<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission File Number: 0-28310
SIBIA Neurosciences, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3616229
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
505 Coast Boulevard South, Suite 300, La Jolla, CA 92037
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(Address of principal executive offices) (Zip Code)
(619) 452-5892
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 22, 1997
----- ----------------------------
<S> <C>
Common Stock, $.001 par value 9,246,402
</TABLE>
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SIBIA Neurosciences, Inc.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
Condensed Balance Sheet as of December 31, 1996
and June 30, 1997 (Unaudited) .............................................. 3
Condensed Statement of Operations (Unaudited) for the Three
Months and Six Months Ended June 30, 1996 and 1997.......................... 4
Condensed Statement of Cash Flows (Unaudited) for the Six Months
Ended June 30, 1996 and 1997................................................ 5
Notes to Financial Statements (Unaudited).................................... 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ........................................................... 12
ITEM 2. Changes in Securities ....................................................... 12
ITEM 3. Defaults Upon Senior Securities.............................................. 12
ITEM 4. Submission of Matters to a Vote of
Security Holders............................................................ 13
ITEM 5. Other Information............................................................ 13
ITEM 6. Exhibits and Reports on Form 8-K............................................. 14
SIGNATURE.............................................................................. 15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
SIBIA Neurosciences, Inc.
Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------- --------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,412,000 $ 3,673,000
Investment securities 36,052,000 34,087,000
Contracts and accounts receivable 68,000 392,000
Prepaid expenses and other current assets 684,000 523,000
------------ ------------
Total current assets 38,216,000 38,675,000
------------ ------------
Property and equipment, net 1,307,000 1,326,000
Other assets 460,000 430,000
------------ ------------
$ 39,983,000 $ 40,431,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,212,000 $2,089,000
Accrued liabilities 1,249,000 1,276,000
Deferred revenue 431,000 167,000
------------ ------------
Total current liabilities 2,892,000 3,532,000
------------ ------------
Capital lease obligations 519,000 489,000
------------ ------------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred Stock, $.001 par value; 5,000,000 shares authorized:
Series A Junior Participating Preferred Stock, 150,000
shares authorized. No shares issued and outstanding at
December 31, 1996 and June 30, 1997.
Common stock, $.001 par value; 25,000,000 shares authorized;
9,154,157 and 9,245,199 shares issued and outstanding at
December 31, 1996 and June 30, 1997, respectively. 9,000 9,000
Additional paid-in capital 59,746,000 59,885,000
Deferred compensation (1,039,000) (843,000)
Notes receivable from stockholders (640,000) (100,000)
Net unrealized gains on investment securities
available-for-sale 189,000 1,772,000
Accumulated deficit (21,693,000) (24,313,000)
------------ ------------
Total stockholders' equity 36,572,000 36,410,000
------------ ------------
$ 39,983,000 $ 40,431,000
============ =============
</TABLE>
See accompanying notes.
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SIBIA Neurosciences, Inc.
Condensed Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
1996 1997 1996 1997
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Revenue:
Contract $ 2,029,000 $1,842,000 $ 4,356,000 $ 3,623,000
License and royalty 15,000 3,164,000 72,000 3,326,000
----------- ---------- ----------- -----------
Total revenue (Note 5) 2,044,000 5,006,000 4,428,000 6,949,000
----------- ---------- ----------- -----------
Expenses:
Research and development 2,981,000 4,111,000 5,656,000 8,070,000
General and administrative 792,000 1,487,000 1,644,000 2,642,000
----------- ---------- ----------- -----------
3,773,000 5,598,000 7,300,000 10,712,000
----------- ---------- ----------- -----------
(1,729,000) (592,000) (2,872,000) (3,763,000)
----------- ---------- ----------- -----------
Other income (expense):
Interest income 404,000 584,000 629,000 1,168,000
Interest expense (17,000) (14,000) (34,000) (29,000)
Other 5,000 2,000 5,000 4,000
----------- ---------- ----------- -----------
392,000 572,000 600,000 1,143,000
----------- ---------- ----------- -----------
Net loss $(1,337,000) $ (20,000) $(2,272,000) $(2,620,000)
=========== ========== =========== ===========
Net loss per common share $ (0.18) $ - $ (0.37) $ (0.28)
----------- ---------- ---------- -----------
Weighted average number of common
shares outstanding: 7,366,319 9,236,512 6,174,100 9,208,189
=========== ========== ========== ===========
</TABLE>
See accompanying notes.
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SIBIA Neurosciences, Inc.
Condensed Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,272,000) $ (2,620,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 284,000 314,000
Compensation from issuance of common stock options 397,000 196,000
(Gain) loss on disposal of property (1,000) (4,000)
Net amortization of premium and discount on
investment securities (288,000) (54,000)
Increase (decrease) in cash resulting from changes in:
Contract and accounts receivable (96,000) (324,000)
Prepaid expenses and other assets (195,000) 186,000
Accounts payable and accrued liabilities 173,000 865,000
Deferred revenue 985,000 (264,000)
------------ ------------
Net cash provided (used) by operating activities (1,013,000) (1,705,000)
------------ ------------
Cash flows from investing activities:
Purchases of investment securities available-for-sale (25,974,000) (7,411,000)
Maturities of investment securities available-for-sale 11,000,000
Maturities of investment securities held-to-maturity 13,692,000
Principal payments received on investment securities
available-for-sale 26,000 13,000
Proceeds from disposal of property and equipment 5,000 4,000
Acquisition of property and equipment (137,000) (62,000)
------------ ------------
Net cash provided (used) by investing activities (12,388,000) 3,544,000
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of stock 25,990,000 139,000
Proceeds from payment on notes receivable 9,000 540,000
Principal payments on capital lease obligations (223,000) (257,000)
------------ ------------
Net cash provided (used) by financing activities 25,776,000 422,000
------------ ------------
Net increase in cash and cash equivalents 12,375,000 2,261,000
Cash and cash equivalents at beginning of period 2,274,000 1,412,000
------------ ------------
Cash and cash equivalents at end of period $ 14,649,000 $ 3,673,000
============ ============
</TABLE>
See accompanying notes.
5
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SIBIA Neurosciences, Inc.
NOTES TO THE FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of SIBIA Neurosciences, Inc.
("SIBIA" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
rules and regulations of the Securities and Exchange Commission ("SEC").
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1996, included
in the Company's Form 10-K filed with the SEC.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures as of the date of the financial statements. Actual results
could differ from such estimates.
2. NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during the periods presented. Other Common Stock
equivalents are antidilutive and are excluded from the computation of net loss
per common share.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share", which
establishes standards for computing and presenting earnings per share (EPS).
SFAS No. 128 will be adopted by the Company as required for the interim periods
and fiscal years ending after December 15, 1997. Upon adoption of SFAS No. 128,
the Company will present basic EPS as well as diluted EPS in the period of
adoption and restate all prior-period EPS data presented for comparative
purposes. Basic EPS will be computed by dividing income available to holders of
Common Stock by the weighted average number of shares of Common Stock
outstanding. Diluted EPS will be computed similarly to basic EPS except that the
weighted average number of shares of Common Stock outstanding will be increased
to include the number of additional shares of Common Stock that would have been
outstanding if the dilutive potential common shares had been issued. Pro forma
EPS calculations under SFAS No. 128 are not presented as they are not materially
different than those currently presented.
3. STOCKHOLDERS' EQUITY
In March 1997, the Board of Directors of the Company adopted a Share Purchase
Rights Plan pursuant to which preferred share purchase rights (the "Rights")
were distributed for each share of Common Stock of the Company held as of the
close of business on April 2, 1997. Each Right, under certain circumstances,
entitles the holder thereof to purchase from the Company one one-
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hundredth of a share of Series A Junior Participating Preferred Stock (each a
"Preferred Share") at an exercise price of $60.00 per one one-hundredth of a
Preferred Share. Each one one-hundredth of a share of Preferred Share has
rights, preferences and privileges equal to the value of a share of Common
Stock. The Rights will expire on March 17, 2007, unless the Rights are earlier
redeemed or exchanged by the Company. The Rights will cause substantial dilution
to a person or group that attempts to acquire the Company on terms not approved
by the Company's Board of Directors.
4. STATEMENT OF CASH FLOWS
Non-cash financing activities were comprised of capital lease obligations of
$266,000 and $154,000, respectively, in the six-month periods ended June 30,
1997 and 1996.
5. SIGNIFICANT COLLABORATIVE AGREEMENTS
Total costs incurred under the Company's various collaborative agreements for
the three and six month periods ended June 30, 1997, including certain
administrative costs, aggregated $1,521,000 and $3,081,000, respectively. For
the corresponding periods in 1996, such costs aggregated $1,400,000 and
$2,885,000, respectively.
Total revenue for the three and six month periods ended June 30, 1997 included
$959,000 and $1,885,000, respectively, from a related party. For the
corresponding periods in 1996, total revenue included $1,578,000 and $3,452,000,
respectively, from related parties.
6. LEASE LINE FUNDING
In February 1997, the Company received a firm commitment from a third-party to
fund an aggregate of $1,500,000 in equipment purchases under a master lease
agreement through March 31, 1998.
7. DEVELOPMENT AGREEMENT
In February 1997, the Company entered into an agreement with Meiji Seika Kaisha,
Ltd. ("Meiji") for the development and commercialization of the Company's
proprietary nicotinic acetylcholine receptor agonist, SIB-1508Y, as a treatment
for Parkinson's disease in Japan and other Asian countries. Under the agreement,
the Company received an upfront license fee of $3,000,000 and may receive
development milestone payments and royalties on future products, if any. The
Company will retain rights for the commercial manufacture of products developed
under the agreement.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in certain litigation with Cadus Pharmaceutical
Corporation. See further discussion of this matter at Item 1 in Part II of this
Form 10-Q.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Except for the historical information contained herein, the discussion in this
report contains forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially from those discussed in
this report. Factors that could cause or contribute to such differences include,
without limitation, those discussed in this Item 2 (Management's Discussion and
Analysis of Financial Condition and Results of Operations) as well as those
discussed in the Company's Form 10-K for the year ended December 31, 1996 under
the heading "Risk Factors".
SIBIA is engaged in the discovery and development of novel, small molecule
therapeutics for disorders of the nervous system based on the Company's unique
approach to characterizing the molecular processes involved in such disorders.
SIBIA is focusing its efforts on discovering and developing compounds for the
treatment of Parkinson's disease, Alzheimer's disease, stroke, depression, head
trauma, epilepsy, chronic pain, schizophrenia and other neurological,
psychiatric and neurodegenerative disorders, many of which have large patient
populations and represent critical unmet medical needs.
The Company has no products available for sale and does not expect to have any
products resulting from its research efforts, including its collaborations with
others, commercially available for at least several years, if at all. Except for
1995, the Company has incurred net losses every year since shifting its area of
therapeutic focus to the central nervous system in 1991. The Company is
continuing to incur losses and expects to incur increasing operating losses over
the next several years as the Company's research and development expenditures
increase. The Company's revenue for the next several years will be limited to
payments under its collaborative agreements, license fees, interest income and
other miscellaneous income.
RESULTS OF OPERATIONS
Revenue
The Company had total revenue of $5,006,000 for the second quarter and
$6,949,000 for the six-month period ended June 30, 1997, compared with
$2,044,000 and $4,428,000, respectively, for the same periods in 1996. The
increase was due primarily to license revenue recognized in 1997 related to the
Company's agreement with Meiji for the development of SIB-1508Y, SIBIA's lead
compound for Parkinson's disease.
Expenses
Research and development expenses increased to $4,111,000 for the second quarter
and $8,070,000 for the six-month period ended June 30, 1997 from $2,981,000 and
$5,656,000, respectively, for the same periods in 1996. The increase in research
and development expenses was primarily the result of expanded programs in drug
discovery and for expenses associated
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with non-clinical and clinical trials of SIB-1508Y, SIBIA's lead compound for
Parkinson's disease.
General and administrative expenses increased to $1,487,000 for the second
quarter and $2,642,000 for the six-month period ended June 30, 1997 from
$792,000 and $1,644,000, respectively, for the same periods in 1996. The
increase in general and administrative expenses was due primarily to the payment
of foreign taxes related to payments received under the Meiji agreement and
increased legal fees related to various patent, general, and litigation matters.
Such increases were offset by decreased compensation expense relating to stock
option grants.
Other Income
Other income increased to $572,000 for the second quarter and $1,143,000 for the
six-month period ended June 30, 1997 from $392,000 and $600,000, respectively,
for the same periods in 1996. The increase in other income was due primarily to
an increase in interest income earned on proceeds from the Company's initial
public offering of Common Stock in May 1996.
LIQUIDITY AND CAPITAL RESOURCES
SIBIA has financed its operations primarily through equity financings, research
contracts (generally conducted on a best efforts basis), option, license and
royalty revenues, and the sale of certain technology. As of June 30, 1997, the
Company had an accumulated deficit of $24,313,000.
The Company anticipates that the cash, cash equivalents and investment
securities balance of $37,760,000 as of June 30, 1997 will be used to support
continued research and development as well as continued drug discovery efforts
and non-clinical and early stage clinical trials of potential drug candidates.
The Company leases laboratory and office facilities under an agreement expiring
on December 31, 2001 with an option to extend for an additional five years. The
average minimum annual payment under the lease is approximately $1,347,000,
before consideration of sublease income. The Company believes that its present
facility will be adequate to conduct its research activities through December
2001, and believes that, when needed, it will be able to secure additional space
at commercially reasonable rates.
