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:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
IGI, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
|_| 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 statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
IGI, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD May 13, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IGI,
Inc., a Delaware corporation (the "Company"), will be held on Thursday, May 13,
1999 at 10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts (the "Meeting") for the purpose of considering and voting upon the
following matters:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders.
2. To approve amendments to the Company's Certificate of Incorporation,
as amended, to (i) increase the number of authorized shares of Common
Stock from 30,000,000 to 50,000,000 and (ii) authorize a new class of
Preferred Stock consisting of 1,000,000 shares.
3. To approve the Company's 1999 Employee Stock Purchase Plan.
4. To approve the Company's 1999 Stock Incentive Plan.
5. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the current fiscal year.
6. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Friday, March 19,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998, which contains financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
By order of the Board of Directors,
Robert E. McDaniel,
Secretary
April 14, 1999
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEEDS TO BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
IGI, INC.
Wheat Road and Lincoln Avenue
Buena, New Jersey 08310
-------------------------
PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held May 13, 1999
-------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IGI, Inc. (the "Company") for use at the
Annual Meeting of Stockholders to be held on Thursday, May 13, 1999 at 10:00
a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts, and at any adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the proposals set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company. Attendance at the Meeting
will not itself be deemed to revoke a Proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
Proxy and vote in person.
Only the record holders of shares of common stock, $.01 par value per
share, of the Company (the "Common Stock") at the close of business on March 19,
1999 may vote at the Meeting. Each share entitles the record holder to one vote
on each of the matters to be voted upon at the Meeting. On March 19, 1999 there
were 9,526,854 shares of Common Stock outstanding.
The Notice of Meeting, Proxy Statement, the enclosed Proxy and the
Company's Annual Report for the year ended December 31, 1998 are being mailed to
stockholders on or about April 14, 1999.
Beneficial Ownership of Common Stock
The following table sets forth information as of March 15, 1999 with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of Common
-1-
<PAGE>
Stock, (ii) the directors of the Company, (iii) the Chief Executive Officer and
the executive officers of the Company listed in the "Summary Compensation Table"
below (collectively, the "Named Executive Officers"), and (iv) the directors and
executive officers of the Company as a group. Unless otherwise noted, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
Number of Percent of
Beneficial Owner Shares Class
- ---------------- ---------- -----------
Stephen J. Morris............................ 2,319,200 (1) 24.3%
66 Navesink Avenue
Rumson, New Jersey
Jane E. Hager................................ 1,174,638 (2) 12.2%
Pinnacle Mountain Farms
Lyndeboro, NH 03082
Edward B. Hager, M.D. ....................... 1,015,815 (3) 10.3%
Pinnacle Mountain Farms
Lyndeboro, NH 03082
Mellon Bank Corporation...................... 732,801(4) 7.4%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
David G. Pinosky, M.D........................ 271,723 (5) 2.8%
Terrence O'Donnell........................... 84,565 (6) *
Constantine L. Hampers, M.D.................. 71,073 (7) *
Terrence D. Daniels.......................... 45,782 (8) *
Paul D. Paganucci............................ 47,298 (8) *
F. Steven Berg............................... 27,823 (9) *
Paul Woitach................................. 200,000 (10) 2.1%
John F. Wall................................. 30,000 (11) *
Robert E. McDaniel........................... 25,000 (12) *
Kevin J. Bratton............................. 29,750 (13) *
Stephen G. Hoch.............................. 0 (14) *
All executive officers and directors, as a
group (13 Persons)(16)....................... 2,383,652 (15) 22.5%
- ----------
* Less than 1% of the Common Stock outstanding.
-2-
<PAGE>
(1) Includes 816,300 shares which Mr. Morris owns jointly with his wife, Xenia
Morris.
(2) Includes 639,815 shares beneficially owned by Dr. and Mrs. Hager, as
co-trustees of the Hager Family Trust, who share voting and investment
power. Includes 100,000 shares which Mrs. Hager may acquire pursuant to
stock options exercisable within 60 days after March 15, 1999.
(3) Includes 375,000 shares which Dr. Hager may acquire pursuant to stock
options exercisable within 60 days after March 15, 1999, and 639,815 shares
(listed above) beneficially owned by Mrs. Hager as co-trustee of the Hager
Family Trust.
(4) On February 19, 1999, Mellon Bank Corporation filed a Schedule 13G/A with
the Securities and Exchange Commission reporting beneficial ownership of a
total of 612,801 shares, which includes 240,000 shares of Common Stock
issuable upon exercise of warrants within 60 days after March 15, 1999.
Mellon Bank reported that it has sole voting power over 482,101 shares of
Common Stock and sole dispositive power over 607,051 shares of Common
Stock. The Company entered into a Second Extension Agreement with Mellon
Bank, effective January 31, 1999, pursuant to which Mellon Bank was granted
warrants for the purchase of an additional 240,000 shares of Common Stock,
of which 120,000 shares are exercisable within 60 days after March 15,
1999.
(5) Includes 100,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999. Dr. Pinosky is not
standing for re-election to the Board of Directors.
(6) Includes 70,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(7) Includes 60,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(8) Includes 40,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(9) Includes 20,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999. Mr. Berg is not standing
for re-election to the Board of Directors.
(10) Consists of 200,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
-3-
<PAGE>
(11) Consists of 5,000 shares Mr. Wall holds jointly with his wife, Rosa Wall,
and 25,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(12) Consists of 25,000 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(13) Includes 24,250 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999. Mr. Bratton resigned in
January 1999.
(14) Mr. Hoch does not hold any shares of Common Stock or stock options of the
Company. Mr. Hoch resigned in September 1998.
(15) Includes 1,079,250 shares which may be acquired pursuant to stock options
exercisable within 60 days after March 15, 1999.
(16) As of July 31, 1998, John P. Gallo, a former President of the Company,
whose employment was terminated as of November 1997, beneficially owned
643,397 shares of Common Stock (including 275,000 which may be acquired
pursuant to stock options within 60 days after July 31, 1998). His holdings
constituted more than 5% of the Company's outstanding shares of Common
Stock. The Company has been unable to ascertain his current holdings by
researching the appropriate filings with the Securities and Exchange
Commission to determine if he is still a 5% security holder. However, his
attorney represents that Mr. Gallo's holdings did not change during fiscal
year 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting Persons") to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Based
solely on its review of copies of reports filed by Reporting Persons furnished
to the Company, the Company believes that during 1998 its officers, directors
and holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements, except that Initial Statements of Beneficial
Ownership of Securities on Form 3 for F. Steven Berg, a director of the Company,
and Robert E. McDaniel, Senior Vice President and General Counsel of the
Company, were inadvertently not filed by the Company on a timely basis.
-4-
<PAGE>
Votes Required
The holders of a majority of the shares of Common Stock outstanding shall
constitute a quorum for the transaction of business at the Meeting. Shares of
Common Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voted at the Meeting is required for the election of directors (Proposal
1). The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company is required for approval of the amendments to the
Company's Certificate of Incorporation (Proposal 2). The affirmative vote of the
holders of a majority of the shares of Common Stock voted at the Meeting is
required to approve the 1999 Employee Stock Purchase Plan and the 1999 Stock
Incentive Plan (Proposals 3 and 4) and to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors of the Company (Proposal 5).
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes cast in favor of such matter, and also will
not be counted as shares voting on such matter. Accordingly, abstentions and
"broker non-votes" will have no effect on the voting on a matter that requires
the affirmative vote of the holders of a certain percentage of the shares of
Common Stock voting on a matter.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Election as Directors
The persons named as proxies in the accompanying Proxy intend (unless
authority to vote therefor is specifically withheld) to vote for the election of
the persons named below as directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any of the nominees becomes unavailable to serve as a
director, the persons named as proxies in the accompanying Proxy may vote the
Proxy for substitute nominees. The Board of Directors has no reason to believe
that any of the nominees will be unable to serve if elected. Neither David G.
Pinosky nor F. Steven Berg is standing for re-election to the Board of Directors
and, accordingly, the Board of Directors has voted to reduce the number of
directors of the Company from eight to seven, effective as of the date of the
Meeting.
