<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-B
REGISTRATION OF SECURITIES OF CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
TECHNICLONE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-3694822
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14282 Franklin Avenue, Tustin, California 92780-7017
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
-----------------------------------------
(Title of class)
Page 1 of 108
Exhibit Index is on Page 7
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
(a) Techniclone Corporation, a Delaware corporation, was
organized under the laws of the State of Delaware on September 25, 1996. As
used in this registration statement, the terms "Registrant" and "Techniclone
Delaware" refer to Techniclone Corporation, a Delaware corporation, and the
term "Company" refers to Registrant and its predecessor.
(b) The Company's fiscal year ends on April 30 of each year.
ITEM 2. TRANSACTION OF SUCCESSION.
(a) The predecessor of Techniclone Delaware was a corporation
organized under the laws of the State of California named Techniclone
International Corporation ("Techniclone California"). The Common Stock, no par
value, of Techniclone California was registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934 at the time of the succession.
(b) Registrant was incorporated in Delaware on September 25,
1996, and became a wholly-owned subsidiary of Techniclone California. On
September 27, 1996, the shareholders of Techniclone California approved a
merger (the "Merger") of Techniclone California with and into Registrant for
the purpose of changing the state of incorporation of Techniclone California
from California to Delaware. The Merger was effected pursuant to the terms of
an Agreement and Plan of Merger (the "Merger Agreement") between Registrant and
Techniclone California, and became effective on March 19, 1997. Registrant is
the surviving corporation in the Merger.
A more complete description of the Merger is contained in the
Proxy Statement dated August 12, 1996, for the Annual Meeting of Shareholders
of Techniclone California held on September 27, 1996. A copy of that Proxy
Statement is filed as Exhibit 2.1 to this registration statement.
Upon the effectiveness of the Merger each outstanding share of
Techniclone California Common Stock, without par value, was automatically
converted into one share of Techniclone Delaware Common Stock, $.001 par value
and each share of Techniclone California Class B Convertible Preferred Stock,
$1.00 par value per share was automatically converted into one share of
Techniclone Delaware Class B Convertible Preferred Stock, $0.001 par value per
share. No other shares of capital stock of Registrant were issued in
connection with the Merger. Therefore, there were outstanding immediately
after the effective date of the Merger the same number of shares of
Registrant's Common Stock and Class B Convertible Preferred Stock as there were
shares of Techniclone California Common Stock and Class B Convertible Preferred
Stock outstanding immediately prior to the effective date of the Merger.
ITEM 3. SECURITIES TO BE REGISTERED.
There are presently 50,000,000 shares of Registrant's Common Stock
authorized, of which 22,167,352 shares are presently issued and outstanding.
No shares are held by or for the account of Registrant.
2
<PAGE> 3
ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Holders of Common Stock of the Registrant are entitled to one
vote per share on all matters to be voted upon by the stockholders. Subject to
preferences that may be applicable to the holders of outstanding shares of
Preferred Stock, the holders of Common Stock are entitled to receive such
lawful dividends as may be declared by the Board of Directors. In the event of
liquidation, dissolution or winding up of the Registrant and subject to the
rights of the holders of outstanding shares of Preferred Stock, the holders of
shares of Common Stock shall be entitled to receive pro-rata all of the
remaining assets of the Registrant available for distribution to its
stockholders. There are no redemption or sinking fund provisions applicable to
the Common Stock.
ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: No financial statements are filed
with this registration statement because the capital structure and balance
sheet of Techniclone Delaware immediately after the succession were
substantially the same as those of Techniclone California.
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Agreement and Plan of Merger of Techniclone Corporation, a
Delaware corporation, and Techniclone International Corporation
a California corporation (included as Exhibit A to the Proxy
Statement filed as Exhibit 2.1 hereto).
2.1 Proxy Statement dated August 12, 1996, for the Annual Meeting
of Shareholders of Techniclone International Corporation a
California corporation, held on September 27, 1996 (the "Proxy
Statement").
