<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
SIBIA NEUROSCIENCES, INC.
(Exact name of Registrant as specified in its charter)
-------------
Delaware 95-3616229
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
505 Coast Boulevard South, Suite 300
La Jolla, California 92037
(619) 452-5892
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
1996 EQUITY INCENTIVE PLAN
(Full title of the plan)
-------------
William T. Comer
President and Chief Executive Officer
SIBIA Neurosciences, Inc.
505 Coast Boulevard South, Suite 300
La Jolla, California 92037
(619) 452-5892
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------
Copies to:
Frederick T. Muto, Esq.
Thomas A. Coll, Esq.
COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
(619) 550-6000
-------------
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and
Common Stock, $.001 par value 1,000,000 $5.0625 $5,062,500 $1,407.38
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 (c) and (h) of the Securities Act
of 1933, as amended. The price per share and aggregate offering price
are calculated based upon the average of the high and low prices of the
Company's Common Stock on July 26, 1999 as reported on the Nasdaq
National Market.
<PAGE> 3
INCORPORATION BY REFERENCE OF CONTENTS OF REGISTRATION STATEMENT ON
FORM S-8 NO. 333-03519
The contents of Registration Statement on Form S-8 No. 333-03519 filed
with the Securities and Exchange Commission on May 9, 1996 is incorporated by
reference herein.
EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Amended and Restated Certificate of Incorporation of the
Registrant. (1)
4.2 Amended and Restated Bylaws of the Registrant. (1)
4.3 Registrant's Certificate of Designation of Series A Junior
Participating Preferred Stock.
4.4 Registrant's Certificate of Designation of Series B Convertible
Non-Voting Preferred Stock.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5 to this
Registration Statement.
24.1 Power of Attorney is contained on the signature pages.
99.1 1996 Equity Incentive Plan, as amended.
- --------------------
(1) Filed as an exhibit to Registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference.
1.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of La Jolla, State of California, on July 29, 1999.
SIBIA NEUROSCIENCES, INC.
By: /s/ William T. Comer, Ph.D.
---------------------------------------
William T. Comer, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William T. Comer and Thomas A. Reed and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any of
them, or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ William T. Comer, Ph.D. President, Chief Executive Officer July 29, 1999
- ---------------------------------- and Director
William T. Comer, Ph.D. (Principal Executive Officer)
/s/ Thomas Reed Vice President, Finance/Administration July 29, 1999
- ---------------------------------- and Chief Financial Officer
Thomas Reed (Principal Financial and Accounting Officer)
/s/ William R. Miller Chairman of the Board July 29, 1999
- ----------------------------------
William R. Miller
/s/ Stanley T. Crooke, M.D., Ph.D. Director July 29, 1999
- ----------------------------------
Stanley T. Crooke, M.D., Ph.D.
Director ________, 1999
- ----------------------------------
Gunnar Ekdahl
/s/ Jeffrey F. McKelvy, Ph.D. Director July 29, 1999
- ----------------------------------
Jeffrey F. McKelvy, Ph.D.
/s/ James D. Watson, Ph.D. Director July 29, 1999
- ----------------------------------
James D. Watson, Ph.D.
</TABLE>
2.
<PAGE> 5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Amended and Restated Certificate of Incorporation of the
Registrant. (1)
4.2 Amended and Restated Bylaws of the Registrant. (1)
4.3 Registrant's Certificate of Designation of Series A Junior
Participating Preferred Stock.
4.4 Registrant's Certificate of Designation of Series B Convertible
Non-Voting Preferred Stock
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Cooley Godward LLP is contained on Exhibit 5 to this
Registration Statement.
24.1 Power of Attorney is contained on the signature pages.
99.1 Registrant's 1996 Equity Incentive Plan, as amended.
- --------------------
(1) Filed as an exhibit to Registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference.