-5-
<PAGE>
The following table sets forth certain information with respect to the
nominees:
<TABLE>
<CAPTION>
Principal Occupation,
Other Business
Experience During
Director Past Five Years and
Name Age Since Other Directorships
---- --- ----- ---------------------
<S> <C> <C> <C>
Edward B. Hager, M.D. 67 1977 Chairman of the Board of
Directors and Chief Executive
Officer of the Company since
1977; Chairman of the Board of
Directors and Chief Executive
Officer of Novavax, Inc. from
1987 to June 1996; Chairman of
the Board of Directors of
Novavax, Inc. from February
1997 to March 1998; Dr. Hager is
the husband of Jane E. Hager.
Jane E. Hager 53 1977 President of Prescott Investment
Corp. (real estate development),
Lyndeboro, NH since 1991;
former Treasurer of IGI, Inc.;
Director of Fleet Bank-NH,
Nashua, NH from 1986 to 1998;
Trustee and Treasurer of the
University System of New
Hampshire; Overseer of
Dartmouth Mary Hitchcock
Hospital; Incorporator of New
Hampshire Charitable Fund,
Concord, NH; Trustee of the
Derryfield School in Manchester,
New Hampshire; Director of
Novavax, Inc. from February
1997 to March 1998; Mrs. Hager
is the wife of Edward B. Hager.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation,
Other Business
Experience During
Director Past Five Years and
Name Age Since Other Directorships
---- --- ----- ---------------------
<S> <C> <C> <C>
Terrence O'Donnell 55 1993 Member of law firm of Williams
& Connolly, Washington, D.C.
since March 1992 and from
March 1977 to October 1989;
General Counsel of Department
of Defense from October 1989 to
March 1992; Special Assistant to
President Ford from August 1974
to January 1977; Deputy Special
Assistant to President Nixon
from May 1972 to August 1974;
Director of MLC Holdings.
Constantine L. 66 1994 Chief Executive Officer of MDL
Hampers, M.D. Consulting Associates since 1996;
Chairman of the Board of Directors
and Chief Executive Officer of
National Medical Care, Inc., a
provider of in-center and home
kidney dialysis services and
products, from 1968 to 1996;
Executive Vice President and
Director of W.R. Grace & Co. from
1986 to 1996; Director of
Artificial Kidney Services at
Peter Bent Brigham Hospital and
Assistant Professor of Medicine at
Harvard University School of
Medicine prior to 1968 and for
several years thereafter.
Paul D. Paganucci 68 1996 Chairman of the Board of Directors
of Ledyard National Bank since
1991; Chairman of the Executive
Committee of Board of Directors of
W.R. Grace & Co. from 1989 to
1991; Vice Chairman of W.R. Grace
& Co. from 1986 to 1989; Executive
Vice President of W.R. Grace from
January 1986 to November 1986;
Director of HRE Properties, Inc.,
Filene's Basement, Inc. and
Allmerica Securities Trust.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation,
Other Business
Experience During
Director Past Five Years and
Name Age Since Other Directorships
---- --- ----- ---------------------
<S> <C> <C> <C>
Terrence D. Daniels 56 1996 President of Quad-C (a structured
investment firm) since 1990; Vice
Chairman of W.R. Grace & Co. from
1986 to 1989; Director of
Stimsonite Corporation, Collins &
Aikman Floorcoverings and numerous
private companies.
Stephen J. Morris 66 Co-founder and General Manager of
John Morris & Sons, Inc., a hotel
and restaurant enterprise;
Co-founder and Advisor of
International Scientific
Communications, a scientific
publishing company; Director of
Pure Energy Corporation, a
developer of alternative motor
fuels.
</TABLE>
For information relating to shares of the Company owned by each of the
directors. See "Beneficial Ownership of Common Stock."
Board and Committee Meetings
The Board of Directors met fifteen times during 1998. Except for Messrs.
Daniels, Pinosky and Paganucci, each of the current directors attended at least
75% of the meetings of the Board of Directors and the committees on which he or
she served. The Board of Directors has an Executive Committee, an Audit
Committee, an Independent Committee of Outside Directors, a Compensation and
Stock Option Committee and a Governance Committee.
The Executive Committee, whose members are Drs. Hager and Hampers and Mrs.
Hager, has the authority to exercise the powers of the Board of Directors
between Board meetings. The Audit Committee, whose members are Dr. Pinosky,
Messrs. O'Donnell (Chairman) and Paganucci and Mrs. Hager, reviews the audit of
the Company's accounts, monitors the effectiveness of the audit and evaluates
the scope of the audit. The Independent Committee of Outside Directors, whose
members are Drs. Hampers (Chairman) and Pinosky and Messrs. O'Donnell, Daniels,
Berg and Paganucci, reviews and approves transactions between management and the
Company. The Compensation and Stock Option Committee, whose members are Drs.
Hampers (Chairman) and Pinosky, and Messrs. Daniels, O'Donnell, Paganucci and
Berg, reviews and recommends salaries and other compensatory benefits for the
principal officers of the Company and grants stock options to key employees of
the Company and its subsidiaries. In February 1999, the
-8-
<PAGE>
Company formed a Governance Committee, whose members are Dr. Hampers (Chairman),
Jane E. Hager and Terrence O'Donnell, to ensure that principles of appropriate
corporate governance are developed and maintained. The Governance Committee also
serves as the nominating body for the Board of Directors.
During 1998, the Executive Committee did not meet, the Independent
Committee of Outside Directors met once, the Compensation and Stock Option
Committee met twice and the Audit Committee met four times.
Director Compensation and Stock Options
The Board of Directors adopted the 1998 Directors Stock Plan (the "1998
Plan") in October 1998 and each outside director agreed to receive shares of the
Company's Common Stock as director compensation in lieu of the former practice
of payment of director fees in cash, thereby encouraging ownership in the
Company by the directors. Each non-employee director receives $2,000 in value of
Common Stock for each meeting of the Board he or she attends in person, $1,000
in value of Common Stock for each telephonic meeting of the Board attended, $500
in value of Common Stock for each Committee meeting attended which is held on
the same day as a Board meeting, $1,000 in value of Common Stock for each
Committee meeting attended which is not held on the same day as the Board
meeting, and up to $5,000 in value of Common Stock annually for the Chairman of
certain of the Board Committees. The fees are payable quarterly and the number
of shares of Common Stock issued to each director is determined by dividing the
fees payable for the quarter by the closing price of the Company's Common Stock
on the American Stock Exchange on the last business day of the applicable
quarter.
Pursuant to the 1998 Plan, Mrs. Hager and Messrs. Pinosky, Daniels,
O'Donnell, Hampers, Berg and Paganucci each received the following number of
shares, respectively, of Common Stock of the Company as compensation for 1998:
9,823; 6,823; 5,782; 14,565; 8,073; 7,823; and 7,298. These shares represented a
total value at the time of issuance of $119,500. Directors' fees of $18,000 were
paid in cash to directors in 1998 prior to the adoption of the 1998 Plan.
Pursuant to the Company's 1991 Stock Option Plan (the "1991 Plan"), each
director who is not an employee of the Company (an "Eligible Director") is
granted a stock option for the purchase of 20,000 shares of Common Stock sixty
days after his or her initial election as a director. In addition, the 1991 Plan
provides that each Eligible Director will be granted a stock option to purchase
10,000 shares of Common Stock on the last business day of each of the calendar
years through 1999. Each Eligible Director elected on or after March 13, 1991
received an option for the initial grant of 20,000 shares, and each Eligible
Director then serving as a director received additional options for 10,000
shares in each of the years 1992 through 1998. Options granted to Eligible
Directors are exercisable in full beginning on the date which is six months
after the date
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<PAGE>
of grant and terminate ten years after the date of grant. Such options cease to
be exercisable at the earlier of their expiration or three years after an
Eligible Director ceases to be a director for any reason. In the event that an
Eligible Director ceases to be a director on account of his death, his
outstanding options (whether exercisable or not on the date of death) may be
exercised within three years after such date (subject to the condition that no
such option may be exercised after the expiration of ten years from its date of
grant).