3.1 Certificate of Incorporation of Techniclone Corporation, a
Delaware corporation (included as Exhibit B to the Proxy
Statement filed as Exhibit 2.1 hereto).
3.2 Bylaws of Techniclone Corporation, a Delaware corporation
(included as Exhibit C to the Proxy Statement filed as Exhibit
2.1 hereto).
4.1 Form of Certificate for Common Stock (Incorporated by reference
to the exhibit of the same number contained in Registrants'
Annual Report on Form 10-K for the year end April 30, 1988)
4.4 Form of Subscription Agreement entered into with Series B
Convertible Preferred Stock Subscribers (Incorporated by
reference to Exhibit 4.1 contained in Registrant's Report on
Form 8-K dated December 27, 1995, as filed with the Commission
on or about January 24, 1996)
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.5 Registration Rights Agreement dated December __, 1995, by and
among Swartz Investments, Inc. and the holders of the
Registrant's Series B Convertible Preferred Stock (incorporated
by reference to Exhibit 4.2 contained in Registrant's Current
Report on Form 8-K dated December 27, 1995 as filed with the
Commission on or about January 24, 1996)
4.6 Warrant to Purchase Common Stock of Registrant issued to Swartz
Investments, Inc. (Incorporated by reference to Exhibit 4.3
contained in Registrant's Current Report on Form 8-K dated
December 27, 1995 as filed with the Commission on or about
January 24, 1996
10.22 1982 Stock Option Plan (Incorporated by reference to the
exhibit contained in Registrant's Registration Statement on
Form S-8 (File No. 2-85628))
10.23 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1986 (Incorporated by
reference to the exhibit contained in Registrant's Registration
Statement on Form S-8 (File No. 33-15102)
10.24 Cancer Biologics Incorporated Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan -
1987 (Incorporated by reference to the exhibit contained in
Registrant's Registration Statement on Form S-8 (File No.
33-8664))
10.25 Amendment to 1982 Stock Option Plan dated March 1, 1988
(Incorporated by reference to the exhibit of the same number
contained in Registrants' Annual Report on Form 10-K for the
year ended April 30, 1988)
10.26 Amendment to 1986 Stock Option Plan dated March 1, 1988
(Incorporated by reference to the exhibit of the same number
contained in Registrant's Annual Report on Form 10-K for the
year ended April 30, 1998)
10.31 Agreement dated February 5, 1996, between Cambridge Antibody
Technology, Ltd. and Registrant (Incorporated by reference to
Exhibit 10.1 contained in Registrant's Current Report on Form
8-K dated February 5, 1996, as filed with the Commission on or
about February 8, 1996)
10.32 Distribution Agreement dated February 29, 1996, between
Biotechnology Development, Ltd. and Registrant (Incorporated by
reference to Exhibit 10.1 contained in Registrant's Current
Report on Form 8-K dated February 29, 1996, as filed with the
Commission on or about March 7, 1996)
10.33 Option Agreement dated February 29, 1996, by and between
Biotechnology Development, Ltd. And Registrant (Incorporated by
reference to Exhibit 10.2 contained in Registrant's Current
Report on Form 8-K dated February 29, 1996, as filed with the
Commission on or about March 7, 1996)
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.34 Purchase Agreement for Real Property and Escrow Instructions
dated as of March 22, 1996, by and between TR Koll Tustin Tech
Corp. and Registrant (Incorporated by reference to Exhibit 10.1
contained in Registrant's Current Report on Form 8-K dated
March 25, 1996, as filed with the Commission on or about April
5, 1996)
10.35 Incentive Stock Option and Nonqualified Stock Option Plan-1993
(Incorporated by reference to the exhibit contained in
Registrants' Registration Statement on Form S-8 (File No.
33-87662)).