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
SIBIA NEUROSCIENCES, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
SIBIA NEUROSCIENCES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on March 17, 1997:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company in accordance with the
provisions of its Certificate of Incorporation, the Board of Directors
hereby creates a series of Preferred Stock, par value $.001 per share,
of the Company and hereby states the designation and number of shares,
and fixes the relative designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions thereof (in
addition to the provisions set forth in the Certificate of Incorporation
of the Company, which are applicable to the Preferred Stock of all
classes and series), as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
SECTION 1. DESIGNATION AND AMOUNT. One Hundred Fifty Thousand
(150,000) shares of Preferred Stock, $.001 par value, are designated
"Series A Junior Participating Preferred Stock" with the designations
and the powers, preferences and rights, and the qualifications,
limitations and restrictions specified herein (the "Junior Preferred
Stock"). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Junior Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the
<PAGE> 2
conversion of any outstanding securities issued by the Company
convertible into Junior Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, par value $.001 per share (the "Common Stock"),
of the Company, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash
on the first day of April, July, October and January in each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Junior Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $l.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a
share of Junior Preferred Stock. In the event the Company shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Junior Preferred Stock
were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Company shall declare a dividend or distribution on
the Junior Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Junior Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
2
<PAGE> 3
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Junior Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Junior Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment
thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Junior
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Junior Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designation creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Junior Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Company having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Junior Preferred Stock shall have no special voting
rights and their consent
3
<PAGE> 4
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Junior Preferred Stock outstanding shall have been paid in full, the
Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Junior Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares
of any stock of the Company ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Junior Preferred
Stock; or
(IV) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of
stock of the Company unless the Company could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Junior Preferred
Stock purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares
4
<PAGE> 5
shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred
Stock subject to the conditions and restrictions on issuance set forth
herein, in the Restated Certificate of Incorporation, or in any other
Certificate of Designation creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Company, no distribution
shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up)
to the Junior Preferred Stock unless, prior thereto, the holders of
shares of Junior Preferred Stock shall have received $100 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided
that the holders of shares of Junior Preferred Stock shall be entitled
to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock,
or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except distributions made ratably on the Junior
Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company shall
at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of shares
of Junior Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Company shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any
such case each share of Junior Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser
5
<PAGE> 6
number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change
of shares of Junior Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. NO REDEMPTION. The shares of Junior Preferred Stock
shall not be redeemable.
SECTION 9. RANK. The Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Company's Preferred
Stock.
SECTION 10. AMENDMENT. The Restated Certificate of Incorporation
of the Company shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Junior
Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Junior Preferred Stock, voting together as a single class.
6
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
March 17, 1997.
/s/ WILLIAM T. COMER
-----------------------------------------
William T. Comer
President, Chief Executive Officer
and Director
/s/ FREDERICK T. MUTO
-----------------------------------------
Frederick T. Muto
Secretary
7
<PAGE> 1
EXHIBIT 4.4
AMENDED CERTIFICATE OF DESIGNATION
OF THE
SERIES B CONVERTIBLE NON-VOTING PREFERRED STOCK
(PAR VALUE $.001 PER SHARE)
OF
SIBIA NEUROSCIENCES, INC.
--------------
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
--------------
SIBIA NEUROSCIENCES, INC., a company organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), in accordance
with the provisions of Section 103 thereof, and pursuant to Section 151 thereof,
DOES HEREBY CERTIFY:
That the Amended and Restated Certificate of Incorporation of the
Company, as amended to date, (the "Certificate of Incorporation") authorizes the
creation of up to 5,000,000 shares of the Company's preferred stock, par value
$.001 per share (such preferred stock, together with all other preferred stock
of the Company the creation of which is in the future authorized by the
Certificate of Incorporation, referred to herein as the "Preferred Stock");
That pursuant to the authority conferred upon the Board of Directors
(the "Board") by the Certificate of Incorporation of the Company, the Board on
May 20, 1999, approved the creation, issuance and the voting powers of shares of
Series B Convertible Non-Voting Preferred Stock and filed with the Delaware
Secretary of State a Certificate of Designation of Series B Convertible
Non-Voting Preferred Stock dated May 25, 1999 (the "Certificate of Designation")
creating a series of one (1) share of Series B Convertible Non-Voting Preferred
Stock designated as set forth in the Certificate of Designation;
That no shares of the Series B Convertible Non-Voting Preferred Stock
have been issued; and
That on June 23, 1999 the Board approved an amendment of the Certificate
of Designation as set forth below:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company in accordance with the
provisions of its Certificate of Incorporation, the Board of Directors
hereby amends the Certificate of Designation, and fixes the relative
designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions thereof (in addition to the
provisions set forth in the Certificate of Incorporation of the Company,
which are applicable to the Preferred Stock of all classes and series),
as follows:
<PAGE> 2
SERIES B CONVERTIBLE NON-VOTING PREFERRED STOCK:
SECTION 1. DESIGNATION AND AMOUNT. One (1) share of Preferred Stock, par
value $.001 per share, is designated "Series B Convertible Non-Voting Preferred
Stock" with the designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions specified herein (the "Series B
Preferred"). Such number of shares may be increased or decreased by resolution
of the Board of Directors; provided, that no decrease shall reduce the number of
shares of Series B Preferred to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company convertible into Series B
Preferred. Each share of Series B Preferred shall have a stated value of
$5,000,000 per share (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS. So long as any shares of Series
B Preferred shall be outstanding, no dividend, whether in cash or property,
shall be paid or declared, nor shall any other distribution be made, on any
Common Stock (other than any dividend or distribution payable solely in Common
Stock of the Company), unless a dividend is paid with respect to all outstanding
shares of Series B Preferred in an amount per share (on an
as-converted-to-Common-Stock basis) equal to the amount paid or set aside for
each share of Common Stock.
