<PAGE>1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
CHECK THE APPROPRIATE BOX:
X Preliminary Proxy Statement Confidential, for
- --- --- Use of the Commission
Only (as permitted
by Rule 14a-6(e)(2))
Definitive Proxy Statement
- ---
Definitive Additional Materials
- ---
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- ---
PHARMAKINETICS LABORATORIES, INC.
(Name of Registrant as Specified in Its Charter)
PAYMENT OF FILING FEE (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)
- --- (2) or item 22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to Exchange Act Rule
- --- 14a-6(i)(3).
Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
- ---
Fee paid previously with preliminary materials.
- ---
Check box if any part of the fee is offset as provided by Exchange
- --- Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
number, or the Form or Schedule and the date of its filing.
<PAGE>2
PHARMAKINETICS LABORATORIES, INC.
302 WEST FAYETTE STREET
BALTIMORE, MARYLAND 21201
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MONDAY, NOVEMBER 25, 1996, AT 10:00 A.M.
AT
PHARMAKINETICS LABORATORIES, INC.
302 WEST FAYETTE STREET
BALTIMORE, MARYLAND 21201
The Annual Meeting of Stockholders ("the Meeting") of PharmaKinetics
Laboratories, Inc., a Maryland corporation, will be held on NOVEMBER 25,
1996, at 10:00 a.m., local prevailing time, at PharmaKinetics Laboratories,
Inc., 302 West Fayette Street, Baltimore, Maryland 21201, to consider and
vote upon:
1. The election of three directors to serve until the Annual Meeting of
Stockholders to be held in 1997, and until their successors are duly
elected and qualified.
2. A proposal to ratify the selection of Coopers & Lybrand L.L.P., as the
Company's independent auditors for the fiscal year ending June 30,
1997.
3. A proposal to approve Articles of Amendment and Restatement, among
other things, in order to impose certain limitations upon voting
rights of holders of 10% or more of the Company's Common Stock.
4. A proposal to approve the PharmaKinetics Laboratories, Inc. 1996
Incentive Stock Option Plan.
5. Any other matters that may properly come before the Meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on October 18,
1996, as the date for determining stockholders of record entitled to notice
of and to vote at the Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AS SOON AS POSSIBLE
IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. The affirmative vote of at least two-thirds of all the shares of
Common Stock is required for the approval of Proposal Three. The
affirmative vote of at least a majority of all the shares voting at the
Meeting in person or by proxy is sufficient for the approval of Proposals
One, Two and Four. You are cordially invited to attend the Meeting in
person. If you attend the Meeting and wish to vote in person, your proxy
can be revoked at any time before it is voted.
By Order of the Board of Directors,
Taryn L. Kunkel
Secretary
October 28, 1996
<PAGE>3
PHARMAKINETICS LABORATORIES, INC.
302 West Fayette Street
Baltimore, Maryland 21201
PROXY STATEMENT
Annual Meeting of Stockholders to be held on
Monday, November 25, 1996 at 10:00 A.M.
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of
PharmaKinetics Laboratories, Inc. (the "Company") for use at the Annual
Meeting of Stockholders (the "Meeting") to be held on November 25, 1996,
and is revocable at any time prior to its exercise. In addition to
solicitation by mail, proxies may be solicited by officers, directors, and
regular employees of the Company personally or by telephone or telegraph.
The cost of soliciting proxies will be borne by the Company and may include
reasonable out-of-pocket expenses in forwarding proxy materials to
beneficial owners. This proxy material is being sent to stockholders on or
about October 28, 1996.
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders of record at the close of business on October 18, 1996,
are entitled to notice of and to vote at the Meeting. As of the close of
business on that date, there were outstanding and entitled to vote
12,195,891 shares of Common Stock, $.001 par value ("Common Stock"), each
of which is entitled to one vote.
The presence, in person or by proxy, of stockholders entitled to cast
a majority of all votes entitled to be cast at the meeting shall constitute
a quorum. The affirmative vote of at least two-thirds of all the shares of
Common Stock is required for the approval of Proposal Three described on
the preceding page. The affirmative vote of at least a majority of all the
shares voted at the meeting is sufficient for the approval of Proposals
One, Two and Four described on the preceding page. An abstention or broker
non-vote has the same effect as a vote against Proposal Three, and is not
included in calculating votes cast for purposes of the other Proposals.
The Company designates an individual to serve as the Inspector of Elections
for purposes of tallying shares voted. The Inspector of Elections will be
present at the Meeting.
ITEM ONE
ELECTION OF DIRECTORS
The Company's By-Laws currently authorize a Board of seven directors.
The Company is, however, proposing nominees for only three directors. The
By-Laws of the Company permit the Board of Directors to appoint at a later
time directors to fill the vacancies, for a term ending upon the election
of his or her successor at the next Annual Meeting. The Company expects to
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<PAGE>4
fill two of the vacancies as soon as suitable candidates are identified and
agree to serve. Two individuals did not stand for re-election to the
Company's Board of Directors for fiscal 1997.
Three directors will be elected at the Meeting, each director to hold
office until the next Annual Meeting of Stockholders and until the election
and qualification of a successor. The persons named in the enclosed proxy
will vote all properly executed proxies for the election of the nominees
named below unless authority to vote is withheld. In the event any of the
nominees is unable to serve, the persons named in the proxy may vote for
such substitute nominee or nominees as they, in their discretion, shall
determine. The Board of Directors has no reason to believe that any
nominee named herein will be unable to serve as a director.
The following table sets forth certain information concerning the
nominees for election. All nominees are currently directors of the Company.
NOMINEES FOR ELECTION
Name, Age, and Year
in which first
Elected a Director Business Experience
- ------------------ --------------------
James K. Leslie President and Chief Executive Officer
51 (1995) of PharmaKinetics Laboratories, Inc. since July
1995; Executive Vice President and Chief Operating
Officer of PharmaKinetics since June 1995;
President and Chief Executive Officer of BioFin,
Inc., a start up biotechnology company from July
1993 to June 1995; President and Chief Executive
Officer of SICPA Industries of America from 1991
to 1992; and President and Chief Operating Officer
of Ecogen, Inc. from 1988 to 1990.
Roger C. Thies Director of Hyman, Phelps and McNamara, P.C.
52 (1991) representing a broad range of clients on legal
issues concerning food, drug, medical devices, and
cosmetic law and legislation since 1988; Vice
President and General Counsel of G.D. Searle
managing all of the company's legal matters from
1986 to 1988.
Thomas F. Kearns, Jr. Retired from Bear Stearns, Inc. in 1987; Director
59 (1995) of Biomet, Inc., Fibrogen, Inc. and OnGard Systems,
Inc.; Trustee of the University of North Carolina
Foundation and Endowment Fund.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation
Committee, each consisting of all directors who are not employees of the
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<PAGE>5
Company. The Board of Directors does not have a Nominating Committee.
The functions of the Audit Committee include: review of the scope of
audits and the results of such audits; review of accounting policies and
adequacy of internal controls; review of the fees paid to, and the scope of
services provided by, the independent auditors; and recommending selection
of the independent auditors.
The Compensation Committee considers and makes recommendations to the
Board of Directors with respect to matters relating to executive
compensation, and considers and recommends grants under the Company's stock
option plans.
During the fiscal year ended June 30, 1996, the Board of Directors met
eight times, the Audit Committee met one time, and the Compensation
Committee met three times. Each director attended all meetings of the
Board of Directors and committees of the Board on which he served, except:
one director who was absent from one regular meeting, and one Compensation
Committee meeting.
Each member of the Board of Directors who is not an employee of the
Company, except one, received a monthly retainer of $1,366.67 through June
1996, and reimbursement of expenses for attendance at meetings. Beginning
in August 1995, one director opted to forego his monthly retainer for
personal reasons.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of August 30, 1996,
regarding stock ownership of management and owners of 5% or more of the
Company's Common Stock:
<TABLE>
<CAPTION> Beneficial Ownership
-------------------------------------
Number of Percent of
Name & Address Shares Owned Shares Owned
- -------------- ------------ ------------
<S> <C> <C>
R.A. Mackie and Co., L.P. 1,115,821 9.1%
18 North Astor Street
Irvington, NY 10533
Allen and Company 843,155 6.9%
711 Fifth Avenue
New York, NY 10022
V. Brewster Jones 429,992 (1)(4) 3.5%
James K. Leslie 165,000 (2)(4) 1.3%
Michael D. Dunn 121,843 (3) 1.0%
-4-
<PAGE>6
Beneficial Ownership
-------------------------------------
Number of Percent of
Name & Address Shares Owned Shares Owned
- -------------- ------------ ------------
<S> <C> <C>
Richard P. Sullivan 58,500 (4) (5)
Christopher H. Hendy, Ph.D. 51,667 (4) (5)
Thomas F. Kearns, Jr. 39,078 (5)
Roger C. Thies 14,600 (4) (5)
All directors and officers
as a group (9 persons) 1,045,680 (4) 8.2%
<FN>
(1) Of the total shares, 30,000 shares are beneficially owned by Mr.