10.36 Promissory Note dated October 24, 1996 in the original
principal amount of $1,020,000 payable to Imperial Thrift and
Loan Association by Registrant (Incorporated by reference to
Exhibit 10.1 to Registrants' Current Report on Form 8-K dated
October 25, 1996)
10.37 Deed of Trust dated October 24, 1996 among Registrant and
Imperial Thrift and Loan Association (Incorporated by reference
to Exhibit 10.2 to Registrants' Current Report on Form 8-K
dated October 25, 1996)
10.38 Assignment of Lease and Rents dated October 24, 1996 between
Registrant and Imperial Thrift and Loan Association
(Incorporated by reference to Exhibit 10.3 on Registrants'
Current Report on Form 8-K dated October 25, 1996)
10.39 Commercial Security Agreement dated October 24, 1996 between
Imperial Thrift and Loan Association and Registrant
(Incorporated by reference to Exhibit 10.4 on Registrants'
Current Report on Form 8-K dated October 25, 1996)
10.40 1996 Stock Incentive Plan (Incorporated by reference to the
exhibit contained in Registrants' Registration Statement in
form S-8 (File No. 333-17513))
10.41 Stock Exchange Agreement dated as of January 15, 1997 among the
stockholders of Peregrine Pharmaceuticals, Inc. and Registrant
(Incorporated by reference to Exhibit 2.1 to Registrants'
Quarterly Report on From 10-Q for the quarter ended January 31,
1997)
</TABLE>
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 21, 1997
TECHNICLONE CORPORATION
By: /s/ William V. Moding
---------------------------
William V. Moding Vice
President-Finance and Chief
Financial Officer
6
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
1.1 Agreement and Plan of Merger of Techniclone ---
Corporation, a Delaware corporation, and
Techniclone International Corporation a California
corporation (included as Exhibit A to the Proxy
Statement filed as Exhibit 2.1 hereto).
2.1 Proxy Statement dated August 12, 1996, for the 11
Annual Meeting of Shareholders of Techniclone
International Corporation a California corporation,
held on September 27, 1996 (the "Proxy Statement").
3.1 Certificate of Incorporation of Techniclone Corporation, ---
a Delaware corporation (included as Exhibit B to the
Proxy Statement filed as Exhibit 2.1 hereto).
3.2 Bylaws of Techniclone Corporation, a Delaware ---
corporation (included as Exhibit C to the Proxy
Statement filed as Exhibit 2.1 hereto).
4.1 Form of Certificate for Common Stock Incorporated ---
by reference to the exhibit of the same number contained
in Registrants' Annual Report on Form 10-K for the year
end April 30, 1988.
4.4 Form of Subscription Agreement entered into with ---
Series B Convertible Preferred Stock Subscribers
(Incorporated by reference to Exhibit 4.1 contained
in Registrant's Report on Form 8-K dated
December 27, 1995, as filed with the Commission
on or about January 24, 1996)
4.5 Registration Rights Agreement dated December __, ---
1995, by and among Swartz Investments, Inc. and
the holders of the Registrant's Series B Convertible
Preferred Stock (incorporated by reference to Exhibit 4.2
contained in Registrant's Current Report on Form 8-K
dated December 27, 1995 as filed with the Commission
on or about January 24, 1996)
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
4.6 Warrant to Purchase Common Stock of Registrant issued ---
to Swartz Investments, Inc. (Incorporated by reference
to Exhibit 4.3 contained in Registrant's Current Report
on Form 8-K dated December 27, 1995 as filed with
the Commission on or about January 24, 1996
10.22 1982 Stock Option Plan (Incorporated by reference to ---
the exhibit contained in Registrant's Registration
Statement on Form S-8 (File No. 2-85628))
10.23 Incentive Stock Option, Nonqualified Stock Option ---
and Restricted Stock Purchase Plan - 1986 (Incorporated
by reference to the exhibit contained in Registrant's
Registration Statement on Form S-8 (File No. 33-15102)
10.24 Cancer Biologics Incorporated Incentive Stock Option, ---
Nonqualified Stock Option and Restricted Stock
Purchase Plan - 1987 (Incorporated by reference to
the exhibit contained in Registrant's Registration
