<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
MAXYGEN, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 77-0449487
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
515 Galveston Drive, Redwood City, California 94063
(Address of Principal Executive Offices)
1997 STOCK OPTION PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
(Full Title of the Plans)
Russell J. Howard, Ph.D.
President and Chief Executive Officer
Maxygen, Inc.
515 Galveston Drive
Redwood City, California 94063
(Name and Address of Agent For Service)
(650) 298-5300
(Telephone Number, Including Area Code, of Agent For Service)
Copies to:
JULIAN N. STERN
AUGUST J. MORETTI
HELLER EHRMAN WHITE & MCAULIFFE
2500 SAND HILL ROAD, SUITE 100
MENLO PARK, CALIFORNIA 94025-7063
Telephone: (650) 234-4229
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Proposed
Amount Proposed Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Registration
to be Registered Registered per Share(1) Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $0.0001 par value 8,200,000 $38.492 $315,634,400 $ 83,328.00
=============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed or to be filed with the Securities and
Exchange Commission (the "Commission) by the Registrant are incorporated by
reference in this registration statement:
(a) The Registrant's prospectus filed with the Commission pursuant to
Rule 424(b) of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the Registration Statement
on Form S-1 as amended and supplemented from time to time
(Registration No. 333-89413) originally filed with the Commission
on October 20, 1999 (the "Registration Statement") in which there
is set forth audited financial statements for the Registrant's
fiscal years ended December 31, 1997, December 31, 1998, and for
the nine month period ended September 30, 1999; and
(b) The description of the Common Stock of the Registrant contained in
the Registrant's Registration Statement on Form 8-A (No. 000-
28401) filed with the Commission on December 7, 1999 pursuant to
Section 12 of the Exchange Act of 1934, as amended (the "Exchange
Act").
All documents subsequently filed by the Registrant pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of
the offering of the securities offered hereby shall be deemed to be incorporated
by reference into this registration statement and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this registration statement
to the extent that a statement contained herein, or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this registration statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
The validity of the Common Stock offered hereby will be passed upon for
the Registrant by Heller Ehrman White & McAuliffe, Palo Alto, California. HEWM
Investors, an entity affiliated with Heller Ehrman White & McAuliffe,
beneficially owns 27,000 shares of our Common Stock. Julian N. Stern, the sole
shareholder of a professional coporation that is a partner of Heller Ehrman
White & McAuliffe and Secretary of Maxygen, beneficially owns 65,000 shares of
the Registrant's Common Stock.
Item 6. Indemnification of Directors and Officers
Section 102 of the Delaware General Corporation Law allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or to any of its stockholders for monetary damage for a breach
of his or her fiduciary duty as a director, except in the case where the
director breached his or her duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or knowingly violated a law, authorized the
payment of a dividend or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. The Registrant's Amended
and Restated Certificate of Incorporation contains a provision that eliminates
directors' personal liability as set forth above.
Section 145 of the Delaware General Corporation Law, as amended,
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact
II-1
<PAGE>
that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at its request in such capacity in another
corporation or business association against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
In addition, Article 9 of the Registrant's Amended and Restated
Certificate of Incorporation provides as follows:
"NINTH.
-----
A. RIGHT TO INDEMNIFICATION
------------------------
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she or a person of whom he or she is the legal representative, is or
was a director or officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director or officer, employee or
agent of another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended, (but, in the
case of such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said Law permitted
the corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall insure to the benefit of his or her heirs,
executors and administrators; provided, however, that the corporation shall
-------- -------
indemnify any such person seeking indemnity in connection with an action, suit
or proceeding (or part thereof) initiated by such person only if such action,
suit or proceeding (or part thereof) was authorized by the board of directors of
the corporation. Such right shall be a contract right and shall include the
right to be paid by the corporation expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that the
-------- -------
payment of such expenses incurred by a director or officer of the corporation in
his or her capacity as a director or officer and not in any other capacity in
which service was or is rendered by such person while a director or officer
including (without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
B. RIGHT OF CLAIMANT TO BRING SUIT
-------------------------------
If a claim under Paragraph A of Article NINTH is not paid in full by
the corporation within ninety (90) days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to this corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such a defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of
II-2
<PAGE>
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
C. NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by Paragraphs A and B of Article
NINTH shall not be exclusive of any other right which such persons may have or
hereafter acquire under any statute, provision of the Amended and Restated
Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
D. INSURANCE
---------
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against, any expense, liability or loss reasonably incurred or suffered by such
person in connection with his or her service as a director, officer, employee or
agent of such entity, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law."
The Registrant has purchased directors and officers liability insurance
which would indemnify the directors and officers of the Registrant against
damages arising out of certain kinds of claims which might be made against them
based on their negligent acts or omissions while acting in their capacity as
such.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part of
Exhibit 5)
24 Power of Attorney (page II-6)
99.1 1997 Stock Option Plan
99.2 1999 Employee Stock Purchase Plan
99.3 1999 Nonemployee Directors Stock Option Plan
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
II-3
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 6, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Redwood City, State of California, on this 22nd day
of December, 1999.
MAXYGEN, INC.
By: /s/ Russell J. Howard
_________________________________________
Russell J. Howard, Ph.D.
President and Chief Executive Officer
II-5
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Isaac
Stein and Simba Gill his or her true and lawful attorneys in fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
or her and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post effective amendments) to the registration
statement on Form S-8, and to sign any registration statement for the same
offering covered by this registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
all post effective amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Commission,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, each acting alone, or his or her substitute or substitutes,
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 below by the following persons in the
capacities as of December 22, 1999.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Russell J. Howard President, Chief Executive Officer December 22, 1999
- --------------------------------------
Russell J. Howard, Ph.D. and Director (Prinicpal
Executive Officer)
/s/ Simba Gill Senior Vice President of Business December 22, 1999
- --------------------------------------
Simba Gill, Ph.D. Development and Chief Financial
Officer (Principal Financial and
Accounting Officer)
/s/ Issac Stein Chairman of the Board December 22, 1999
- --------------------------------------
Isaac Stein
/s/ Robert J. Glaser Director December 22, 1999
- --------------------------------------
Robert J. Glaser, M.D.
/s/ M.R.C. Greenwood Director December 22, 1999
- --------------------------------------
M.R.C. Greenwood, Ph.D.
/s/ Adrian Hennah Director December 22, 1999
- --------------------------------------
Adrian Hennah
/s/ Gordon Ringold Director December 22, 1999
- --------------------------------------
Gordon Ringold, Ph.D.
/s/ George Poste Director December 22, 1999
- --------------------------------------
George Poste, Ph.D.
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
Item No. Description of Items
- -------- --------------------
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part of Exhibit
5)
24 Power of Attorney (page II-6)
99.1 1997 Stock Option Plan
99.2 1999 Employee Stock Purchase Plan
99.3 1999 Nonemployee Directors Stock Option Plan
II-7
<PAGE>
EXHIBIT 5
December 22, 1999
Maxygen, Inc.