Jones with his wife. Mr. Jones has options to purchase 260,000
shares in which he was vested at June 30, 1995. Upon Mr. Jones'
resignation as President and Chief Executive Officer in July 1995,
the Board of Directors approved an extension of Mr. Jones' period
to exercise such options to July 25, 1998.
(2) Of the total shares, 10,000 shares are owned by Mr. Leslie's wife.
Mr. Leslie disclaims beneficial ownership.
(3) Of the total shares, 108,343 shares are beneficially owned by Mr.
Dunn with his wife.
(4) Includes shares of Common Stock which directors and officers have
rights to acquire as of, or within 60 days of, June 30, 1996,
through the exercise of options, in the amount of 10,000 shares
for Mr. Sullivan; 14,600 shares for Mr. Thies; 55,000 shares for
Mr. Leslie; 51,667 shares for Dr. Hendy; 260,000 shares for Mr.
Jones; and 556,267 shares for all directors and officers as a
group.
(5) Less than 1%
</FN>
</TABLE>
EXECUTIVE OFFICERS
Information concerning executive officers and other significant
employees can be found in Part I of the Company's Annual Report on Form
10-K filed for the fiscal year ended June 30, 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of copies of reporting forms received by
it, the Company believes that during the fiscal year ended June 30, 1996, all
applicable filing requirements were complied with, except that one report, a
Form 4, was filed late by Mr. Jones.
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<PAGE>7
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal
years, the cash compensation paid or accrued by the Company, as well as
certain other compensation paid or accrued for those years, to its Chief
Executive Officer and other executive officers whose remuneration exceeded
$100,000 for the fiscal year ended June 30, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation All Other
-------------------------------- ------------ ------------
Name and Other Securities All Other
Principal Fiscal Salary Bonus Annual Underlying Compensation
Position Year ($) ($) Comp.($) Options(#) ($)
- -------- ------ ------- ------- -------- ----------- ------------
(1)
<S> <C> <C> <C> <C> <C> <C>
V. Brewster Jones 1996 16,700(2) - 3,100 - -
President, CEO, 1995 150,000 - 8,400 - -
Director 1994 147,000 - 7,200 - -
and Secretary
James K. Leslie 1996 124,000(2) 87,043 6,000 100,000 -
President, CEO, 1995 4,700 - 230 120,000 -
and Director 1994 - - - - -
Christopher H. 1996 102,000(3) 32,226 6,000 - -
Hendy, Ph.D. 1995 102,000 - 6,000 10,000 -
Vice President 1994 54,000 - 2,700 70,000 -
Clinical Evaluation
Services
Roger H.
Meacham, Jr.,Ph.D.1996 47,800(4) - 19,600 - 26,000
Vice President 1995 - - - - -
Analytical 1994 - - - - -
Laboratory Services
<FN>
(1) Other Annual Compensation includes personal benefits provided by the
Company.
(2) Mr. Jones resigned from the Company effective July 24, 1995. Mr. Leslie,
who joined the Company in June 1995, was promoted to President and Chief
Executive Officer upon Mr. Jones' resignation.
(3) Dr. Hendy, who joined the Company in December 1993, resigned from the
Company effective September 27, 1996.
(4) Dr. Meacham joined the Company in July 1995. His employment with the
Company ended in December 1995. Dr. Meacham's annual salary for fiscal
1996 was $110,000, plus other compensation of $5,000. In addition, Dr.
Meacham received reimbursement for relocation and related expenses of
approximately $17,300 and, upon his termination, a relocation settlement
allowance of $26,000.
</FN>
</TABLE>
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<PAGE>8
EMPLOYMENT AGREEMENTS
The Company had an employment agreement with Mr. Jones, which expired upon
his resignation from the Company on July 24, 1995. As part of his
resignation arrangement, Mr. Jones was granted an extension of time, through
July 25, 1998, in which to exercise the 260,000 options in which
he was vested at June 30, 1995.
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of
stock options under the Company's Incentive Stock Option Plan during
fiscal 1996 to the executive officers named in the Summary Compensation
Table.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<CAPTION>
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/share) Date
- ---- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
James K. Leslie 100,000 35.5% $0.50 7/24/05
<FN>
(1) All options were granted under the Incentive Stock Option Plan. All
options vest over a four year period from the date of grant and all options
expire ten years from the date of grant, if not exercised earlier. Material
terms of the options are set forth under the caption "Incentive Stock
Option Plan."
</FN>
</TABLE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information related to the number and value
of options held by three of the Company's executive officers. No options were
exercised during the fiscal year ended June 30, 1996.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Shares Value of Unexercised
Acquired ($) Number of Unexercised In-the-Money
in Value Options at FY-End(#) Options at FY-End ($)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James K. Leslie - - 30,000 190,000 $863 $2,587
Christopher H.
Hendy, Ph.D.(1) - - 49,167 30,833 - -
V. Brewster Jones - - 260,000 - $30,750 -
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<PAGE>9
<FN>
(1) The exercise price of all options exceeded market value at June 30, 1996.
</FN>
</TABLE>
INCENTIVE STOCK OPTION PLAN
The Company's Incentive Stock Option Plan (the "ISO Plan") was adopted by
the Board of Directors on September 9, 1985, and approved by stockholders on
November 14, 1985. The ISO Plan permits the Company to grant options to
purchase up to an aggregate of 1,700,000 shares of its Common Stock to key
employees of the Company. As of June 30, 1996, an aggregate of 582,100 shares
of Common Stock were subject to options granted under the ISO Plan. By its
terms, the ISO Plan expired in September 1995.
The ISO Plan had a ten-year term, subject to earlier termination by the
Board of Directors, and was administered by the Compensation Committee of the
Board of Directors. Under the ISO Plan, options were granted to selected key
employees of the Company. Approximately 100 employees were eligible for option
grants. Subject to the terms and conditions of the ISO Plan, the Committee
selected optionees and determined the number of shares to be granted, the option
prices, the term of each option, and the terms and conditions of stock option
agreements. Payment of the option price is made, as specified in the option
agreement, either in cash at the time of exercise or, at the discretion of the
Board of Directors or Committee, (i) by delivery of shares of the Company's
Common Stock, valued as of the option exercise date, (ii) according to a
deferred payment or other arrangement or (iii) in any other form of payment
acceptable to the Board of Directors or Committee in its discretion, either at
the time of grant or exercise of the option.
Options granted under the ISO Plan are intended to qualify as "incentive
stock options" within the meaning of Section 422A of the Internal Revenue Code.
The exercise price of options granted under the ISO Plan may not be less than
100% of the fair market value of the Common Stock at the time of the grant, or
110% of the fair market value of the Common Stock at the time of the grant in
the case of a key employee who holds more than 10% of the combined voting power
of the Common Stock as of the date of the grant. The term of any option granted
under the ISO Plan may not exceed ten years, or five years in the case of a key
employee who holds more than 10% of the combined voting power of the Common
Stock as of the date of grant.
Options granted under the ISO Plan are non-assignable and may be exercised,
except in the case of death, only by the option holder. Options terminate
ninety days after termination of employment, except by reason of death or total
and permanent disability.
The Board of Directors may alter, suspend or amend the ISO Plan at any
time. However, no such action by the Board of Directors shall affect any option
theretofore granted under the ISO Plan without the consent of the option holder
so affected. In addition, no such action by the Board of Directors may, without
stockholder approval (except pursuant to the anti-dilution provisions of the ISO
Plan), increase the number of shares reserved for options under the ISO Plan,
materially modify the requirements as to eligibility for participation in the
ISO Plan, or materially increase the benefits accruing to participants under the
ISO Plan.
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<PAGE>10
An optionee recognizes no taxable income at the time a stock option is
granted or exercised under the ISO Plan. However, the excess of the fair market
value of the shares received on the date of exercise (or six months after the
date of exercise, in the case of an optionee subject to Section 16(b) of the
Securities Exchange Act of 1934) over the exercise price is taken into account
in determining whether he is subject to the alternative minimum tax. Assuming
compliance with applicable holding period requirements, an optionee realizes
long-term capital gain or loss when he disposes of his shares, measured by the
difference between the exercise price and the amount received for the shares at
the time of disposition. If the optionee disposes of shares acquired by the
exercise of the option before the expiration of at least one year from the date
of exercise and two years from the date of grant of the option, any amount
realized from such disqualifying disposition is generally taxable as ordinary
income in the year of disposition to the extent that the lesser of (i) fair
market value on the date the option was exercised or (ii) the amount realized
upon such disposition, exceeds the exercise price. Any amount realized in
excess of fair market value on the date of exercise will be treated as long or
short-term capital gain, depending upon the holding period of the shares. If
the amount realized upon such disposition is less than the exercise price, the
loss is treated as long or short-term capital loss, depending upon the holding
period of the shares.
