<PAGE>
As filed with the Securities and Exchange Commission on November 6, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
DEPOMED, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
California 94-3229046
----------------------------- ------------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
366 Lakeside Drive, Foster City, California 94404
----------------------------------------------------------------
(Address of Principal Executive Offices)
1995 Stock Option Plan, as amended
-------------------------------------------------
(Full Title of the Plan)
John W. Fara
President and Chief Executive Officer
366 Lakeside Drive
Foster City, California 94404
-----------------------------------------------
(Name and Address of Agent For Service)
(650) 513-0990
---------------------------------------
(Telephone Number, Including Area Code, of Agent For Service)
Copy to:
Stephen C. Ferruolo
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1908
Telephone: (650) 324-7000
Facsimile: (650) 324-0638
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities to be Price Offering Registration
to be Registered Registered per Share(1) Price Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value, issuable 1,000,000 $8.625 $8,625,000 $2,398
under 1995 Stock Option Plan
=========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
on the average of the high and low prices of the Registrant's Common Stock
reported on the Nasdaq SmallCap Market on October 30, 1998.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed or to be filed with the Securities and
Exchange Commission (the "Commission") by the registrant are incorporated by
reference in this registration statement:
(a) The registrant's latest annual report (Form 10-K) filed pursuant to
Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or the latest prospectus filed pursuant to Rule 424 (b) under the
Securities Act of 1933, as amended (the Securities Act), that contains audited
financial statements for the registrant's latest fiscal year for which such
statements have been filed;
(b) All other reports filed by the registrant pursuant to Section 13 (a) or
15 (d) of the Exchange Act since the end of the fiscal year covered by the
annual report or prospectus referred to in (a) above;
(c) The description of the Common Stock of the registrant contained in the
registrant's registration statement filed under the Exchange Act registering
such Common Stock under Section 12 of the Exchange Act; and
(d) All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Julian N. Stern, the Secretary of the Company, is the owner of 83,333
shares of Common Stock and is the sole stockholder and employee of a
professional corporation that is a partner of Heller Ehrman White & McAuliffe.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 204(a) and 317 of the California Corporations Code, as
amended, the registrant has included in its articles of incorporation and bylaws
provisions regarding the indemnification of officers and directors of the
registrant. Article Four of registrant's Amended and Restated Articles of
Incorporation provides as follows:
"The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
This corporation is also authorized, to the fullest extent permissible under
California law, to indemnify its agents (as defined in Section 317 of the
California Corporations Code), whether by by-law, agreement or otherwise, in
excess of the indemnification expressly permitted by Section 317 and to advance
defense expenses to its agents in connection with such matters as they are
incurred, subject to the limits on such excess idemnification set forth in
Section 204 of the California Corporations Code. If, after the effective date
of this Article, California law is amended in a manner which permits a
corporation to limit the monetary or other liability of its directors or to
authorize indemnification of, or advancement of such defense expense to, its
directors or other persons, in any such case to a greater extent than is
permitted on such effective date, the references in this Article to "California
law" shall to that extent be deemed to refer to California law as so amended."
Section 29 of the registrant's Bylaws, as amended, provides as follows:
II-1
<PAGE>
"29. Indemnification of Directors and Officers.
(a) Indemnification. To the fullest extent permissible under California
law, the corporation shall indemnify its directors and officers against all
expenses, judgment, fines, settlement and other amounts actually and reasonably
incurred by them in connection with any proceeding, including an action by or in
the right of the corporation, by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans). To the fullest
extent permissible under California law, expenses incurred by a director or
officer seeking indemnification under this Bylaw in defending any proceeding
shall be advanced by the corporation as they are incurred upon receipt by the
corporation of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that the director or
officer is not entitled to be indemnified by the corporation for those expenses.