515 Galveston Drive
Redwood City, California 94063
Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Maxygen, Inc., a Delaware corporation (the
"Company"), in connection with the Registration Statement on Form S-8 (the
"Registration Statement") which the Company proposes to file with the Securities
and Exchange Commission on or about December 22, 1999, for the purpose of
registering under the Securities Act of 1933, as amended, 8,200,000 shares of
its Common Stock, $.0001 par value per share (the "Shares"). Of the Shares,
7,500,000 are issuable under the Company's 1997 Stock Option Plan, 400,000 are
issuable under the Company's 1999 Employee Stock Purchase Plan, and 300,000 are
issuable under the Company's 1999 Nonemployee Directors Stock Option Plan
(collectively, the "Plans").
In connection with this opinion, we have assumed the authenticity of all
records, documents and instruments submitted to us as originals, the genuineness
of all signatures, the legal capacity of natural persons and the conformity to
the originals of all records, documents and instruments submitted to us as
copies. We have based our opinion upon our review of the following records,
documents and instruments:
(a) The Certificate of Incorporation of the Company, as amended to date,
certified by the Secretary of State of the State of Delaware as of
December 20, 1999 and certified to us by an officer of the Company as
being complete and in full force and effect as of the date of this
opinion;
(b) The Bylaws of the Company, as amended to date, certified to us by an
officer of the Company as being complete and in full force and effect
as of the date of this opinion;
<PAGE>
Maxygen, Inc. Heller Ehrman White & McAuliffe
December 22, 1999 ATTORNEYS
Page 2
(c) A Certificate of an officer of the Company (i) attaching records
certified to us as constituting all records of proceedings and actions
of the Board of Directors and stockholders of the Company relating to
the adoption and approval of the Plans, and (ii) certifying as to
certain factual matters;
(d) A Certificate of ChaseMellon Shareholder Services, L.L.C., the
transfer agent of the Company, as to the number of shares of common
stock of the Company outstanding as of December 21, 1999; and
(e) The Plans.
This opinion is limited to the federal laws of the United States of America
and the General Corporation Law of the State of Delaware. We disclaim any
opinion as to any other statute, rule, regulation, ordinance, order or other
promulgation of any other jurisdiction or any regional or local governmental
body or as to any related judicial or administrative opinion.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered, issued and sold, (ii) the Shares
to be sold are issued in accordance with the terms of the Plans, (iii) the
Company receives the full consideration for the Shares as stated in the Plans,
(iv) the per share consideration for each Share includes payment of cash or
other lawful consideration at least equal to the par value of the Company's
common stock, and (v) all applicable securities laws are complied with, it is
our opinion that the Shares covered by the Registration Statement, when issued
and sold by the Company, after payment therefore in the manner provided in the
applicable Plan and the Registration Statement, will be legally issued, fully
paid and nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon by
you for any other purpose, or relied upon by any other person, firm, corporation
or other entity for any purpose, without our prior written consent. We disclaim
any obligation to advise you of any change of law that occurs, or any facts of
which we may become aware, after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Heller Ehrman White & McAuliffe
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
on Form S-8 pertaining to the 1997 Stock Option Plan, the 1999 Employee Stock
Purchase Plan, and the 1999 Nonemployee Directors Stock Option Plan, of Maxygen,
Inc., of our report dated October 29, 1999 with respect to the financial
statements of Maxygen, Inc. for the years ended December 31, 1998 and 1997 and
the nine month period ended September 30, 1999 included in its Registration
Statement (Form S-1, No. 333-89413) filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Palo Alto, California
December 21, 1999
<PAGE>
Exhibit 99.1
1997 STOCK OPTION PLAN
OF
MAXYGEN, INC.
(as amended)
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1997 Stock Option Plan (the "Plan") of Maxygen, Inc., a
Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonstatutory
options" ("NSOs").
2. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is a full-time employee
of the Company or of any Affiliate (as defined below) of the Company is eligible
to receive NSOs or ISOs under this Plan. Every person who at the date of grant
is a consultant to, or nonemployee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NSOs under this Plan. The
term "Affiliate" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions of the Code. The term "employee" includes
an officer or director who is an employee, of the Company. The term
"consultant" includes persons employed by, or otherwise affiliated with, a
consultant.
3. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under options granted pursuant to this Plan
shall be 7,500,000 shares of Common Stock plus an annual increase to be added on
the first day of the Company's fiscal year beginning in fiscal year 2001, equal
to the lesser of (i) 1,500,000 shares, (ii) 4% of the outstanding shares of
capital stock on such date or (iii) an amount
1
<PAGE>
determined by the Board. The shares covered by the portion of any grant under
the Plan which expire unexercised shall become available again for grants under
the Plan.
4. ADMINISTRATION
--------------
4.1 General. This Plan shall be administered by the Board of
-------
Directors of the Company (the "Board") or, by a committee (the "Committee") of
at least two Board members to which administration of the Plan, or of part of
the Plan, is delegated (in either case, the "Administrator").
4.2 Public Company. From and after such time as the Company registers
--------------
a class of equity securities under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Committee shall consist of Board
members who are "Non-Employee Directors" as defined under Rule 16b-3 promulgated
by the Securities and Exchange Commission ("Rule 16b-3"), or any successor rule
thereto.
4.3 Authority of Administrator. Subject to the other provisions of
--------------------------
this Plan, the Administrator shall have the authority, in its discretion: (i) to
grant Options; (ii) to determine the fair market value of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations
relating to this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not limited to, the
time or times at which Options shall be exercisable; (viii) with the consent of
the optionee, to modify or amend any Option; (ix) to accelerate the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
4.4 Interpretation by Administrator. All questions of interpretation,
-------------------------------
implementation, and application of this Plan shall be determined in its absolute
discretion by the Administrator. Such determinations shall be final and binding
on all persons.
4.5 Rule 16b-3. With respect to persons subject to Section 16 of the
----------
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent a transaction under this Plan or action by the Administrator fails to so
comply, it shall, to the extent deemed advisable by the Administrator, be
modified to comply with Rule 16b-3. Notwithstanding the above, it shall be the
responsibility of such persons, not of the
2
<PAGE>
Company or the Administrator, to comply with the requirements of Section 16 of
the Exchange Act; and neither the Company nor the Administrator shall be liable
if this Plan or any transaction under this Plan fails to comply with the
applicable conditions of Rule 16b-3 or any successor rule thereto, or if any
such person incurs any liability under Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
-------------------------------------
5.1 No Options shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board.
5.2 Each Option shall be evidenced by a written stock option
agreement (the "Option Agreement"), in form satisfactory to the Company,
executed by the Company and the person to whom such Option is granted; provided,
however, that the failure by the Company, the optionee, or both to execute the
Option Agreement shall not invalidate the granting of an Option, although the
exercise of each option shall be subject to Section 6.1.3.
5.3 The Option Agreement shall specify whether each Option it
evidences is an NSO or an ISO.