No deduction is allowed to the Company for federal income tax purposes at
the time of grant or exercise of an option under the ISO Plan. In the event of
a disqualifying disposition by an optionee, the Company is entitled to a
deduction for the amount taxable to the optionee as ordinary income.
ITEM TWO
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors desires to obtain from the stockholders their
approval of the Board of Directors' actions in appointing Coopers & Lybrand
L.L.P., Certified Public Accountants, as independent auditors of the Company for
the fiscal year ending June 30, 1997.
Coopers & Lybrand has served the Company in such capacity since January
1992. The Company has been informed that neither Coopers & Lybrand nor any of
its partners has any direct financial interest or any material indirect
financial interest in the Company and during the past three years has had no
connection therewith in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
A representative of Coopers & Lybrand is expected to be present at the
Meeting with the opportunity to make a statement, if such representative so
desires, and to be available to respond to appropriate questions.
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<PAGE>11
ITEM THREE
APPROVAL OF
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
GENERAL
By resolution adopted October 10, 1996, the Board of Directors proposed the
adoption of certain amendments to the Company's Articles of Incorporation
pursuant to which:
1. Article SIXTH would be amended to provide that the voting rights of
holders of more than 10% of the outstanding Common Stock of the Company
would be limited so that shares in excess of 10% would have no voting
rights unless such percentage ownership was achieved as a result of an
offer for all outstanding shares of the Company's Common Stock
determined by the Board of Directors to be in the best interest of the
Company and its stockholders;
2. Former Article EIGHTH, relating to perpetual existence of the Company,
would be removed;
3. Former Article TENTH, now Article NINTH, would incorporate and modify
indemnification provisions relating to directors and officers, which
provisions formerly appeared in the Company's By-Laws; and
4. Former Article TWELFTH, which was added to the Company's Articles of
Incorporation during the period in which the Company reorganized
pursuant to Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code"), would be removed.
If the stockholders approve the amendments, the Articles of Incorporation
will be amended and restated as proposed by the Board, and the provisions
described above will take effect upon acceptance of the Articles of Amendment
and Restatement by the Maryland State Department of Assessments and Taxation.
PURPOSES FOR PROPOSED AMENDMENTS
1. LIMITATION OF VOTING RIGHTS. The Board of Directors believes that it
is in the best interest of the Company and its shareholders to preserve the
long-term value of the Company. The Board of Directors further deems it to be
in the best interest of the Company and its stockholders for the Board of
Directors to have the ability to objectively review and evaluate, on behalf of
the Company, proposed transactions involving the Company, and to deter a holder
or holders of a substantial portion of voting power of the Company's Common
Stock from influencing a proposed transaction which may result in the Company's
stockholders receiving less than fair value for their shares in any such
proposed transaction.
The Board of Directors is not aware of any specific effort to acquire the
Company's Common Stock or to obtain control of the Company by any means.
However, the Company's directors believe that the possibility of an acquisition
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<PAGE>12
occurring in which stockholders receive less than fair value for their shares is
heightened when a corporation's stock has a low market price and the corporation
operates in an industry that is experiencing consolidation, and the directors
believe that the Company fits this profile. Therefore, the Board of Directors
believes it is desirable to limit the voting rights of holders of 10% or more of
the Company's shares to deter takeover attempts that may result in the Company's
stockholders receiving less than fair value for their shares. The limitation of
voting rights will not apply if a person becomes the beneficial owner of 10% or
more of the outstanding Common Stock of the Company as a result of an offer by
such person for all shares of outstanding Common Stock, which has been
determined by the Board of Directors to be in the best interest of the Company
and its stockholders.
The Company's Articles of Incorporation and by-laws do not presently
contain cumulative voting rights provisions or other provisions specifically
intended to have an anti-takeover effect, although the Company's Articles of
Incorporation authorize the issuance of preferred stock upon such terms as the
Board of Directors may determine. Such shares could be issued with provisions
that could have the effect of preventing a change of control of the Company.
The proposed limitation of voting rights is not part of a plan by management to
adopt a series of anti-takeover measures, and management has no plans to propose
additional such measures in the foreseeable future.
2. REMOVAL OF FORMER ARTICLES EIGHTH AND TWELFTH. Former Article EIGHTH
of the Company's Articles of Incorporation provided that the Company shall have
a perpetual existence. Section 2-103(1) of the Maryland General Corporation Law
provides that a corporation has perpetual existence unless otherwise provided by
law or its charter. It is not necessary that the Articles of Incorporation
contain a provision relating to perpetual existence.
Former Article TWELFTH of the Company's Articles of Incorporation
prohibited the Company from issuing any non-voting stock prior to the time that
the Company consummated its plan of reorganization in connection with
proceedings under Chapter 11 of the Bankruptcy Code that commenced in 1990. On
May 23, 1996, the United States Bankruptcy Court for the District of Maryland
approved the Company's Application for Final Decree, thus closing the bankruptcy
case. Therefore, former Article TWELFTH is no longer required to be included in
the Company's Articles of Incorporation.
The Board of Directors of the Company has deemed it to be in the best
interest of the Company to restate the Articles of Incorporation, in conjunction
with the amendment of the Articles of Incorporation and, as part of such
restatement, the Board of Directors recommends the approval of the removal of
these unnecessary Articles.
3. INDEMNIFICATION PROVISIONS. Currently, the Company's by-laws and
Articles of Incorporation include provisions that limit the personal liability
of officers and directors of the Company, and provide for indemnification of
currently acting officers and directors to the maximum extent permitted by
Maryland law. Former Article TENTH of the Company's Articles of Incorporation
provides that a director or officer of the Company will not be liable to the
Company or its stockholders for money damages except under circumstances in
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<PAGE>13
which such limitation of liability is prohibited by Maryland law. Maryland law
does not permit personal liability to be limited when a director or officer
received an improper benefit or profit or when a judgement or other final
adjudication is entered against a director or officer based on a finding that
his or her action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action.
Article VII of the Company's by-laws contains indemnification provisions,
providing for indemnification of the Company's officers and directors to the
maximum extent permitted by Maryland law. Indemnification is not permitted
under Maryland law in cases where the director's or officer's act or omission
was material to the cause of action, and was committed in bad faith or was the
result of active and deliberate dishonesty, or where the individual received an
improper benefit (or in a criminal case, had reasonable cause to believe that
his act or omission was unlawful).
In connection with the amendment and restatement of the Articles of
Incorporation, the Board of Directors deems it to be desirable to incorporate
all provisions relating to the limitation of liability and indemnification of
directors and officers in one Article in the Company's Articles of
Incorporation, and to extend the coverage of the indemnification provisions to
former officers and directors and persons who serve at the Company's request as
directors, partners, employees or agents of other entities. In addition, the
proposed amendment would require the Company to advance expenses to indemnified
persons to the extent permitted by Maryland law, and would provide that the
limitation of liability and indemnification provisions could not be eliminated
or reduced by repeal or amendment of the Company's Articles of Incorporation,
with respect to acts or omissions that occurred prior to such repeal or
amendment. The Board believes that indemnification provisions such as the
proposed amendments are widely in force in Maryland corporations' charters, and
are necessary to enhance the Company's ability to attract and retain highly
qualified officers and directors.
POTENTIAL IMPACT OF PROPOSED AMENDMENTS
If the proposed limitation of voting rights is approved, the overall effect
would be to render more difficult the accomplishment of mergers or the
assumption of control by a stockholder, and to render more difficult the removal
of management. The Company's directors believe that such a provision will deter
possible acquirers from attempting to influence a transaction that would result
in stockholders receiving less than fair value for their shares. However, such
limitation could make the accomplishment of a specific transaction more
difficult even if a proposed transaction is favorable to shareholders.
A person or a group of persons who own more than 10% of the shares of the
Company's Common Stock would have limited voting rights, in that such persons
would be entitled to one vote per share only with respect to shares of Common
Stock not in excess of 10% of outstanding shares. Shares in excess of 10% of
outstanding shares would not be entitled to voting rights and would be deducted
from the total number of shares outstanding for purposes of determining the
proportion of Common Stock required to approve a matter submitted for
stockholder approval or to constitute a quorum. The limitation of voting rights
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<PAGE>14
will not apply if a person becomes the beneficial owner of 10% or more of the
outstanding Common Stock of the Company as a result of an offer by such person
for all shares of outstanding Common Stock, which has been determined by the
Board of Directors to be in the best interest of the Company and its
stockholders. Currently, no person or group owns more than 10% of the
outstanding Common Stock of the Company.