Statement on Form S-8 (File No. 33-8664))
10.25 Amendment to 1982 Stock Option Plan dated March 1, ---
1988 (Incorporated by reference to the exhibit of the
same number contained in Registrants' Annual Report
on Form 10-K for the year ended April 30, 1988
10.26 Amendment to 1986 Stock Option Plan dated March 1, ---
1988 (Incorporated by reference to the exhibit of the
same number contained in Registrant's Annual Report
on Form 10-K for the year ended April 30, 1998)
10.31 Agreement dated February 5, 1996, between Cambridge ---
Antibody Technology, Ltd. and Registrant (Incorporated
by reference to Exhibit 10.1 contained in Registrant's
Current Report on Form 8-K dated February 5, 1996,
as filed with the Commission on or about February 8, 1996)
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
10.32 Distribution Agreement dated February 29, 1996, ---
between Biotechnology Development, Ltd. And
Registrant (Incorporated by reference to Exhibit 10.1
contained in Registrant's Current Report on Form 8-K
dated February 29, 1996, as filed with the Commission
on or about March 7, 1996)
10.33 Option Agreement dated February 29, 1996, by and ---
between Biotechnology Development, Ltd. And
Registrant (Incorporated by reference to Exhibit 10.2
contained in Registrant's Current Report on Form 8-K
dated February 29, 1996, as filed with the Commission
on or about March 7, 1996)
10.34 Purchase Agreement for Real Property and Escrow ---
Instructions dated as of March 22, 1996, by and
between TR Koll Tustin Tech Corp. and Registrant
(Incorporated by reference to Exhibit 10.1 contained
in Registrant's Current Report on Form 8-K dated
March 25, 1996, as filed with the Commission on or
about April 5, 1996)
10.35 Incentive Stock Option and Nonqualified Stock Option ---
Plan-1993 (Incorporated by reference to the exhibit
contained in Registrants' Registration Statement on
Form S-8 (File No. 33-87662)).
10.36 Promissory Note dated October 24, 1996 in the ---
original principal amount of $1,020,000 payable
to Imperial Thrift and Loan Association by
Registrant (Incorporated by reference to Exhibit 10.1
to Registrants' Current Report on Form 8-K dated
October 25, 1996)
10.37 Deed of Trust dated October 24, 1996 among ---
Registrant and Imperial Thrift and Loan Association
(Incorporated by reference to Exhibit 10.2 to
Registrants' Current Report on Form 8-K dated
October 25, 1996)
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
10.38 Assignment of Lease and Rents dated October 24, ---
1996 between Registrant and Imperial Thrift and
Loan Association (Incorporated by reference to
Exhibit 10.3 on Registrants' Current Report on
Form 8-K dated October 25, 1996)
10.39 Commercial Security Agreement dated October 24, ---
1996 between Imperial Thrift and Loan Association
and Registrant (Incorporated by reference to
Exhibit 10.4 on Registrants' Current Report on
Form 8-K dated October 25, 1996)
10.40 1996 Stock Incentive Plan (Incorporated by reference ---
to the exhibit contained in Registrants' Registration
Statement in form S-8 (File No. 333-17513))
10.41 Stock Exchange Agreement dated as of January 15, ---
1997 among the stockholders of Peregrine
Pharmaceuticals, Inc. and Registrant (Incorporated
by reference to Exhibit 2.1 to Registrants' Quarterly
Report on From 10-Q for the quarter ended January 31, 1997)
</TABLE>
10
<PAGE> 1
TECHNICLONE INTERNATIONAL CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
(714) 838-0500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 27, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Shareholders of TECHNICLONE INTERNATIONAL CORPORATION, a California corporation
(the "Company"), will be held at FOUR SEASONS HOTEL, 690 NEWPORT CENTER DRIVE,
NEWPORT BEACH, CALIFORNIA, 92660 on Friday, September 27, 1996, at 9:00 A.M.,
Pacific Time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
(1) To elect the following six (6) nominees to serve as directors
until the next annual meeting of shareholders or until their
successors are elected and have qualified:
Lon H. Stone Clive Taylor, M.D. Ph.D.