5.4 Subject to Section 6.3.3 with respect to ISOs, the Administrator
may approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NSOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. Options
-----------------------------------------------------
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital. Subject to Section 6.1.2, if the stock
------------------
of the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and class of shares of
stock subject to this Plan and each Option outstanding under this Plan, and (b)
the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a
3
<PAGE>
result of any such adjustments. Each such adjustment shall be subject to
approval by the Board in its absolute discretion .
6.1.2 Corporate Transactions. In the event of the proposed
----------------------
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action. In the event of a merger or consolidation
of the Company with or into another corporation or entity in which the Company
does not survive, or in the event of a sale of all or substantially all of the
assets of the Company in which the stockholders of the Company receive
securities of the acquiring entity or an affiliate thereof, all Options shall be
assumed or equivalent options shall be substituted by the successor corporation
(or other entity) or a parent or subsidiary of such successor corporation (or
other entity). If such successor does not agree to assume the Options or to
substitute equivalent options therefor, unless the Administrator shall determine
otherwise, the Options shall be fully exercisable for a period of 30 days form
the date notice is given under this Section 6.1.2 and shall terminate upon
expiration of such 30-day period.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
-----------------------
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the Option Agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the Administrator
(in any case, the "Vesting Base Date") and specified in the Option Agreement
relating to such Option; provided, however, that the right to exercise an Option
must vest at the rate of at least 20% per year over five years from the date the
option was granted. Options granted to officers, directors or consultants may
become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Board of the
Administrator in accordance with this Plan. In any case, no Option shall be
exercisable until a written Option Agreement in form satisfactory to the Company
is executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance approvals
-----------------
described in Section 5.4, the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
6.1.5 Nonassignability of Option Rights. Except as otherwise
---------------------------------
determined by the Administrator and expressly set forth in the Option Agreement,
no Option granted under this Plan shall be assignable or otherwise transferable
by the optionee except by will or by the laws of descent and distribution.
During the life of the optionee, except as otherwise determined by the
Administrator and expressly set forth in the Option Agreement, an Option shall
be exercisable only by the optionee.
4
<PAGE>
6.1.6 Payment. Except as provided below, payment in full, in
-------
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more of
the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory
note for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
would be imputed and in no event more than the maximum interest rate allowed
under applicable usury laws), which promissory note may be either secured or
unsecured in such manner as the Administrator shall approve (including, without
limitation, by a security interest in the shares of the Company); and
(b) Delivery by the optionee of Common Stock already
owned by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.
6.1.7 Termination of Employment.
-------------------------
(a) If, for any reason other than death, disability or
"cause" (as defined below), an optionee ceases to be employed by the Company or
any of its Affiliates (such event being called a "Termination"), Options held at
the date of Termination (to the extent then exercisable) may be exercised in
whole or in part at any time within 90 days of the date of such Termination, or
such other period of not less than 30 days after the date of such Termination as
is specified in the Option Agreement (but in no event after the Expiration
Date).
(b) If an optionee dies or becomes disabled (within the
meaning of Section 22(c)(3) of the Code) while employed by the Company or an
Affiliate or within the period that the Option remains exercisable after
Termination, Options then held (to the extent then exercisable) may be
exercised, in whole or in part, by the optionee, by the optionee's personal
representative or by the person to whom the Option is transferred by devise or
the laws of descent and distribution, at any time within 12 months after the
death or 12 months after the disability of the optionee, or such other
5
<PAGE>
period of not less than six months from the date of Termination as is specified
in the Option Agreement (but in no event after the Expiration Date).
(c) If an optionee is terminated for "cause," all Options
then held shall terminate and no longer be exercisable as of the date of
Termination.
(d) For purposes of this Section 6.1.7, "employment"
includes service as a director or as a consultant.
(e) For purposes of this Section 6.1.7, an optionee's
employment shall not be deemed to terminate by reason of sick leave, military
leave or other leave of absence approved by the Administrator, if the period of
any such leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
(f) For purposes of this Section 6.1.7, "cause" shall
mean Termination (i) by reason of optionee's commission of a felony, misdemeanor
or other illegal conduct involving dishonesty, fraud or other matters of moral
turpitude, (ii) by reason of optionee's dishonesty towards, fraud upon, or
deliberate injury or attempted injury to the Company or any of its Affiliates,
or (iii) by reason of optionee's willfully engaging in misconduct which is
materially and demonstrably injurious to the Company or any of its Affiliates.
6.1.8 Repurchase of Stock. At the option of the Administrator,
-------------------
the stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase shall be exercisable as the
Administrator may determine in the grant of option, either:
(a) at the Option exercise price and (i) shall lapse at
the rate of at least 20% per year over five years from the date the Option is
granted (without regard to the date it was exercised or becomes exercisable),
and must be exercised for cash or cancellation of purchase money indebtedness
within 90 days after such termination of employment (or in the case of
securities issued upon exercise of options after the date of termination, within
90 days after the date of the exercise) ; or
(b) at the higher of the Option exercise price or the
value (determined as set forth in Section 6.1.11) of the stock being repurchased
on the date of termination, and must be exercised for cash or cancellation of
purchase money indebtedness within 90 days of termination of employment (or in
the case of securities issued upon exercise of options after the date of
termination, within 90 days after the date
6
<PAGE>
of exercise), and such right shall terminate when the Company's securities
become publicly traded.
In addition to the restrictions set forth in subparagraphs (a) and (b)
above, the shares held by an officer, director or consultant of the issuer or an
affiliate of the issuer may be subject to additional or greater restrictions, at
the absolute discretion of the Administrator.
6.1.9 Withholding and Employment Taxes. At the time of exercise
--------------------------------
of an Option or at such other time as the amount of such obligations becomes
determinable (the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment taxes. If authorized
by the Administrator in its absolute discretion, after considering any tax or
accounting consequences, an optionee may elect to (i) deliver a full recourse
promissory note on such terms as the Administrator deems appropriate, (ii)
tender to the Company previously owned shares of Stock or other securities of
the Company, or (iii) have shares of Common Stock which are acquired upon
exercise of the Option withheld by the Company to pay some or all of the amount
of tax that is required by law to be withheld by the Company as a result of the
exercise of such Option. Any election pursuant to clause (ii) above, where the
optionee is tendering Common Stock issued pursuant to the exercise of an Option,
shall require that such shares have been held at least six months prior to the
Tax Date. Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan may
----------------
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code. If Options provide for a right of first refusal in favor of the
Company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the earlier of (i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten years after the grant
date as set forth in Section 6.1.4.
6.1.11 Determination of Value. For purposes of the Plan, the
----------------------
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or
7
<PAGE>
the closing bid if no sales were reported, as quoted on such system or exchange
(or the largest such exchange) for the date the value is to be determined (or if
there are no sales for such date, then for the last preceding business day on
which there were sales), as reported in the Wall Street Journal or similar
-------------------
publication.