If, after the effective date of this Bylaw, California law is amended in a
manner which permits the corporation to authorize indemnification of or
advancement of expenses to its directors or officers, in any such case to a
greater extent than is permitted on such effective date, the references in this
Bylaw to "California law" shall to that extent be deemed to refer to California
law as so amended. The rights granted by this Bylaw are contractual in nature
and, as such, may not be altered with respect to any present or former director
or officer without the written consent of that person.
(b) Procedure. Upon written request to the Board of Directors by a person
seeking indemnification under this Bylaw, the Board shall promptly determine in
accordance with Section 317(e) of the California Corporations Code whether the
applicable standard of conduct has been met and, if so, the Board shall
authorize indemnification. If the Board cannot authorize indemnification
because the number of directors who are parties to the proceeding with respect
to which indemnification is sought prevents the formation of a quorum of
directors who are not parties to the proceeding, then, upon written request by
the person seeking indemnification, independent legal counsel (by means of a
written opinion obtained at the corporation's expense) or the corporation's
shareholders shall determine whether the applicable standard of conduct has been
met and, if so, shall authorize indemnification.
(c) Definitions. The term "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative. The term "expenses" includes, without limitation, attorney's
fees and any expenses of establishing a right to indemnification."
The registrant has entered into indemnification agreements with each of its
current directors and officers pursuant to the foregoing provisions.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
5.1 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP, Independent Accountants
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part of
Exhibit 5.1)
24.1 Power of Attorney (See pages II-4)
99.1 1995 Stock Option Plan, as amended
II-2
<PAGE>
ITEM 9. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Foster City, State of California, on this 6th day of
November, 1998.
DEPOMED, INC.
By: /s/ John W. Fara
----------------
John W. Fara
President and Chief Executive Officer
POWER OF ATTORNEY TO SIGN AMENDMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint John W. Fara and John F. Hamilton with
full power of substitution, such person's true and lawful attorneys-in-fact and
agents for such person in such person's name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement on Form S-8 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully, to all intents and purposes, as he or such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement on Form S-8 has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- ----------------------------- -------------------------------------- ------------------
<S> <C> <C>
/s/ John W. Fara President, Chief Executive Officer November 6, 1998
- -----------------------------
John W. Fara, Ph.D. and Director (Principal Executive
Officer)
/s/ John W. Shell Chairman of the Board and Chief November 6, 1998
- -----------------------------
John W. Shell Ph.D. Scientific Officer
/s/ John N. Shell Vice President Operations, Director November 6, 1998
- -----------------------------
John N. Shell
/s/ John F. Hamilton Vice President-Finance and Chief November 6, 1998
- -----------------------------
John F. Hamilton Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ G. Steven Burrill Director November 6, 1998
- -----------------------------
G. Steven Burrill
/s/ W. Leigh Thompson Director November 6, 1998
- -----------------------------
W. Leigh Thompson, M.D.
</TABLE>
II-5
<PAGE>
Index to Exhibits
-----------------
<TABLE>
<CAPTION>
Item
No. Description of Item
--- -------------------------------------------------------------------------
<S> <C>
5.1 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP, Independent Accountants
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part of Exhibit 5.1)
24.1 Power of Attorney (See page II-4)
99.1 1995 Stock Option Plan, as amended
</TABLE>
<PAGE>
EXHIBIT 5.1
[Heller Ehrman Letterhead]
November 5, 1998
22038-0001
DepoMed, Inc.
366 Lakeside Drive
Foster City, California 94404
REGISTRATION STATEMENT ON FORM S-8
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to DepoMed, Inc., a California corporation
(the "Company"), in connection with the Registration Statement on Form S-8
(the "Registration Statement") which the Company proposes to file with the
Securities Exchange Commission on or about November 5, 1998 for the purposes
of registering under the Securities Exchange Act of 1933, as amended,
1,000,000 shares (the "Shares") of its common stock, no par value ("Common
Stock"). The Shares are issuable under the Company's 1995 Stock Option Plan,
as amended (the "Plan").
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to us as copies.