The proposed limitation of voting rights is somewhat more stringent than
the limitations on voting rights by the Maryland control share acquisition
statute. That statute limits voting rights of shares acquired in a "control
share acquisition." The statute provides that a "control share acquisition" is
deemed to occur upon the acquisition of shares that results in the acquirer
having the ability to exercise 20%, 33-1/3%, or 50% of the voting power of a
corporation's stock. The approval of two-thirds of the voting stock (excluding
shares owned by the acquiring person and certain members of management) is
required to restore voting rights to the stock acquired in a control share
acquisition. The statute also provides, among other things, that a corporation
must hold a special meeting at the request of an actual or proposed control
share acquirer if certain conditions are met. The statute further provides that
if voting rights are approved for an acquiring person and such person has the
power to vote at least a majority of the shares, then minority stockholders will
have the right to receive "fair value" of their shares after an appraisal made
as required by Maryland law. A corporation is permitted to adopt a charter or
by-law provision that exempts an acquisition of shares from the control share
acquisition statute if such provision is adopted prior to the control share
acquisition. There are no such provisions in the charter or by-laws of the
Company.
The proposal to remove former Article EIGHTH will have no substantive
impact, because the Company will have perpetual existence under Maryland General
Corporation Law even without the express provision for perpetual existence
included in former Article EIGHTH.
The proposal to remove former Article TWELFTH will have no impact other
than to permit the Company to issue non-voting stock in the future if the Board
of Directors of the Company deems such issuance to be in the best interest of
the Company. Currently, there is no plan to issue non-voting stock.
The proposal to amend former Article TENTH, now Article NINTH, will permit
indemnification of former officers and directors, and will permit
indemnification of persons who serve, at the Company's request, as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture or other enterprise. Currently, indemnification is
provided only to currently acting directors and officers. The provision also
would require the Company to advance expenses to indemnified persons to the
extent permitted by Maryland law. In addition, the limitation on liability and
the indemnification provisions could not be eliminated or reduced by amendment
or repeal of the Articles of Incorporation. The Board of Directors believes
that providing indemnification to former directors and officers and to persons
who serve another entity at the request of the Company will have a positive
impact by enhancing the Company's ability to attract and retain qualified
persons. In addition, the Board of Directors believes that the Company and its
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<PAGE>15
stockholders will be best served when the Company's officers and directors have
the opportunity to make business decisions without threat of personal liability.
The proposed amendment could, however, have a negative impact in the event of
legal proceedings that require the Company to indemnify former directors and
officers or persons serving other entities at the Company's request. If the
Company would be required to indemnify a larger number of individuals, the
financial impact upon the Company could be more substantial than the impact
resulting from the Company's indemnification obligations as they currently
exist. Currently, there is no litigation pending or, to the Company's
knowledge, threatened which could trigger the indemnification provisions as they
are proposed to be amended.
The complete text of the Articles of Amendment and Restatement are attached
to this Proxy Statement as Exhibit A.
The Board of Directors recommends a vote "FOR" the approval of the Articles
of Amendment and Restatement. Incumbent directors and officers have a direct
interest in the approval of the proposed amendments because the proposed
limitation on voting rights would have the effect of making more difficult
the removal of management, and the proposed modifications to indemnification
provisions benefit an officer or director even after he or she ceases to serve
in such capacity, or if he or she serves at the Company's request as a director,
officer, employee or agent of another entity.
ITEM FOUR
APPROVAL OF 1996 INCENTIVE STOCK OPTION PLAN
GENERAL
By resolution adopted October 10, 1996, the Board of Directors ratified,
confirmed and approved the adoption, effective as of January 31, 1996, of the
PharmaKinetics Laboratories, Inc. 1996 Incentive Stock Option Plan (the "1996
Plan"). Options to purchase an aggregate of 299,700 shares of the Company's
Common Stock have been granted under the 1996 Plan. Although the 1996 Plan, by
its terms, became effective as of January 31, 1996, no options granted under the
1996 Plan may be exercised unless and until the 1996 Plan has been approved by
the vote of the holders of a majority of shares of Common Stock of the Company
represented in person or by proxy at this meeting. The terms of the 1996 Plan
are substantially the same as the terms of the Company's incentive stock plan
which expired in September 1995.
SUMMARY OF THE 1996 PLAN
PURPOSE OF THE 1996 PLAN
The purpose of the 1996 Plan is to provide a means by which selected key
employees of the Company may acquire equity interests or increase their equity
interests in the Company, thereby encouraging such employees to remain in the
employ of the Company and to work for the growth and success of the Company.
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<PAGE>16
ELIGIBLE EMPLOYEES
Officers and other key employees of the Company or its parent or
subsidiaries, if any (collectively, "Affiliates"), are eligible to receive
options under the 1996 Plan to purchase shares of the Company's Common Stock,
$.001 par value. No member of the Board who is not an employee of the Company
or Affiliate is eligible to receive a grant under the 1996 Plan. At January 31,
1996 approximately 100 employees were eligible to participate in the 1996 Plan.
Employees are selected to participate in the Plan based on their ability to
impact future performance of the Company.
ADMINISTRATION OF THE 1996 PLAN
Within the limitations described in the 1996 Plan, the 1996 Plan is
administered by the Board of Directors of the Company (the "Board") and/or a
committee of the Board as designated from time to time. Pursuant to its power
of delegation under the 1996 Plan, the Board has delegated administration of the
1996 Plan to the Compensation Committee (the "Committee") of the Board. No
member of the Committee, at the time he exercises any discretion in
administering the 1996 Plan or within one year prior to such time, may be
eligible for selection as a participant in the 1996 Plan or any other plan of
the Company or any of its Affiliates entitling participants to acquire equity
securities of the Company or any of its Affiliates, except as permitted under
the 1996 Plan or under Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, or its successors ("Rule 16b-3"). The Committee has the
full administrative power which otherwise would be exercised by the Board,
subject, however, to such resolutions, not inconsistent with the 1996 Plan, as
may be adopted from time to time by the Board, and subject further to the right
of the Board to revest administration of the 1996 Plan in the Board at any time.
In accordance with its delegated authority, the Committee has the power to
determine from time to time which eligible employees will be granted options,
when and how the options will be granted, the provisions of each option (which
need not be identical), and the number of shares covered by each option. The
Committee is also authorized to construe and interpret the 1996 Plan and options
granted under it, and to establish, amend and revoke rules and regulations for
administration of the 1996 Plan.
The present members of the Committee are Michael D. Dunn, Thomas F. Kearns,
Jr., Richard P. Sullivan and Roger C. Thies all of whom are non-employee
directors of the Company. Members of the Committee act without additional
compensation for serving on the Committee, and serve at the pleasure of the
Board of Directors.
TERMS AND CONDITIONS OF THE 1996 PLAN
Certain features of the 1996 Plan are summarized below. Reference is
hereby made to the full text of the 1996 Plan (a copy of which is attached to
this Proxy Statement as Exhibit B) for complete information concerning the 1996
Plan, and all summary information is qualified in its entirety by this
reference.
(a) Grant of Options. Options granted under the 1996 Plan are intended
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<PAGE>17
to be incentive stock options as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). Options under the 1996 Plan are
evidenced by written option agreements in a form approved by the Board or
Committee and containing such terms and conditions, not inconsistent with the
1996 Plan, as the Board or Committee may determine.
(b) Number of Shares and Option Price. The 1996 Plan permits the grant of
options for the purchase of up to an aggregate of 1,500,000 shares of the
Company's Common Stock. Each option agreement specifies the total number of
shares to which it pertains. The 1996 Plan does not establish any maximum
number of options which may be granted to any participant, except that the
aggregate fair market value (determined as of the time the option is granted) of
the shares with respect to which options are exercisable for the first time by
any participant during any calendar year shall not exceed $100,000.
The purchase price per share shall be determined by the Board or Committee,
but may not be less than 100% of fair market value at the date of grant. The
purchase price of shares subject to an option granted to any person who, at the
date the option is granted, owns (within the meaning of Section 424(d) of the
Code) stock representing more than 10% of the combined voting power of all
classes of stock of the Company may not be less than 110% of the fair market
value of the stock on the date of grant. Fair market value shall be determined
by the Board or Committee which may use any reasonable method of valuation. At
October 4, 1996, the market value of the Common Stock underlying the options was
$0.641 per share, as determined by the average of the bid and asked prices on
that date.
(c) Option Period. Options may be granted for terms up to ten years.
However, in the case of an option granted to a person who, at the date the
option is granted, owns (within the meaning or Section 424(d) of the Code) stock
representing more than 10% of the voting power of all classes of stock of the
Company, such option shall not be exercisable later than five years from the
date of grant. Subject to the foregoing limitations, each option shall be
exercisable at such time or times, including periodic installments, as shall be
determined by the Board or Committee and set forth in the option agreement. In
the case of any option previously granted under the 1996 Plan which is not
immediately exercisable in full, the Board or Committee may accelerate the time
or times at which such option may be exercised to any earlier time or times.