(b) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator, by consideration of such factors as the Administrator in its
discretion deems appropriate among the recent issue price of other securities of
the Company, the Company's net worth, prospective earning power, dividend-paying
capacity, and other relevant factors, including the goodwill of the Company, the
economic outlook in the Company's industry, the Company's position in the
industry and its management, and the values of stock of other corporations in
the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.5, no Option shall be
-----------
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the Option Agreement is referred to in this Plan as
the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option granted
--------------
to any person who owns, directly or by attribution under the Code currently
Section 424(d), stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any Affiliate (a "Ten
Percent Stockholder") shall in no event be less than 110% of the fair market
value (determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.2 Terms and Conditions to Which Only NSOs Are Subject. Except as
---------------------------------------------------
set forth in Section 6.1.13, the exercise price of a NSO shall be not less than
85% of the fair market value (determined in accordance with Section 6.1.11) of
the stock subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
---------------------------------------------------
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
--------------
exercise price of an ISO shall be determined in accordance with the applicable
provisions
8
<PAGE>
of the Code and shall in no event be less than the fair market value (determined
in accordance with Section 6.1.11) of the stock covered by the Option at the
time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise
--------------------------
of an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of
----------
employment as provided in Section 5.4, the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this Plan,
-------
ISOs granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator, ISOs with
lower exercise prices shall vest before ISOs with higher exercise prices,
regardless of the grant date.
6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to
----
any Ten Percent Stockholder shall be exercisable more than five years after the
date of grant .
7. MANNER OF EXERCISE
------------------
7.1 An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1.6. The date the Company
receives written notice of an exercise hereunder accompanied by payment of the
exercise price will be considered as the date such Option was exercised.
7.2 Promptly after receipt of written notice of exercise of an
Option, the Company shall, without stock issue or transfer taxes to the optionee
or other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a stockholder with respect to
9
<PAGE>
any shares of stock covered by the Option until the date of issuance (as
evidenced by the appropriate entry on the books of the Company or a duly
authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
-------------------------------------
Nothing in this Plan or any Option granted thereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. FINANCIAL INFORMATION
---------------------
The Company shall provide to each optionee during the period such optionee
holds an outstanding Option, and to each holder of Common Stock acquired upon
exercise of Options granted under the Plan for so long as such person is a
holder of such Common Stock, annual financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall include, at a minimum, a balance
sheet and an income statement, and shall be delivered as soon as practicable
following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
----------------------------------
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
11. NONEXCLUSIVITY OF THE PLAN
--------------------------
The adoption of the Plan shall not be construed as creating any limitations
on the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under the Plan.
12. MARKET STANDOFF
---------------
Each Optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Securities Act"), shall not sell or otherwise transfer any shares of Common
Stock acquired upon exercise of Options during the 180-day period following the
effective date of a registration statement of the company filed under the
Securities Act; provided, however, that such restriction shall
10
<PAGE>
apply only to the first two registration statements of the Company to become
effective under the Securities Act which includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under the
Securities Act. The Company may impose stop-transfer instructions with respect
to securities subject to the foregoing restriction until the end of such 180-day
period.
13. AMENDMENTS TO PLAN
------------------
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
stockholder approval is advisable.
14. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within 12 months
after adoption by the Board. If such stockholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be
granted and exercised under this Plan only after there has been compliance with
all applicable federal and state securities laws.
Plan adopted by the Board of Directors on March 1, 1997
Plan approved by Stockholders on March 30, 1997.
11
<PAGE>
EXHIBIT 99.2
MAXYGEN, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. This Plan is intended to provide Employees of the Company and
-------
its Designated Subsidiaries an opportunity to purchase Common Stock through
accumulated payroll deductions.
2. Definitions.
-----------
(a) "Administrator" means the Board or the persons appointed by the
-------------
Board to administer this Plan pursuant to Section 13.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means Maxygen, Inc., a Delaware corporation.
-------
(f) "Compensation" means all regular, straight-time gross earnings of
------------
a Participant, including commissions but exclusive of payments for overtime,
shift premium, incentive compensation, incentive payments, bonuses and other
compensation.
(g) "Continuous Employment" means the absence of any interruption or
---------------------
termination of service as an Employee. Continuous Employment shall not be
considered interrupted in the case of a leave of absence agreed to in writing by
the Company, provided that either (i) the leave does not exceed 90 days or (ii)
re-employment upon expiration of the leave is guaranteed by contract or statute.
(h) "Designated Subsidiaries" means the Subsidiaries that have been
-----------------------
designated by the Board from time to time in its sole discretion to participate
in this Plan.
(i) "Employee" means any person, including an officer, who is
--------
customarily employed for at least 20 hours per week by the Company or one of its
Designated Subsidiaries. Whether an individual qualifies as an Employee shall be
determined by the Administrator, in its sole discretion, by reference to Section
3401(c) of the Code and the regulations promulgated thereunder; unless the
Administrator makes a contrary determination, the Employees of the Company
shall, for all purposes of this Plan, be those individuals who satisfy the
customary employment criteria set forth
<PAGE>
above and are carried as employees by the Company or a Designated Subsidiary for
regular payroll purposes.
(j) "Purchase Date" means such business days during each Offering
-------------
Period of this Plan as may be identified by the Administrator pursuant to
Section 8.
(k) "Interim Offering Date" means the first business day following a
---------------------
Purchase Date other than the last Purchase Date of an Offering Period.
(l) "Offering Date" means the first business day of an Offering
-------------
Period.
(m) "Offering Period" means a period established by the Administrator
---------------
pursuant to Section 4 during which payroll deductions are accumulated from one
or more Participants and applied to the purchase of Common Stock.
(n) "Participant" means an Employee who has elected to participate in
-----------
this Plan pursuant to Section 5.
(o) "Plan" means this Maxygen, Inc. 1999 Employee Stock Purchase
----
Plan.
(p) "Purchase Right" means a right to purchase Common Stock granted
--------------
pursuant to Section 7.
(q) "Subsidiary" means, from time to time, any corporation, domestic
----------
or foreign, of which not less than 50% of the voting shares are held by the
Company or another Subsidiary of the Company.
3. Eligibility.
-----------
(a) Regular Participation. Any person who is, or will be, an
---------------------
Employee on an Offering Date shall be eligible to participate in this Plan
during the corresponding Offering Period, subject to the requirements of Section
5(a).
(b) Interim Participation. Any person who becomes an Employee
---------------------
after an Offering Date shall be eligible to participate in this Plan during the
corresponding Offering Period, but only on and beginning with the first Interim
Offering Date.
(c) No Participation by Five-Percent Stockholders.
---------------------------------------------
Notwithstanding paragraphs (a) and (b) of this Section 3, an Employee shall not
participate in this Plan during an Offering Period if immediately after the
grant of a Purchase Right on the Offering Date or Interim Offering Date, the
Employee (or any other person whose stock would be attributed to the Employee
under Section 424(d) of the Code) would own stock possessing five percent or
more of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary. For this purpose, an Employee is treated as owning
stock that he or she could purchase by exercise of Purchase Rights or other
options.