In rendering our opinion, we have examined the following records,
documents and instruments:
(a) The Amended and Restated Articles of Incorporation of the
Company, certified by the California Secretary of State as
of October 28, 1998, and certified to us by an officer of
the Company as being complete and in full force as of the
date of this opinion;
(b) The Bylaws of the Company certified to us by the Vice
President-Finance and Chief Financial Officer of the Company
as being complete and in full force and effect as of the
date of this opinion;
<PAGE>
DepoMed, Inc.
November 5, 1998
(c) A Certificate of the Vice President-Finance and Chief
Financial Officer of the Company (i) attaching records
certified to us as constituting all records of proceedings
and actions of the Board of Directors, including any
committee thereof, and stockholders of the Company relating
to the Shares, and the Registration Statement, and (ii)
certifying as to certain factual matters;
(d) The Registration Statement;
(e) The Plan; and
(f) A letter from the Company's transfer agent, dated November
4, 1998, as to the number of shares of the Common Stock that
were outstanding on November 3, 1998.
This opinion is limited to the federal law of the United States of
America and the law of the State of California, and we disclaim any opinion as
to the laws of any other jurisdiction. We further disclaim any opinion as to
any other statute, rule, regulation, ordinance, order or other promulgation of
any other jurisdiction or any regional or local governmental body or as to any
related judicial or administrative opinion.
Based on the foregoing and our examination of such questions of law as
we have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered and issued, (ii) the full
consideration stated in the Plan is paid for each Share and that such
consideration in respect of each Share includes payment of cash or other lawful
consideration, (iii) appropriate certificates evidencing the Shares are executed
and delivered by the Company, and (iv) all applicable securities laws are
complied with, it is our opinion that when issued and sold by the Company, after
payment therefore in the manner provided in the Plan and Registration Statement,
the Shares will be duly authorized and validly issued, and will be fully paid
and nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose, or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written consent.
We disclaim any obligation to advise you of any change of law that occurs, or
any facts of which we may become aware, after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ HELLER EHRMAN WHITE & MCAULIFFE
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1995 Stock Option Plan, as amended, of our report
dated February 27, 1998, with respect to the financial statements included in
its Annual Report (Form 10-K) for the year ended December 31, 1997, filed with
the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
November 4, 1998
<PAGE>
EXHIBIT 99.1
1995 STOCK OPTION PLAN
OF
DEPOMED, INC.
(AS AMENDED)
1. PURPOSES OF THE PLAN
The purposes of the 1995 Stock Option Plan (the "Plan") of DepoMed, Inc., a
California corporation (the "Company"), are to: (a) Encourage selected
employees, directors and consultants to improve operations and increase profits
of the Company; (b) Encourage selected employees, directors and consultants to
accept or continue employment or association with the Company or its Affiliates;
and (c) Increase the interest of selected employees, directors and consultants
in the Company's welfare through participation in the growth in value of the
common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonstatutory
options" ("NSOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a full-time employee
of the Company or of any Affiliate (as defined below) of the Company is eligible
to receive NSOs or ISOs under this Plan. Every person who at the date of grant
is a consultant to, or non-employee director of, the Company or any Affiliate
(as defined below) of the Company is eligible to receive NSOs under this Plan.
The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
(a) Number and Source of Shares. Subject to the provisions of Section
---------------------------
6.1.1 of the Plan, the total number of shares of stock which may be issued under
options granted pursuant to this Plan shall not exceed 1,000,000 shares of
Common Stock. The shares
<PAGE>
covered by the portion of any grant under the Plan which expires unexercised
shall become available again for grants under the Plan.
(b) Individual Limitation. The Company may not issue options with a fair
---------------------
market value exercise price as of the date of grant covering in the aggregate
more than 500,000 shares of Common Stock to any one participant in any one-year
period.
4. ADMINISTRATION
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or, either in its entirety or only insofar as required
pursuant to Section 4(b) hereof, by a committee (the "Committee") of at least
two Board members to which administration of the Plan, or of part of the Plan,
is delegated (in either case, the "Administrator").