The Company will require substantial additional funds to conduct the research
and development with respect to its technologies and preclinical and clinical
testing of potential drug candidates. The Company's future capital needs will be
dependent upon many factors, including progress in its research and development
activities, the magnitude and scope of these activities, progress with
preclinical and clinical trials, the cost of preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, changes in or
terminations of existing collaborative arrangements and the establishment of
additional collaborative arrangements. The Company expects to expend substantial
funds in connection with research and development and in the area of
intellectual property. Funds generated from payments under existing
collaborative agreements, together with the Company's current cash reserves,
will be insufficient to fund the Company's operations through the completion of
any clinical trials. Although the Company will seek to obtain additional funds
through public or private equity or debt financings, collaborative or other
arrangements with corporate partners or from other sources, there can be no
assurance that
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additional financing will be available or, if available, that it
will be available on acceptable terms. If additional funds are raised by issuing
equity securities, further dilution to then existing stockholders would result.
If adequate funds are not available, the Company may be required to curtail
significantly or eliminate one or more of its research, discovery or development
programs or obtain funds through additional arrangements with corporate partners
or others which may require the Company to relinquish rights to certain of its
technologies or product candidates that the Company would not otherwise
relinquish, which could have a material adverse effect on the Company's
business.
The Company's strategy for the development, clinical testing, manufacturing and
commercialization of certain of its compounds includes entering into various
collaborations with corporate partners, licensors, licensees and others. The
Company currently has collaborative arrangements with Eli Lilly and Company
("Lilly"), Novartis AG, Bristol-Myers Squibb and Company, and Meiji Seika
Kaisha, Ltd. and intends to enter into additional collaborations. There can be
no assurance that these collaborations will continue or be successful or that
any products will be developed. The amount and timing of resources dedicated by
these collaborators under their respective agreements also is not within the
control of the Company. There can be no assurance that the Company will ever
receive any milestone or royalty payments under these agreements. Each of the
collaborative parties has the right to terminate its respective collaboration
under certain circumstances. There can be no assurance that collaborators will
not terminate their respective collaborations. In addition, there can be no
assurance that collaborators will not pursue alternative technologies to develop
treatments for the diseases targeted by the respective collaborative programs.
If any of the Company's collaborative partners terminates or breaches its
agreement with the Company or fails to devote adequate resources to or to
conduct in a timely manner its collaborative activities, the research program
under the applicable collaborative agreement or the development and
commercialization of drug candidates subject to such collaboration would be
materially adversely affected, which could have a material adverse effect on the
Company's business. In addition, because the Company's collaborative agreements
accounted for 39% and 55%, respectively, of total revenues for the three months
and six months ended June 30, 1997 and 99% and 97%, respectively, for the three
months and six months ended June 30, 1996, such a termination or breach could
materially adversely affect the Company's results of operations and financial
condition.
In August 1997, the Company announced that its collaboration with Lilly would be
completed as of the end of October 1997. The term of the collaboration was to
expire as of October 1998. The company believes that the reduction in research
funding revenues from Lilly as a result of the early completion of the
collaboration will not have a material financial impact on the Company.
The Company's success will depend in part on its ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others, both in the United States and other countries. The patent positions
of biotechnology and pharmaceutical companies can be highly uncertain and
involve complex legal and factual questions, and therefore, the breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
Litigation, which could result in substantial costs to the Company, may be
necessary to enforce any patents issued to the Company or to determine the scope
and validity of third-party proprietary rights. Moreover, if competitors of the
Company prepare and file patent applications in the United States that claim
technology also claimed by the Company, the Company may have to participate in
interference proceedings to determine priority of invention, which could result
in substantial cost to the Company, even if the eventual outcome is favorable to
the Company. The Company
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is aware of a third-party patent application that may elicit an interference
proceeding with one of the Company's patent applications. In addition, the
Company believes that certain claims in three of its other patent applications
may elicit such proceedings. The Company believes that its transcription-based
assay technology is fundamental and broadly applicable to modern drug discovery,
and represents a valuable asset to the Company. The Company is involved in
litigation with Cadus Pharmaceutical Corporation regarding such technology. See
Part II, Item 1 of this Report. There can be no assurance that the Company will
prevail in these proceedings.
Prior to marketing in the United States, any drug developed by the Company must
undergo rigorous preclinical and clinical testing and an extensive regulatory
approval process implemented by the FDA under the federal Food, Drug and
Cosmetic Act. To market products abroad, the Company also would be subject to
foreign regulatory requirements, implemented by foreign health authorities,
governing clinical trials and marketing approval for drugs. Satisfaction of such
regulatory requirements, which includes demonstrating to the satisfaction of the
FDA that the product is both safe and effective, typically takes several years
or more depending upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. The Company intends to
establish collaborative relationships to conduct clinical trials and seek
regulatory approvals to market products that it may develop, although there can
be no assurance that such approvals will be received on a timely basis, if at
all.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings:
On July 9, 1996, the Company filed an action in the United States
District Court for the Southern District of California for patent
infringement against Cadus Pharmaceutical Corporation ("Cadus"). The
complaint asserts that Cadus' assay technology infringes the Company's
U.S. Patent No. 5,401,629 (the "629 patent"), entitled "Assay Methods
and Compositions Useful for Measuring the Transduction of an
Intracellular Signal". Through the complaint, the Company seeks damages
in an unspecified amount and a preliminary and permanent injunction.
On August 1, 1996, Cadus filed its answer and a counterclaim seeking a
judicial declaration that the '629 patent and the Company's U.S. Patent
No. 5,436,128 are invalid, unenforceable and not infringed. The
counterclaim seeks unspecified compensation and punitive damages based
on claims for intentional interference with prospective economic
advantage and unfair competition.
Company management believes that its complaint against Cadus is
well-founded and necessary to protect the value of its intellectual
property portfolio. Management believes that Cadus' counterclaim is
without merit and intends to vigorously prosecute its claim of
infringement and defend against Cadus' counterclaim.
Management believes that the ultimate resolution of the above matter
will not have a material adverse impact on the Company's financial
position, results of operations or cash flow.
In addition to the above, the Company is involved in certain legal or
administrative proceedings generally incidental to its normal business
activities. While the outcome of any such proceedings cannot be
accurately predicted, the Company does not believe the ultimate
resolution of any such existing matters will have a material adverse
effect on its financial position, results of operations or cash flows.
ITEM 2. Changes in Securities:
None.
ITEM 3. Defaults Upon Senior Securities:
None.
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ITEM 4. Submission of Matters to a Vote of Security Holders:
(a) The Company held its Annual Meeting of Stockholders on June 4,
1997.
(b) The following directors were elected to serve for the term
designated by their Class (I, II, or III) as defined in
subparagraph (c)(1) below:
<TABLE>
<CAPTION>
CLASS FOR WITHHELD
----- --- --------
<S> <C> <C> <C>
William T. Comer, Ph.D. I 8,642,518 172,980
Gunnar Ekdahl I 8,781,798 33,700
Frederick B. Rentschler II 8,765,888 49,610
James D. Watson, Ph.D. II 8,553,098 262,400
William R. Miller III 8,781,798 33,700
Stanley T. Crooke, M.D., Ph.D. III 8,553,098 262,400
</TABLE>
(c) The following items were approved at the Annual Meeting:
(1) Amendment of the Company's Certificate of
Incorporation and Bylaws to provide for a classified
board of directors and to eliminate the ability of
stockholders to remove a director without cause.
Directors assigned to Class I shall serve until the
1998 Annual Meeting of Stockholders, directors
assigned to Class II shall serve until the 1999
Annual Meeting of Stockholders, directors assigned to
Class III shall serve until the 2000 Annual Meeting
of Stockholders and, in each case, until such
director's successor is elected and has qualified, or
until such director's earlier death, resignation or
removal. The total number of votes cast for, against,
withheld, and abstained were 6,394,994, 1,904,169,
919,514, and 5,382, respectively.
(2) The selection of Price Waterhouse LLP as the
Company's independent auditors for the fiscal year
ending December 31, 1997. The total votes for,
against, and abstained were 8,774,556, 10,232, and
30,710, respectively.
The following item was not approved at the Annual Meeting:
(1) Amendment of the Company's Certificate of
Incorporation and Bylaws to eliminate the ability of
the stockholders to call special stockholders'
meetings. The votes for, against, withheld, and
abstained were 5,346,891, 2,953,669, 919,514 and
3,985, respectively.
ITEM 5. Other Information:
None.
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ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
3.1 Amended and Restated Certificate of incorporation of
the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
10.1 Registrant's 1992 Stock Option and Restricted Stock
Plan, as amended (the "1992 Option Plan").
10.2 Registrant's 1996 Equity Incentive Plan, as amended
(the "1996 Equity Plan").
10.3 Registrant's 1996 Non-Employee Directors' Stock
Option Plan, as amended (the "Non-Employee
Directors' Option Plan").
10.4 Registrant's Management Change of Control Plan, as
amended (the "Change of Control Plan").
27.1 Financial Data Schedule. (Exhibit 27 is submitted as
an exhibit in the electronic format of this Quarterly
Report on Form 10-Q submitted to the Securities and
Exchange Commission.)
(b) Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
SIBIA Neurosciences, Inc.
Date: August 14, 1997 By: /s/ THOMAS A. REED
--------------------- ---------------------------
Thomas A. Reed
Vice President, Finance & Administration,
and Chief Financial Officer
(on behalf of the registrant and as the
registrant's principal financial officer)
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EXHIBIT 10.1
SIBIA NEUROSCIENCES, INC.
(formerly, "The Salk Institute Biotechnology/
Industrial Associates, Inc.")
AMENDED AND RESTATED 1992 STOCK OPTION AND RESTRICTED STOCK PLAN
Amended December 2, 1992
Amended June 5, 1997
1. INTRODUCTION
This Amended and Restated Stock Option and Restricted Stock
Plan (the "Plan") was originally adopted effective as of January 8, 1992, and
subsequently amended and restated as of December 2, 1992 (the "Restatement
Date"), to encourage stock ownership by directors, employees and designated
Scientific Consultants (as defined below) of SIBIA Neurosciences, Inc. (formerly
"The Salk Institute Biotechnology/Industrial Associates, Inc."), a Delaware
corporation (the "Company"), and its subsidiaries (collectively, the
"Subsidiaries" and individually, a "Subsidiary"), in order to increase their
proprietary interest in the success of the Company and to encourage them to
provide future services to the Company or a Subsidiary. Options granted under
this plan may be either Incentive Stock Options (as defined and provided for in
Section 5(a) of this Plan) or Nonstatutory Stock Options (as defined and
provided for in Section 5(b) of this Plan; the term "option" when used
hereinafter shall refer to either Incentive Stock Options or Nonstatutory Stock
Options, or both). Restricted stock awarded under this Plan shall be subject to
such restrictions as shall be determined in each specific case by the Board of
Directors of the Company (the "Board") or by a duly appointed committee of the
Board (the "Committee"), as hereinafter provided. The term "Award" when used
hereinafter shall collectively refer to options and restricted stock awarded
under the Plan.
2. ADMINISTRATION
(a) This Plan shall be administered by the Board or, if the
Board so determines, by the Committee, provided that except as otherwise
provided below, in the case of any Awards to directors or officers that are or
become subject to Section 16 of the Securities Exchange Act of 1934, the
Committee shall have exclusive responsibility for and authority to administer
the Plan unless the Board expressly determines otherwise. Subject to the
foregoing and to the express provisions of this Plan, the Board or the
Committee, as applicable, shall have plenary authority, in its sole discretion.
(i) To determine the time or times at which, and
the directors, employees and Scientific Consultants (as defined below) to whom,
options and restricted stock shall be awarded under this Plan;
(ii) To determine, as the case may be, the Incentive
Stock Option Price or Nonstatutory Stock Option Price (both as defined herein)
of, and the number of shares of Stock (as defined herein) to be covered by,
options granted under this Plan;
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(iii) To determine the number of shares of Stock to be
covered by awards of restricted stock under this Plan;
(iv) To determine the time or times at which each
option granted under this Plan may be exercised, including whether such option
may be exercised in whole or in installments; provided, however, that options
granted hereunder must be exercisable at the rate of at least 20% per year over
5 years from the date of grant;
(v) To determine the restrictions, if any, applicable
to shares of Stock obtained upon the exercise of any option granted hereunder;
provided, however, that if such restrictions restrict the transfer of such
shares and give the Company the right to repurchase all (but not less than all)
of such shares upon a Grantee's termination of employment, the following
restrictions shall apply-
(1) If the repurchase price is equal to the higher
of the original Option Price or the fair market value of the shares of Stock on
the date of termination of employment, the right to repurchase must be exercised
for cash or cancellation of purchase money indebtedness within 90 days of
termination of employment or exercise of the option, whichever is later, and
such right must terminate when the Stock becomes publicly traded; or
(2) If the repurchase price is equal to the
original Option Price, the right to repurchase shall be nontransferable by the
Company and must lapse at the rate of at least 20% per year over 5 years from
the date the option is granted (without respect to the date the option was
exercised or became exercisable), and must be exercised for cash or cancellation
of purchase money indebtedness within 90 days of termination of employment or
exercise of the option, whichever is later.
(vi) To establish the terms of the restrictions
applicable to any restricted stock awarded hereunder, and to determine the time
or times at which such restrictions shall lapse;
(vii) To interpret this Plan and to prescribe, amend
and rescind rules and regulations relating to it; and
(viii) To make-all other determinations which the
Committee shall deem necessary or advisable for the administration of this Plan.