Certain Relationships and Related Transactions
During 1998, Company personnel and advisors traveled at various times on
Company business on an airplane owned by a company which is wholly-owned by Jane
E. Hager, a director of the Company and spouse of Edward B. Hager, M.D. Total
charges to the Company for its use of the airplane in 1998 were $82,500. The
Board of Directors authorized use of the aircraft for business travel only, and
provided that (i) the air travel rate billed to the Company for use of the
airplane be at least as favorable as the rate charged by private aircraft owners
unaffiliated with the Company, and (ii) use of the airplane be limited to 100
hours at $1,350 per hour. Notwithstanding these criteria, the Company was billed
for such use of the aircraft at rates not exceeding those for first class
commercial airfare.
In connection with the April 29, 1998 Extension Agreement, the Company
issued to Mellon Bank warrants to purchase an aggregate of 240,000 shares of the
Company's Common Stock at an exercise price of $3.50 per share. On August 19,
1998, the Company and Mellon Bank entered into a Forbearance Agreement whereby
the bank agreed to forbear from exercising its rights and remedies arising from
covenant defaults through January 31, 1999. The Company then entered into a
Second Extension Agreement with Mellon Bank, effective January 31, 1999, whereby
the Company issued to Mellon Bank new warrants to purchase an additional 240,000
shares of the Company's Common Stock at an exercise price of $2.00 per share. As
of March 15, 1999, Mellon Bank is the beneficial owner of 732,801 shares of the
Company's Common Stock or 7.4% of the outstanding shares.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company, the four most highly compensated executive officers of
the Company who received compensation in excess of $100,000 during 1998 and who
were serving as executive officers at the end of 1998, and one individual who
would have been one of the Company's four most highly compensated executive
officers, but for the fact that he was no longer employed by the Company at the
end of 1998.
-10-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($)(1) (#)(2) ($)(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Hager(4) 1998 $ -- $ -- $ -- 225,000 $ 11,775
Chief Executive 1997 303,480 -- -- -- 11,944
Officer 1996 345,455 -- -- 50,000 12,864
Paul Woitach (5) 1998 151,442 -- 4,200 100,000 2,848
President and Chief
Operating Officer
John F. Wall(5) 1998 99,167 -- 4,200 50,000 2,387
Senior Vice President
and Chief Financial
Officer
Robert E. McDaniel (5) 1998 106,920 -- 3,000 60,000 2,963
Senior Vice President,
General Counsel and
Secretary
Kevin J. Bratton(6) 1998 130,846 -- 3,000 53,000 9,373
Vice President and 1997 122,723 -- 6,000 -- 8,847
Treasurer 1996 116,416 3,000 6,000 5,000 10,588
Stephen G. Hoch(7) 1998 182,572 -- 6,000 -- 6,642
Vice President 1997 218,149 -- 7,200 -- 8,166
1996 200,293 10,000 7,200 5,000 9,128
</TABLE>
- ----------
(1) The amounts shown in this column represent automobile allowances.
(2) The Company has never granted any stock appreciation rights.
(3) The amounts shown in this column represent premiums for group life
insurance and medical insurance paid by the Company and the Company's
contributions under its 401(k) plan.
(4) Dr. Hager elected to defer payment of his salary in 1998. That salary,
which amounted to $380,000 was accrued to expense in 1998. See "Employment
Agreements." Dr. Hager's options for 225,000 shares were granted to him in
November 1998 in substitution for lower-priced options for the same number
of shares pursuant to an option repricing that took place in November 1998.
See "10-Year Option Repricings."
(5) Messrs. Woitach, Wall and McDaniel joined the Company in 1998.
(6) Mr. Bratton's options for 53,000 shares include 28,000 shares which were
granted in substitution for existing lower-priced options pursuant to the
November 1998 option repricing. See "10-Year Option Repricings." Mr.
Bratton resigned in January 1999.
(7) Mr. Hoch resigned in September 1998.
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<PAGE>
Stock Options
The following tables set forth certain information concerning option grants
during the fiscal year ended December 31, 1998 to the Named Executive Officers
and the number and the value of the options held by such persons on December 31,
1998. The first table does not include options granted to Dr. Hager and Mr.
Bratton in November 1998 in substitution of lower-priced options. See "10-Year
Option Repricings." No options were exercised by Named Executive Officers during
1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------
Potential Realizable Value
Number of Percent of At Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (1)
Options Employees in Base Price Per Expiration -------------------
Name Granted (#) Fiscal Year Share ($/sh) Date 5% 10%
- ---- ----------- ----------- ------------ ---- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Hager -- -- -- -- -- --
Paul Woitach 100,000(2) 24.91% 2.00 5/11/08 $126,000 $318,000
John F. Wall 50,000(2) 12.45% 3.13 6/2/08 98,438 248,438
Robert E. McDaniel 50,000(2) 12.45% 3.13 6/2/08 98,438 248,438
10,000(3) 2.50% 3.00 9/24/08 18,900 47,700
Kevin J. Bratton 25,000(3) 6.23% 3.50 3/17/08 55,125 139,125
Stephen G. Hoch -- -- -- -- -- --
</TABLE>
- ----------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised. No gain to the optionees is possible without an
appreciation in stock price, which will benefit all stockholders
commensurately.
(2) 50% of the shares covered by the options are exercisable on the six-month
anniversary of the option grant and the remaining 50% of the shares are
exercisable one year after the date of grant.
(3) 25% of the shares covered by the options are exercisable on the first
anniversary of the option grant date and an additional 25% of the shares
are exercisable on each successive anniversary date, with full vesting
occurring on the fourth anniversary date.
-12-
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired On Value Options at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) (#)
Name (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Edward B. Hager -- -- 375,000/0 $0/$0
Paul Woitach -- -- 50,000/50,000 0/0
John F. Wall -- -- 25,000/25,000 0/0
Robert E. McDaniel -- -- 25,000/35,000 0/0
Kevin J. Bratton -- -- 24,250/28,750 0/0
Stephen G. Hoch -- -- 0/0 0/0
</TABLE>
(1) Represents the difference between the exercise price and the last sales
price of the Common Stock on the date of exercise.
(2) Value based on market value of the Company's Common Stock at the end of
fiscal 1998 ($1.94 per share) minus the exercise price.
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<PAGE>
Repricing of Options
The following table sets forth certain information concerning the Company's
repricing in 1998 of options held by two executive officers of the Company. No
other repricing of stock options has occurred during the past ten years.
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Original
Number of Exercise Option
Shares Price at Term
Underlying Market Price of Time of New Remaining
Date of Options Stock at Time Repricing Exercise at Date of
Name Repricing Repriced (#) of Repricing ($) ($) Price ($) Repricing
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Hager 11/23/98 50,000 $2.125 $4.70 $2.66 1 month
Chief Executive 11/23/98 50,000 2.125 5.10 2.66 13 months
Officer 11/23/98 25,000 2.125 5.02 2.66 25 months
11/23/98 25,000 2.125 4.78 2.66 28 months
11/23/98 25,000 2.125 9.88 2.66 37 months
11/23/98 25,000 2.125 7.29 2.66 46 months
11/23/98 25,000 2.125 7.12 2.66 49 months
Kevin J. Bratton 11/23/98 5,000 $2.125 $5.10 $2.44 13 months
Vice President and 11/23/98 4,000 2.125 5.02 2.44 25 months
Treasurer 11/23/98 1,000 2.125 9.88 2.44 37 months
11/23/98 5,000 2.125 7.29 2.44 46 months
11/23/98 3,000 2.125 8.58 2.44 73 months
11/23/98 5,000 2.125 6.63 2.44 85 months
11/23/98 5,000 2.125 5.75 2.44 97 months
</TABLE>
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<PAGE>
Report on Option Repricing
On November 9, 1998, the Compensation and Stock Option Committee of the
Board of Directors approved a repricing of options for current employees and
consultants of the Company holding outstanding stock options with an exercise
price of more than $4.00 per share, which included the two named executive
officers listed in the table above.
Because of the substantial decline in the market value of the Company's
Common Stock, many of the options which were outstanding in November 1998 were
exercisable at prices that exceeded the market value of the Common Stock. In
view of this decline and in keeping with the Company's philosophy of using
equity incentives to motivate and retain qualified employees and consultants,
the Compensation and Stock Option Committee believed that it was in the best
interests of the Company and its stockholders to restore the incentive intended
when these options were originally granted.