(b) From and after such time as the Company registers a class of equity
securities under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), it is intended that this Plan shall be administered in
accordance with the disinterested administration requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.
(c) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to determine
the fair market value of the Common Stock subject to Options; (iii) to determine
the exercise price of Options granted; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted, and the number of
shares subject to each Option; (v) to interpret this Plan; (vi) to prescribe,
amend, and rescind rules and regulations relating to this Plan; (vii) to
determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
(d) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations shall be
final and binding on all persons.
2
<PAGE>
(e) With respect to persons subject to Section 16 of the Exchange Act, if
any, transactions under this Plan are intended to comply with the applicable
conditions of Rule 16b-3, or any successor rule thereto. To the extent any
provision of this Plan or action by the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Administrator. Notwithstanding the above, it shall be the
responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option agreement,
in form satisfactory to the Company, executed by the Company and the person to
whom such Option is granted; provided, however, that the failure by the Company,
the optionee, or both to execute such an agreement shall not invalidate the
granting of an Option, although the exercise of each option shall be subject to
Section 6.1.3.
(c) The stock option agreement shall specify whether each Option it
evidences is a NSO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator may
approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NSOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1. Terms and Conditions to Which All Options are Subject. All Options
-----------------------------------------------------
granted under this Plan shall be subject to the following terms and conditions:
3
<PAGE>
6.1.1. Changes in Capital Structure. Subject to Section 6.1.2, if
----------------------------
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.
6.1.2. Corporate Transactions. In the event of the proposed
----------------------
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action. In the event of a merger or consolidation
of the Company with or into another corporation or entity in which the Company
does not survive, or in the event of a sale of all or substantially all of the
assets of the Company in which the stockholders of the Company receive
securities of the acquiring entity or an affiliate thereof, all Options shall be
assumed or equivalent options shall be substituted by the successor corporation
(or other entity) or a parent or subsidiary of such successor corporation (or
other entity). If such successor does not agree to assume the Options or to
substitute equivalent options therefor, unless the Administrator shall determine
otherwise, the Options will expire upon such event.
6.1.3. Time of Option Exercise. Subject to Section 5 and Section
-----------------------
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule related to the date of the grant of the Option,
the date of first employment, or such other date as may be set by the
Administrator (in any case, the "Vesting Base Date") and specified in the
written stock option agreement relating to such Option; provided, however, that
the right to exercise an Option must vest at the rate of at least 20% per year
over five years from the date the option was granted. In any case, no Option
shall be exercisable until a written stock option agreement in form satisfactory
to the Company is executed by the Company and the optionee.
6.1.4. Option Grant Date. Except in the case of advance approvals
-----------------
described in Section 5(d), the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
6.1.5. Nonassignability of Option Rights. No Option granted under
---------------------------------
this Plan shall be assignable or otherwise transferable by the optionee except
by will or by the laws of descent and distribution. During the life of the
optionee, an Option shall be exercisable only by the optionee.
4
<PAGE>
6.1.6. Payment. Except as provided below, payment in full, in cash,
-------
shall be made for all stock purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. At the time an Option is granted or exercised, the
Administrator, in the exercise of its absolute discretion after considering any
tax or accounting consequences, may authorize any one or more of the following
additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory
note for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
would be imputed and in no event more than the maximum interest rate allowed
under applicable usury laws), which promissory note may be either secured or
unsecured in such manner as the Administrator shall approve (including, without
limitation, by a security interest in the shares of the Company); and
(b) Delivery by the optionee of Common Stock already owned
by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.