SECTION 3. NO VOTING RIGHTS. Holders of Series B Preferred shall not be
entitled to vote together with holders of Common Stock, including with respect
to the election of directors of the Company, or as a separate class, except as
otherwise provided by the General Corporation Law of the State of Delaware
("DGCL") and in this Section 3. To the extent that, under the DGCL, the vote of
the holders of the Series B Preferred, voting separately as a class or series as
applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series B Preferred represented at a duly held meeting at which a quorum
is present or by written consent of a majority of the shares of Series B
Preferred (except as otherwise may be required under the DGCL) shall constitute
the approval of such action by the class. Holders of the Series B Preferred
shall be entitled to notice of all stockholder meetings or written consents (and
copies of proxy materials and other information sent to stockholders) with
respect to which they would be entitled as of right under the DGCL which notice
would be provided pursuant to the Company's Bylaws and the DGCL.
SECTION 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value plus all accrued but unpaid dividends per share, whether
declared or not, before any distribution or payment shall be made to the holders
of any Common Stock, and if the assets of the Company shall be insufficient to
pay in full such amounts, then the entire assets to be distributed to the
holders of Preferred Stock shall be distributed among the holders of Preferred
Stock ratably in accordance with the respective amounts that would be payable on
such shares if all amounts payable thereon were
<PAGE> 3
paid in full. A sale, conveyance or disposition of all or substantially all of
the assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record holder of Preferred Stock.
SECTION 5. CONVERSION.
(a) ELECTION TO CONVERT. Subject to the other provisions of
this Certificate of Designation, at any time prior to February 21, 2001, the
outstanding Series B Preferred shall be convertible, without payment of any
additional consideration by the holder thereof and at the option of such holder,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing two million dollars ($2,000,000) by the average of the
closing prices per share of the Common Stock on the Nasdaq National Market (or
any other national securities exchange on which the Common Stock is then traded)
for the thirty (30) consecutive trading days ending on the trading date
immediately preceding the date of such conversion; provided, however, that in no
event will the total number of shares of Common Stock beneficially owned by the
holder of the Series B Preferred upon conversion of the Series B Preferred
exceed a number of shares of Common Stock equal to 15% of the Common Stock then
outstanding.
(b) MECHANICS OF CONVERSION. Before any holder of Series B
Preferred shall be entitled to convert the same into shares of Common Stock
pursuant to Section 5(a) hereof, such holder shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the Company or of any
transfer agent for such stock, and shall give written notice to the Company at
such office that such holder elects to convert the same and shall state therein
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The Company shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series B Preferred or its nominee or nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid, together with cash in lieu of any fractional shares. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of surrender of the shares of Series B Preferred to be converted. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(c) AUTOMATIC CONVERSION. Subject to the other provisions of
this Certificate of Designation, the outstanding Series B Preferred, unless
converted earlier pursuant to Section 5(a) above, shall automatically convert on
the date (the "Automatic Conversion Date") that is the earlier of (i) February
21, 2001, or (ii) the date of the closing of a Change of Control (as defined
below), and, in the event of such Change of Control, such conversion shall be
contingent upon the consummation of such Change of Control and occur
simultaneously with the closing of the Change of Control (and in any event by
such time as may be necessary to permit
<PAGE> 4
the holder of the Series B Preferred to receive any consideration to be received
by other holders of Common Stock in connection with such Change of Control), in
the following manner:
(1) In the event that a Candidate Selection Approval
is achieved for a Project Compound under the Collaboration Agreement dated May
25, 1999 (the "Lilly Agreement") between Eli Lilly and Company ("Lilly") and the
Company prior to the Automatic Conversion Date, the Series B Preferred shall
automatically, and without requirement of further action by the Company or the
holder of the Series B Preferred, be converted into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing two
million dollars ($2,000,000) by the average of the closing prices per share of
the Common Stock on the Nasdaq National Market (or any other national securities
exchange on which the Common Stock is then traded) for the thirty (30)
consecutive trading days ending on the trading date immediately preceding the
date of such conversion; provided, however, that in no event will the total
number of shares of Common Stock beneficially owned by the holder of the Series
B Preferred upon conversion of the Series B Preferred exceed a number of shares
of Common Stock equal to 15% of the Common Stock then outstanding.