Pursuant to the terms of the repricing, 34 option holders, holding options
to purchase an aggregate of 331,465 shares of the Company's Common Stock, which
had an exercise price of greater than $4.00 per share ("Existing Options"), were
issued new options as of November 23, 1998, at a reduced exercise price of $2.44
per share. Dr. Hager's options to purchase a total of 225,000 shares were only
reduced to $2.66 per share (the "New Options"). Except for the different
exercise price, which is at a premium to the then fair market value of the
Common Stock, the terms of the option agreements, including the vesting schedule
relating to the New Options, are substantially the same as the terms of the
option agreements for the Existing Options that they replaced.
Compensation and Stock Option Committee
Constantine L. Hampers, M.D., Chairman
Terrence D. Daniels
Terrence O'Donnell
Paul D. Paganucci
F. Steven Berg
David G. Pinosky, M.D.
Employment Agreements
Pursuant to his Employment Agreement, Dr. Hager is entitled to an annual
increase of 10% of his prior year's salary each year through December 31, 1999,
the expiration date of the Employment Agreement. Dr. Hager waived the 10%
increase for 1998 and chose to defer the payment of his entire annual salary as
of January 1, 1998, to preserve funds for the Company's cash needs. Therefore,
the Company accrued, but did not pay, Dr. Hager's 1998 salary of $380,000. Dr.
Hager's accrued and unpaid salary as of February 28, 1999 was $456,667 and that
amount, plus future deferred salary payments, will be paid to Dr. Hager only at
such time as the Board of Directors of the
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<PAGE>
Company, in consultation with the Compensation and Stock Option Committee,
determines that the Company's cash position is adequate to pay the deferred
amount and to resume the current payment of his salary. Dr. Hager's Employment
Agreement also provides for continuation of his salary through December 31, 1999
in the event he is terminated without cause prior to that date.
Dr. Hager is bound by certain non-compete and non-solicitation obligations
for five years after termination of employment or such longer period during
which he receives severance payments under the Employment Agreement.
The Company has entered into employment agreements with each of Messrs.
Paul Woitach, President and Chief Operating Officer of the Company, and John F.
Wall, Senior Vice President and Chief Financial Officer of the Company. The
agreements provide for their employment for a one year period, which is
automatically renewed annually unless terminated by the Company by written
notice at least 60 days prior to the renewal date. In the event their employment
is terminated without cause, Mr. Woitach is entitled to continuation of his
annual salary for up to 18 months and Mr. Wall is entitled to continuation of
his annual salary for up to 12 months.
Report of the Compensation and Stock Option Committee
Overview and Philosophy
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is comprised of six non-employee directors and is responsible for
the development and administration of the Company's executive compensation
policies and programs, subject to the review and approval by the full Board. The
Committee reviews and recommends to the Board for its approval the salaries and
incentive compensation for the executive officers of the Company and grants
stock options to executives and other key employees of the Company and its
subsidiaries.
The objectives of the Company's executive compensation program are to:
o Support the achievement of strategic goals and objectives of the
Company.
o Attract and retain key executives critical to the long-term success of
the Company.
o Align the executive officers' interests with the success of the
Company.
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<PAGE>
Compensation Program
The Company's executive compensation program consists of three principal
elements - base salary, annual cash incentive compensation and long-term
incentive compensation in the form of stock options.
The base salary of Dr. Hager was established pursuant to the terms of his
employment agreement with the Company. See "Employment Agreements." Base salary
levels for the Company's executive officers are generally based on a review of
compensation for competitive positions in the market, the executives' job skills
and experience and judgments as to past and future contributions of the
executives to the Company's success. Due to the mix of the types of businesses
in which the Company is engaged, animal health products and skin care products,
it is difficult to find similar companies with which meaningful comparisons can
be made. The Committee seeks to set the annual base salaries of its executives
at levels competitive with those paid to executives in these businesses. It
seeks, however, to provide its executives with opportunities for substantially
higher compensation through annual incentive awards and stock options.
The Company made no cash incentive or bonus payments in 1998. The annual
cash incentive compensation program was designed to tie annual awards to Company
and individual executive performance. Accordingly, the Committee considers a
number of factors in determining whether annual incentive awards should be paid,
including (i) achievement by the Company and/or specific business units of
approved budgets, new product introductions, progress in development of new
products and operating income and cash flow goals and (ii) achievement by the
executives of their assigned objectives. In considering individual performance,
as contrasted to Company performance, the Committee relies more on subjective
evaluations of executive performance than on quantitative data or objective
criteria. Further, the Company is in the process of implementing a variable
compensation plan for its top executives. The purpose of the plan is to directly
link management compensation to Company performance. Present plans include
expanding the application of the variable compensation plan to more upper level
managers.
Long-term incentives for executive officers and key managers are provided
through stock options. The objectives of this program are to align executive and
stockholder long-term interests by creating a strong and direct link between
executive compensation and stockholder return, and to enable executives to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock.
Stock options are granted at an option price equal to the fair market value
of the Company's Common Stock on the date of grant and will only have value if
the Company's stock price increases. In selecting executives eligible to receive
option grants and determining the amount of such grants, the Committee evaluates
a variety of factors including (i) the job level of the executive, (ii) option
grants awarded by
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<PAGE>
competitors to executives at a comparable job level, and (iii) past, current and
prospective service to the Company rendered, or to be rendered, by the
executive. It has been the Company's practice to fix the exercise price of
option grants at 100% of the fair market value per share on the date of grant.
Chief Executive Officer's 1998 Compensation
Dr. Edward B. Hager, Chairman of the Board and Chief Executive Officer of
the Company, is eligible to participate in the same executive compensation plans
available to the other Company executives. In addition to his duties as Chief
Executive Officer and Chairman of the Board, Dr. Hager serves as Chief
Scientific Officer of the Company. The Committee has set Dr. Hager's total
annual compensation, including annual incentive awards and potential additional
compensation derived from the Company's stock option program, at a level it
believes is competitive with other comparable companies.
Dr. Hager's annual compensation is governed by the terms of his employment
agreement with the Company. Pursuant to his employment agreement, Dr. Hager is
entitled to an annual increase of 10% of his prior year's salary each year
through December 31, 1999, the expiration date of the employment agreement.
However, Dr. Hager waived the 10% increase for 1998 and chose to defer the
payment of his annual salary to preserve funds for the Company's cash needs. Dr.
Hager's accrued unpaid salary as of February 28, 1999 was $456,667, and that
amount plus future deferred salary payments will be paid to Dr. Hager only at
such time as the Board of Directors of the Company, in consultation with the
Committee, determines that the Company's cash position is adequate to pay the
deferred amount and to resume the current payment of his salary. Dr. Hager's
Employment Agreement also provides for continuation of his salary through
December 31, 1999 in the event he is terminated without cause prior to that
date.
The Committee did not award Dr. Hager any additional options in 1998.
However, Dr. Hager did receive an option grant on January 5, 1999 to purchase
100,000 shares of Common Stock and, as set forth above, options held by Dr.
Hager for the purchase of 225,000 shares of Common Stock were repriced on
November 23, 1998 at a lower exercise price, but an exercise price higher than
that offered to other employees. See "10-Year Option Repricings."
Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation in excess of one million dollars paid to its chief executive
officer and its other four highest compensated officers. Qualified
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. While the Committee does not
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<PAGE>
currently intend to qualify its annual cash incentive compensation as qualified
performance-based compensation, it will continue to monitor the impact of
Section 162(m) on the Company. Based on the compensation received by Dr. Hager
and the other Named Executive Officers, it does not appear that the Section
162(m) limitation will have a significant impact on the Company in the near
term.
Compensation and Stock Option Committee
Constantine L. Hampers, M.D., Chairman
Terrence D. Daniels
Terrence O'Donnell
Paul D. Paganucci
F. Steven Berg
David G. Pinosky, M.D.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation and Stock Option Committee was, during fiscal
year 1998, an officer or employee of the Company or any of its subsidiaries; or
was formerly an officer of the Company or any of its subsidiaries. During fiscal
year 1998, no executive officer of the Company served as a director or member of
the compensation committee (or other board committee performing equivalent
functions, or in the absence of such committee, the entire board of directors)
of another entity, one of whose executive officers served as a member of the
Compensation and Stock Option Committee, or as a director, of the Company.