2
<PAGE>
4. Offering Periods.
----------------
Unless otherwise determined by the Administrator:
(a) the first Offering Period under this Plan shall begin on the
first business day before the effective date of a firmly underwritten initial
public offering of Common Stock and shall end on the last business day of March
2001;
(b) the duration of each Offering Period (other than the first
Offering Period) shall be 12 months (measured from the first business day of the
first month to the last business day of the 12th month);
(c) a new Offering Period shall begin on the first business day
after the last Purchase Date of an Offering Period; and
(d) an Offering Period shall terminate on the first date that no
Participants are enrolled in it.
5. Participation.
-------------
(a) An Employee may become a Participant in this Plan by
completing a subscription agreement, in such form or forms as the Administrator
may approve from time to time, and delivering it to the Administrator within 15
days before the applicable Offering Date or Interim Offering Date, unless
another time for filing the subscription agreement is set by the Administrator
for all Employees with respect to a given Offering Period. The subscription
agreement shall authorize payroll deductions pursuant to this Plan and shall
have such other terms as the Administrator may specify from time to time.
(b) At the end of an Offering Period, each Participant in the
Offering Period who remains an Employee shall be automatically enrolled in the
next succeeding Offering Period (a "Re-enrollment") unless, in a manner and at a
time specified by the Administrator, but in no event later than the day before
the Offering Date of such succeeding Offering Period, the Participant notifies
the Administrator in writing that the Participant does not wish to be re-
enrolled. Re-enrollment shall be at the withholding percentage specified in the
Participant's most recent subscription agreement unless the Participant changes
that percentage by timely written notice. No Participant shall be automatically
re-enrolled whose participation has terminated by operation of Section 10.
6. Payroll Deductions.
------------------
(a) Each Participant shall have withheld a percentage of his or
her Compensation received during an Offering Period. Withholding shall be in
whole percentages of such Compensation, up to a maximum (not to exceed 15%)
established by the Administrator from time to time, as specified by the
Participant in his or her subscription agreement. Payroll
3
<PAGE>
deductions for a Participant during an Offering Period shall begin with the
first payroll following the Offering Date or Interim Offering Date and shall end
on the last Purchase Date of the Offering Period, unless sooner terminated by
the Participant as provided in Section 10.
(b) All payroll deductions made by a Participant shall be
credited to the Participant's account under this Plan. A Participant may not
make any additional payments into such account.
(c) A Participant may reduce the rate of his or her payroll
deductions to 0% at any time during an Offering Period, effective 15 days after
the Participant files with the Administrator a new subscription agreement
authorizing the change. A Participant may make other changes to the rate of his
or her payroll deductions during an Offering Period effective the day after the
first Purchase Date that is at least 15 days after the Administrator's receipt
of a new subscription agreement authorizing the change.
7. Purchase Rights.
---------------
(a) Grant of Purchase Rights. On the Offering Date, or (if
------------------------
applicable) Interim Offering Date of each Offering Period, the Participant shall
be granted a Purchase Right to purchase during the Offering Period the number of
shares of Common Stock determined by dividing (i) $25,000 multiplied by the
number of (whole or part) calendar years in the Offering Period by (ii) the fair
market value of a share of Common Stock on the Offering Date or Interim Offering
Date.
(b) Terms of Purchase Rights. Except as otherwise determined by
------------------------
the Administrator, each Purchase Right shall have the following terms:
(i) The per-share price of the shares subject to a Purchase
Right shall be 85% of the lower of the fair market values
of a share of Common Stock on (a) the Offering Date, or
Interim Offering Date, on which the Purchase Right was
granted and (b) the Purchase Date. The fair market value of
the Common Stock on a given date shall be the closing price
as reported in the Wall Street Journal; provided, however,
-------- -------
that if there is no public trading of the Common Stock on
that date, then fair market value shall be determined by
the Administrator in its discretion.
(ii) Payment for shares purchased by exercise of Purchase Rights
shall be made only through payroll deductions under Section
6.
(iii) Upon purchase or disposition of shares acquired by exercise
of a Purchase Right, the Participant shall pay, or make
provision adequate to the Administrator for payment of, all
tax (and similar) withholdings that the Administrator
determines, in its discretion, are required due to the
acquisition or disposition, including without
4
<PAGE>
limitation any such withholding that the Administrator
determines in its discretion is necessary to allow the
Company and its Subsidiaries to claim tax deductions or
other benefits in connection with the acquisition or
disposition.
(iv) During his or her lifetime, a Participant's Purchase Right
is exercisable only by the Participant.
(v) The Purchase Rights will in all respects be subject to the
terms and conditions of this Plan, as interpreted by the
Administrator from time to time.
8. Purchase Dates; Purchase of Shares; Refund of Excess Cash.
---------------------------------------------------------
(a) The Administrator shall establish one or more Purchase Dates for
each Offering Period. Unless other wise determined by the Administrator,
(i) the last business days of September 2000 and March 2001
shall be the Purchase Dates of the initial Offering Period
under this Plan, and
(ii) the last trading day of each March and September during a
subsequent Offering Period shall be a Purchase Date.
(b) Each Participant's Purchase Right shall be exercised
automatically on each Purchase Date during the Offering Period, to purchase the
maximum number of full shares at the applicable price using the Participant's
accumulated payroll deductions.
(c) The shares purchased upon exercise of a Purchase Right shall be
deemed to be transferred to the Participant on the Purchase Date.
(d) Any cash remaining in a Participant's payroll deduction account
after the purchase of shares on a Purchase Date shall be carried forward in that
account for application on the next Purchase Date; provided that upon
--------
termination of an Offering Period, any such cash shall be promptly refunded to
the Participant.
9. Registration and Delivery of Share Certificates.
-----------------------------------------------
(a) Shares purchased by a Participant under this Plan will be
registered in the name of the Participant, or in the name of the Participant and
his or her spouse, or in the name of the Participant and joint tenant(s) (with
right of survivorship), as designated by the Participant.
(b) As soon as administratively feasible after each Purchase Date,
the Company shall deliver to the Participant a certificate representing the
shares purchased upon exercise of a Purchase Right. If approved by the
Administrator in its discretion, the Company may instead (i) deliver a
certificate (or equivalent) to a broker for crediting to the Participant's
account or (ii)
5
<PAGE>
make a notation in the Participant's favor of non-certificated shares on the
Company's stock records.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may withdraw all, but not less than all, the
payroll deductions credited to his account under this Plan at any time before a
Purchase Date by giving written notice to the Administrator in a form the
Administrator prescribes from time to time. The Participant's Purchase Right
will automatically terminate on the date of receipt of the notice, all payroll
deductions credited to the Participant's account will be refunded promptly
thereafter, and no further payroll deductions will be made during the Offering
Period.