6.1.7. Termination of Employment. If for any reason other than death
-------------------------
or disability, an optionee ceases to be employed by the Company or any of its
Affiliates (such event being called a "Termination"), Options held at the date
of Termination (to the extent then exercisable) may be exercised in whole or in
part at any time within one (1) month of the date of such Termination, or such
other period of not less than thirty (30) days after the date of such
Termination as is specified in the Option Agreement (but in no event after the
Expiration Date); provided, that if such exercise of the Option would result in
liability for the optionee under Section 16(b) of the Exchange Act, then such
one-month period automatically shall be extended until the tenth (10th) day
following the last date upon which optionee has any liability under Section
16(b) (but in no event after the Expiration Date). If an optionee dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that the Option
remains exercisable after Termination, Options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the Option is
transferred by devise or the laws of descent and distribution, at any time
within twelve (12) months after
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the death or twelve (12) months after the disability of the optionee, or such
other period of not less than six (6) months from the date of Termination as is
specified in the Option Agreement (but in no event after the Expiration Date).
For purposes of this Section 6.1.7, "employment" includes service as a director
or as a consultant. For purposes of this Section 6.1.7, an optionee's employment
shall not be deemed to terminate by reason of sick leave, military leave or
other leave of absence approved by the Administrator, if the period of any such
leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
6.1.8. Repurchase of Stock. At the option of the Administrator, the
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stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase either:
(a) shall be at the Option exercise price and (i) shall
lapse at the rate of at least 20% per year over five years from the date the
Option is granted (without regard to the date it becomes exercisable), and must
be exercised for cash or cancellation of purchase money indebtedness within the
later of (x) 30 days after the acquisition of stock upon exercise of such Option
or (y) 90 days after such termination, and (ii) if the right is assignable by
the Company, the assignee must pay the Company upon assignment of the right
(unless the assignee is a 100% owned subsidiary of the Company or is an
Affiliate) cash equal to the difference between the Option exercise price and
the value (determined as set forth in Section 6.1.11) of the stock to be
purchased if the Option exercise price is less than such value; or
(b) shall be at the higher of the Option exercise price or
the value (determined as set forth in Section 6.1.11 or as otherwise provided in
the grant of Option) of the stock being purchased on the date of termination,
and must be exercised for cash or cancellation of purchase money indebtedness
within the later of (x) 30 days after the acquisition of stock upon exercise of
such Option or (y) 90 days after such termination, and such right shall
terminate when the Company's securities become publicly traded.
Determination of the number of shares subject to any such right of repurchase
shall be made as of the date the employee's employment as an employee,
consultant or director of the Company terminates, not as of the date that any
Option granted to such employee, director or consultant is thereafter exercised.
6.1.9. Withholding and Employment Taxes. At the time of exercise of
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an Option
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or at such other time as the amount of such obligations becomes determinable
(the "Tax Date"), the optionee shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. If authorized by the
Administrator in its sole discretion after considering any tax or accounting
consequences, an optionee may elect to (i) deliver a promissory note on such
terms as the Administrator deems appropriate, (ii) tender to the Company
previously owned shares of Stock or other securities of the Company, or (iii)
have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company to pay some or all of the amount of tax that is required
by law to be withheld by the Company as a result of the exercise of such Option,
subject to the following limitations:
(a) Any election pursuant to clause (iii) above by an optionee
subject to Section 16 of the Exchange Act shall either (x) be made at least six
months before the Tax Date and shall be irrevocable; or (y) shall be made in (or
made earlier to take effect in) any ten-day period beginning on the third
business day following the date of release for publication of the Company's
quarterly or annual summary statements of earnings and shall be subject to
approval by the Administrator, which approval may be given at any time after
such election has been made. In addition, in the case of (y), the Option shall
be held at least six months prior to the Tax Date.
(b) Any election pursuant to clause (ii) above, where the optionee is
tendering Common Stock issued pursuant to the exercise of an Option, shall
require that such shares be held at least six months prior to the Tax Date.
Any of the foregoing limitations may be waived (or additional limitations may be
imposed) by the Administrator, in its sole discretion, if the Administrator
determines that such foregoing limitations are not required (or that such
additional limitations are required) in order that the transaction shall be
exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3, or any
successor rule thereto. In addition, any of the foregoing limitations may be
waived by the Administrator, in its sole discretion, if the Administrator
determines that Rule 16b-3, or any successor rule thereto, is not applicable to
the exercise of the Option by the optionee or for any other reason.