Comparative Stock Performance
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the AMEX Composite Index and a peer group over the same period
(assuming the investment of $100 in the Company's Common Stock, the AMEX
Composite Index and the peer group on December 31, 1993, and reinvestment of all
dividends). The peer group consists of the Company, The Liposome Company, Inc.,
Sequus Pharmaceuticals (formerly Liposome Technology, Inc.), Nexstar
Pharmaceuticals (formerly Vestar, Inc.) and Advanced Polymer Systems, Inc. The
Company's Common Stock was suspended from trading on the American Stock Exchange
from March 31, 1998 to September 7, 1998 due to delays in filing periodic
reports under the Securities Exchange Act of 1934, as amended, and resumed
trading on September 8, 1998.
-19-
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Data Points
Cumulative Total Return
12/93 12/94 12/95 12/96 12/97 12/98
----- ----- ----- ----- ----- -----
IGI, Inc. 100 137 140 115 68 33
Peer Group 100 102 214 216 104 186
AMEX Market Value 100 91 115 122 148 151
PROPOSAL 2 - APPROVAL OF INCREASE IN NUMBER OF
SHARES OF AUTHORIZED COMMON STOCK AND
CREATION OF A NEW CLASS OF PREFERRED STOCK
On March 16, 1999, the Board of Directors adopted, subject to stockholder
approval, amendments to the Company's Certificate of Incorporation to (1)
increase the Company's authorized number of shares of Common Stock from
30,000,000 shares to 50,000,000 shares and (2) create a new class of Preferred
Stock consisting of 1,000,000 shares. If approved by the stockholders, the
amendments would become effective upon the filing of a Certificate of Amendment
of the Company's Certificate of Incorporation (the "Certificate of Amendment")
with the Secretary of the State of Delaware.
The Certificate of Amendment would amend Article Fourth of the Certificate
of Incorporation to read as set forth in Appendix A annexed hereto.
Increase in Common Stock
Under the Company's Certificate of Incorporation, as currently in effect,
the only class of capital stock which the Company is authorized to issue is
Common Stock. If the Certificate of Amendment is approved, the additional shares
of Common Stock would be part of the existing class of Common Stock and, if and
when issued, would not affect the rights of the holders of currently outstanding
Common Stock, except for effects incidental to increasing the number of shares
of Common Stock outstanding, such as dilution of earnings per share and voting
rights of current stockholders. At December 31, 1998, 9,512,917 shares of Common
Stock were outstanding.
At March 1, 1999, the Company had cash and cash equivalent balances of
approximately $535,000, and no available borrowing capacity under its bank
credit line or bank revolving facility. The Company is currently generating
losses that may extend through much of 1999. Further, the Company has
significant debt that it must repay on August 31, 1999, November 30, 1999, and
March 31, 2000. Over the past 14 months, the Company's lending banks have
modified the terms of their loan agreement at least three times, most recently
extending the loan agreement to March 2000. In the event of future defaults the
banks may or may not make additional changes in the loan agreement.
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<PAGE>
The Company is pursuing additional debt and equity financing alternatives
to meet these obligations. The Company believes it can obtain such financing on
acceptable terms. However, if the Company is not successful in obtaining the
required additional financing, it believes it has the ability and it plans to
meet its 1999 debt repayment obligations by altering its business plans
including, if necessary, a sale of selected Company operating and non-operating
assets. Any sale of operating assets would involve a curtailment of certain of
the Company's business operations and a modification of its business strategy.
However, if the Company is unable to raise sufficient funds to repay or
refinance the debt repayment due March 31, 2000, the Company could be in default
under its loan agreement and any such default could lead to the commencement of
insolvency proceedings by its creditors subsequent to that date.
Accordingly, the Board of Directors of the Company has authorized
management of the Company to seek additional equity capital through the sale of
Common Stock of the Company, either through a private sale to institutional or
individual investors or through a rights offering to its stockholders. Subject
to shareholder approval, the Board has authorized an increase in the number of
shares of Common Stock and the creation of a class of preferred stock. While the
Company has contacted a number of potential providers of additional capital who
have expressed interest in negotiating financing arrangements with the Company,
to date no agreements or commitments have been obtained.
Therefore, the Board of Directors is considering offering all of its
current stockholders the right to purchase shares of Common Stock in a rights
offering, pursuant to which all stockholders would be entitled to purchase
additional shares of Common Stock on a pro rata basis ("Proposed Financing").
The price per share of Common Stock to be sold in the Proposed Financing is
expected to be determined based upon valuation advice from an independent
investment bank. It is expected that the price will be fixed at a substantial
discount to the prevailing market price to attract stockholder participation in
the Proposed Financing. Although the Company has discussed the Proposed
Financing with three of its largest stockholders, no commitment, agreement or
understanding has been made by any of them with respect to their participation
in the Proposed Financing.
The proceeds from the Proposed Financing will be used to reduce the
Company's bank indebtedness, including the payment of $4,000,000 to its bank
lenders on August 31, 1999. The increase in the authorized Common Stock is
needed, in the opinion of the Board of Directors, to give the Company the
flexibility to consummate an equity sale while at the same time providing
additional shares of Common Stock for possible future financings, the Company's
stock plans for its employees, the establishment of future strategic
relationships or the acquisition of other products or businesses. There is no
assurance at this time that the Proposed Financing will be consummated. The
terms of any equity financing have not been determined and will be subject to
all applicable securities laws. The issuance of additional shares of Common
Stock in the Proposed Financing would be dilutive to the current stockholders
since the shares will be issued at a discount to the prevailing market price of
the Company's Common Stock.
Series Preferred Stock
From time to time, in its efforts to replace its current bank debt, the
Company has been advised that a Preferred Stock issuance would be an appropriate
financing vehicle.
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<PAGE>
While the Company has no present plans to issue any shares of Preferred Stock,
approval by the Company's stockholders would allow the Company to seek to sell
shares of Preferred Stock to raise needed equity capital. Therefore, approval by
the Company's stockholders of the Certificate of Amendment would also permit the
Board of Directors (1) to issue from time to time shares of Preferred Stock,
$.01 par value per share (the "Preferred Stock"), in one or more series, (2)
determine the number of shares constituting each such series and (3) designate
the rights, powers and preferences of each series, including, but not limited
to, dividend rights, liquidation preferences, redemption provisions, conversion
rights and voting rights, if any, in addition to those provided by law. Any
issued shares of a series of Preferred Stock may rank prior to shares of Common
Stock as to dividends or distributions upon liquidation, or both, and may rank
prior to, on a parity with, or junior to shares of any other series of Preferred
Stock with respect to the payment of dividends or distributions upon
liquidation, or both, in each case as determined by the Board of Directors at
the time such series is established (and subject to the rights of the holders of
any previously issued shares of a series of Preferred Stock).
The holders of shares of Common Stock do not have preemptive rights to
subscribe for any of the Company's securities and will not have any such rights
to subscribe for shares of any series of Preferred Stock.
If the Certificate of Amendment is approved, the shares of Preferred Stock
would be available for issuance from time to time by the Board of Directors,
without further action on the part of the Company's stockholders, for such
corporate purposes as the Board of Directors may deem advisable, including
without limitation, issuance of Preferred Stock in connection with any future
financings or acquisitions or for other corporate purposes.
The issuance of either the Common Stock or the Preferred Stock in certain
circumstances may have the effect of deferring or preventing a change in control
of the Company, may discourage a proposed acquisition of the Company at a
premium over the market price of the Common Stock and, in the case of the
Preferred Stock, may adversely affect the market price of, and other rights of
the holders of, Common Stock. The Company is not aware of any attempt to effect
a change in control or takeover of the Company. If the Certificate of Amendment
is approved, the Board of Directors will have shares of Preferred Stock
available to effect a sale of shares (either in public or private transactions,
mergers, consolidations or similar transactions) in which case the number of the
Company's outstanding shares would be increased and would thereby dilute the
interest of a party attempting to obtain control of the Company.