(d) Rights as a Stockholder. An option holder has no voting, dividend or
other rights as a stockholder with respect to any shares covered by an option
until such time as such shares have been issued to him upon exercise of an
option.
(e) Nonassignability. Options may not be transferred other than by will
or by the laws of descent and distribution, and during the option holder's
lifetime may be exercised only by the option holder, unless such restriction on
transferability is no longer required by Rule 16b-3.
(f) Exercise and Payment. In order to exercise an option under the 1996
Plan, the option holder shall deliver to the Company written notice of the
number of full shares with respect to which the option is to be exercised.
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<PAGE>18
Payment shall be made, as specified in the option agreement; either (i) in cash
at the time the option is exercised, or (ii) at the discretion of the Board or
Committee, (A) by delivery of shares of the Company's Common Stock, (B)
according to a deferred payment or other arrangement or (C) in any other form of
payment acceptable to the Board or Committee in its discretion, either at the
time of grant or exercise of the option. The value of securities delivered in
full or partial payment of the option price shall be based on the fair market
value of the shares at the time the option is exercised.
(g) Termination of Employment, Disability and Death. An option shall
terminate three months after termination of the optionee's employment with the
Company or an affiliate, unless (i) the termination of employment of the
optionee is due to such person's permanent and total disability or such person's
death, in which case, if so provided in the option agreement, the option may be
exercised at any time within one year following such termination of employment
by such optionee, or if termination is due to death, by the person or persons to
whom the optionee's rights under such option pass by will or by the laws of
descent and distribution, or (ii) the option by its terms specified either (A)
that it shall terminate sooner than three months after termination of the
optionee's employment, or (B) that, in the event of death or disability, it may
be exercised more than three months after termination of the optionee's
employment with the Company or an affiliate. In no event may an option be
exercised after the expiration date of the option set forth in the option
agreement.
(h) Exercise Prior to Stated Vesting Date. The option may, but need not,
include a provision whereby the optionee may elect at any time during the term
of his employment with the Company or an Affiliate to exercise the option as to
all or any part of the shares subject to the option prior to the stated vesting
date of the option or of any installment or installments specified in the
option. Any shares so purchased from any unvested installment or option may be
subject to a repurchase in favor of the Company or to any other restriction the
Board or Committee determines to be appropriate.
(i) Termination of Options under Dissolution, Merger or Certain
Reorganizations. In the event of (i) a dissolution or liquidation of the
Company; (ii) a merger or consolidation in which the Company is not the
surviving corporation; (iii) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise; or (iv) any
other capital reorganization in which more than 50% of the shares of the Company
entitled to vote are exchanged, then any outstanding options under the 1996 Plan
shall terminate, unless another corporation assumes such options or substitutes
similar options or the Board determines in its sole discretion that such options
shall continue in full force and effect.
(j) Adjustment for Certain Events. In the event of a merger,
consolidation, reorganization, recapitalization, stock dividend (or dividend in
property other than cash), stock split, liquidating dividend, combination of
shares, exchange of shares, or any other change in the corporate structure or
shares of the Company's Common Stock, the Board may make adjustments, if any, as
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<PAGE>19
it may deem appropriate in the maximum number of shares subject to the 1996 Plan
and the number and option price of shares covered by the options granted.
(k) Amendments and Termination. The Board may alter, amend, suspend or
terminate the 1996 Plan at any time. However, no amendment by the Board shall
affect any option theretofore granted under the 1996 Plan without the consent of
the option holder so affected. In addition, no amendment by the Board may,
without stockholder approval (except pursuant to the anti-dilution provisions
described under "Adjustment for Certain Events" above), increase the number of
shares reserved for options under the 1996 Plan, materially modify the
requirements as to eligibility for participation in the 1996 Plan, or materially
increase the benefits accruing to participants under the 1996 Plan. Unless
sooner terminated, the 1996 Plan shall terminate on January 30, 2006.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax law, the income taxation of incentive
stock options is determined pursuant to Sections 421 and 422 and related
provisions of the Code. The following are certain of the federal income tax
consequences with respect to the 1996 Plan under existing provisions of the
Code:
1) Grant of Options
An employee will not recognize income and the Company will not receive a
deduction at the time of grant of an option.
2) Exercise of Options
An employee will not recognize income and the Company will not receive a
deduction at the time of exercise of an option. The excess of the fair
market value of stock received upon exercise of an option over the exercise
price is taken into account in determining whether one is subject to the
alternative minimum tax.
3) Sale or Exchange
(a) If an employee sells or otherwise disposes of the shares issued
upon exercise of an option within two years after the date of grant or
within one year after exercise, the disposition is considered to be a
"disqualifying disposition." The employee generally will recognize
ordinary income in the year in which the disposition occurs in an amount
equal to the excess of the fair market value of the stock on the date of
exercise over the amount paid for the stock upon exercise. However, if the
amount realized on the disposition is less than the fair market value of
the stock on the date of exercise and the disposition is by sale or
exchange with respect to which a loss, if sustained, would be recognized
for federal income tax purposes, the amount of income recognized by the
employee will be limited to the excess of the amount realized on
disposition of the stock over the amount paid for the stock upon exercise.
The excess of the amount realized upon disposition of the shares over the
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<PAGE>20
fair market value of the shares on the date of exercise will be taxable to
the employee as capital gain, assuming such shares were held as a capital
asset. The capital gain will be long-term if such shares were held more
than one year from the date of exercise, and will be short-term if such
shares were held one year or less from the date of exercise. The Company
generally will be entitled to a federal income tax deduction at the time of
the disqualifying disposition in an amount equal to the ordinary income
required to be recognized by the employee.
If an option is exercised by the estate of an employee, there is no
required holding period. When the estate disposes of the shares acquired
by exercise of the incentive stock option, it will not recognize any
ordinary income, but it may recognize long-term or short-term capital gain.
The Company will not be entitled to any deduction for federal income tax
purposes.
(b) If an employee sells or otherwise disposes of the shares issued
upon the exercise of an option more than two years after the date of grant
and more than one year after the date of exercise, the entire gain or loss
realized upon disposition of the shares generally will be taxable as long-
term capital gain or loss, assuming such shares were held as a capital
asset. The excess of the amount realized upon disposition of the shares
over the fair market value of the shares on the date of exercise is taken
into account in determining whether one is subject to alternative minimum
tax. The Company will not be entitled to any federal income tax deduction
with respect to shares not disposed of in a qualifying disposition.
(c) If an employee uses previously acquired shares of stock to
exercise an incentive stock option, the employee will not recognize gain or
loss on the exchange of the previously acquired shares for the option
shares unless the previously acquired shares were obtained through the
exercise of a prior incentive stock option and the exchange of the
previously acquired shares constitutes a disqualifying disposition of such
shares. If no gain or loss is recognized on the exchange, those shares
received that are equal in number to the previously acquired shares
exchanged therefor will have the same tax basis and holding period (for
determining capital gain or loss) as the previously acquired shares. The
additional shares received upon exercise of the option will have a zero
basis and holding period (for purposes of determining capital gain or loss)
beginning on the date of exercise. All shares received upon exercise of an
incentive stock option are subject to the holding periods specified in
subparagraph 3(a) above for purposes of determining whether a disposition
of such shares constitutes a "disqualifying disposition."
The foregoing discussion of federal income tax consequences applies to an
option holder only if his income is subject to U.S. federal income tax and
relates only to laws, regulations and published administrative interpretations
in effect on the date of this document. Such discussion may no longer apply if
changes in such laws, regulations or interpretations occur. Each employee who
receives an option should discuss with his own tax advisor the anticipated tax
consequences of the 1996 Plan in light of the employee's personal tax situation.
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NEW PLAN BENEFITS
The following table summarizes stock options which have been granted, or
will be granted, under the 1996 Plan to the persons described below:
<TABLE>
NEW PLAN BENEFITS
1996 INCENTIVE STOCK OPTION PLAN
<CAPTION>
Name and Position Number of Options Awarded (1)
- ----------------- -----------------------------
<S> <C>
James K. Leslie, President and CEO(2) 100,000
Christopher H. Hendy, Ph.D., Vice President -
All current executive officers, as a group(2) 170,000
All current directors who are not executive -
officers, as a group
All employees, including current officers 129,700
who are not executive officers, as a group(3)
<FN>
(1) Each option entitles the holder to purchase one share of Common Stock of
the Company subject to the provisions of the 1996 Plan and any additional
provisions imposed by the Board or the Committee as permitted by the 1996 Plan.