(b) Upon termination of a Participant's Continuous Employment for any
reason, including retirement or death, the payroll deductions credited to the
Participant's account will be promptly refunded to the Participant or, in the
case of death, to the person or persons entitled thereto under Section 14 of
this Plan, and the Participant's Purchase Right will automatically terminate.
(c) A Participant's withdrawal from an offering will not affect the
Participant's eligibility to participate in a succeeding offering or in any
similar plan that may be adopted by the Company.
11. Use of Funds; No Interest.
-------------------------
Amounts withheld from Participants' Compensation under this Plan shall
constitute general funds of the Company, may be used for any corporate purpose,
and need not be segregated from other funds. No interest shall accrue on a
Participant's payroll deductions.
12. Number of Shares Reserved.
-------------------------
(a) Shares of Common Stock are reserved for issuance under this Plan
as follows:
(i) Beginning the date of approval of this Plan by the stockholders
of the Company, 400,000 shares of Common Stock may be issued at
any time before termination of this Plan; and
(ii) Beginning the first business day of each calendar year during the
term of this Plan, an additional 200,000 shares of Common Stock
may be issued at any time before termination of this Plan.
(b) If the total number of shares that would otherwise be subject to
Purchase Rights granted on an Offering Date exceeds the number of shares then
available under this Plan (after deduction of all shares for which Purchase
Rights have been exercised or are then outstanding), the Administrator shall
make a pro-rata allocation of the available shares in a
6
<PAGE>
manner that it determines to be as uniform and equitable as practicable. In such
event, the Administrator shall give written notice of the reduction and
allocation to each Participant.
(c) The Administrator may, in its discretion, transfer shares
reserved for issuance under this Plan into a plan or plans of similar terms, as
approved by the Board, providing for the purchase of shares of Common Stock to
employees of Subsidiaries designated by the Board that do not (or do not
thereafter) participate in this Plan. Such additional plans may, without
limitation, provide for variances from the terms of this Plan to take into
account special circumstances (such as foreign legal restrictions) affecting the
employees of the designated Subsidiaries.
13. Administration.
--------------
This Plan shall be administered by the Board or by such directors,
officers, and employees of the Company as the Board may select from time to time
(the "Administrator"). All costs and expenses incurred in administering this
Plan shall be paid by the Company, provided that any taxes applicable to an
Employee's participation in this Plan may be charged to the Employee by the
Company. The Administrator may make such rules and regulations as it deems
necessary to administer this Plan and to interpret any provision of this Plan.
Any determination, decision, or action of the Administrator in connection with
the construction, interpretation, administration, or application of this Plan or
any right granted under this Plan shall be final, conclusive, and binding upon
all persons, and no member of the Administrator shall be liable for any such
determination, decision, or action.
14. Designation of Beneficiary.
--------------------------
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
this Plan in the event of the Participant's death.
(b) A designation of beneficiary may be changed by the Participant at
any time by written notice. In the event of the death of a Participant, and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of the Participant's death, the Administrator shall deliver such shares
and/or cash to the executor or administrator of the Participant's estate, or if
no such executor or administrator has been appointed (to the Administrator's
knowledge), the Administrator, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant or, if no spouse, dependent, or relative is known to the
Administrator, then to such other person as the Administrator may designate.
15. Transferability.
---------------
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of a Purchase Right or to receive shares
under this Plan may be assigned, transferred, pledged, or otherwise disposed of
in any way (other than by will, the laws of descent
7
<PAGE>
and distribution or as provided in Section 14) by the Participant. Any such
attempt at assignment, transfer, pledge, or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw funds in accordance with Section 10.
16. Reports.
-------
Individual accounts will be maintained for each Participant in this
Plan. Statements of account will be given to Participants promptly following
each Purchase Date, setting forth the amounts of payroll deductions, per-share
purchase price, number of shares purchased, and the remaining cash balance, if
any.
17. Adjustments upon Changes in Capitalization.
------------------------------------------
(a) Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each Purchase Right
that has not yet been exercised and the number of shares of Common Stock that
have been authorized for issuance under this Plan but have not yet been placed
under a Purchase Right (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each Purchase Right that has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
-------- -------
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Administrator, whose determination shall be final, binding, and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to a Purchase
Right.
(b) In the event of the proposed dissolution or liquidation of the
Company, the then-current Offering Period will terminate immediately before the
consummation of such proposed action, unless otherwise provided by the Board or
the Administrator (if the Administrator is not the Board). In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation (if stockholders of the
Company own less than 50% of the total outstanding voting power in the surviving
entity or a parent of the surviving entity after the merger), each Purchase
Right shall be assumed or an equivalent purchase right shall be substituted by
the successor corporation or a parent or subsidiary of the successor
corporation, unless the successor corporation does not agree to assume the
Purchase Right or to substitute an equivalent purchase right, in which case the
Administrator may, in lieu of such assumption or substitution, accelerate the
exercisability of Purchase Rights and allow Purchase Rights to be exercisable
(if the Board approves) as to shares as to which the Purchase Right would not
otherwise be exercisable, on terms and for a period that the Administrator
determines in its discretion. To the extent that the Administrator accelerates
8
<PAGE>
exercisability of Purchase Rights as described above, it shall promptly so
notify all Participants in writing.
(c) The Administrator may, in its discretion, also make provision for
adjusting the Reserves, as well as the price per share of Common Stock covered
by each outstanding Purchase Right, if the Company effects one or more
reorganizations, recapitalizations, rights offerings, or other increases or
reductions of shares of its outstanding Common Stock, or if the Company
consolidates with or merges into any other corporation.
18. Amendment or Termination.
------------------------
(a) The Board may at any time terminate or amend this Plan. No
amendment may be made without prior approval of the stockholders of the Company
(obtained in the manner described in paragraph 20) if it would:
(i) Increase the number of shares that may be issued under this Plan;
or
(ii) Change the designation of the employees (or class of employees)
eligible for participation in this Plan.
(b) The Board may elect to terminate any or all outstanding Purchase
Rights at any time, except to the extent that exercisability of such Purchase
Rights has been accelerated pursuant to Section 17(b). If this Plan is
terminated, the Board may also elect to terminate Purchase Rights upon
completion of the next purchase of shares on the next Purchase Date or to permit
Purchase Rights to expire in accordance with their terms (with participation to
continue through such expiration dates). If Purchase Rights are terminated
before expiration, any funds contributed to this Plan that have not been used to
purchase shares shall be refunded to Participants as soon as administratively
feasible.
19. Notices.
-------
All notices or other communications by a Participant to the Company or
the Administrator under or in connection with this Plan shall be deemed to have
been duly given when received in the form specified by the Administrator at the
location, or by the person, designated by the Administrator for that purpose .
20. Stockholder Approval.
--------------------
This Plan shall be submitted to the stockholders of the Company for
their approval within 12 months after the date this Plan is adopted by the
Board.