Board Recommendation
The affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock of the Company is required for the approval of the
Certificate of
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<PAGE>
Amendment. The Board of Directors believes that the proposed amendments are in
the best interests of the Company and its stockholders and recommends a vote FOR
the Certificate of Amendment.
PROPOSAL 3 - PROPOSED APPROVAL OF THE
1999 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to
maintain a competitive position in attracting and retaining quality personnel.
The Company believes that an employee stock purchase plan will be an integral
component of the benefit package for all eligible employees. Accordingly, on
December 7, 1998, the Board of Directors adopted, subject to stockholder
approval, the 1999 Employee Stock Purchase Plan (the "1999 Stock Purchase
Plan").
Summary of the 1999 Stock Purchase Plan
The following summary of the 1999 Stock Purchase Plan is qualified in its
entirety by reference to the 1999 Employee Stock Purchase Plan.
An aggregate of 300,000 shares of Common Stock (subject to adjustment in
the event of a subdivision of outstanding shares of Common Stock, or the payment
of a dividend in Common Stock, or such other event in which it is deemed
equitable to make an adjustment) may be issued pursuant to the 1999 Stock
Purchase Plan. The 1999 Stock Purchase Plan is implemented through offerings,
each approximately twelve months in length after an initial six month offering
period, and provides eligible employees with the opportunity to purchase shares
of the Company's Common Stock at a discounted price. The first offering will
commence on July 1, 1999 and will terminate on December 31, 1999. Thereafter,
each offering period will begin on the first day of each year and end on the
last day of such year. It is anticipated that subsequent offerings will be
twelve months in duration, although the Board may, at its discretion, choose a
different offering period of less than twelve months for subsequent offering
periods.
Each employee of the Company and its eligible subsidiaries, including an
officer or director who is also an employee, is eligible to participate in the
1999 Stock Purchase Plan, provided he or she (i) is employed by the Company or
any eligible subsidiary on the applicable offering commencement date, (ii) is
customarily employed by the Company or any eligible subsidiary for more than 20
hours per week and for more than five months in a calendar year, and (iii) has
been employed by the Company or any eligible subsidiary for at least 90 days
prior to enrolling in the 1999 Stock Purchase Plan. An employee may elect to
have up to a maximum of 10% withheld from his or her base pay for purposes of
purchasing shares under the 1999 Stock Purchase Plan, subject to certain
limitations on the maximum number of shares that may be purchased. The price
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<PAGE>
at which shares may be purchased during each offering will be the lower of (i)
85% of the closing price of the Common Stock on the date that the offering
commences or (ii) 85% of the closing price of the Common Stock on the date that
the offering terminates.
The 1999 Stock Purchase Plan is administered by the Board of Directors of
the Company and the Compensation and Stock Option Committee of the Board of
Directors. The Board and the Compensation and Stock Option Committee have the
authority to make rules and regulations for the administration of the 1999 Stock
Purchase Plan. Pursuant to the terms of the 1999 Stock Purchase Plan, the Board
has appointed the Compensation and Stock Option Committee to administer certain
aspects of the 1999 Stock Purchase Plan. The Board may at any time terminate or
amend the 1999 Stock Purchase Plan, except that (a) if the approval of any such
amendment by the stockholders of the Company is required by Section 423 of the
Code, such amendment shall not be effected without such approval, and (b) in no
event may any amendment be made which would cause the 1999 Stock Purchase Plan
to fail to comply with Section 423 of the Code. The 1999 Stock Purchase Plan
contains provisions relating to the disposition of the employee's rights to
purchase shares in the event of certain mergers, acquisitions and other
extraordinary corporate transactions involving the Company.
As of March 1, 1999, approximately 208 employees would have been eligible
to participate in the 1999 Stock Purchase Plan.
The purchase of shares under the 1999 Stock Purchase Plan is discretionary,
and the Company cannot now determine the number of shares to be purchased in the
future by any particular person or group.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
1999 Stock Purchase Plan and with respect to the sale of Common Stock acquired
under the 1999 Stock Purchase Plan.
Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the 1999 Stock Purchase Plan or upon
purchasing shares of Common Stock at the end of any offering. If a participant
sells Common Stock acquired under the 1999 Stock Purchase Plan at a sale price
that exceeds the price at which the participant purchased the Common Stock, then
the participant will recognize taxable income in an amount equal to the excess
of the sale price of the Common Stock over the price at which the participant
purchased the Common Stock. A portion of that taxable income will be ordinary
income, and a portion may be capital gain.
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<PAGE>
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced (the "Grant Date"), then the participant will be taxed as follows. If
the sale price of the Common Stock is higher than the price at which the
participant purchased the Common Stock, then the participant will recognize
ordinary compensation income in an amount equal to the lesser of: (i) fifteen
percent of the fair market value of the Common Stock on the Grant Date; and (ii)
the excess of the sale price of the Common Stock over the price at which the
participant purchased the Common Stock. Any further income will be long-term
capital gain. If the sale price of the Common Stock is less than the price at
which the participant purchased the Common Stock, then the participant will
recognize long-term capital loss in an amount equal to the excess of the price
at which the participant purchased the Common Stock over the sale price of the
Common Stock.
If the participant sells the Common Stock within one year after acquiring
it or within two years after the Grant Date (a "Disqualifying Disposition"),
then the participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the price at which the participant purchased the
Common Stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the Common Stock on
the date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the Common Stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
Common Stock for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under the
1999 Stock Purchase Plan will have no tax consequences to the Company. Moreover,
in general, neither the purchase nor the sale of Common Stock acquired under the
1999 Stock Purchase Plan will have any tax consequences to the Company except
that the Company will be entitled to a business-expense deduction with respect
to any ordinary compensation income recognized by a participant upon making a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Code.
Board Recommendation
The Board of Directors believes that the 1999 Stock Purchase Plan is in
the best interests of the Company and its stockholders and recommends that the
stockholders vote FOR the adoption of the 1999 Stock Purchase Plan.
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PROPOSAL 4 - PROPOSED APPROVAL OF THE
1999 STOCK INCENTIVE PLAN
On March 16, 1999, the Board of Directors of the Company adopted, subject
to stockholder approval, the 1999 Stock Incentive Plan (the "1999 Incentive
Plan"). The 1999 Incentive Plan replaces all presently authorized stock option
plans, and no additional options may be granted under those plans if the
stockholders approve the 1999 Incentive Plan. Up to 1,200,000 shares of Common
Stock of the Company (subject to adjustment in the event of stock splits and
other similar events) may be issued pursuant to awards granted under the 1999
Incentive Plan. The purpose of the 1999 Incentive Plan is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Summary of the 1999 Incentive Plan
The following summary of the 1999 Incentive Plan is qualified in its
entirety by reference to the 1999 Incentive Plan.
Description of Awards
The 1999 Incentive Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Code, nonstatutory stock options
and restricted stock awards (collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. The 1999 Incentive
Plan authorizes the Board to determine the number of shares of Common Stock to
be covered by each option, the exercise price of each option and the conditions
and limitations applicable to the exercise of each option grant, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable.
Currently, under the Code, incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Code may
not be granted at an exercise price less than the fair market value of the
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the voting power of the Company).
No option will be granted for a term in excess of ten years. The 1999
Incentive Plan permits the Board to determine the manner of payment of the
exercise price of options, including through payment by cash, check or in
connection with a "cashless exercise" through a broker, by surrender to the
Company of shares of Common Stock, by delivery to the Company of a promissory
note or by any other lawful means.
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Restricted Stock Awards. The Board may grant Awards entitling recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares at their issue price or other stated or
formula price (or to require forfeiture of such shares if issued at no cost)
from the recipient in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award.
Stock Available for Awards
Subject to adjustment, Awards may be made under the 1999 Incentive Plan for
up to 1,200,000 shares of Common Stock. If any Award expires or is terminated,
surrendered or canceled without having been fully exercised or is forfeited in
whole or in part or results in any Common Stock not being issued, the unused
Common Stock covered by such Award shall again be available for the grant of
Awards under the 1999 Incentive Plan, subject, however, in the case of incentive
stock options, to any limitation required under the Code. Shares issued under
the 1999 Incentive Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
Eligibility to Receive Awards
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted Awards under the 1999 Incentive Plan. Subject to
adjustment, the maximum number of shares of Common Stock with respect to which
Awards may be granted to any participant under the 1999 Incentive Plan shall be
300,000 per calendar year. This per-participant limit described shall be
construed and applied consistently with Section 162(m) of the Code.