(2) In the event that a Candidate Selection Approval
is not achieved for a Project Compound under the Lilly Agreement prior to the
Automatic Conversion Date, the Series B Preferred shall automatically, and
without requirement of further action by the Company or the holder of the Series
B Preferred, be converted into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing five million dollars
($5,000,000) by the average of the closing prices per share of the Common Stock
on the Nasdaq National Market (or any other national securities exchange on
which the Common Stock is then traded) for the thirty (30) consecutive trading
days ending on the trading date immediately preceding the date of such
conversion; provided, however, that in no event will the total number of shares
of Common Stock beneficially owned by the holder of the Series B Preferred upon
conversion of the Series B Preferred exceed a number of shares of Common Stock
equal to 15% of the Common Stock then outstanding.
For purposes of this Certificate of Designation, "Change of Control"
shall mean (I) a reorganization, merger, consolidation or other transaction or
series of related transactions in which immediately after any such transaction
(by virtue of securities issued or sold in such transaction) the former
stockholders of the Company do not hold at least fifty percent (50%) of the
voting power of the surviving or acquiring entity, (II) an acquisition of all
outstanding capital stock of the Company or (III) a sale or other transfer of
all or substantially all of the Company's assets.
(d) LIMITATION ON ISSUANCE OF SHARES UPON CONVERSION.
(1) The following definitions shall apply to this
Certificate of Designation:
(i) "Maximum Share Amount" shall mean the
number of shares of the Company's Common Stock equal to 19.9% of the Company's
Common Stock
<PAGE> 5
outstanding as of the date that the first share of Series B Preferred is issued
(the "Original Issue Date");
(ii) "Conversion Stock" shall mean the shares
of Common Stock issuable upon conversion of the Series B Preferred;
(iii) "Excess Shares" shall mean Conversion
Stock which, upon issuance, would result in the beneficial ownership (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934) by a holder of shares
of Conversion Stock in excess of the Maximum Share Amount; and
(iv) "Exchange Rules" shall mean the rules or
regulations of Nasdaq or any other principal securities market upon which the
Common Stock of the Company is or becomes traded.
(2) The Company shall not be obligated to issue upon
conversion of the Series B Preferred any Excess Shares if such issuance in
excess of the Maximum Share Amount would constitute a breach or violation of the
Company's obligations under the Exchange Rules; provided that, to the extent the
Company will be required, or it appears likely to the Board of Directors of the
Company that the Company will be required, to issue any Excess Shares, the
Company shall promptly use its best efforts to obtain stockholder approval of
such issuance in accordance with Delaware law, the applicable rules of the
Securities and Exchange Commission and the Exchange Rules or to take such other
action to enable issuance of the Conversion Stock in accordance with Exchange
Rules.
(e) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series B Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Company which they
would have received had their Series B Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series B Preferred or with respect
to such other securities by their terms.
(f) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series B Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
5), in any such event each holder of Series B Preferred shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization,
9
<PAGE> 6
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series B Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(g) REORGANIZATIONS. If at any time or from time to time
after the Original Issue Date, there is a capital reorganization of the Common
Stock (other than a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 5), as a part of such capital reorganization, provision shall be
made so that the holders of the Series B Preferred shall thereafter be entitled
to receive upon conversion of the Series B Preferred the number of shares of
stock or other securities or property of the Company to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Series B Preferred after the
capital reorganization to the end that the provisions of this Section 5 shall be
applicable after that event and be as nearly equivalent as practicable.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the number of shares of Common Stock issuable
upon conversion of a share of Series B Preferred pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series B Preferred a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon the written request at any time of any holder of
Series B Preferred, furnish or cause to be furnished to such holder a like
certificate prepared by the Company setting forth (i) such adjustments and
readjustments and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of the Series B Preferred.