21. Conditions upon Issuance of Shares.
----------------------------------
(a) Shares shall not be issued with respect to a Purchase Right
unless the exercise of such Purchase Right and the issuance and delivery of such
shares pursuant thereto
9
<PAGE>
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of a Purchase Right, the Company
may require the person exercising such Purchase Right to represent and warrant
at the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
22. Term of Plan.
------------
This Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the
Company as described in Section 20. It shall continue in effect for a term of 20
years unless sooner terminated under Section 19.
10
<PAGE>
Exhibit 99.3
1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
OF
MAXYGEN, INC.
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1999 Nonemployee Directors Stock Option Plan of
Maxygen, Inc., a Delaware corporation, are: (a) to encourage Nonemployee
Directors to accept or continue their association with the Company; and (b) to
increase the interest of Nonemployee Directors in the Company's operations and
increased profits through participation in the growth in value of the Common
Stock of the Company.
2. DEFINITIONS
-----------
As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the entity, either the Board or a
-------------
committee appointed by the Board, responsible for administering this Plan, as
provided in Section 5.
(b) "Affiliate" shall mean a parent or subsidiary corporation as
---------
defined in the applicable provisions of the Code.
(c) "Annual Option" shall have the meaning set forth in Section 6(b).
-------------
(d) "Board" shall mean the Board of Directors of the Company, as
-----
constituted from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Common Stock" shall mean the Common Stock of the Company.
------------
(g) "Company" shall mean Maxygen, Inc., a Delaware corporation.
-------
(h) "Director Fee" shall mean the cash amount, if any, a Nonemployee
------------
Director shall be entitled to receive for serving as a director of the Company
in any fiscal year.
<PAGE>
(i) "Fair Market Value" shall mean, as of the date in question, the
-----------------
last transaction price quoted by the NASDAQ National Market System on the date
of grant; provided, however, that if the Common Stock is not traded on such
-------- -------
market system or the foregoing shall otherwise be inappropriate, then the Fair
Market Value shall be determined by the Administrator in good faith at its sole
discretion and on such basis as it shall deem appropriate. Such determination
shall be conclusive and binding on all persons.
(j) "Initial Option" shall have the meaning set forth in Section
--------------
6(a).
(k) "Nonemployee Director" shall mean any person who is a member of
--------------------
the Board but is not an employee of the Company or any Parent or Subsidiary of
the Company and has not been an employee of the Company or any Parent or
Subsidiary of the Company at any time during the preceding 12 months.
(l) "Option" shall mean a stock option granted pursuant to this Plan.
------
(m) "Option Agreement" shall mean the written agreement described in
----------------
Section 6(c) evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.
(n) "Option Shares" shall mean the Shares subject to an Option
-------------
granted under this Plan.
(o) "Optionee" shall mean a Nonemployee Director who holds an Option.
--------
(p) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this 1999 Nonemployee Directors Stock Option
----
Plan of Maxygen, Inc., as it may be amended from time to time.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
----------
and Exchange Commission, or any successor rule thereto.
(s) "Section" unless the context clearly indicates otherwise, shall
-------
refer to a Section of this Plan.
(t) "Share" shall mean a share of Common Stock, as adjusted in
-----
accordance with Section 7(a).
2
<PAGE>
(u) "Subsidiary" shall mean a "subsidiary corporation" of the
----------
Company, whether now or hereafter existing, within the meaning of Section 424(f)
of the Code, but only for so long as it is a "subsidiary corporation".
3. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is a Nonemployee
Director is eligible to receive Options under this Plan.
4. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to Section 7(a) of this Plan, the maximum aggregate number of
Shares which may be issued on exercise of Options granted pursuant to this Plan
is 300,000 Shares. The Shares covered by the portion of any grant under the Plan
which expires unexercised shall become available again for grants under the
Plan.
5. ADMINISTRATION
--------------
(a) This Plan shall be administered by the Board, or by a committee
(the "Committee") of at least two Board members to which administration of the
Plan is delegated (in either case, the "Administrator"), in accordance with the
requirements of Rule 16b-3.
(b) Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its sole discretion: (i) to determine the Fair
Market Value of the Shares subject to Option; (ii) to interpret this Plan; (iii)
to prescribe, amend and rescind rules and regulations relating to this Plan;
(iv) to defer (with the consent of the Optionee) or accelerate the exercise date
of any Option; (v) to authorize any person to execute on behalf of the Company
any instrument evidencing the grant of an Option; and (vi) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper.
(c) All questions of interpretation, implementation and application
of this Plan shall be determined by the Administrator. Such determination shall
be final and binding on all persons.
6. GRANT OF OPTIONS
----------------
(a) Grant for Initial Election or Appointment to Board. Subject to
--------------------------------------------------
the terms and conditions of this Plan, if any person who is not an officer or
employee of the Company is first elected or appointed as a member of the Board
and is otherwise
3
<PAGE>
considered a "Nonemployee Director" as defined herein, then the Company shall
grant to such Nonemployee Director on such day an Option to purchase 20,000
Shares ("Initial Option") at an exercise price equal to the Fair Market Value of
such Shares on the date of such Initial Option grant, subject to the limitation
of Section 7(i).
(b) Grant for Re-election to Board. Subject to the terms and
------------------------------
conditions of this Plan, on the date of the first meeting of the Board
immediately following each annual meeting of stockholders of the Company (even
if held on the same day as the meeting of stockholders) the Company shall grant
to each Nonemployee Director then in office for longer than six months, an
Option to purchase 5,000 shares (the "Annual Option") at an exercise price equal
to the Fair Market Value of such Shares.
(c) No Option shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board. Each Option shall be evidenced
by a written Option Agreement, in form and substance satisfactory to the
Company, executed by the Company and the Optionee. Failure by the Company, the
Nonemployee Director, or both to execute an Option Agreement shall not
invalidate the granting of an Option; however, the Option may not be exercised
until the Option Agreement has been executed by both parties.
7. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in this Section 7.
(a) Changes in Capital Structure. Subject to subsection 7(b), if the
----------------------------
Common Stock is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation, or reorganization,
appropriate adjustments shall be made in: (i) the number and class of shares of
Common Stock subject to this Plan and each Option outstanding under this Plan;
and (ii) the exercise price of each outstanding Option; provided, however, that
-------- -------
the Company shall not be required to issue fractional shares as a result of any
such adjustment. Each such adjustment shall be subject to approval by the
Administrator in its sole discretion.
(b) Time of Option Exercise. Subject to the other provisions of this
-----------------------
Plan, each Option shall be for a term of ten years. Each Option shall be
exercisable in full on the date of grant. At the discretion of the
Administrator, the Company shall have a right of repurchase of Option Shares.
The Administrator shall have the discretion to specify the times at which such
right of repurchase shall lapse; provided, however, that
-------- -------
4
<PAGE>
the right of repurchase must lapse at the rate of at least 20% per year over
five years from the date the option was granted.
(c) Limitation on Other Grants. The Administrator shall have no
--------------------------
discretion to grant Options under this Plan other than as set forth in Sections
6(a) and 6(b).