As of March 1, 1999, approximately 230 persons were eligible to receive
Awards under the 1999 Incentive Plan, including the Company's four executive
officers and seven non-employee directors. The granting of Awards under the 1999
Incentive Plan is discretionary and the Company cannot now determine the number
or type of Awards to be granted in the future to any person or group.
Administration
The 1999 Incentive Plan is administered by the Compensation and Stock
Option Committee who then recommends awards to the Board of Directors for
approval. The Board has authority to grant Awards and to adopt, amend and repeal
such administrative rules, guidelines and practices relating to the 1999
Incentive Plan as it shall deem advisable. Pursuant to the terms of the 1999
Incentive Plan, the Board of Directors may delegate authority under the 1999
Incentive Plan to one or more committees of the Board, and subject to certain
limitations, to one or more executive
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officers of the Company. Subject to any applicable limitations contained in the
1999 Incentive Plan, the Board of Directors, or any committee or executive
officer to whom the Board delegates authority, as the case may be, selects the
recipients of Awards and determines (i) the number of shares of Common Stock
covered by options and the dates upon which such options become exercisable,
(ii) the exercise price of options, (iii) the duration of options, and (iv) the
number of shares of Common Stock subject to any restricted stock or other
stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board of Directors may make appropriate adjustments in connection with
the 1999 Incentive Plan and any outstanding Awards to reflect stock dividends,
stock splits and other certain events that affect the Company's capitalization.
In the event of a merger, liquidation or other Acquisition Event (as defined in
the 1999 Incentive Plan), the Board of Directors is authorized to provide for
outstanding options or other stock-based Awards to be assumed or substituted
for, to accelerate the Awards to make them fully exercisable prior to
consummation of the Acquisition Event, or to provide for a cash-out of the value
of any outstanding options. Upon the occurrence of an Acquisition Event in the
case of restricted stock, the rights of the Company shall inure to the benefit
of the Company's successor. If any Award expires or is terminated, surrendered,
canceled or forfeited, the unused shares of Common Stock covered by such Award
will again be available for grant under the 1999 Incentive Plan.
Amendment or Termination
No Award may be made under the 1999 Incentive Plan after March 16, 2009,
but Awards previously granted may extend beyond that date. The Board may amend,
modify or terminate any outstanding Award, including but not limited to,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization, and converting an incentive stock option to
a nonstatutory stock option. The Board may also amend, suspend or terminate the
1999 Incentive Plan or any portion thereof at any time, provided that, to the
extent required by Section 162(m) of the Code, no Award granted to a participant
designated as subject to Section 162(m) by the Board after the date of such
amendment shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the 1999 Incentive Plan was required
to grant such Award to a particular participant), unless and until such
amendment shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1999 Incentive Plan and with respect to the sale of Common Stock acquired under
the 1999 Incentive Plan.
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Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the exercise date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
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loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.
Restricted Stock Awards
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the Award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the Award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, the participant will recognize ordinary compensation income, at the time
that the forfeiture provisions or restrictions on transfer lapse, in an amount
equal to the difference between the fair market value of the Common Stock at the
time of such lapse and the original purchase price paid for the Common Stock.
The participant will have a basis in the Common Stock acquired equal to the sum
of the price paid and the amount of ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made or just after the Award is granted if a Section 83(b) Election is made.
Tax Consequences to the Company
The grant of an Award under the 1999 Incentive Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the 1999
Incentive Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1999 Incentive Plan, including in connection with a restricted stock Award
or as a result of the exercise of a nonstatutory stock option or a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
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Board Recommendation
The Board of Directors believes that the approval of the 1999 Incentive
Plan is in the best interests of the Company and its stockholders and therefore
recommends that the stockholders vote FOR the adoption of the 1999 Incentive
Plan.
PROPOSAL 5 - RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as auditors
of the Company for the fiscal year ending December 31, 1999, subject to
ratification by stockholders at the Meeting. If this proposal is not approved at
the Meeting, the Board of Directors will reconsider this selection. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Meeting to respond to appropriate questions, and to make a statement if he or
she so desires.
On July 23, 1997, Coopers & Lybrand L.L.P., who had acted as certifying
accountants for the Company for the years ended December 31, 1996 and 1995,
informed the Company that it was resigning as the Company's auditors effective
as of that date. None of the prior certifying accountants' reports on the
Company's financial statements for the past two years contained an adverse
opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to terminate the
client-auditor relationship between the Company and Coopers & Lybrand L.L.P. was
initiated by Coopers & Lybrand L.L.P. and accordingly neither the Company's
Board of Directors nor its Audit Committee participated in a decision to change
the Company's independent accountants. At the end of the fiscal years ended
December 31, 1996 and 1995 the Company was unaware of any disagreement with
Coopers & Lybrand L.L.P. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which would have
caused Coopers & Lybrand L.L.P. to make reference to the subject matter in
connection with any report it has issued.
On September 8, 1997, the Company engaged Price Waterhouse LLP to act as
the Company's independent certified public accountant. The Company did not
consult with Price Waterhouse LLP during the fiscal years 1995 and 1996, or any
subsequent interim period prior to engaging them regarding matters that were or
should have been subject to Statement on Auditing Standard No. 50 or any subject
matter of a disagreement or reportable event with its former accountant.
On July 1, 1998 Price Waterhouse LLP and Coopers & Lybrand L.L.P. merged to
become PricewaterhouseCoopers LLP. The Company has decided to retain the new
entity, PricewaterhouseCoopers LLP, as its auditors.
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STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2000 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
offices, Wheat Road and Lincoln Avenue, Buena, New Jersey 08310, no later than
Thursday, December 16, 1999, in order to be considered for inclusion in the
Proxy Statement relating to that meeting.
If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting and the Company has not received notice of such matter prior
to Tuesday, February 29, 2000, the Company shall have discretionary authority to
vote on such matter, if the Company includes a specific statement in the proxy
statement or form of proxy to the effect that it has not received such notice in
a timely fashion.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
Robert E. McDaniel,
Secretary
April 14, 1999
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<PAGE>
IGI, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Edward B. Hager and Robert E. McDaniel, and each of them singly, attorneys or
attorney of the undersigned (with full power of substitution in them and each of
them) for and in the name(s) of the undersigned to attend the Annual Meeting of
Stockholders of IGI, Inc. (the "Company"), to be held on Thursday, May 13, 1999
at 10:00 a.m. at the law offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts, and at any adjourned sessions thereof, and there to vote and act
upon the following matters in respect of all shares of stock of the Company
which the undersigned will be entitled to vote or act upon, with all the powers
the undersigned would possess if personally present.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS PROXY
WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
[ ] PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL 1
AND "FOR" PROPOSALS 2, 3, 4 AND 5.
(1) Election of Directors.
[ ] For All Nominees
[ ] Withhold
[ ] For All Except
Edward B. Hager, M.D., Jane E. Hager, Constantine L. Hampers, M.D., Paul D.
Paganucci, Terrence O'Donnell, Terrence D. Daniels and Stephen J. Morris.
<PAGE>
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).
(2) To approve amendments to the Company's Certificate of Incorporation, as
amended, to (i) increase the number of authorized shares of Common Stock
from 30,000,000 to 50,000,000 and (ii) authorize a new class of Preferred
Stock consisting of 1,000,000 shares.
For [ ] Against [ ] Abstain [ ]
(3) To approve the adoption of the Company's 1999 Employee Stock Purchase Plan.
For [ ] Against [ ] Abstain [ ]
(4) To approve the adoption of the Company's 1999 Stock Incentive Plan.
For [ ] Against [ ] Abstain [ ]
(5) To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the current fiscal year.
For [ ] Against [ ] Abstain [ ]
(6) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
Please be sure to sign and date this Proxy. Date:_____________________
__________________________________________ __________________________
Stockholder sign here Co-owner sign here
<PAGE>
Appendix A
IGI, INC.