(i) NOTICES OF RECORD DATE. In the event of any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Company shall mail to each holder of Series B
Preferred at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right, and the amount and character of
such dividend, distribution, security or right.
(j) ISSUE TAXES. The holders of Series B Preferred shall pay
any and all issue, transfer and other taxes that may be payable in respect of
any issue or delivery of shares of Common Stock on conversion of shares of
Series B Preferred pursuant hereto.
10
<PAGE> 7
(k) RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION.
The Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series B Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series B Preferred; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the Certificate of
Incorporation. All shares of Common Stock which are issuable upon such
conversion shall, when issued, be duly and legally issued, fully paid and
nonassessable and free of all taxes, liens and charges.
(l) FRACTIONAL SHARES. No fractional share shall be issued
upon the conversion of any share or shares of Series B Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series B Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Company shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the Board).
(m) NOTICES. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
SECTION 6. REACQUIRED SHARES. No share or shares of Series B Preferred
acquired by the Company by reason of purchase, conversion or otherwise shall be
reissued. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designation creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
SECTION 7. RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of the Company not expressly provided for to the contrary herein shall be
vested in the Common Stock.
11
<PAGE> 8
IN WITNESS WHEREOF, SIBIA Neurosciences, Inc. has caused this
Certificate to be signed by its President and Chief Executive Officer and by its
Secretary on this 23rd day of June, 1999.
SIBIA NEUROSCIENCES, INC.
By: /s/ WILLIAM T. COMER
-------------------------------------
William T. Comer
President, Chief Executive Officer
and Director
By: /s/ FREDERICK T. MUTO
-------------------------------------
Frederick T. Muto
Secretary
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
July 29, 1999
SIBIA Neurosciences, Inc.
505 Coast Boulevard South
Suite 300
La Jolla, California 92037
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by SIBIA Neurosciences, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to 1,000,000 shares of the
Company's Common Stock, $.001 par value (the "Shares"), pursuant to its 1996
Equity Incentive Plan, as amended (the "Plan").
In connection with this opinion, we have examined the Registration Statement,
the Plan, your Certificate of Incorporation and Bylaws, as amended, and such
other documents, records, certificates, memoranda and other instruments as we
deem necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan and the
Registration Statement, will be validly issued, fully paid, and nonassessable
(except as to shares issued pursuant to certain deferred payment arrangements,
which will be fully paid and nonassessable when such deferred payments are made
in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
COOLEY GODWARD LLP
By: /s/ Thomas A. Coll
--------------------------
Thomas A. Coll
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 for the 1996 Equity Incentive Plan of SIBIA Neurosciences,
Inc. of our report dated February 19, 1999 appearing on page F-2 of the Form
10-K for the year ended December 31, 1998.
PRICEWATERHOUSECOOPERS LLP
San Diego, California
July 28, 1999
<PAGE> 1
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
AMENDED FEBRUARY 25, 1999
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
1.
<PAGE> 2
or alcohol abuse on Company premises or at a Company sponsored event, (iii)
conduct which in 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.
(g) "COMPANY" means SIBIA Neurosciences, Inc., a Delaware
corporation.
2.
<PAGE> 3
(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.
<PAGE> 4
(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.
(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.
(r) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(3) of the Plan.
(s) "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.
4.
<PAGE> 5
(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.
(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
5.
<PAGE> 6
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.
(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 two million five hundred thirteen thousand one
hundred forty-one (2,513,141) 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.
6.
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(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
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
7.
<PAGE> 8
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 "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
8.
<PAGE> 9
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 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
9.
<PAGE> 10
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 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
10.
<PAGE> 11
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to 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
11.
<PAGE> 12
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.
(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.
12.
<PAGE> 13
(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 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.
13.
<PAGE> 14
(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. 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.
14.
<PAGE> 15
(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 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
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<PAGE> 16
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) 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.
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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 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.
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(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.
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.
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