(b) The membership of the Committee shall at all times consist
of not less than two members of the Board and shall be constituted to permit the
Plan to comply with Rule 16b-3 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), or any successor role ("Rule 16b-3"), if the Board
determines it to be in the best interests of the Company to qualify the Plan for
the exemptions from Section 16 of the Exchange Act afforded by Rule 16b-3.
Without limiting the foregoing, from and after the date the Board determines to
bring the Plan into compliance with Rule 16b-3, no director shall serve on the
Committee at any time within one year following such director's receipt of any
grant or award of an equity security
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of the Company or any related entity if such grant or award prevents such
director from qualifying as a "disinterested person" within the meaning of Rule
16-3(c)(2).
The Committee shall have all of the powers and duties
set forth herein, as well as such additional powers and duties as the Board may
delegate to it; provided, however, that the Board expressly retains the right
(i) to determine whether the shares of Stock reserved for issuance upon the
exercise of options or as restricted stock awarded under this Plan shall be
issued shares or unissued shares, (ii) to appoint the members of the Committee,
and (iii) to terminate or amend this Plan. The Board may from time to time
appoint members of the Committee in substitution for or in addition to members
previously appointed, may fill vacancies in the Committee, however caused, and
may discharge the Committee. Duly authorized actions of the Committee shall
constitute actions of the Board for the purposes of this Plan and the
administration thereof.
3. STOCK
Except as provided in Section 10 of this Plan, the number of
shares which may at any time be made subject to options (including, for this
purpose, options outstanding on the Restatement Date), or which may be issued
upon the exercise of options granted under this Plan (excluding, for this
purpose, shares issued prior to the Restatement Date), or made subject to grants
of restricted stock hereunder, shall be limited to 460,475 share of the Series A
Common Stock, $.10 par value, of the Company (the "Stock"). The shares reserved
for issuance pursuant to this Plan may consist either of authorized but
previously unissued shares of Stock, or of issued shares of Stock which have
been reacquired by the Company, as determined from time to time by the Board.
Except as otherwise provided in Section 10 of this Plan, if
any option granted under this Plan expires, terminates or is canceled for any
reason without having been exercised in full, or any restricted stock awarded
hereunder is forfeited for any reason, the shares of Stock allocable to the
unexercised portion of such option or to the forfeited portion of such
restricted stock award may again be made subject to an option or restricted
stock award under this Plan.
4. ELIGIBILITY
Awards may be granted under this Plan to such Scientific
Consultants, directors and employees of the Company or a Subsidiary as shall be
designated by the Board or the Committee in accordance with Section 2 of this
plan, provided that Incentive Stock Options, as defined below, may be awarded
only to regular full-time employees of the Company or a Subsidiary (including
but not limited to, employees who serve as officers or directors). As used in
this Plan, "Scientific Consultant" shall mean an independent contractor retained
to perform continuing and substantial services for the Company or any of its
Subsidiaries, as an individual Scientific Consultant, as a member of a
Scientific Advisory Board, or in such other capacity as may be designated by the
Board. Any person granted an Award under this Plan shall remain eligible to
receive one or more additional grants thereafter, notwithstanding that options
previously granted to such person remain unexercised in whole or in part, or
that the applicable restrictions on any restricted stock issued to such person
have not lapsed.
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5. TERMS OF OPTIONS
This Plan is intended to authorize the Board or the Committee
to grant, in its discretion, options that qualify as incentive stock options
pursuant to Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), (such qualifying options being referred to herein as "Incentive Stock
Options") or options that do not so qualify (such non-qualifying options being
referred to herein as "Nonstatutory Stock Options"). Each option granted under
this Plan shall be evidenced by a written option agreement which shall be
executed and delivered as provided in Section 12 of this Plan and which shall
specify whether the option granted therein is an Incentive Stock Option or a
Nonstatutory Stock Option.
(a) TERMS OF INCENTIVE STOCK OPTIONS. Each stock option
agreement covering an Incentive Stock Option granted under this Plan and any
amendment thereof, other than an amendment to convert an Incentive Stock Option
into a Nonstatutory Stock Option, shall conform to the provisions of Section
5(a)(i)-(iv) below, and may contain such other terms and provisions consistent
with the requirements of this Plan as the Board or the Committee shall deem
appropriate:
(i) INCENTIVE STOCK OPTION PRICE. The purchase price of
each of the shares of Stock subject to an Incentive Stock Option (the "Incentive
Stock Option Price ") shall be a stated price which is not less than the fair
market value of such share of Stock, determined in accordance with Section 8 of
this Plan, or the par value of such share if greater, as of the date such
Incentive Stock Option is granted; provided, however, that if an employee, at
the time an Incentive Stock Option is granted to him or her, owns stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company or of the parent corporation (as defined in Section 424(e)
of the Code), if any, of the Company, or of any of the Subsidiaries (or, under
Section 424(d) of the Code), is deemed to own stock representing more than 10%
of the total combined voting power of all such classes of stock, by reason of
the ownership of such classes of stock, directly or indirectly, by or for any
brother, sister, spouse, ancestor, or lineal descendent of such employee, or by
or for any corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), then the Incentive Stock Option Price of
each share of Stock subject to such Incentive Stock Option shall be at least
110% of the fair market value of such share of Stock, as determined in the
manner stated above.
(ii) TERM OF INCENTIVE STOCK OPTIONS. Incentive Stock
Options granted under this Plan shall be exercisable for such periods as shall
be determined by the Board or the Committee at the time of grant of each such
Incentive Stock Option, but in no event shall an Incentive Stock Option be
exercisable after the expiration of 10 years from the date of grant; provided,
however, than Incentive Stock Option granted to any employee as to whom the
Incentive Stock Option Price of each share of stock subject thereto is required
to be 110% of the fair market value of such share of Stock pursuant to Section
5(a)(i) above, shall not be exercisable after the expiration of 5 years from the
date of grant. Each incentive Stock Option granted under this Plan shall also be
subject to earlier termination as provided in this Plan.
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(iii) VESTING OF INCENTIVE STOCK OPTIONS.
Notwithstanding any other provision of this Plan, no employee shall be granted
an Incentive Stock Option in any calendar year which causes such employee's
"annual vesting amount" to exceed $100,000. An employee's "annual vesting
amount" is the aggregate fair market value of the shares of Stock subject to
Incentive Stock Options (determined in accordance with Section 8 of this Plan as
of the respective dates of grant of individual options) with respect to which
such options are first exercisable during the calendar year. For purposes of the
foregoing, the aggregate fair market value of shares of Stock with respect to
which Incentive Stock Options are first exercisable during the calendar year
shall be determined by taking into account all Incentive Stock Options granted
to the employee under all current stock option plans of the Company, its parent
corporation (as defined in Section 424(e) of the Code), if any, or any of the
Subsidiaries.
(iv) EXERCISE OF INCENTIVE STOCK OPTIONS.
(1) Subject to the provisions of Sections 5(a)
(iv)(5), 9 and 10 of this Plan, Incentive Stock Options granted under this Plan
any be exercised in whole or in installments, to such extent, and at such time
or times during the terms thereof, as shall be determined by the Board or the
Committee at the time of grant of each such option.
(2) Incentive Stock Options granted under this
Plan shall be exercisable only by delivery to the Company of written notice of
exercise, which notice shall state the number of shares with respect to which
such Incentive Stock Option is exercised, the date of grant of the Incentive
Stock Option, the aggregate purchase price for the shares with respect to which
the Incentive Stock Option is exercised and the effective date of such exercise,
which date shall not be earlier than the date the notice is received by the
Company nor later than the date upon which such Incentive Stock Option expires.
The written notice of exercise shall be sent together with the full Incentive
Stock Option Price of the shares purchased, which may be paid (i) in cash, (ii)
in shares of any class of issued and outstanding stock of the Company held for
more than six months by the option holder, whether preferred or common, (iii) by
the delivery of any other lawful consideration approved by the Board or the
Committee, or (iv) by any combination of the foregoing. If any portion of the
Incentive Stock Option Price is paid in shares of Stock of the Company, such
shares shall be valued at their fair market value, as determined in accordance
with Section 8 of this Plan, as of the effective date of exercise of the
Incentive Stock Option.
(3) Except as provided to the contrary in Section
9 of this Plan, an Incentive Stock Option granted hereunder shall remain
outstanding and shall be exercisable only so long as the person to whom such
Incentive Stock Option was granted remains an officer or employee of the
Company, the parent corporation, if any, of the Company or any of the
Subsidiaries.
(4) All Incentive Stock Options granted under this
Plan shall be nontransferable, except by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
granted only by such person (or his duly appointed, qualified, and acting
personal representative).
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(5) No Incentive Stock Option may be exercised as
to fewer than 100 shares of Stock at any one time without the consent of the
Board or the Committee, unless the number of shares to be purchased upon such
exercise is the total of shares at the time available for purchase under such
Incentive Stock Option.
(b) TERMS OF NONSTATUTORY STOCK OPTIONS. Each stock option agreement
covering a Nonstatutory Stock Option granted under this Plan and any
amendment thereof shall conform to the provisions of Section 5(b)(i)-(iii)
below, and may contain such other terms and provisions consistent with the
requirements of this Plan as the Board or the Committee shall deem
appropriate:
(i) NONSTATUTORY STOCK OPTION PRICE. The purchase price of each
of the shares of Stock subject to a Nonstatutory Stock Option (the "Nonstatutory
Stock Option Price ") shall be a stated price which is not less than 85% of the
fair market value of such share of Stock, determined in accordance with Section
8 of this Plan, or the par value of such share if greater, as of the date such
Nonstatutory Stock Option is granted; provided, however, that if an employee,
director or Scientific Consultant at the time a Nonstatutory Stock Option is
granted to him, owns stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or of the parent corporation
(as defined in Section 424(e) of the Code), if any, of the Company, or of any of
the Subsidiaries (or, under Section 424(d) of the Code, is deemed to own stock
representing more than 10% of the total combined voting power of such classes of
stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor, or lineal
descendent of such employee, or by or for any corporation, partnership, estate
or trust of which such employee is a shareholder, partner or beneficiary), then
the Nonstatutory Stock Option Price of each share of Stock subject to such
Nonstatutory Stock Option shall be at least 110% of the fair market value of
such share of Stock, as determined in the manner stated above.
(ii) TERM OF NONSTATUTORY STOCK OPTIONS. Nonstatutory Stock
Options granted under this Plan shall be exercisable for such periods as shall
be determined by the Board or the Committee at the time of grant of each such
Nonstatutory Stock Option, but in no event shall a Nonstatutory Stock Option be
exercisable after the expiration of l0 years from the date of grant. Each
Nonstatutory Stock Option granted under this Plan shall also be subject to
earlier termination as provided in this Plan.
(iii) EXERCISE OF NONSTATUTORY STOCK OPTIONS.
(1) Subject to the provisions of Section 5(b)(iii)
(5), 9 and 10 of this Plan, Nonstatutory Stock Options granted under this Plan
may be exercised in whole or in installments, to such extent, and at such time
or times during the terms thereof, as shall be determined by the Board or the
Committee at the time of grant of each such option.
(2) Nonstatutory Stock Options granted under this
Plan shall be exercisable only by delivery to the Company of written notice of
exercise, which notice shall state the number of shares with respect to which
such Nonstatutory Stock Option is exercised, the date of grant of the
Nonstatutory Stock Option, the aggregate purchase price for the shares with
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respect to which the Nonstatutory Stock Option is exercised and the effective
date of such exercise, which date shall not be earlier than the date the notice
is received by the Company nor later than the date upon which such Nonstatutory
Stock Option expires. The written notice of exercise shall be sent together with
the full Nonstatutory Stock Option Price of the shares purchased, which may be
paid (i) in cash, (ii) in shares of any class of issued and outstanding stock of
the Company held for more than six months by the option holder, whether
preferred or common, (iii) by the delivery of any other lawful consideration
approved by the Board or the Committee, or (iv) by any combination of the
foregoing. If any portion of the Nonstatutory Stock Option Price is paid in
shares of stock of the Company, such shares shall be valued at their fair market
value, as determined in accordance with Section 8 of this Plan, as of the
effective date of exercise of the Nonstatutory Stock Option.
(3) Except as provided to the contrary in
Section 9 of this Plan, a Nonstatutory Stock Option granted hereunder shall
remain outstanding and shall be exercisable only so long as the person to whom
such Nonstatutory Stock Option was granted remains either a director, employee
or Scientific Consultant of the Company, the parent corporation, if any, of the
Company or any of the Subsidiaries. A person shall be deemed a Scientific
Consultant only so long as such person continues to perform and be compensated
for substantial services for the Company or a Subsidiary, as to which the
determination of the Board or the Committee, as applicable, shall be binding and
conclusive.
(4) Except as otherwise provided in a Nonstatutory
Stock Option agreement or any amendment thereto, all Nonstatutory Stock Options
granted under this Plan shall be nontransferable, except by will or the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom granted only by such person (or his duly appointed, qualified,
and acting personal representative).
(5) No Nonstatutory Stock Option may be exercised
as to fewer than 100 shares at any one time without the consent of the Board or
the Committee, unless the number of shares to be purchased upon such exercise is
the total number of shares at the time available for purchase under such
Nonstatutory Stock Option.
6. RESTRICTIONS APPLICABLE TO RESTRICTED STOCK
The Board or the Committee may place such restrictions as it
shall deem appropriate on any shares of restricted stock awarded hereunder to an
employee, director or Scientific Consultant; provided, however, that unless the
Board or the Committee shall determine otherwise, shares of restricted stock
awarded hereunder shall be subject to the following restrictions:
(a) VESTING - Subject to the provisions of Section 9 herein,
such shares of Stock awarded to directors, employees or Scientific Consultants
shall vest (i.e., become non-forfeitable) in accordance with a vesting schedule
based upon continued service by the recipient as a director, employee or
Scientific Consultant of the Company or any of its Subsidiaries. Any shares of
Stock remaining subject to forfeiture in accordance with the vesting schedule
related thereto are hereinafter referred to as "Unvested Shares."