(2) On July 1, 1996, Mr. Leslie was granted options to purchase 100,000 shares
of the Company's Common Stock at an exercise price of $0.469, the average of the
bid and asked prices on the date of grant. The options vest over a four year
period from the date of grant and expire ten years from the date of grant, if
not exercised earlier. In addition, James M. Wilkinson II, Ph.D., the Company's
Vice President of Analytical Laboratory Services as of July 1, 1996 received a
grant of options on July 1, 1996 to acquire 70,000 shares of the Company's
Common Stock under the same terms and conditions.
(3) Options were granted to employees on February 6, 1996 and July 1, 1996
under the provisions of the 1996 Plan. Options to purchase an aggregate of
97,700 shares, granted February 6, 1996, had an exercise price of $0.4375 per
share and options to purchase an aggregate of 32,000 shares, granted July 1,
1996, had an exercise prices of $0.469 per share. All options vest over a four
year period from the date of grant. Options were priced at fair market value on
the date of grant as determined by the average of the bid and asked prices on
that date. All options expire ten years from the date of grant, if not
exercised earlier. Grantees are not required to pay for the granting of
options.
</FN>
</TABLE>
The Board of Directors recommends a vote "FOR" the approval of the
PharmaKinetics Laboratories, Inc. 1996 Incentive Stock Option Plan. Certain
officers of the Company have a direct interest in the approval of the 1996 Plan
because they have been granted options under the 1996 Plan which will not be
exercisable unless the 1996 Plan is approved by holders of a majority of the
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<PAGE>22
shares of Common Stock of the Company voted at the meeting in person or by
proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy material for
the Annual Meeting of Stockholders to be held in 1997 must be received in
writing by the Company on or before June 5, 1997. The inclusion of any proposal
will be subject to applicable rules of the Securities and Exchange Commission.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1996, as filed with the Securities and Exchange Commission is enclosed herewith.
Additional copies are available to shareholders without charge on written
request directed to Taryn L. Kunkel, Secretary, PharmaKinetics Laboratories,
Inc., 302 West Fayette Street, Baltimore, Maryland 21201.
Information concerning executive officers and other significant employees
can be found in Part I of the Company's Annual Report on Form 10-K filed for the
fiscal year ended June 30, 1996.
OTHER MATTERS
Management knows of no other business to be presented for action at the
Meeting, but if any other business should properly come before the Meeting, it
is intended that the proxies will be voted in accordance with the best judgment
of the persons acting thereunder in their discretion.
By Order of the Board of Directors,
Taryn L. Kunkel
Secretary
October 28, 1996
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EXHIBIT A
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
PHARMAKINETICS LABORATORIES, INC.
PHARMAKINETICS LABORATORIES, INC., a Maryland corporation, having its
principal office at 302 West Fayette Street, Baltimore, Maryland 21201
(hereinafter referred to as the "Corporation") hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect as hereinafter provided. The provisions set forth in these
Articles of Amendment and Restatement are all the provisions of the charter of
the Corporation as currently in effect.
SECOND: The charter of the Corporation is hereby amended by striking in
its entirety Articles FIRST through TWELFTH, inclusive, and by substituting in
lieu thereof the following:
FIRST: That we, the subscribers, W.D. Zander, Bernhard E. Holzapfel, and
Alan G. Woodman, all of whom have a post office address of 750 Third Avenue, New
York, New York 10017, and all of whom are at least eighteen years of age,
intend to form a corporation under the general laws of the State of Maryland.
SECOND: That the name of the Corporation is PHARMAKINETICS LABORATORIES,
INC.
THIRD: The purposes for which the Corporation is formed are as
follows:
A. To engage in the business for profit of bioavailability testing
in human volunteers with complete laboratory capabilities in
microbiological and chemical assays.
B. To engage in the business for profit of providing complete in
vitro and in vivo evaluations of drug dosage forms.
C. To engage in the business for profit of general pharmaceutical
and medical research.
D. To acquire by purchase, lease, or otherwise, and to improve, and
develop real property which is deemed necessary or useful in conducting the
business of the Corporation.
E. To acquire by purchase, lease, manufacture, or otherwise any
personal property which is deemed necessary or useful in conducting the
business of the Corporation.
F. To engage in all other businesses, occupations, and activities
which may be conducive to achieving the above-enumerated purposes and to
engage in any and all businesses, occupations, and activities in which a
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<PAGE>24
corporation may lawfully engage.
FOURTH: The post office address of the principal office of the
Corporation in this state is 302 West Fayette Street, Baltimore, Maryland 21201.
FIFTH: The resident agent of the Corporation is Taryn L. Kunkel, whose
post office address is 302 West Fayette Street, Baltimore, Maryland 21201, said
resident agent being a citizen of the State of Maryland, and actually residing
therein.
SIXTH: The total number of shares of stock of all classes which the
Corporation has authority to issue is 26,500,000 shares, divided into 25,000,000
shares of Common Stock, par value 1 mill ($0.001), and 1,500,000 shares of
Preferred Stock, without par value. The aggregate par value of all shares
having par value is $25,000.
The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of each class are as follows:
A. Common Stock. Subject to (1) the voting rights of any series of
Preferred Stock pursuant to the terms of such series and (2) the provisions
of Subparagraph (C) below, each outstanding share of Common Stock shall be
entitled to one vote on each matter submitted to a vote or approval of
stockholders. Subject to the provisions of law and any preferences of
Preferred Stock, dividends may be paid on the Common Stock at such time and
in such amounts as the Board of Directors may from time to time determine.
Upon any voluntary or involuntary liquidation or dissolution of the
Corporation, after payment or provision for the payment of the debts and
other liabilities of the Corporation and of the amounts to which holders of
any Preferred Stock may be entitled, the holders of shares of Common Stock
shall be entitled to share ratably in all remaining assets of the
Corporation.
B. Preferred Stock. The Preferred Stock may be issued, from time to
time, in one or more series as authorized by the Board of Directors. Prior
to issuance of each series, the Board of Directors by resolution shall
designate that series to distinguish it from all other series and classes
of stock of the Corporation, shall specify the number of shares to be
included in the series, and shall fix the terms, rights, restrictions,
qualifications and limitations of the shares of the series, including any
preferences, voting powers, dividend rights, liquidation rights, and
redemption, sinking fund and conversion rights. Subject to the express
terms of any other series of Preferred Stock outstanding at the time, and
notwithstanding any other provision of the charter, the Board of Directors
may increase or decrease the number of shares or alter the designation or
classify or reclassify any unissued shares of a particular series of
Preferred Stock by setting or changing in any one or more respects, from
time to time before issuing the shares, the preferences, conversion or
other rights, voting powers, restrictions, limitation as to dividends,
qualifications, terms or conditions of redemption, or any other terms of
such series of Preferred Stock.
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<PAGE>25
C. (1) From and after the date any person first becomes a
Substantial Stockholder (as defined in clause (2)(f) of this Subparagraph)
until such time as such person shall cease to be a Substantial Stockholder,
the shares of Common Stock beneficially owned by the Substantial
Stockholder shall have limited voting rights on any matter requiring their
vote or consent. The voting rights shall be limited as follows:
(a) The Substantial Stockholder (or the record owner(s) thereof)
shall be entitled to one vote for each share beneficially owned by the
Substantial Stockholder not in excess of 10% of the then issued and
outstanding shares of Common Stock.
(b) For all shares of Common Stock beneficially owned by the
Substantial Stockholder in excess of 10% of the then issued and outstanding
shares of Common Stock, the Substantial Stockholder (or the record owner(s)
thereof) shall not be entitled to cast any votes in respect of such shares
and such shares shall be deducted from the total number of shares of Common
Stock outstanding for purposes of determining the proportion of Common
Stock required to approve a matter submitted for stockholder approval or to
constitute a quorum. To the extent that the Substantial Stockholder is
comprised of more than one record owner, the aggregate voting power of the
Substantial Stockholder (or such record owners) so limited for all shares
of Common Stock beneficially owned by the Substantial Stockholder shall be
allocated proportionately among such record owners. For each such record
owner, this allocation shall be accomplished by multiplying the aggregate
voting power of the then outstanding shares of Common Stock owned by the
Substantial Stockholder by a fraction whose numerator is the number of
shares of Common Stock owned of record by such record owner and whose
denominator is the total number of shares of Common Stock beneficially
owned by the Substantial Stockholder. A person who is a record owner of
shares of Common Stock that are beneficially owned simultaneously by
more than one person shall have, with respect to such shares, the right to
cast the least number of votes that such person would be entitled to cast
under this subsection (1) by virtue of such shares being so beneficially
owned by any of such persons.
(2) For purposes of this Subparagraph (C), the following words
have the meanings indicated:
(a) "Affiliate," including the term "Affiliated Person," means a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
person, and includes all Associates of such person.
(b) "Associate," when used to indicate a relationship with any
person, means:
(i) Any corporation or organization (other than the
Corporation or a subsidiary of the Corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
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(ii) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(iii) Any relative or spouse of such person, or any relative
of such spouse, who has the same home address as such person or who is a
director or officer of any corporation controlling, under common control
with or controlled by such person or of any of its Affiliates.