AMENDMENT TO CERTIFICATE
OF INCORPORATION
"FOURTH: The total number of shares of stock which the Corporation is
authorized to issue is 51,000,000 shares, of which 50,000,000 shall be shares of
Common Stock, $.01 par value per share, and 1,000,000 shall be shares of Series
Preferred Stock, $.01 par value per share."
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
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B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one of more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise specifically provided in this Certificate
of Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
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<PAGE>
Appendix B
IGI, Inc.
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is to
provide eligible employees of IGI, Inc. (the "Company") and certain of its
subsidiaries with opportunities to purchase shares of the Company's common
stock, $.01 par value (the "Common Stock"), commencing on July 1, 1999. Three
hundred thousand (300,000) shares of Common Stock in the aggregate have been
authorized for issuance under this Plan.
1. Administration. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours per week and for more than five months in
any calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least 90 days prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
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<PAGE>
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
3. Offerings. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. The first Offering will begin on
July 1, 1999 and will terminate on December 31, 1999. Thereafter, each Offering
will begin on the first day of each year and end on the last day of such year.
Each commencement date of an Offering is hereinafter referred to as an "Offering
Commencement Date" and the duration of each Plan period as a "Plan Period."
During each Plan Period, payroll deductions will be made and held for the
purchase of Common Stock at the end of the Plan Period. The Board or the
Committee may, at its discretion, choose a different Plan Period of twelve (12)
months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 10 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation (as
defined below) received by the employee during the Plan Period. Unless an
employee files a new form or withdraws from the Plan, his deductions and
purchases will continue at the same rate for future Offerings under the Plan as
long as the Plan remains in effect. The term "Compensation" means the amount of
money reportable on the employee's Federal Income Tax Withholding Statement,
excluding allowances and reimbursements for expenses such as relocation
allowances for travel expenses, income or gains on the exercise of Company stock
options or stock appreciation rights, and similar items, whether or not shown on
the employee's Federal Income Tax Withholding Statement.
5. Deductions. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any dollar amount up to a maximum
of 10% of the Compensation he or she receives during the Plan Period or such
shorter period during which deductions from payroll are made. The minimum
payroll deduction is such percentage of Compensation as may be established from
time to time by the Board or the Committee.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at the
Offering Commencement Date of the Plan Period) for each calendar year in which
the Option is outstanding at any time.
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<PAGE>
6. Deduction Changes. An employee may decrease or discontinue his payroll
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing (a) the product of $2,083 and the number of whole months
in such Plan Period by (b) the closing price (as defined below) on the Offering
Commencement Date of such Plan Period or such other number as may be determined
by the Board prior to the Offering Commencement Date.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on
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such date will pay for pursuant to the formula set forth above (but not in
excess of the maximum number determined in the manner set forth above).
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. Rights on Retirement, Death or Termination of Employment. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
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15. Adjustment in Case of Changes Affecting Common Stock. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares approved for this Plan, and the share
limitation set forth in Section 9, shall be increased proportionately, and such
other adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Section 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
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18. Insufficient Shares. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to the
extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take effect
on January 1, 1999, subject to approval by the shareholders of the Company as
required by Section 423 of the Code, which approval must occur within twelve
months of the adoption of the Plan by the Board.
Adopted by the Board of Directors
on December 7, 1998
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APPENDIX C
IGI, INC.
1999 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 1999 Stock Incentive Plan (the "Plan") of IGI, Inc., a
Delaware corporation (the "Company"), is to advance the interests of the
Company's stockholders by enhancing the Company's ability to attract, retain and
motivate persons who make (or are expected to make) important contributions to
the Company by providing such persons with equity ownership opportunities and
performance-based incentives and thereby better aligning the interests of such
persons with those of the Company's stockholders. Except where the context
otherwise requires, the term "Company" shall include any of the Company's
present or future subsidiary corporations as defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the "Code") and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has
a significant interest, as determined by the Board of Directors of the Company
(the "Board").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options or restricted stock awards (each, an "Award")
under the Plan. Each person who has been granted an Award under the Plan shall
be deemed a "Participant."
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
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(b) Delegation to Executive Officers. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 7, Awards may be
made under the Plan for up to 1,200,000 shares of common stock, $.01 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 7, the
maximum number of shares of Common Stock with respect to which an Award may be
granted to any Participant under the Plan shall be 300,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code.
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The Company shall have no liability to a Participant, or any other party, if an
Option (or any part thereof) which is intended to be an Incentive Stock Option
is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement; provided, however, that no Option will be granted for a term
in excess of 10 years.
(e) Exercise of Option. Options may be exercised by delivery to the Company
of a written notice of exercise signed by the proper person or by any other form
of notice (including electronic notice) approved by the Board together with
payment in full as specified in Section 5(f) for the number of shares for which
the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company
cash or a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i) such method of payment is
then permitted under applicable law and (ii) such Common Stock was owned by
the Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on
terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
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6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Adjustments for Changes in Common Stock and Certain Other Events
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 7(a)
applies and Section 7(c) also applies to any event, Section 7(c) shall be
applicable to such event, and this Section 7(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or
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dissolution, except to the extent exercised before such effective date. The
Board may specify the effect of a liquidation or dissolution on any Restricted
Stock Award or other Award granted under the Plan at the time of the grant of
such Award.
(c) Acquisition Events
(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of
which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of
the Company for cash, securities or other property pursuant to a statutory
share exchange transaction.
(2) Consequences of an Acquisition Event on Options. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide
that all outstanding Options shall be assumed, or equivalent options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed
if, following consummation of the Acquisition Event, the Option confers the
right to purchase, for each share of Common Stock subject to the Option
immediately prior to the consummation of the Acquisition Event, the
consideration (whether cash, securities or other property) received as a
result of the Acquisition Event by holders of Common Stock for each share
of Common Stock held immediately prior to the consummation of the
Acquisition Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise
of Options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair market value to
the per share consideration received by holders of outstanding shares of
Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or
substitute for, such Options, then the Board shall, upon written notice to
the Participants, provide that all then unexercised Options will become
exercisable in full as of a specified time prior to the Acquisition Event
and will terminate immediately prior to the consummation of such
Acquisition Event, except to the extent exercised by the Participants
before the consummation of such Acquisition Event; provided, however, that
in the event of an Acquisition Event under the terms of which holders of
Common Stock will receive upon
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consummation thereof a cash payment for each share of Common Stock
surrendered pursuant to such Acquisition Event (the "Acquisition Price"),
then the Board may instead provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event and that each
Participant shall receive, in exchange therefor, a cash payment equal to
the amount (if any) by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price
of such Options.
(3) Consequences of an Acquisition Event on Restricted Stock Awards.
Upon the occurrence of an Acquisition Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall
inure to the benefit of the Company's successor and shall apply to the
cash, securities or other property which the Common Stock was converted
into or exchanged for pursuant to such Acquisition Event in the same manner
and to the same extent as they applied to the Common Stock subject to such
Restricted Stock Award.
8. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written instrument in
such form as the Board shall determine. Such written instrument may be in the
form of an agreement signed by the Company and the Participant or a written
confirming memorandum to the Participant from the Company. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may, to the extent then permitted under
applicable law, satisfy
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such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted
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as of the date of the distribution of the dividend (rather than as of the record
date for such dividend), then an optionee who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to a Participant
designated by the Board as subject to Section 162(m) of the Code by the Board
shall become exercisable, vested or realizable, as applicable to such Award,
unless and until the Plan has been approved by the Company's stockholders to the
extent stockholder approval is required by Section 162(m) in the manner required
under Section 162(m) (including the vote required under Section 162(m)). No
Awards shall be granted under the Plan after the completion of ten years from
the earlier of (i) the date on which the Plan was adopted by the Board or (ii)
the date the Plan was approved by the Company's stockholders, but Awards
previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted to a Participant designated as
subject to Section 162(m) by the Board after the date of such amendment shall
become exercisable, realizable or vested, as applicable to such Award (to the
extent that such amendment to the Plan was required to grant such Award to a
particular Participant), unless and until such amendment shall have been
approved by the Company's stockholders as required by Section 162(m) (including
the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
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