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(b) DELIVERY TO ESCROW - Upon issuance of a certificate
evidencing such shares the recipient shall be required to deliver such
certificate, endorsed in blank or with a duly executed stock power attached, to
the Secretary of the Company, or such other person or entity as the Board or the
Committee may designate, to be held until any vesting restrictions applicable
thereto have lapsed or any Unvested Shares have been forfeited.
(c) LEGEND - Each certificate evidencing Unvested Shares
issued hereunder shall bear a legend to the effect that such shares are subject
to potential forfeiture and may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms of an
agreement between the issuer and the registered owner.
7. RIGHTS OF GRANTEES
(a) OPTIONS. No holder of an option shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Stock subject to such option unless and until his option shall have been
exercised pursuant to the terms thereof, the Company shall have issued and
delivered to the holder of the option the shares of Stock as to which he has
exercised his option, and his name shall have been entered as a stockholder of
record on the books of the Company. Thereupon, such person shall have full
voting and other ownership rights with respect to such shares of Stock.
(b) RESTRICTED STOCK. Each recipient of a restricted stock
award hereunder shall be deemed to be the registered owner of any Unvested
Shares subject to such award, notwithstanding that such Shares may be subject to
restrictions and possible forfeiture under the terms of the agreement pursuant
to which they were received. Unless and until all or a portion of such Unvested
Shares are forfeited in accordance with the terms of such agreement, the
recipient thereof shall have full voting rights with respect to such shares as
well as the right to receive any and all distributions thereon.
8. DETERMINATION OF FAIR MARKET VALUE
For the purposes of this Plan, the fair market value of a
share of stock of the Company shall be determined as follows: (i) if on the date
as of which such determination is made the class of stock being valued is
admitted to trading on a national securities exchange or exchanges for which
actual sales prices are regularly reported, or actual sales prices are otherwise
regularly published for such stock, the fair market value of a share of such
stock shall be deemed to be equal to the average of the closing sale prices
reported for such stock on each of the five (5) trading dates immediately
preceding the date as of which such determination is made, or (ii) if on the
date as of which such determination is made no such closing sales prices are
reported, but quotations for the class of stock being valued are regularly
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or another comparable system, the fair market value of a share
of such stock shall be deemed to be equal to the mean of the average of the
closing bid and asked prices for such stock quoted on such system on each of
five (5) trading dates immediately preceding the date as of which such
determination is made or, (iii) if no such quotations or actual sales prices are
available, the fair market value of a share of such stock shall be deemed to be
the average of the closing bid and asked prices furnished by a
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professional securities dealer making a market in such shares, as selected by
the Board of Directors, for the trading date as of which such determination is
made (or the immediately preceding trading date if the date of determination is
not a trading date); provided, however, that if none of Sections (i) through
(iii) above are applicable, or the Board or the Committee determines in good
faith that the approach specified in those Sections does not properly reflect
the fair market value of such stock, the Board or the Committee may determine
the fair market value of a share of stock of the Company on the basis of such
factors as it shall deem appropriate.
9. RETIREMENT, TERMINATION OF EMPLOYMENT OR DEATH OF HOLDERS OF
OPTIONS AND RESTRICTED STOCK
(a) DEATH, RETIREMENT OR DISABILITY. If an employee to whom an
Award has been granted under this Plan dies while providing services to the
Company or a Subsidiary, retires from employment with the Company or a
Subsidiary after attaining his "normal retirement date," or terminates
employment with the Company or a Subsidiary as a result of "total and permanent
disability" both as defined in the Company's Retirement Savings Plan as in
effect on the date of adoption of this Plan by the Board), any restrictions then
applicable to such Award shall continue as if the employee had not terminated
employment and such Award shall thereafter be exercisable (in the case of
options) or transferable (in the case of restricted stock), in whole or in part,
by the person to whom granted (or by his duly appointed, qualified, and acting
personal representative, his estate, or by a person who acquired the right to
exercise such option by bequest or inheritance from the Grantee) in the manner
set forth in Sections 5 and 6 of this Plan, at any time within the remaining
term of such Award.
(b) OTHER TERMINATION OF SERVICE OR EMPLOYMENT. Except as
otherwise provided in Section 9(a) above, (i) if a person to whom restricted
stock has been awarded under this Plan ceases to be either a director, employee
or Scientific Consultant of the Company or a Subsidiary, any Unvested Shares of
restricted stock held by such person shall be forfeited as of the last date such
person was either a director, employee or Scientific Consultant of the Company
or a Subsidiary, and (ii) if a person to whom an option has been granted under
this Plan ceases to be either a director, employee or Scientific Consultant of
the Company or a Subsidiary, such option shall continue to be exercisable to the
same extent that it was exercisable on the last day on which such person was
either a director, employee or Scientific Consultant for a period of 30 days
thereafter, or for such longer period as may be determined by the Board or the
Committee at the time of grant, whereupon such option shall terminate and shall
not thereafter by exercisable. No Award made under this Plan shall be affected
by any change of duties or position of the person to whom such Award was made or
by any temporary leave of absence granted to such person by the Company or any
of its Subsidiaries.
(c) TERMINATION WITH BOARD APPROVAL. If a Grantee ceases to be
either a director, employee or Scientific Consultant of the Company or a
Subsidiary for any reason covered by Section 9(b) above, and the Board or the
Committee expressly determines that for purposes of this Section 9(c) such
termination of service or employment is in the best interests of the Company,
then notwithstanding anything herein to the contrary, an option awarded to such
Grantee hereunder shall be exercisable by such Grantee or by the estate of such
Grantee, or by a
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person who acquired the right to exercise such option by bequest or inheritance
from the Grantee, for such additional period following termination of service or
employment as shall be determined by the Board or Committee, but in no event
later than the date upon which such option would have expired absent such
termination of service or employment. Any such extended option shall be
exercisable only to the extent and in the manner exercisable by such Grantee at
the time of such termination of service or employment.
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) In the event of any change in the number of shares of the
outstanding Stock of the Company effected without the receipt of full and
adequate consideration by the Company, as a consequence of a stock split, stock
dividend, combination or reclassification of shares, recapitalization, merger,
or similar event, the Board or the Committee shall adjust proportionally the
number and kind of shares subject to this plan and the number, kind, and per
share Incentive Stock Option Price or Nonstatutory Stock Option Price (as the
case may be) of shares then subject to Awards outstanding under the Plan. Any
such adjustment shall be made without a change in the aggregate purchase price
of the Shares of Stock subject to the unexercised portion of any option. In the
event of any other change affecting any class of stock of the Company subject to
Awards made under the Plan or any distribution (other than normal cash
dividends) to holders of such stock, such adjustments as may be deemed equitable
by the Board or the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event.
(b) (i) In the event of a Change of Control then to the extent
permitted by applicable law: (A) any surviving or acquiring corporation or an
Affiliate of such corporation shall assume any Awards outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 10(b)) for those outstanding under the Plan, or (B) such Awards shall
continue in full force and effect. If Awards are assumed, substituted, or
continue in full force and effect, then the vesting of such Awards shall be
accelerated in full if the holder's Continuous Status as an Employee, Director
or Consultant is terminated either without Cause by the surviving or acquiring
corporation or with Good Reason by the holder, within the twelve (12) months
following the date of the Change of Control. In the event any surviving or
acquiring corporation or its Affiliate refuses to assume such Awards or to
substitute similar Awards for those outstanding under the Plan, then the vesting
of such Awards shall be accelerated in full prior to the Change of Control and
such Awards shall be terminated if not exercised at or prior to such Change of
Control; provided, however, that if such Change of Control occurs as the result
of an event described in Section 10(b)(iii)(4) or Section 10(b)(iii)(5) of this
Plan, then the holders of Awards shall have fifteen (15) days from the date of
such Change of Control to exercise such Awards, after which time such Awards
shall be terminated. In the event of a dissolution or liquidation of the
Company, any Awards outstanding under the Plan shall terminate if not exercised
at or prior to such Change of Control.
(ii) "Cause" means (1) gross or habitual failure to
perform assigned duties of the job, that is, performance failure not corrected
within thirty (30) days after written
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notice thereof or (2) misconduct, including but not limited to: (A) conviction
of a crime, or entry of a plea of nolo contendere, with regard to a crime
involving moral turpitude or dishonesty, (B) illegal drug use or alcohol abuse
on Company premises or at a Company sponsored event, (C) conduct which in the
good faith and reasonable determination of the Board demonstrates gross
unfitness to serve, or (D) intentional, material violation of any contract
between the holder of an Award and the Company or any statutory duty of such
person to the Company.
(iii) "Change of Control" means any one of the
following: (1) a sale of all or substantially all of the assets of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation (other than a transaction the principal purpose of which is to
change the state of the Company's incorporation or a transaction in which the
voting securities of the Company are exchanged for beneficial ownership of at
least 50% of the voting securities of the controlling acquiring corporation);
(3) a merger or consolidation in which the Company is the surviving corporation
and less than 50% of the voting securities of the Company which are outstanding
immediately after the consummation of such transaction are beneficially owned,
directly or indirectly, by the persons who owned such voting securities
immediately prior to such transaction; (4) any transaction or series of related
transactions after which any person (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), other than any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
subsidiary of the Company, becomes the beneficial owner of voting securities of
the Company representing 50% or more of the combined voting power of all of the
voting securities of the Company; (5) during any period of two consecutive
years, individuals who at the beginning of such period constitute the membership
of the Company's Board of Directors ("Incumbent Directors") cease for any reason
to have authority to cast at least a majority of the votes which all directors
on the Board of Directors are entitled to cast, unless the election, or the
nomination for election by the Company's stockholders, of a new director was
approved by a vote of at least two-thirds of the votes entitled to be cast by
the Incumbent Director in the future; or (6) the liquidation or dissolution of
the Company.
(iv) "Good Reason" means any action taken by the
Company or its successor, as the case may be, that would result in a (i)
reduction of the rate of compensation as in effect immediately prior to the
Change of Control, (2) failure to provide a package of welfare benefit plans
which, taken as a whole, provide substantially similar benefits to those in
which the holder of an Award is entitled to participate immediately prior to the
Change of Control (except that employee contributions may be raised to the
extent of any cost increases imposed by third parties) or any action by the
Company which would adversely affect participation or reduce benefits under any
of such plans, (3) change in responsibilities, authority, titles or offices
resulting in diminution of position, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith which is remedied by
the Company promptly after notice thereof, (4) request that the holder of an
Award relocate to a worksite that is more than thirty-five (35) miles from the
prior worksite, unless such relocation opportunity is accepted, (5) material
reduction in duties, (6) failure or refusal of the acquiring or surviving
corporation to assume the Company's obligations under this Plan, as required by
Section 10(b), or (7) material breach by the Company or any acquiring or
surviving corporation of any of the material provisions of the Plan.
11.
<PAGE> 12
11. EFFECTIVENESS OF THE PLAN
This Plan shall become effective upon its adoption by the
Board; provided, however, that the effectiveness of this Plan shall be subject
to the approval of the stockholders of the Company by the affirmative vote of
not less than the holders of a majority of the shares of the Company's Voting
Stock present in person or represented by proxy at a duly held meeting at which
a quorum is present (or by such greater vote as may be required by applicable
law, regulation or provision of the Certificate of Incorporation or Bylaws of
the Company) within 12 months after the adoption of this Plan by the Board.
12. MANNER OF GRANT
Nothing contained in this Plan or in any resolution heretofore
or, except as provided in this Plan, hereafter adopted by the Board or any
committee thereof or by the stockholders of the Company with respect to this
Plan shall constitute the granting of an Award under this Plan. The granting of
an Award under this Plan shall be deemed to occur only upon the date on which
the Board or the Committee shall approve the grant of such Award. All Awards
granted under this Plan shall be evidenced by a written agreement, in such form
as shall be determined by the Board or the Committee, signed by a representative
of the Board or the Committee and the recipient thereof.
13. COMPLIANCE WITH LAW AND REGULATIONS
The obligation of the Company to sell and deliver any shares
of Stock under this Plan shall be subject to all applicable laws, rules,
regulations, and the obtaining of all approvals by or permits from governmental
agencies deemed necessary or appropriate by the Board or the Committee. Except
as otherwise provided in Section 2 and Section 16 herein, the Board may make
such changes in the Plan and the Board or the Committee may include such terms
in any Award agreement as may be necessary or appropriate, in the opinion of
counsel to the Company, to comply with the rules and regulations of any
governmental authority, or to obtain for employees granted Incentive Stock
Options the tax benefits under the applicable provisions of the Code and the
regulations thereunder.
14. TAX WITHHOLDING
The company for whom services are performed (whether the
Company or a Subsidiary) by a director, employee or Scientific Consultant
granted an Award under this Plan shall have the right to deduct or otherwise
effect a withholding of any amount required by federal or state laws to be
withheld with respect to the grant, vesting or exercise of any Award or the sale
of stock acquired upon the exercise of an Incentive Stock Option in order for
such company to obtain a tax deduction otherwise available as a consequence of
such grant, vesting, exercise or sale, as the case may be.
12.