(d) Nonassignability of Option Rights. No Option shall be assignable
---------------------------------
or otherwise transferable by the Optionee, except by will or the laws of descent
and distribution. During the life of an Optionee, an Option shall be exercisable
only by the Optionee.
(e) Payment. Except as provided below, payment in full, in cash,
-------
shall be made for all Option Shares purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. Payment may also be made pursuant to a
cashless exercise/sale procedure. At the time an Option is granted or exercised,
the Administrator, in its absolute discretion, may authorize any one or more of
the following additional methods of payment: (i) acceptance of the Optionee's
full recourse promissory note for all or part of the Option price, less any par
value per share, which must be paid in cash, payable on such terms and bearing
such interest rate as determined by the Administrator (but in no event less than
the minimum interest rate specified under the Code at which no additional
interest on debt instruments of such type would be imputed), which promissory
note may be either secured or unsecured in such manner as the Administrator
shall approve (including, without limitation, by a security interest in the
Shares); (ii) delivery by the Optionee of Common Stock already owned by the
Optionee for all or part of the Option price, provided the Fair Market Value of
such Common Stock is equal on the date of exercise to the Option price, or such
portion thereof as the Optionee is authorized to pay by delivery of such stock;
provided, however, that if an Optionee has exercised any portion of any Option
- -------- -------
granted by the Company by delivery of Common Stock, the Optionee may not, within
six months following such exercise, exercise any Option granted under this Plan
by delivery of Common Stock; and (iii) any other consideration and method of
payment to the extent permitted under the Delaware General Corporation Law.
(f) Termination as Director. Unless determined otherwise by the
-----------------------
Administrator in its absolute discretion, to the extent not already expired or
exercised, an Option shall terminate at the earlier of: (i) the expiration of
the term of the Option; or (ii) three months after the last day served by the
Optionee as a director of the Company; provided, that an Option shall be
--------
exercisable after the date of termination of service as a
5
<PAGE>
director only to the extent exercisable on the date of termination; and provided
--------
further, that if termination of service as a director is due to the Optionee's
- -------
death or "disability" (as determined in accordance with Section 22(e)(3) of the
Code), the Optionee, or the Optionee's personal representative (or any other
person who acquires the Option from the Optionee by will or the applicable laws
of descent and distribution), may at any time within 12 months after the
termination of service as a director (or such lesser period as is specified in
the Option Agreement but in no event after the expiration of the term of the
Option), exercise the rights to the extent they were exercisable on the date of
the termination.
(g) Withholding and Employment Taxes. At the time of exercise of an
--------------------------------
Option (or at such later time(s) as the Administrator may prescribe), the
Optionee shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. If authorized by the Administrator in its sole
discretion, an Optionee shall be permitted to elect, by means of a form of
election to be prescribed by the Administrator, to have shares of Common Stock
which are acquired upon exercise of the Option withheld by the Company or to
tender to the Company other shares of Common Stock or other securities of the
Company owned by the Optionee on the date of determination of the amount of tax
to be withheld as a result of the exercise of such Option (the "Tax Date") to
pay the amount of withholding taxes due. Any securities so withheld or tendered
shall be valued by the Company as of the Tax Date.
(h) Option Term. Each Option shall expire ten years after the date of
-----------
grant.
(i) Exercise Price. The exercise price of any Option grantd to any
--------------
person who owns, directly or by attribution under the Code currently Section
424(d), stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or of any Affiliate (a "Ten Percent
Stockholder") shall in no event be less than 110% of the fair market value
(determined in accordance with 2(i) of the stock covered by the Option at the
time the Option is granted.
8. MANNER OF EXERCISE
------------------
(a) An Optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 7(e) and, if required, by payment
of any federal or state withholding or employment taxes required to be withheld
due to exercise of the Option. The date the Company receives written notice of
an exercise accompanied by payment of
6
<PAGE>
the exercise price and any required federal or state withholding or employment
taxes will be considered as the date such Option was exercised. Unless otherwise
provided by the Administrator, Options may be exercised only twice in any
calendar year.
(b) Promptly after the date an Option is exercised, the Company
shall, without stock issue or transfer taxes to the optionee or other person
entitled to exercise the Option, deliver to the Optionee or such other person a
certificate or certificates for the requisite number of shares of Common Stock.
An Optionee or transferee of an Optionee shall not have any privileges as a
stockholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate.
9. NO RIGHT TO DIRECTORSHIP
------------------------
Neither this Plan nor any Option shall confer upon any Optionee any
right with respect to continuation of the Optionee's membership on the Board or
shall interfere in any way with provisions in the Company's Certificate of
Incorporation, as amended, and Bylaws, as amended, relating to the election,
appointment, terms of office, and removal of members of the Board.
10. FINANCIAL INFORMATION
---------------------
The Company shall provide to each Optionee during the period the
Optionee holds an outstanding Option a copy of the financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall be delivered as soon
as practicable following the end of the Company's fiscal year during the period
Options are outstanding.
11. LEGAL REQUIREMENTS
------------------
The Company shall not be obligated to offer or sell any Shares upon
exercise of any Option unless the Shares are at that time effectively registered
or exempt from registration under the federal securities laws and the offer and
sale of the Shares are otherwise in compliance with all applicable securities
laws and the regulations of any stock exchange on which the Company's securities
may then be listed. The Company shall have no obligation to register the Shares
covered by this Plan under the federal securities laws or take any other steps
as may be necessary to enable the Shares covered by this Plan to be offered and
sold under federal or other securities laws. Upon exercising all or any portion
of an Option, an Optionee may be required to furnish representations or
undertakings deemed appropriate by the Company to enable the offer and sale of
the Shares or subsequent transfers of any interest in the Shares to comply with
applicable securities laws. Certificates evidencing Shares acquired upon
exercise of Options shall
7
<PAGE>
bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan or the Option Agreements.
12. AMENDMENTS TO PLAN
------------------
The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may adversely affect outstanding Options. No amendment
shall require stockholder approval unless:
(a) stockholder approval is required to meet the exemptions provided
by Rule 16b-3, or any successor rule thereto or under applicable state statutes;
or
(b) the Board otherwise concludes that stockholder approval is
advisable.
13. STOCKHOLDER APPROVAL; TERM
--------------------------
This Plan shall become effective upon adoption by the Board of
Directors; provided, however, that no Option shall be exercisable unless and
-------- -------
until written consent of holders of a majority of the outstanding shares of
capital stock of the Company, or approval by holders of a majority of shares of
capital stock of the Company present, or represented, and entitled to vote at a
validly called stockholders' meeting (or such greater number as may be required
by law or applicable governmental regulations or orders) is obtained within 12
months after adoption by the Board. This Plan shall terminate ten years after
adoption by the Board unless terminated earlier by the Board. The Board may
terminate this Plan at any time without stockholder approval. No Options shall
be granted after termination of this Plan, but termination shall not affect
rights and obligations under then-outstanding Options.
Adopted by the Board of Directors: September 29, 1999
Approved by the Stockholders:
8