(c) "Beneficial Owner," when used with respect to Common Stock,
means a person:
(i) That, individually or with any of its Affiliates,
beneficially owns Common Stock, directly or indirectly; or
(ii) That, individually or with any of its Affiliates, has:
(A) The right to acquire Common Stock (whether such
right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; or
(B) The right to vote Common Stock pursuant to any
agreement, arrangement, or understanding; or
(iii) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of Common Stock
with any other person that beneficially owns, or whose Affiliates
beneficially own, directly or indirectly, such shares of Common Stock;
provided, however, that for purposes of the definition of Beneficial Owner
and beneficial ownership, (A) no director, officer or employee of the
Corporation or any subsidiary (nor any Affiliate of any such director,
officer or employee) shall solely by reason of any or all of such
directors, officers or employees acting in their capacities as such
(including, without limitation, communicating with a stockholder by order
of the Board of Directors) be deemed, for any purposes hereof, to
beneficially own any shares of Common Stock beneficially owned by any other
such director, officer, employee or stockholder (or any Affiliate thereof);
(B) in the case of any employee stock ownership or similar plan of the
Corporation or of any subsidiary heretofore or hereafter adopted in which
the beneficiaries thereof possess the right to vote or to direct the voting
of shares of Common Stock held by such plan, no such plan, any entity
organized, appointed or established by the Corporation or any subsidiary
for or pursuant to any plan, nor any trustee or any member of an
administrative committee or any other representative with respect thereto
(nor any Affiliate of such trustee, administrative committee member or
other such representative), solely by reason of such capacity of such
trustee, administrative committee member or other such representative,
shall be deemed, for any purposes hereof, to beneficially own any shares of
Common Stock held under any such plan; (C) a person shall not be deemed a
beneficial owner of stock solely by reason of a revocable proxy granted
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for a particular meeting of stockholders, pursuant to a public solicitation
of proxies for such meeting complying with applicable rules of the
Securities and Exchange Commission or any successor administrative body,
with respect to shares of which neither such person nor any Affiliate of
such person is otherwise deemed the beneficial owner; and (D) a person
shall not be deemed a beneficial owner of stock solely by reason of stock
being tendered pursuant to a tender or exchange offer made by such person
or such person's Affiliates until such tendered stock is accepted for
purchase or exchange.
(d) "Control," including the terms "Controlling," "controlled
by" and "under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise, and the beneficial ownership of 10%
or more of the votes entitled to be cast by a corporation's voting stock
creates a presumption of control.
(e) A "person" shall mean any individual, firm, partnership,
corporation or other entity.
(f) "Substantial Stockholder" shall mean any person, other than
the Corporation or any subsidiary, who or which is the Beneficial Owner,
directly or indirectly, of 10% or more of the outstanding shares of Common
Stock (determined solely on the basis of the total number of shares so
beneficially owned and without giving effect to the number or percentage of
votes entitled to be cast in respect of such shares) in relation to the
total number of shares of Common Stock issued and outstanding; provided,
however, that such person shall not be deemed a "Substantial Stockholder"
for purposes of this Subsection (C) and shall not be subject to the
limitation on voting rights imposed hereby if such person becomes the
Beneficial Owner of 10% or more of the outstanding shares of Common Stock,
determined as provided in this clause (2)(f), as a result of an offer by
such person for all shares of Common Stock which the Board of Directors of
the Corporation determines, prior to the Stock Acquisition Date, to be in
the best interest of the Corporation and its stockholders.
(g) "Stock Acquisition Date" shall mean the first date of public
announcement by the Corporation or any persons that such person has become
the Beneficial Owner of 10% or more of the outstanding shares of Common
Stock.
(3) For purposes of computing the percentage beneficial
ownership of shares of Common Stock of a person in order to determine
whether such person is a Substantial Stockholder, the outstanding shares of
Common Stock shall be deemed to include shares of Common Stock which may be
issuable by the Corporation pursuant to any agreement, or upon the exercise
of conversion rights, warrants, or options or otherwise and which are
deemed owned by such person through application of the definition of
Beneficial Owner but shall not include any other shares of Common Stock
which may be issuable by the Corporation to others pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
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<PAGE>28
otherwise. For all other purposes, the outstanding shares of Common Stock
shall include such shares then outstanding and shall not include any shares
of Common Stock which may be issuable by the Corporation pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options,
or otherwise.
(4) The Board of Directors shall have the power to determine for
the purposes of this Subparagraph (C) on the basis of information known to
them (a) the number of shares of Common Stock beneficially owned by any
person; (b) whether a person is an Affiliate or Associate of another; (c)
whether a person has an agreement, arrangement or understanding with
another; and/or (d) any other factual matter relating to the applicability
or effect of this Subparagraph (C).
(5) The Corporation shall have the right to demand that any
person who it reasonably believes is a Substantial Stockholder (or holder
of record of shares of stock beneficially owned by a person reasonably
believed to be a Substantial Stockholder) supply the Corporation with
complete information as to: (a) the record owner(s) of all shares of
stock; (b) the number of, and class of, shares beneficially owned by such
person and held of record by each such record owner and the number(s) of
the stock certificate(s) evidencing such shares; (c) each date or dates on
which such person or the record owner(s) of such shares purchased the
shares; and (d) any other factual matter relating to the applicability or
effect of this Subparagraph (C) as may reasonably be requested of such
person, and such person shall furnish such information within 10 days after
the receipt of such demand.
(6) Any determinations made by the Board of Directors pursuant
to this Subparagraph (C) in good faith on the basis of such information and
assistance as was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its shareholders, including
any Substantial Stockholder.
(7) Nothing contained in this Subparagraph (C) shall be
construed to relieve any Substantial Stockholder from any fiduciary
obligation imposed by law.
SEVENTH: The number of directors of the Corporation shall be three (3),
which number may be increased pursuant to the by-laws of the Corporation, but
shall never be less than three (3); and the names of the directors who shall act
until the next annual meeting of stockholders or until their successors are duly
chosen and qualified are:
James K. Leslie
Michael D. Dunn
Thomas F. Kearns
Richard P. Sullivan
Roger C. Thies
EIGHTH: No holders of any class of stock of the Corporation shall have
any preemptive rights to acquire additional stock in the Corporation.
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NINTH: A. Directors and officers of the Corporation shall not be liable
to the Corporation or its stockholders for money damages. The purpose of this
limitation of liability is to limit liability to the maximum extent that the
liability of directors and officers of Maryland corporations is permitted to be
limited by Maryland law. This limitation of liability shall apply to
events which occurred during the term of office of any director or officer
whether or not such director or officer is serving as such at the time any
proceeding in which liability is asserted commences.
B. To the maximum extent permitted by Maryland law, the
Corporation shall indemnify its currently acting and its former directors
against any and all liabilities and expenses incurred in connection with their
services in such capacities, and shall indemnify its currently acting and its
former officers to the full extent that indemnification shall be provided to
directors, and may indemnify, to the same extent, persons who serve and have
served, at its request, as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture or other enterprise.
The Corporation shall advance expenses to its directors and officers and the
other persons referred to above to the extent permitted by Maryland law. This
indemnification of directors and officers shall also apply to directors and
officers who are also employees, in their capacity as employees. The Board of
Directors may by By-law, resolution or agreement make further provision for
indemnification of employees and agents to the extent permitted by Maryland law.
C. References to Maryland law shall include the Maryland General
Corporation Law as from time to time amended. Neither the repeal or amendment
of this Article NINTH nor any other amendment to these Articles of
Incorporation, shall eliminate or reduce the protection afforded to any person
by the foregoing provisions of this Article NINTH with respect to any act or
omission which shall have occurred prior to such repeal or amendment.
TENTH: The Corporation reserves the right from time to time to make any
amendments of its charter now or hereafter authorized by law, including any
amendment which alters the contract rights, as expressly set forth in its
charter, or any outstanding stock but no such amendment may change the terms of
any class or series of any class of outstanding stock unless such change of
terms shall have been authorized by the holders of not less than two-thirds of
all shares of such class or series of such class at the time outstanding.
THIRD: Immediately before and immediately after the effective date of this
amendment, the Corporation had authority to issue 26,500,000 shares of capital
stock, divided into 25,000,000 shares of Common Stock, par value $0.001 per
share, and 1,500,000 shares of Preferred Stock, without par value. The
aggregate par value of all shares having par value is $25,000.
FOURTH: By unanimous written consent executed by each member of the Board
of Directors as of October 10, 1996, pursuant to Section 2-408(c) of the
Corporations and Associations Article of the Annotated Code of Maryland, the
Board of Directors of the Corporation duly advised the foregoing Articles of
Amendment and Restatement, and at a duly called annual meeting of the
stockholders of the Corporation on November 25, 1996, the stockholders of the
Corporation duly approved said Articles of Amendment and Restatement.