<PAGE> 13
15. NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the
submission of this Plan to the stockholders of the Company for approval shall be
construed as having an impact on existing qualified or non-qualified retirement
or bonus plans of the Company or, except as otherwise expressly provided herein,
as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options, stock appreciation rights or restricted stock
otherwise than under this Plan, and such arrangements may be either applicable
generally or only in specific cases.
16. AMENDMENT
The Board at any time, and from time to time, may amend this
Plan, subject to any required regulatory approvals and subject to the limitation
that, except as provided in Section 10 hereof, no amendment shall be effective
unless approved within 12 months after the date of the adoption of such
amendment by the affirmative vote of the holders of a majority of the shares of
the Company's Voting Stock (or by such greater or lesser vote as may be
permitted by applicable law, regulation or provision of the Certificate of
Incorporation or Bylaws of the Company) if such amendment would, in the absence
of shareholder approval, cause Awards that would otherwise qualify as Incentive
Stock Options to fail to qualify as such or cause the Plan to fail to comply
with the requirements of Rule 16b-3 after the Board determines to bring the Plan
into compliance with the requirements of such Rule.
Except as provided in Section 10 hereof, rights and
obligations under any Awards granted before amendment of this Plan shall not be
altered or impaired by amendment of this Plan, except with the consent of the
person to whom the Award was granted.
17. TERMINATION OR SUSPENSION
The Board at any time may suspend or terminate this Plan. This
Plan, unless sooner terminated, shall terminate on the 10th anniversary of its
adoption by the Board, but such termination shall not affect any Award
theretofore granted. No Award may be granted under this Plan while this Plan is
suspended or after it is terminated.
Except as Otherwise expressly provided herein, no rights or
obligations under any Award granted while this Plan is in effect shall be
altered or impaired by suspension or termination of this Plan, except with the
consent of the person to whom the Award was granted. Any Award granted under
this Plan may be terminated by agreement between the holder thereof and the
Company and, in lieu of the terminated Award, a new Award may be granted.
18. CONTINUATION OF EMPLOYMENT
Nothing contained in this Plan (or in any written Award
agreement) shall obligate the Company or any Subsidiary to continue for any
period to elect any individual as a director or to employ an employee or
Scientific Consultant to whom an Award has been granted, or interfere
13.
<PAGE> 14
with the right of the Company or any Subsidiary to vary the terms of such
person's service or employment or reduce such person's compensation.
19. EXCULPATION AND INDEMNIFICATION
To the extent permitted by applicable law and regulation, the
Company shall indemnify and hold harmless the members of the Board and the
members of the Committee from and against any and all liabilities, costs, and
expenses incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities, and
obligations under this Plan, other than such liabilities, costs and expenses as
may result from the negligence, gross negligence, bad faith, willful misconduct,
or criminal acts of such persons.
20. PROVISION OF INFORMATION TO AWARD RECIPIENTS
The Company shall annually provide each holder of an Award
with the information required by Section 260.140.46 of the Regulations of the
California Commissioner of Corporations.
21. HEADINGS
Headings are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
14.
<PAGE> 1
EXHIBIT 10.2
All references herein to numbers of shares already
take into account and give effect to the 2.35-for-1
stock split effected in March 1996.
SIBIA NEUROSCIENCES, INC.
(FORMERLY "THE SALK INSTITUTE
BIOTECHNOLOGY/INDUSTRIAL ASSOCIATES, INC.")
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON FEBRUARY 22, 1996
AMENDED ON FEBRUARY 26, 1997
AMENDED ON JUNE 5, 1997
1. PURPOSE.
(a) The purpose of the 1996 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which certain directors of SIBIA
Neurosciences, Inc., a Delaware corporation (the "Company"), who are not
otherwise employees of the Company or of any Affiliate of the Company (a
"Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
certain persons now serving as Non-Employee Directors of the Company, to secure
and retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
1.
<PAGE> 2
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate two hundred thirty-five
thousand (235,000) shares of the Company's common stock. If any option granted
under the Plan shall for any reason expire or otherwise terminate without having
been exercised in full, the stock not purchased under such option shall again
become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY. Options shall be granted only to Non-Employee Directors
of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who for the first time becomes a Non-Employee Director
automatically shall be granted, upon the date of his or her initial election to
be a Non-Employee Director by the Board or stockholders of the Company, an
option to purchase ten thousand (10,000) shares of common stock of the Company
on the terms and conditions set forth herein.
(b) On the date of each annual meeting of the stockholders of the
Company commencing with the 1997 annual meeting of stockholders of the Company,
each person who is
2.
<PAGE> 3
then a Non-Employee Director immediately following such meeting (other than a
person who receives a grant under subparagraph 5(a) on such date) automatically
shall be granted an option to purchase three thousand (3,000) shares of common
stock of the Company on the terms and conditions set forth herein; provided,
however, that in lieu of such three thousand (3,000) share grant, a Non-Employee
Director who is the Chairman of the Board immediately following such meeting
automatically shall be granted an option to purchase an aggregate of five
thousand (5,000) shares of the common stock of the Company on the terms and
conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ten (10) years
from the date of grant (the "Expiration Date"). If the optionee's status as a
Non-Employee Director terminates for any reason or for no reason, then the
option shall terminate on the date that is ninety (90) days following such
termination; provided, however, that if such termination is due to the
optionee's death, the option shall terminate on the date that is twelve (12)
months following the date of the optionee's death. Except as provided in
subparagraph 6(h), in any and all circumstances, an option may be exercised
following any such termination only as to that number of shares as to which it
was exercisable under the provisions of subparagraph 6(e) on the date of such
termination.
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise, provided that an option may be exercised pursuant to a
program developed under Regulation T as
3.
<PAGE> 4
promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(d) An option shall not be transferable except as provided in the stock
option agreement evidencing such option and any amendments thereto or by will or
by the laws of descent and distribution, or pursuant to a qualified domestic
relations order satisfying the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934 ("Rule 16b-3"), and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person (or by
his or her guardian or legal representative) or transferee pursuant to such an
order. Notwithstanding the foregoing, the optionee may, by delivering written
notice to the Company in a form satisfactory to the Company, designate a third
party who, in the event of the death of the optionee, shall thereafter be
entitled to exercise the option.
(e) Except as provided in subparagraph 6(h), options shall become
exercisable ("vest") as follows: one-half (1/2) of the shares subject to each
option shall be deemed vested on the date of grant and the remaining one-half
(1/2) of the shares subject to each option shall vest on the first anniversary
of the date of grant so long as (with respect to the shares vesting on such
anniversary) the optionee has, during the entire period prior to such vesting
date, continuously served as a Non-Employee Director, whereupon such option
shall become fully exercisable in accordance with its terms.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Option for such person's own
account
4.
<PAGE> 5
and not with any present intention of selling or otherwise distributing the
stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then currently effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company determines is necessary, desirable or appropriate
to comply with applicable securities laws as a condition of granting an option
to the optionee or permitting the optionee to exercise the option. 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
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
(h) Notwithstanding anything contained herein to the contrary, in the
event of a Change of Control, then to the extent permitted by applicable law:
(1) any surviving or acquiring corporation or an Affiliate of such corporation
shall assume any options outstanding under the Plan or shall substitute similar
options (including an option to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 6(h)) for those
outstanding under the Plan, or (2) such options shall continue in full force and
effect. If options are assumed,
5.
<PAGE> 6
substituted, or continue in full force and effect, then the vesting and
exercisability of such options shall be accelerated in full if the holder's
Continuous Status as a Director of the Company terminates for any reason or for
no reason, within twelve (12) months following the date of the Change of
Control. In the event any surviving or acquiring corporation or its Affiliate
refuses or is not permitted under applicable law to assume such options or to
substitute similar options for those outstanding under the Plan, then the
vesting and exercisability of such options shall be accelerated in full prior to
the Change of Control and such options shall be terminated if not exercised at
or prior to such Change of Control; provided, however, that if such Change of
Control occurs as the result of an event described in clause (4) or clause (5)
of this subparagraph (h), then the holders of any options outstanding under the
Plan shall have fifteen (15) days from the date of such Change of Control to
exercise such options, after which time such options shall be terminated. In the
event of a dissolution or liquidation of the Company, any options outstanding
under the Plan shall terminate if not exercised at or prior to such event.
For purposes of this subparagraph (h), the following terms shall have the
meanings set forth below:
"CHANGE OF CONTROL" means any one of the following:
(1) a sale of all or substantially all of the assets of the Company;
(2) a merger or consolidation in which the Company is not the
surviving corporation (other than a transaction the principal purpose of which
is to change the state of the Company's incorporation or a transaction in which
the voting securities of the Company are exchanged for beneficial ownership of
at least 50% of the voting securities of the controlling acquiring corporation);
6.
<PAGE> 7
(3) a merger or consolidation in which the Company is the surviving
corporation and less than 50% of the voting securities of the Company which are
outstanding immediately after the consummation of such transaction are
beneficially owned, directly or indirectly, by the persons who owned such voting
securities immediately prior to such transaction;
(4) any transaction or series of related transactions after which any
person (as such term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), other than any employee benefit plan (or related trust)
sponsored or maintained by the Company or any subsidiary of the Company, becomes
the beneficial owner of voting securities of the Company representing 50% or
more of the combined voting power of all of the voting securities of the
Company.
(5) during any period of two consecutive years, individuals who at the
beginning of such period constitute the membership of the Company's Board of
Directors ("Incumbent Directors") cease for any reason to have authority to cast
at least a majority of the votes which all directors on the Board of Directors
are entitled to cast, unless the election, or the nomination for election by the
Company's stockholders, of a new director was approved by a vote of at least
two-thirds of the votes entitled to be cast by the Incumbent Directors, in which
case such director shall also be treated as an Incumbent Director in the future;
or
(6) the liquidation or dissolution of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such options.
7.
<PAGE> 8
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the shareholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
8.
<PAGE> 9
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to remove any Non-Employee Director
pursuant to the Company's Bylaws and the provisions of the Delaware General
Corporation Law (or the applicable laws of the Company's state of incorporation
or the state in which the Company's principal business offices are located) with
or without cause.
(d) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option granted pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to an Non-Employee Director, or to evidence the removal or lapse of any
restrictions on transfer, that such Non-Employee Director make arrangements
satisfactory to the Company to insure that the amount of any federal or other
withholding tax required to be withheld with respect to such sale or transfer,
or such removal or lapse, is made available to the Company for timely payment of
such tax.
(f) As used in this Plan, "fair market value" means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National 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 system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of
9.
<PAGE> 10
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the common stock is quoted on Nasdaq (but not on the
National Market thereof) or is regularly quoted by a recognized securities
dealer but selling prices are not reported, the fair market value of a share of
common stock shall be the mean between the bid and asked prices for 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;
(iii) In the absence of an established market for the common
stock, the fair market value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split (other than the 2.35 for 1 stock split effected in March
1996), 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 and outstanding options will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities shall not be treated
as a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving
10.
<PAGE> 11
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's 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; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent not prohibited by
applicable law, the time during which options outstanding under the Plan may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan, provided,
however, that the Board shall not amend the plan more than once every six (6)
months with respect to the provisions of the Plan which relate to the amount,
price and timing of grants, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules thereunder. Except as provided in paragraph 10 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
11.
<PAGE> 12
(i) Increase the number of shares which may be issued under the
Plan; or
(ii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 or Section 162(m) of the Internal Revenue Code.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the date that is ten (10) years
after the Effective Date. No options may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective on the Effective Date, subject to
the condition that the Plan be approved by the stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
12.
<PAGE> 1
EXHIIT 10.3
All references herein to numbers of shares already take
into account and give effect to the 2.35-for-1 stock
split effected in March 1996.
SIBIA NEUROSCIENCES, INC.
1996 EQUITY INCENTIVE PLAN
Originally adopted February 22, 1996 Amended December 12,
1996 Amended February 27, 1997
Amended June 5, 1997
1. PURPOSES
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" means (1) gross or habitual failure to perform assigned duties
of the job, that is, performance failure not corrected within thirty (30) days
after written notice thereof or (2) misconduct, including but not limited to:
(i) conviction of a crime, or entry of a plea of nolo contendere, with regard to
a crime involving moral turpitude or dishonesty, (ii) illegal drug use or
alcohol abuse on Company premises or at a Company sponsored event, (iii) conduct
which in
1.
<PAGE> 2
the good faith and reasonable determination of the Board demonstrates
gross unfitness to serve, or (iv) intentional, material violation of any
contract between the holder of a Stock Award and the Company or any statutory
duty of such person to the Company.
(d) "Change of Control" means any one of the following:
(1) a sale of all or substantially all of the assets of the Company;
(2) a merger or consolidation in which the Company is not the
surviving corporation (other than a transaction the principal purpose of which
is to change the state of the Company's incorporation or a transaction in which
the voting securities of the Company are exchanged for beneficial ownership of
at least 50% of the voting securities of the controlling acquiring corporation);
(3) a merger or consolidation in which the Company is the surviving
corporation and less than 50% of the voting securities of the Company which are
outstanding immediately after the consummation of such transaction are
beneficially owned, directly or indirectly, by the persons who owned such voting
securities immediately prior to such transaction;
(4) any transaction or series of related transactions after which
any person (as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended), other than any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the Company,
becomes the beneficial owner of voting securities of the Company representing
50% or more of the combined voting power of all of the voting securities of the
Company.
(5) during any period of two consecutive years, individuals who at
the beginning of such period constitute the membership of the Company's Board of
Directors ("Incumbent Directors") cease for any reason to have authority to cast
at least a majority of the votes which all directors on the Board of Directors
are entitled to cast, unless the election, or the nomination for election by the
Company's stockholders, of a new director was approved by a vote of at least
two-thirds of the votes entitled to be cast by the Incumbent Directors, in which
case such director shall also be treated as an Incumbent Director in the future;
or
(6) the liquidation or dissolution of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
2.
