participant.
Except as otherwise provided in Section 11, any amendment which would increase
the number of shares of Common Stock for which Awards may be granted under the
Plan (in the aggregate or on an individual basis) or modify the class of
employees eligible to receive Awards under the Plan shall be subject to the
approval of the stockholders of the Company. The Board may amend the terms of
any Award Agreement at any time and from time to time, provided, however, that
any amendment which would adversely affect the rights of the Participant may not
be made without the consent of the Participant.
13. Effective Date of Plan. The Plan shall become effective at the
Effective Time.
14. Definitions.
14.1 "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
14.2 "Award" means any Option, Stock Appreciation Right or Stock Bonus
granted under the Plan.
14.3 "Award Agreement" means a written agreement or other instrument
between the Company and a holder of an Award evidencing the terms and conditions
of an individual Award.
14.4 "Board" means the Board of Directors of the Company.
14.5 "Code" means the Internal Revenue Code of 1986, as amended.
14.6 "Committee" means a committee appointed by the Board in accordance
with Section 2.3.
14.7 "Common Stock" means the common stock, par value $.01, of the
Company.
14.8 "Company" means Impax Laboratories, Inc., a Delaware corporation.
14.9 "Disability" means the dates and permanent disability of a person
within the meaning of Section 22(e)(3) of the Code.
14.10 "Effective Time" means the "Effective Time" as defined in the
Agreement and Plan of Merger by and between Global Pharmaceuticals Corporation
and Impax Pharmaceuticals, Inc. dated July 26, 1999.
14.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
14.12 "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows: (i) if the Common Stock is listed on any
6
<PAGE>
established stock exchange or traded on the NASDAQ National Market System or the
NASDAQ SmallCap Market, the Fair Market Value of a share of Common Stock shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; and (ii) in the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Board.
14.13 "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
14.14 "Non-Employee Director" means a member of the Board who is not also
an employee of, or consultant to, the Company or its Affiliates.
14.15 "Nonstatutory Stock Option" means an Option that does not qualify as
an Incentive Stock Option.
14.16 "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
14.17 "Participant" means a person to whom an Award is granted pursuant to
the Plan or, if applicable, such other person who holds an Award.
14.18 "Plan" means this Impax Laboratories, Inc. 1999 Equity Incentive
Plan.
14.19 "Securities Act" means the Securities Act of 1933, as amended.
14.20 "Stock Appreciation Right" means a stock appreciation right granted
pursuant to Section 6 of the Plan.
14.21 "Stock Bonus" means a stock bonus granted pursuant to Section 7 of
the Plan.
14.22 "Ten Percent Stockholder" means a person who owns (or is deemed to
own pursuant to Section 424 (d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
7
<PAGE>
IMPAX LABORATORIES, INC.
This Proxy is solicited by the Board of Directors for the Special Meeting
of Stockholders to Be Held on October 3, 2000.
The undersigned, a stockholder of Impax Laboratories, Inc. (the
"Corporation"), hereby constitutes and appoints Charlie Hsiao, Ph.D. and Cornel
C. Spiegler, and each of them, the true and lawful proxies and attorneys-in-fact
of the undersigned, with full power of substitution in each of them, to vote all
shares of Common Stock, Series 1A Preferred Stock, Series 1B Preferred Stock and
Series 2 Preferred Stock of the Corporation which the undersigned is entitled to
vote at the Special Meeting of Stockholders of the Corporation to be held on
Tuesday, October 3, 2000, and at any and all adjournments or postponements
thereof, as follows:
(1) PROPOSAL TO INCREASE THE CORPORATION'S AUTHORIZED SHARES OF COMMON STOCK
FROM 50,000,000 TO 75,000,000 SHARES
|_| FOR |_| AGAINST |_| ABSTAIN
(2) PROPOSAL TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE
ISSUED PURSUANT TO THE COPORATION'S 1999 EQUITY INCENTIVE PLAN FROM
2,400,000 TO 5,000,000
|_| FOR |_| AGAINST |_| ABSTAIN
(3) In their discretion, upon such other business as may properly come before
the meeting and any and all adjournments and postponements thereof.
(Continued on reverse side.)
<PAGE>
(Continued)
Shares represented by this Proxy will be voted in accordance with the
instructions indicated in items 1, 2 and 3 above. If no instruction is
indicated, this Proxy will be voted FOR Proposal 1 and FOR Proposal 2.
A majority of the attorneys and proxies named herein present and acting at
the meeting in person or by their substitutes (or if only one is present and
acting then that one) may exercise all the powers conferred hereby.
Discretionary authority is conferred hereby as to certain maters as may properly
come before the meeting.
Any and all proxies heretofore given by the undersigned are hereby
revoked.
Receipt of the Notice of Special
Meeting of Stockholders and Proxy
Statement dated September 1, 2000 is
hereby acknowledged.
Dated:
-----------------------------
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Please sign exactly as your name(s)
appear hereon. If shares are held by
two or more persons each should
sign. Trustees, executors and other
fiduciaries should indicate their
capacity. Shares held by
corporations, partnerships,
associations, etc. should be signed
by an authorized person, giving full
title or authority.
Please Date, Sign and Mail in the Enclosed Reply Envelope