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IN WITNESS WHEREOF, PHARMAKINETICS LABORATORIES, INC. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be affixed hereunder and attested by its Secretary on this
______ day of ___________________________________, 1996, and its President
acknowledges that these Articles of Amendment and Restatement are the act and
deed of PHARMAKINETICS LABORATORIES, INC., and, under the penalties of perjury,
that the matters and facts set forth herein with respect to authorization and
approval are true in all material respects to the best of his knowledge,
information and belief.
ATTEST PHARMAKINETICS LABORATORIES, INC.
__________________________ By:___________________________(SEAL)
Taryn L. Kunkel, Secretary James K. Leslie, President
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EXHIBIT B
1996 INCENTIVE STOCK OPTION PLAN
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which selected key
employees of PharmaKinetics Laboratories, Inc., may be given an opportunity to
purchase stock of the Company. The Company, by means of the Plan, seeks to
retain the services of persons now holding key positions, to secure and retain
the services of persons capable of filling such positions, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(b) The Company intends that the options issued under the Plan be
incentive stock options as that term is used in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company, if each member is a "disinterested person" as defined by and
subject to the provisions of subparagraph 2(d), unless and until the Board
delegates administration to a committee, as provided in subparagraph 2(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the options shall be
granted; the provisions of each option granted (which need not be
identical), including the time or times during the term of each option
within which all or portions of such option may be exercised; and the
number of shares for which an option shall be granted to each person.
(2) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement,
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(3) To amend the Plan as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interest of the
Company.
(c) The Board may delegate administration of the Plan to a committee
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composed of not fewer than three (3) members of the Board, all of the members of
which committee shall be "disinterested persons", as defined by and subject to
the provisions of subparagraph 2(d) (the "Committee"). If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
(d) The term "disinterested person" as used in this Plan, shall mean an
administrator of the Plan, whether a member of the Board or of any Committee to
which responsibility for administration of the Plan has been delegated pursuant
to subparagraph 2(c), who is not at the time he or she exercises discretion in
administering the Plan eligible and has not at any time within one year prior
thereto been eligible for selection as a person to whom "equity securities"
(hereafter defined) may be granted or awarded pursuant to the Plan or any other
plan of the Company or any of its Affiliates entitling the participants therein
to acquire equity securities of the Company or any of its Affiliates, except as
permitted by Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as from time to time in effect. Any such
person shall otherwise comply with the requirements of Rule 16b-3, as from time
to time in effect. The term "equity securities" shall have the meaning set
forth in Rule 16a-1 promulgated under the Exchange Act, as from time to time in
effect. Any requirement that an administrator of the Plan be a "disinterested
person" shall not apply in the event that administration by "disinterested
persons" is no longer required by Rule 16b-3 or its successors.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate one million five hundred thousand
(1,500,000) shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"). If any option granted under the Plan shall for any reason
expire or otherwise terminate without having been exercised in full, the stock
not purchased under such option shall again become available for the Plan. In
addition, if options granted under the Plan are exercised in accordance with the
option prior to the full vesting thereof, and shares of the stock so acquired
are thereafter repurchased by the Company in accordance with the terms of such
option, the stock so repurchased shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) The aggregate fair market value (determined as of the time the option
is granted) of the stock with respect to which options are exercisable for the
first time by any optionee during any calendar year (including for purposes of
this calculation stock with respect to which options become exercisable under
incentive stock options granted after December 31, 1986 under all plans of the
Company or any subsidiary which provide for the granting of incentive stock
options) shall not exceed $100,000.
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4. ELIGIBILITY.
(a) Options may be granted only to key employees (including officers) of
the Company or its parent or subsidiaries (collectively, "Affiliates"). A
director of the Company shall not be eligible for the benefits of the Plan
unless such director is also a key employee (including an officer) of the
Company or any Affiliates, and in such case, such person shall only be eligible
in the capacity as an employee.
(b) A director who is also an employee shall in no event be eligible for
the benefits of the Plan unless and until such director is expressly declared
eligible to participate in the Plan by action of the Board or the Committee, and
only if, at any time discretion is exercised by the Board or the Committee in
the selection of a director as a person to whom options may be granted, or in
the determination of the pricing and number of shares which may be covered by
options and timing of exercise of options granted to a director, the Board or
the Committee shall comply with the requirements of Rule 16b-3 promulgated under
the Exchange Act, as from time to time in effect.
(c) No person shall be eligible for the grant of an option under the Plan
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any of its
Affiliates unless the option price is at least one hundred ten percent (110%) of
the fair market value of such stock at the date of the grant and the term of the
option does not exceed five (5) years from the date of grant.
5. OPTION PROVISIONS.
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation or provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of the option shall not be greater than ten (10) years from
the date it was granted.
(b) The exercise price of each option shall be not less than one hundred
percent (100%) of the fair market value of the stock subject to the option on
the date the option is granted.
(c) The purchase price of the stock acquired pursuant to an option shall
be paid, as specified in the option, either (i) in cash at the time the option
is exercised, or (ii) at the discretion of the Board or the Committee, (A) by
delivery to the Company of other common stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company) with
the person to whom the option is granted or to whom the option is transferred
pursuant to subparagraph 5(d), or (C) in any other form of legal consideration
that may be acceptable to the Board or the Committee in their discretion, either
at the time of grant or exercise of the option.
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In the case of any deferred payment arrangement specified at the time of
grant, an interest rate shall be stated which is not less than the rate then
specified which will prevent any imputation of higher interest under Section
483, 1274, or 7872 of the Code.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person.
(e) The total number of shares of stock subject to an option may, but need
not, be allotted in periodic installments (which may, but need not, be equal).
From time to time during each of such installment periods, the option may be
exercised with respect to some or all of the shares allotted to any prior period
as to which the option was not fully exercised. During the remainder of
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised from time to time with respect to any
shares then remaining subject to the option. The provisions of this
subparagraph 5(e) are subject to any option provisions governing the minimum
number of shares to which an option may be exercised.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 5(d), as a condition of exercising any such
option, to give written assurance satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The requirement of providing written assurances, and any assurances
given pursuant to the requirement, shall be inoperative if (i) the issuance of
the shares upon exercise of the option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) a determination is made by counsel for
the Company that such written assurances are not required in the circumstances
under the then applicable federal securities laws.
(g) An option shall terminate three (3) months after termination of the
optionee's employment with the Company or an Affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent and
total disability, within the meaning of Section 22(e) (3) of the Code, or such
person's death, in which cases the option may, but need not, provide that it may
be exercised at any time no longer than (1) year following such termination of
employment by such optionee or, if termination is due to death, by the person or
persons to whom the optionee's rights under such option pass by will or by the
laws of descent and distribution; or (ii) the option by its terms specifies
either (A) that it shall terminate sooner than three (3) months after
termination of the optionee's employment, or (B) that, in the case of death or
disability, it may be exercised more than three (3) months after termination of
the optionee's employment with the Company or an Affiliate. This subparagraph
5(g) shall not be construed to extend the term of any option or to permit anyone
to exercise the option after expiration of its term, nor shall it be construed
to increase the number of shares as to which any option is exercisable from the
amount exercisable on the date of termination of the optionee's employment.
(h) The option may, but need not, include a provision whereby the optionee
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may elect at any time during the term of his or her employment with the Company
or any Affiliate to exercise the option as to any part or all of the shares
subject to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any vested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board or the Committee
determines to be appropriate.
6. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options
unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Board or the Committee shall have the power to accelerate the time
during which an option may be exercised, notwithstanding the provisions in the
option stating the time during which it may be exercised.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Board may make
appropriate adjustments in the maximum number of shares subject to the Plan and
the number of shares and price per share of stock subject to outstanding
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options.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, any outstanding options under the Plan shall terminate,
unless another corporation assumes such options or substitutes similar options
for those under the Plan or the Board determines in its sole discretion that
such options shall continue in full force and effect.
10. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of the
holders of a majority of the shares of Common Stock of the Company represented
in person or by proxy at the meeting of stockholders at which approval is sought
or by the unanimous written consent of the holders of all outstanding shares of
the Company entitled to vote, within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants under
the Plan.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the Plan and/or options granted under it into compliance
therewith.
(b) Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day preceding the tenth
anniversary of the Effective Date of the Plan (hereinafter defined). No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
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(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as of January 31, 1996 (the "Effective
Date"), but no options granted under the Plan shall be exercised unless and
until the Plan has been approved by the vote of the holders of a majority of the
shares of Common Stock of the Company represented in person or by proxy at the
meeting of stockholders at which such approval is sought or by the unanimous
written consent of the holders of all outstanding shares of the Company entitled
to vote.
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