<PAGE> 3
(g) "COMPANY" means SIBIA Neurosciences, Inc., a Delaware corporation.
(h) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(i) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(j) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; or (ii) transfers between the Company, Affiliates or their
successors.
(k) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(l) "DIRECTOR" means a member of the Board.
(m) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(o) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations:
(1) If the common stock 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 ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the last closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in common stock) prior to the determination, as
reported in the Wall Street Journal or such other source as the Board deems
reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
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;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
3.
<PAGE> 4
(p) "GOOD REASON" means any action taken by the Company or its successor,
as the case may be, that would result in a (1) reduction of the rate of
compensation as in effect immediately prior to the Change of Control, (2)
failure to provide a package of welfare benefit plans which, taken as a whole,
provide substantially similar benefits to those in which the holder of a Stock
Award is entitled to participate immediately prior to the Change of Control
(except that employee contributions may be raised to the extent of any cost
increases imposed by third parties) or any action by the Company which would
adversely affect participation or reduce benefits under any of such plans, (3)
change in responsibilities, authority, titles or offices resulting in diminution
of position, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by the Company
promptly after notice thereof, (4) request that the holder of a Stock Award
relocate to a worksite that is more than thirty-five (35) miles from the prior
worksite, unless such relocation opportunity is accepted, (5) material reduction
in duties, (6) failure or refusal of the acquiring or surviving corporation to
assume the Company's obligations under this Plan, as required by Section 13(b),
or (7) material breach by the Company or any acquiring or surviving corporation
of any of the material provisions of the Plan.
(q) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(s) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(t) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(Regulation S-K)), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under 404(b) of Regulation S-K; or (ii) is otherwise considered a non-employee
director for purposes of Rule 16b-3.
(t) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "OPTION" means a stock option granted pursuant to the Plan.
(w) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
4.
<PAGE> 5
(x) "OPTIONEE" means a person who holds an outstanding Option.
(y) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(z) "PLAN" means this 1996 Equity Incentive Plan.
(aa) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(bb) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(cc) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(dd) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(ee) "TANDEM STOCK APPRECIATION RIGHT" or "Tandem Right" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
5.
<PAGE> 6
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(1) are not then subject to Section 16 of the Exchange Act and/or (2) are either
(i) not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.
4. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate one million five hundred thirteen thousand one
hundred forty-one (1,513,141) shares of the Company's common stock. If any Stock
Award shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, the stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
Shares subject to Stock Appreciation Rights exercised in accordance with Section
8 of the Plan shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
6.
<PAGE> 7
5. ELIGIBILITY
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option or an award to
purchase restricted stock if, at the time of grant, such person 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 unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant, or in the case of a
restricted stock purchase award, the purchase price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than five hundred thousand (500,000) shares of
the Company's common stock in any twelve (12) month period.
6. OPTION PROVISIONS
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's
7.
<PAGE> 8
"par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except as provided in the stock option agreement evidencing such
Nonstatutory Stock Option and any amendments thereto or by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 and any administrative interpretations
or pronouncements thereunder (a "QDRO"), and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person or any
transferee pursuant to a QDRO. Notwithstanding the foregoing, the person to whom
the Option is granted may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period, which in no event shall be less
than thirty (30) days, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option
8.
<PAGE> 9
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, which in no
event shall be less than six (6) months, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period, which in no event shall be less than six (6) months, specified in the
Option Agreement), or (ii) the expiration of the term of such Option as set
forth in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not
9.
<PAGE> 10
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is less
than the stock's Fair Market Value.
(j) Re-Load Options. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is granted to a 10% stockholder (as
described in subsection 5(b)), shall have an exercise price which is equal to
one hundred ten percent (110%) of the Fair Market Value of the stock subject to
the Re-Load Option on the date of exercise of the original Option and shall have
a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(e) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject
10.
<PAGE> 11
such other terms and conditions as the Board or Committee may determine which
are not inconsistent with the express provisions of the Plan regarding the
terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order satisfying
the requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee;
provided, however, that (i) the right to repurchase at the original purchase
price shall lapse at a minimum rate of twenty percent (20%) per year over five
(5) years from the date the Stock Award was granted, and (ii) such right shall
be exercisable only (A) within the ninety (90) day period following the
termination of employment or the relationship as a Director or Consultant, or
(B) such longer period as may be agreed to by the Company and the holder of the
Stock Award (for example, for purposes of satisfying the requirements of Section
1202(c)(3) of the Code (regarding "qualified small business stock")), and (iii)
such right shall be exercisable only for cash or cancellation of purchase money
11.
<PAGE> 12
indebtedness for the shares. Should the right of repurchase be assigned by the
Company, the assignee shall pay the Company cash equal to the difference between
the original purchase price and the stock's Fair Market Value if the original
purchase price is less than the stock's Fair Market Value.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time subject to
Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the Stock Award
Agreement of grant shall incorporate all the terms and conditions at the time
necessary to assure that the subsequent exercise of such right shall qualify for
the safe-harbor exemption from short-swing profit liability provided by Rule
16b-3 promulgated under the Exchange Act (or any successor rule or regulation).
Except as provided in subsection 5(c), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be
12.
<PAGE> 13
subject to the same terms and conditions applicable to the particular Option
grant to which it pertains. A Concurrent Right shall be exercised automatically
at the same time the underlying Option is exercised with respect to the
particular shares of stock to which the Concurrent Right pertains. The
appreciation distribution payable on an exercised Concurrent Right shall be in
cash (or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Concurrent Right) in an
amount equal to such portion as shall be determined by the Board or the
Committee at the time of the grant of the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the Concurrent Right) of the vested
shares of stock purchased under the underlying Option which have Concurrent
Rights appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to Nonstatutory Stock Options as set forth in Section 6. They shall be
denominated in share equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE GRANT OF OPTIONS
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options and/or
any Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
affected holders of Options and/or Stock Appreciation Rights, the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option) or, in the case of a 10% stockholder (as
described in subsection 5(b)), not less than one hundred ten percent (110%) of
the Fair Market Value) per share of stock on the new grant date. Notwithstanding
the foregoing, the Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth above if
such Option and/or Stock Appreciation Right is granted as part of a transaction
to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(c) of the Plan.
13.
<PAGE> 14
The repricing of an Option and/or Stock Appreciation Right under this Section 9,
resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and/or Stock Appreciation Right and the
grant of a substitute Option and/or Stock Appreciation Right; in the event of
such repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of Options and
Stock Appreciation Rights permitted to be granted pursuant to subsection 5(c) of
the Plan. The provisions of this subsection 9(b) shall be applicable only to the
extent required by Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS
(a) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(b) Throughout the term of any Stock Award, the Company shall deliver to
the holder of such Stock Award, not later than one hundred twenty (120) days
after the close of each of the Company's fiscal years during the term of such
Stock Award, a balance sheet and an income statement. This section shall not
apply when issuance is limited to key employees whose duties in connection with
the Company assure them access to equivalent information.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards
14.
<PAGE> 15
any right to continue in the employ of the Company or any Affiliate (or to
continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee with or
without cause, to remove any Director as provided in the Company's By-Laws and
the provisions of the General Corporation Law of the State of Delaware, or to
terminate the relationship of any Consultant in accordance with the terms of
that Consultant's agreement with the Company or Affiliate to which such
Consultant is providing services.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the holder of the Stock
Award to provide such other representations, written assurances or information
which the Company shall determine is necessary, desirable or appropriate to
comply with applicable securities and other laws as a condition of granting a
Stock Award to such person or permitting the holder of the Stock Award to
exercise the Stock Award. 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 comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3)
15.
<PAGE> 16
delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock 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 (excluding the
2.35-for-1 stock split effected in March 1996), 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 will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan pursuant to subsection 4(a) and the maximum number of
shares subject to award to any person during any twelve (12) month period
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of a Change of Control, then to the extent permitted by
applicable law: (1) any surviving or acquiring corporation or an Affiliate of
such corporation shall assume any Stock Awards outstanding under the Plan or
shall substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 13(b)) for those outstanding under the Plan, or (2) such Stock Awards
shall continue in full force and effect. If Stock Awards are assumed,
substituted, or continue in full force and effect, then the vesting of such
Stock Awards shall be accelerated in full if the holder's Continuous Status as
an Employee, Director or Consultant is terminated either without Cause by the
surviving or acquiring corporation or with Good Reason by the holder, within the
twelve (12) months following the date of the Change of Control. In the event any
surviving or acquiring corporation or its Affiliate refuses or is not permitted
under applicable law to assume such Stock Awards or to substitute similar Stock
Awards for those outstanding under the Plan, then the vesting and exercisability
of such Stock Awards shall be accelerated in full prior to the Change of Control
and such Stock Awards shall be terminated if not exercised at or prior to such
Change of Control; provided, however, that if such Change of Control occurs as
the result of an event described in Section 2(d)(4) or Section 2(d)(5) of this
Plan, then the holders of Stock Awards shall have fifteen (15) days from the
date of such Change of Control to exercise such Stock Awards, after which time
such Stock Awards shall be terminated. In the event of a dissolution or
liquidation of the Company, any Stock Awards outstanding under the Plan shall
terminate if not exercised at or prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment
16.
<PAGE> 17
shall be effective unless approved by the stockholders of the Company within
twelve (12) months before or after the adoption of the amendment, where the
amendment will:
(1) Increase the number of shares reserved for Stock Awards under
the Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on February 21, 2006, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.
17.
<PAGE> 18
16. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
18.
<PAGE> 1
EXHIBIT 10.4
CONFIDENTIAL
SIBIA NEUROSCIENCES, INC.
AMENDED AND RESTATED
MANAGEMENT CHANGE-OF-CONTROL PLAN
Amended and Restated as of June 5, 1997
INTRODUCTION
SIBIA Neurosciences, Inc. (formerly, "The Salk Institute
Biotechnology/Industrial Associates, Inc."), a Delaware corporation (the
"Company") Management Change-of-Control Plan was adopted by the Board of
Directors (the "Board") of the Company, effective November 10, 1994. The Plan is
intended to provide members of management who are Participants in the Plan with
the Benefits specified herein in the event of a Change of Control.
WHEREAS, the Plan was previously amended by the Board in November 1995
and March 1996 (the "Prior Amendments");
WHEREAS, the Board at a meeting held on June 5, 1997 has approved an
amendment to the Plan (the "Current Amendment") to, among other things, amend
the definition of "change of control" and include Dr. David E. McClure as a Plan
participant; and
WHEREAS, the Board wishes to amend and restate the Plan to consolidate
the Prior Amendments and the Current Amendment in one Plan document.
NOW, THEREFORE, upon authorization duly granted by the Board, the
undersigned parties hereto agree to amend and restate the Plan as provided
herein.
Certain capitalized terms used in the Plan are defined in Article 13.
ARTICLE 1
ESTABLISHMENT OF THE PLAN AND ELIGIBILITY
1.1 Establishment of Plan. As of the Effective Date, the Company
hereby establishes a plan to be known as the "Management Change-of-Control Plan"
(the "Plan"), as set forth herein.
1.2 Applicability of Plan. The benefits provided by the Plan shall be
available to all Participants, unless otherwise specifically provided.
1.
<PAGE> 2
ARTICLE 2
ELIGIBILITY
2.1 PARTICIPATION. William T. Comer will be a Participant in the Plan
and will serve in the position of Chief Executive Officer. The following members
of management shall also be Participants in the Plan and shall each serve in a
position of Vice President: Michael J. Dunn, Michael M. Harpold, G. Kenneth
Lloyd, Ian A. McDonald, David E. McClure and Thomas A. Reed. The Board or the
Compensation Committee of the Board (the "Compensation Committee") may, in its
sole discretion, designate additional members of management or employees to be
Participants in the Plan and, subject to the terms of Section 2.2, may decide
that members of management or employees who have been designated as Participants
in the Plan shall no longer be Participants.
2.2 DURATION OF PARTICIPATION. A Participant shall cease to be a
Participant in the Plan upon a determination thereof by the Board or the
Compensation Committee; provided, however, that in no event shall any such
determination impair a Participant's rights under this Plan with respect to
Benefits that have accrued prior to such determination. Without limiting the
foregoing, if a Participant is then entitled to payment of Benefits as a result
of a Change of Control that occurred prior to such determination, such
Participant shall remain a Participant in the Plan until the full amount of such
Benefits has been paid to such Participant. In no event shall any Participant be
entitled to Benefits pursuant to this Plan with respect to a Change in Control
that occurs after the termination of such Participant's employment with the
Company, for any reason or for no reason, and nothing in this Plan shall alter
the status of each Participant as an at-will employee of the Company.
ARTICLE 3
BENEFITS
Participants shall be entitled to the following Benefits pursuant to
this Plan: Bonus Payments, as provided in Article 4; Stock Options and
Additional Incentives, as provided in Article 5 (except that Dr. David McClure
will not be entitled to any benefits provided to Plan Participants under Article
5); and Severance Benefits, as provided in Article 6.
ARTICLE 4
BONUS PAYMENTS
4.1 BONUS PAYMENT UPON CHANGE OF CONTROL. If a Change in Control
occurs, then each Participant (i) who remains employed by the Company or its
successor for a
2.