Any securities tendered or withheld in accordance with this Section 6.1.9
shall be valued by the Company as of the Tax Date.
6.1.10. Other Provisions. Each Option granted under this Plan
----------------
may contain such other terms, provisions, and conditions not inconsistent with
this Plan as may be determined by the Administrator, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code. If Options
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provide for a right of first refusal in favor of the Company with respect to
stock acquired by employees, directors or consultants, such Options shall
provide that the right of first refusal shall terminate upon the earlier of (i)
the closing of the Company's initial registered public offering to the public
generally, or (ii) the date ten years after the grant date as set forth in
Section 6.1.4.
6.1.11. Determination of Value. For purposes of the Plan, the
----------------------
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or the closing bid if no sales were reported,
as quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there are no sales for such date, then for
the last preceding business day on which there were sales), as reported in the
Wall Street Journal or similar publication.
(b) If the stock of the Company is regularly quoted by
a recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.
6.1.12. Option Term. Subject to Section 6.3.5, no Option shall
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be exercisable more than ten years after the date of grant, or such lesser
period of time as is set forth in the stock option agreement (the end of the
maximum exercise period stated in the stock option agreement is referred to in
this Plan as the "Expiration Date").
6.1.13. Exercise Price. The exercise price of any Option
--------------
granted to any person who owns, directly or by attribution under the Code
currently Section 424(d), stock possessing more than ten percent of the total
combined voting power of all classes
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of stock of the Company or of any Affiliate (a "Ten Percent Stockholder") shall
in no event be less than 110% of the fair market value (determined in accordance
with Section 6.1.11) of the stock covered by the Option at the time the Option
is granted.
6.2. TERMS AND CONDITIONS TO WHICH ONLY NSOS ARE SUBJECT. Options granted
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under this Plan which are designated as NSOs shall be subject to the following
terms and conditions:
6.2.1. Exercise Price. Except as set forth in Section 6.1.13, the
--------------
exercise price of a NSO shall be not less than 85% of the fair market value
(determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.
6.3. TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options granted
---------------------------------------------------
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1. Exercise Price. Except as set forth in Section 6.1.13, the
--------------
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.3.2. Disqualifying Dispositions. If stock acquired by exercise of
--------------------------
an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3. Grant Date. If an ISO is granted in anticipation of
----------
employment as provided in Section 5(d), the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4. Vesting. Notwithstanding any other provision of this Plan,
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ISOs granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator,
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ISOs with lower exercise prices shall vest before ISOs with higher exercise
prices, regardless of the grant date.
6.3.5. Term. Notwithstanding Section 6.1.12, no ISO granted to any
----
Ten Percent Stockholder shall be exercisable more than five years after the date
of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price as provided in Section 6.1.6. The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price will be considered as the date such Option was exercised.
(b) Promptly after receipt of written notice of exercise of an Option, the
Company shall, without stock issue or transfer taxes to the optionee or other
person entitled to exercise the Option, deliver to the optionee or such other
person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a stockholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the appropriate entry on the
books of the Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted thereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. FINANCIAL INFORMATION
The Company shall provide to each optionee during the period such optionee
holds an outstanding Option, and to each holder of Common Stock acquired upon
exercise of Options granted under the Plan for so long as such person is a
holder of such Common Stock, annual financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall include, at a minimum, a balance
sheet and an income statement, and shall be delivered as soon as practicable
following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
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11. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any limitations
on the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under the Plan.
12. MARKET STANDOFF
Each Optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first two registration statements of the Company to
become effective under the Securities Act which includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of such
180-day period.
13. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
stockholder approval is advisable.
14. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within 12 months
after adoption by the Board. If such stockholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be granted
and exercised under this Plan only after there has been compliance with all
applicable federal and state securities laws.
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