<PAGE> 3
period of six months following such Change in Control (the "Bonus Service
Period") or (ii) whose employment shall be Terminated Without Cause during the
Bonus Service Period, shall receive a Bonus Payment based upon the Company's
valuation at the time of the Change of Control in accordance with the following
schedule:
<TABLE>
<CAPTION>
Value of Company Bonus Amount as a
Upon Change of Control Percent of Base Salary
-------------------------- -----------------------
<S> <C>
Less than $10,000,000 0%
$10,000,000 to $20,000,000 10%
Greater than $20,000,000 25%
</TABLE>
4.2 DETERMINATION OF VALUE OF THE COMPANY.
(a) For purposes of determining the Bonus
amounts to be paid under this Article 4 and the number of Stock Options and the
applicability of Additional Incentives under Article 5, the value of the Company
shall be determined as of the closing date of the applicable Change in Control
transaction (the "Value Determination Date ") by a Qualified Valuation Expert
(defined below) retained by the Company or its successor (at the Company's or
such successor's expense) not later than ten (10) days after the Valuation
Determination Date. Such Qualified Valuation Expert shall be directed to prepare
and deliver to the Company and each eligible Participant a report setting forth
the value of the Company in accordance with this Section 4.2 as soon as
practicable but not less than thirty (30) days following the Valuation
Determination Date. Such report shall be prepared pursuant to this Section 4.2
in accordance with the Qualified Valuation Expert's normal valuation procedures
applicable to companies in similar industries and stages of development as the
Company and shall be final and binding on the Company (and any successor) and
each Participant.
(b) (i) The value of the Company shall be
determined by the Qualified Valuation Expert pursuant to this Section 4.2 based
on the aggregate consideration received (A) by the stockholders of the Company
to the extent such Change in Control involves a merger (including a reverse
merger), tender offer, consolidation or sale or issuance of securities,
including the aggregate consideration received by holders of options, warrants
and convertible securities, and (B) by the Company to the extent such Change in
Control involves a transfer, sale or other disposition of assets or securities
of the Company.
(ii) For purposes of this Section 4.2, the
"aggregate consideration received" as of the Valuation Determination Date shall
be deemed to include the following: (A) any amounts paid into any escrow or
similar arrangement, (B)
3.
<PAGE> 4
the aggregate amount of any liabilities assumed by the acquiror and/or the
affiliates or stockholders of the acquiror, (C) any amounts allocated to any
noncompete or similar arrangement entered into with any employees (including
officers) and/or stockholders of the Company and (D) to the extent such Change
in Control involves a transfer, sale or other disposition of assets of the
Company, the aggregate net value of any assets not transferred, sold or
otherwise disposed of by the Company. In addition, if the "aggregate
consideration received" with respect to such transaction may be increased as a
result of contingent payments related to future earnings or operations or the
achievement of milestones or other future events, any incremental Benefits that
would otherwise be payable pursuant to this Plan if such consideration were
received on the Valuation Determination Date shall be paid when and as such
contingent payments are made.
(c) For purposes of this Section 4.2, a "Qualified
Valuation Expert" shall mean (i) an investment banking firm of recognized
regional or national standing such as, by way of example, Mehta & Isaly,
Cruttendon, Kemper Securities, Needham & Company, Wedbush Securities or Sutro or
(ii) a nationally recognized valuation firm such as, by way of example, Houlihan
Lokey.
4.3 TIME OF BONUS PAYMENT. The Bonus Payments under this Article 4
shall be paid in a cash lump sum no later than fifteen (15) days following the
Bonus Completion Date.
ARTICLE 5
STOCK OPTIONS AND OTHER INCENTIVES
5.1 STOCK OPTIONS. Each Participant in the Plan shall be granted
nonqualified stock options to acquire the Company's common stock ("Stock
Options"). The number of such Stock Options granted shall be based upon the
Participant's position with the Company on the date the Participant is initially
designated as a Participant by the Board or the Compensation Committee and in
accordance with the schedule set forth in this Section 5.1. Notwithstanding the
foregoing, in the event the Board or Compensation Committee subsequently
promotes a Participant to a more senior officer position, such Participant shall
be entitled to receive an additional grant of Stock Options in an amount equal
to that required to make the total Stock Options granted to such Participant
equal to that number of Stock Options granted to other Participants serving in
like positions with the Company. Each Stock Option granted under this Article 5
shall have an exercise price of $.85 per share. Each Stock Option shall not be
granted pursuant to the Company's Amended and Restated 1992 Stock Option and
Restricted Stock Plan, but shall incorporate the terms of such plan to the
extent not inconsistent with this Plan, as determined by the Board or the
Compensation Committee in its sole discretion, including terms related to the
transferability of stock options granted hereunder.
4.
<PAGE> 5
<TABLE>
<CAPTION>
Officer Status with Company Number of Stock
Options Granted
<S> <C>
Vice President 25,000 shares
Chief Executive Officer (CEO) 40,000 shares
</TABLE>
5.2 TIME AND EXERCISE OF STOCK OPTION GRANT. The Stock Options
granted under this Article 5 shall be granted as of the Effective Date (or, if
later, the date the Participant is initially designated as a Participant by the
Board or the Compensation Committee). Except as set forth below, the Stock
Options granted under this Section 5 shall be subject to vesting and shall not
become exercisable in any respect until seven (7) years following the date of
grant, at which time they shall become fully vested and exercisable pursuant to
the terms thereof. Notwithstanding the foregoing, in the event the Company shall
consummate an initial public offering of its Common Stock, 25% of all then
outstanding options under the Plan shall vest and become fully exercisable
immediately prior to the effective date of the registration statement pursuant
to which such shares of Common Stock are being registered, with the remaining
75% of the then outstanding options vesting in three equal annual installments
commencing on the anniversary date of the effectiveness of the registration
statement.
In addition to the foregoing, vesting of options outstanding under the
Plan shall be accelerated and the Stock Options will become fully vested and
exercisable pursuant to their terms immediately prior to a Change of Control in
accordance with the following schedule:
<TABLE>
<CAPTION>
Value of Company Upon Number or Percentage of Shares
Change of Control Accelerated
<S> <C>
Less than $10,000,000 0
$10,000,000 to $20,000,000
Vice President 20,000 shares
Chief Executive Officer 30,000 shares
Greater than $20,000,000 100%
</TABLE>
Stock Options granted to each Participant hereunder shall be
exercisable for not more than thirty (30) days following such Participant's
termination of employment (for any reason or for no reason) and shall also be
subject to the terms and conditions specified in a standard form of stock option
agreement as set forth in Appendix A.
5.
<PAGE> 6
5.3 ADDITIONAL INCENTIVES. An Additional Incentive as described in
this Section 5.3 shall be provided to Michael Harpold ("Harpold") upon a Change
of Control if the conditions set forth in this Section 5.3 are satisfied.
Harpold has two loans outstanding from the Company: a loan in the principal
amount of $43,600 bearing interest at 7.5 % annually and due in full on July 29,
1997, which is more fully described in that certain loan agreement dated July
29, 1992 (the "Loan"); and a stock loan in the principal amount of $795.08, more
fully described in that certain note dated November 30, 1988 (the "Stock Loan").
Following a Change of Control and upon the completion of each of the following
terms and conditions, the Loan principal plus interest will be forgiven as set
forth in Section 5.3(d), below:
(a) The Change of Control occurs on or before
July l, 1995;
(b) The value of the Company on the Value
Determination Date exceeds $20,000,000;
(c) Any delinquent amounts on the Loan and the
Stock Loan, both principal and interest, are paid by Harpold on or before
July 1, 1996; and
(d) Harpold continues to be employed by the
Company as follows: If Harpold terminates employment for any reason, prior to
July 1, 1996, no amount of the Loan will be forgiven. If Harpold is employed by
the Company on July 1, 1996, one-half of the Loan principal and interest will be
forgiven on July 1, 1996. If Harpold is employed by the Company on July 1, 1997,
the remainder of the Loan principal and interest will be forgiven on July 1,
1997.
The Company and Harpold shall take such actions and execute such documents as
are necessary and appropriate to document the forgiveness of the Loan principal
and interest and to release and extinguish Harpold's liability to the Company
for the Loan to the extent provided for in this Section 5.3. No portion of the
Stock Loan shall be forgiven pursuant to this Plan.
ARTICLE 6
SEVERANCE BENEFITS
6.1 RIGHT TO SEVERANCE BENEFITS. If the Change of Control is
consummated while the Plan remains in effect, a Participant shall be entitled to
receive Severance Benefits from the Company as set forth in Section 6.2
providing the Participant was employed by the Company at the time of the Change
of Control, and within twelve (12) months following the Change of Control, the
Participant's employment with the Company is Terminated Without Cause.
6.
<PAGE> 7
6.2 DETERMINATION OF SEVERANCE BENEFITS. If, after a Change of
Control, any Participant has a right to receive Severance Benefits pursuant to
Section 6.1 above, Severance Benefits shall be determined as follows:
(a) Each Vice-President will receive as a Severance
Payment the equivalent of one and one-half (1 1/2) times Base Salary. The Chief
Executive Officer (CEO) will receive as a Severance Payment the equivalent of
two (2) times Base Salary.
(b) The Company shall pay the premiums for the
terminated Participant and for the eligible spouse and other COBRA qualified
beneficiaries of the terminated Participant for the health insurance
continuation benefits provided under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, ("COBRA"), and Section 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"), for the maximum period
provided by law for such qualified beneficiary's COBRA continuation rights.
(c) The Company shall reimburse the Participant for
outplacement expenses incurred during the three months following the Date of
Termination as a result of the Participant's search for other employment. In no
event, however, will such outplacement expenses exceed a total of seven thousand
five hundred dollars ($7,500) per Participant. The Participant shall provide to
the Company proof of such outplacement expenses in a form mutually acceptable to
the Company and the Participant.
6.3 TIME OF SEVERANCE PAYMENT. The Severance Payment shall be
payable by the Company in lump sum in cash not later than thirty (30) days
following the Date of Termination.
6.4 NO MITIGATION. The Participant shall not be required to mitigate
the amount of the Severance Benefits by seeking other employment or otherwise,
and any amount earned by the Participant as the result of employment by another
employer after the Date of Termination shall not reduce the amount of the
Severance Payment.
6.5 WITHHOLDING. The Company shall withhold appropriate federal,
state, local and foreign income and employment taxes from any payments
hereunder.
6.6 NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Participant for Good Reason shall be communicated by Notice of
Termination to the other party hereto given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, if to the
Participant, to the Participant at the Participant's address as set forth in the
Company's records, and, if to the Company, to SIBIA, 505 Coast Boulevard South,
La Jolla, California 92037-4641, or to such other address as may be designated
by the Company. Any notices given pursuant to this Section 6.6 shall be
7.
<PAGE> 8
effective on the earlier of the date on which such notice is actually received
by the addressee or the date that is three days after such notice is sent by the
addressor. For purposes of the Plan, a "Notice of Termination" means a written
notice which (i) indicates the provisions in the Plan that are affected by such
termination and (ii) if the Date of Termination, as defined below, is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by the Company or the Participant to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Cause or
of Good Reason shall not waive any right of the Company or of the Participant,
respectively, hereunder or preclude the Company or the Participant,
respectively, from asserting such fact or circumstance in enforcing its or his
rights hereunder.
6.7 DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Participant's employment
terminates by the Company other than by reason of death or Disability, or for
Cause, the Date of Termination shall be the date on which the Company notifies
the Participant of such termination and (ii) if the Participant's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death or determination of Disability pursuant to Section 13.9, as
the case may be.
6.8 CERTAIN REDUCTION OF PAYMENTS. In the event that any distribution
received or to be received by a Participant pursuant to the Plan
("Distribution") would (i) constitute a "parachute payment" within the meaning
of Section 280G of the Code and (ii) but for this Section 6.8, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such
Distribution may be reduced to the largest amount which the Participant, in his
sole discretion, determines would result in no portion of the Distribution being
subject to the Excise Tax. The determination by a Participant of any reduction
shall be conclusive and binding upon the Company. The Company shall reduce a
Distribution only upon written notice by the Participant indicating the amount
of such reduction.
ARTICLE 7
PAYMENTS TO AND FROM THE PLAN
The cash benefits under the Plan shall be paid from the general funds
of the Company (by certified or official bank check or wire transfer of
immediately available funds to an account designated by the applicable
Participant), and the Participants shall be no more than unsecured general
creditors of the Company.
8.
<PAGE> 9
ARTICLE 8
OTHER RIGHTS AND BENEFITS NOT AFFECTED
8.1 NONEXCLUSIVITY. Nothing in the Plan shall prevent or limit any
Participant's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company and for which a Participant may otherwise qualify, nor shall anything
herein limit or otherwise affect such rights as any Participant may have under
any stock option or other agreements with the Company. Except as otherwise
expressly provided herein, amounts which are vested benefits or which a
Participant is otherwise entitled to receive under any plan, policy, practice or
program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program.
8.2 EMPLOYMENT STATUS. The Plan does not constitute a contract of
employment or impose on any Participant or the Company any obligation to retain
any Participant as an employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. In no event shall any Participant be entitled to Benefits pursuant
to this Plan with respect to a Change in Control that occurs after the
termination of such Participant's employment with the Company, for any reason or
for no reason, and nothing in this Plan shall alter the status of each
Participant as an at-will employee of the Company.
ARTICLE 9
SUCCESSOR TO COMPANY
The Plan shall be binding upon any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Company, and any such successor
or assignee shall be required to perform the Company's obligations under the
Plan, in the same manner and to the same extent that the Company would be
required to perform if no such succession or assignment had taken place. In such
event, the term "Company," as used in the Plan, shall mean the Company as
hereinafter defined and any successor or assignee to the business or assets
which by reason hereof becomes bound by the terms and provisions of the Plan.
9.
<PAGE> 10
ARTICLE 10
DURATION, AMENDMENT AND TERMINATION; RIGHT TO INTERPRETATION
10.1 DURATION. Beginning on December 31, 1995, and on each subsequent
anniversary of such date, one year shall be added to the term of the Plan,
unless, prior to such date or anniversary, the Company, by resolution of the
Board, shall have notified each Participant in writing that such extension will
not become effective. If such resolutions are adopted by the Board, the term of
the Plan will not be extended and the Plan will terminate on the first December
31 following the date that such resolutions are adopted.
ARTICLE 11
NON-TRANSFER OF BENEFITS
No benefit hereunder shall be subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do
so shall be void.
ARTICLE 12
LEGAL CONSTRUCTION AND ARBITRATION
12.1 APPLICABLE LAW. This Plan shall be construed in accordance
with the laws of the State of California without regard to the conflict of laws
provisions thereof.
12.2 ARBITRATION. Any and all disputes or controversies, whether of
law or fact of any nature whatsoever, arising from or respecting the application
of the Plan to any Participant shall be decided by arbitration by the American
Arbitration Association in accordance with the rules and regulations of that
Association, or by any other arbitration body mutually agreed upon by the
parties. Pre-arbitration discovery shall be permitted at the request of either
party to a dispute under appropriate protection for proprietary and confidential
business information.
The arbitrators shall be selected as follows: the Company and the
Participant who is a party to the dispute shall each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the third
arbitrator. The Company reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place in San Diego County, California, or any
other location mutually agreeable to the parties. At the request of either
party, arbitration proceedings will be conducted in the utmost secrecy and, in
such case, all documents, testimony and
10.
<PAGE> 11
records shall be received, heard and maintained by the arbitrators in secrecy
under seal, available for inspection only by the parties to the arbitration,
their respective attorneys, and their respective expert consultants or witnesses
who shall agree, in advance and in writing, to receive all such information
confidentially and to maintain such information in secrecy, and make no use of
such information except for the purposes of the arbitration, until such
information shall become generally known.
The arbitrators, who shall act by majority vote, shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a temporary injunction, or a
permanent injunction, and shall also be able to award damages, with or without
an accounting and costs. The decree or judgment of an award rendered by the
arbitrators may be entered and enforced in any court having jurisdiction over
the parties.
Reasonable notice of the time and place of arbitration shall be given
to persons other than the parties, if such notice is required by law, in which
case such persons or their authorized representatives shall have the right to
attend or participate in the arbitration hearing in such manner as the law shall
require.
If any action is necessary to enforce or interpret the application of
the Plan to a Participant, the prevailing party shall be entitled to reasonable
attorneys fees, costs, and necessary disbursements in addition to any other
relief to which that party may be entitled.
ARTICLE 13
DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
set forth below.
13.1 "ADDITIONAL INCENTIVES" means the forgiveness of debt described
in Section 5.3.
13.2 "BASE SALARY" means, as of the Effective Date (or if the
individual named below became a participant in the Plan following the Effective
Date, the date as of which such individual first became a Participant), the
following salaries for each Participant: William T. Comer, $228,000; Michael J.
Dunn, $80,400; Michael M. Harpold, $170,000; G. Kenneth Lloyd, $165,000; Ian A.
McDonald, $140,000; David E. McClure, $160,000; Thomas A. Reed, $92,000. The
Base Salary for each Participant or any Participant may be increased by the
Compensation Committee in its sole discretion and such increased Base Salary in
effect on the Value Determination Date shall constitute Base Salary for purposes
of payments under the Plan.
11.
<PAGE> 12
13.3 "BENEFITS" means, collectively, the various benefits payable or
awarded under this Plan, which are the Bonus Payments, the Stock Options, the
Additional Incentives, and the Severance Benefits.
13.4 "BONUS COMPLETION DATE" means the last date of the Bonus Service
Period.
13.5 "BONUS PAYMENTS" means the payments described in Article 4.
13.6 "BONUS SERVICE PERIOD" shall have the meaning assigned in
Section 4.1 herein.
13.7 "CAUSE" means (a) gross or habitual failure to perform assigned
duties of the Participant's job, that is, performance failure not corrected
within thirty (30) days after written notice to the Participant thereof or (b)
misconduct, including but not limited to: (i) conviction of a crime, or entry of
a plea of nolo contendere, with regard to a crime involving moral turpitude or
dishonesty, (ii) illegal drug use or alcohol abuse on Company premises or at a
Company sponsored event, (iii) conduct by the Participant which in the good
faith and reasonable determination of the Board demonstrates gross unfitness to
serve, or (iv) intentional, material violation by the Participant of any
contract between the Participant and the Company or any statutory duty of the
Participant to the Company.
13.8 "change of control" means any one of the following:
(a) a sale of all or substantially all of the assets of the
Company;
(b) a merger or consolidation in which the Company is not the
surviving corporation (other than a transaction the principal purpose of which
is to change the state of the Company's incorporation or a transaction in which
the voting securities of the Company are exchanged for beneficial ownership of
at least 50% of the voting securities of the controlling acquiring corporation);
(c) a merger or consolidation in which the Company is the
surviving corporation and less than 50% of the voting securities of the Company
which are outstanding immediately after the consummation of such transaction are
beneficially owned, directly or indirectly, by the persons who owned such voting
securities immediately prior to such transaction;
(d) any transaction or series of related transactions after
which any person (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended), other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary of the
Company, becomes the beneficial
12.
<PAGE> 13
owner of voting securities of the Company representing 50% or more of the
combined voting power of all of the voting securities of the Company.
(e) during any period of two consecutive years, individuals
who at the beginning of such period constitute the membership of the Company's
Board of Directors ("Incumbent Directors") cease for any reason to have
authority to cast at least a majority of the votes which all directors on the
Board of Directors are entitled to cast, unless the election, or the nomination
for election by the Company's stockholders, of a new director was approved by a
vote of at least two-thirds of the votes entitled to be cast by the Incumbent
Directors, in which case such director shall also be treated as an Incumbent
Director in the future; or
(f) the liquidation or dissolution of the Company.
13.9 "company" means SIBIA Neurosciences, Inc., a Delaware
corporation, and any successor as provided in Article 9 hereof.
13.10 "DATE OF TERMINATION" has the meaning set forth in Section 6.7.
13.11 "DISABILITY" means that the Participant has exhausted any
short-term disability benefits to which he is entitled and is permanently
unable, by reason of a physical or mental incapacity, to perform the normal
duties of the work for which he was employed by the Company.
13.12 "EFFECTIVE DATE" shall mean November 10, 1994.
13.13 "GOOD REASON" means any action taken by the Company or its
successor, as the case may be, that results in a (i) reduction of the
Participant's rate of compensation as in effect immediately prior to the Change
of Control, (ii) failure to provide a package of welfare benefit plans which,
taken as a whole, provide substantially similar benefits to those in which the
Participant is entitled to participate immediately prior to the Change of
Control (except that employee contributions may be raised to the extent of any
cost increases imposed by third parties) or any action by the Company which
would adversely affect the Participant's participation or reduce the
Participant's benefits under any of such plans, (iii) change in the
Participant's responsibilities, authority, titles or offices resulting in
diminution of position, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith which is remedied by the Company
promptly after notice thereof is given by the Participant, (iv) request that the
Participant relocate to a worksite that is more than 35 miles from his prior
worksite, unless the Participant accepts such relocation opportunity, (v)
material reduction in duties, (vi) failure or refusal of the successor company
to assume the Company's obligations under this Plan, as required by Article 9,
or (vii) material breach by the Company or any successor company of any of the
material provisions of the Plan.
13.
<PAGE> 14
13.14 "NOTICE OF TERMINATION" has the meaning set forth in
Section 6.6.
13.15 "PARTICIPANT" shall mean an employee who has been designated as
a Participant as provided in Section 2.1.
13.16 "PLAN" has the meaning set forth in Section 1.1.
13.17 "SEVERANCE BENEFITS" has the meaning set forth in Section 6.2.
13.18 "SEVERANCE PAYMENT" has the meaning set forth in Section 6.2.
13.19 "STOCK OPTIONS" means the options to purchase Company stock
described in Article 5.
13.20 "TERMINATED WITHOUT CAUSE" shall occur if a Participant's
employment with the Company:
(a) shall be involuntarily terminated, unless the Company
terminates the employment of the Participant for Cause, or unless the
Participant's employment is terminated by reason of death or Disability; or
(b) shall be voluntarily terminated by the Participant
for Good Reason.
ARTICLE 14
MISCELLANEOUS
14.1 SEVERABILITY. If any term, provision, covenant or restriction of
the Plan is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of the Plan shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
14.2 CONSTRUCTION OF PLAN. Any gender, where appearing in the Plan,
shall be deemed to include the other gender, the singular shall include the
plural, and the plural shall include the singular, unless the context otherwise
requires. Descriptive headings of the several Articles of the Plan are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof. In the event of a conflict between the text of
the Plan and any summary, description or other information regarding the Plan,
the text of the Plan shall control.
14.3 ADJUSTMENTS TO STOCK. If any change is made in the stock subject
to options granted under the Plan (through merger, consolidation,
reorganization,
14.
<PAGE> 15
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 number of shares remaining subject
to such options will be appropriately adjusted in the type(s) and maximum
number. Such adjustments shall be made by the Board or the Compensation
Committee of the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company".)
ARTICLE 15
CLAIMS, INQUIRIES AND APPEALS
15.1 APPLICATIONS FOR BENEFITS AND INQUIRIES. Any application for
benefits, inquiries about the Plan or inquiries about present or future rights
under the Plan must be submitted to the Plan Administrator in writing. The
Company, or any successor, shall at all times maintain a Plan Administrator, and
shall give each Participant written notice of any change in the Plan
Administrator or the address to which benefits or inquiries should be sent. The
Plan Administrator is:
SIBIA Neurosciences, Inc.
Attention: Treasurer
505 Coast Boulevard South
La Jolla, CA 92037-4641
15.2 DENIAL OF CLAIMS. In the event that any application for benefits
is denied in whole or in part, the Plan Administrator must notify the applicant,
in writing, of the denial of the application. The written notice of denial will
be set forth in a manner designed to be understood by the Participant, and will
include specific reasons for the denial, specific references to the Plan
provision upon which the denial is based and a description of any information or
material that the Plan Administrator needs to complete the review. This written
notice will be given to the employee within 20 days after the Plan Administrator
receives the application.
15.3 LEGAL ACTION. No legal action for benefits under the Plan may be
brought until the claimant (i) has submitted a written application for benefits
in accordance with the procedures described by Section 15.1 above and (ii) has
been notified by the Plan Administrator that the application is denied (or the
application is deemed denied due to the Plan Administrator's failure to act on
it within the established time period).
15.
<PAGE> 16
ARTICLE 16
OTHER PLAN INFORMATION
16.1 EMPLOYER AND PLAN IDENTIFICATION NUMBERS. The Employer
Identification Number assigned to the Company (which is the "Plan Sponsor" as
that term is used in ERISA) by the Internal Revenue Service is 95-3616229. The
Plan Number assigned to the Plan by the Plan Sponsor pursuant to the
instructions of the Internal Revenue Service is 530.
16.2 ENDING DATE FOR PLAN'S FISCAL YEAR. The date of the end of the
fiscal year for the purpose of maintaining the Plan's records is December 31.
16.3 AGENT FOR THE SERVICE OF LEGAL PROCESS. The agent for the service
of legal process with respect to the Plan is: SIBIA Neurosciences, Inc., 505
Coast Boulevard South, La Jolla, CA 92037-4641, Attn: Treasurer. Service of
legal process also may be made upon the Plan Administrator.
16.4 PLAN SPONSOR AND ADMINISTRATOR. The "Plan Sponsor" and the "Plan
Administrator" of the Plan is SIBIA Neurosciences, Inc., 505 Coast Boulevard
South, La Jolla, CA 92037-4641. The Plan Sponsor's and Plan Administrator's
telephone number is (619) 452-5892. The Plan Administrator is the named
fiduciary charged with the responsibility for administering the Plan.
ARTICLE 17
EXECUTION
Having been originally adopted by the Board on November 10, 1994, and
having been amended, this Amended and Restated Management Change of Control Plan
is executed by a duly authorized officer and the Chairman of the Board as of the
5th day of June, 1997.
SIBIA NEUROSCIENCES, INC.
By:
-------------------------------------
William T. Comer,
Chief Executive Officer
16.
<PAGE> 17
By:
-------------------------------------
William R. Miller,
Chairman of the Board
PARTICIPANTS:
-------------------------------------
William T. Comer
-------------------------------------
Michael J. Dunn
-------------------------------------
Michael M. Harpold
-------------------------------------
G. Kenneth Lloyd
-------------------------------------
David E. McClure
-------------------------------------
Ian A. McDonald
-------------------------------------
Thomas A. Reed
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF JUNE 30, 1997 AND UNAUDITED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,673,000
<SECURITIES> 34,087,000
<RECEIVABLES> 392,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,675,000
<PP&E> 1,326,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,431,000
<CURRENT-LIABILITIES> 3,532,000
<BONDS> 0
0
0
<COMMON> 9,000
<OTHER-SE> 36,401,000
<TOTAL-LIABILITY-AND-EQUITY> 40,431,000
<SALES> 0
<TOTAL-REVENUES> 6,949,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,712,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,000
<INCOME-PRETAX> (2,620,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,620,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,620,000)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