William V. Moding Edward Joseph Legere II
Rudolph C. Shepard Carmelo J. Santoro, Ph.D.
(2) To approve a change in the Company's state of incorporation
from California to Delaware by means of a merger of the
Company with and into a wholly-owned Delaware subsidiary. In
connection with the reincorporation of the Company,
substantial changes are being made to the charter documents of
the Company including but not limited to (i) a change in the
name of the Company, (ii) an increase in the authorized number
of shares of Common Stock of the Company, (iii) the creation
of a class of preferred stock which will be available for
issuance in the future without the requirement of further
action of the shareholders of the Company, and (iv) certain
other changes as described herein (See Proposal Two,
Reincorporation in Delaware);
(3) To approve and ratify the Company's 1996 Stock Incentive Plan
(the "1996 Plan");
(4) To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ended
April 30, 1997; and
(5) To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on August 7, 1996
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
August 12, 1996 William V. Moding, Secretary
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
shareholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Shareholders attending
the meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
11
<PAGE> 2
TECHNICLONE INTERNATIONAL CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
-----------
PROXY STATEMENT
-----------
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 27, 1996
-----------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of TECHNICLONE INTERNATIONAL
CORPORATION, a California corporation ("Techniclone" or the "Company""), for
use at its 1996 Annual Meeting of Shareholders to be held on Friday, September
27, 1996, at 9:00 A.M. at the FOUR SEASONS HOTEL, 690 NEWPORT CENTER DRIVE,
NEWPORT BEACH, CALIFORNIA, 92660. It is contemplated that this solicitation of
proxies will be made exclusively by mail; however, if it should appear
desirable to do so in order to ensure adequate representation at the meeting,
directors, officers and employees of the Company may communicate with
shareholders, brokerage houses and others by telephone, telegraph or in person
to request that proxies be furnished and may reimburse banks, brokerage houses,
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to the beneficial owners of the shares held by them.
All expenses incurred in connection with this solicitation shall be borne by
the Company.
Holders of shares of Common Stock and preferred stock of the Company
("shareholders") who execute proxies retain the right to revoke them at any
time before they are voted. Any proxy given by a shareholder may be revoked or
superseded by executing a later dated proxy, by giving notice of revocation to
the Secretary of the Company, 14282 Franklin Avenue, Tustin, California
92780-7017, in writing prior to or at the meeting or by attending the meeting
and voting in person. A proxy, when executed and not so revoked, will be voted
in accordance with the instructions given in the proxy. If a choice is not
specified in the proxy, the proxy will be voted "FOR" the nominees for election
of directors named in this Proxy Statement, "FOR" the change in the Company's
state of incorporation, and "FOR" the approval and ratification of the 1996
Plan. This Proxy Statement is first being mailed to shareholders on or about
August 12, 1996.
VOTING SECURITIES
The Company has two classes of securities outstanding and entitled to
vote at the meeting, common stock (the "Common Stock") and Class B Convertible
Preferred Stock (the "Class B Preferred Stock"). The Common Stock is entitled
to vote on all proposals. The Class B Preferred Stock will vote only on the
Reincorporation Proposal (Proposal 2). Only the shareholders of the Company of
record as of the close of business on August 7, 1996 (the "Record Date"), will
be entitled to vote at the meeting or any adjournment or postponement thereof.
As of the Record Date, there were 21,042,409 shares of Common Stock and 3,900
shares of Class B Preferred Stock outstanding and entitled to vote. Each
holder of shares of Common Stock is entitled to one vote for each share of
Common Stock held as of the Record Date. Each holder of shares of Class B
Preferred Stock is entitled to one vote for each share of Class B Preferred
Stock held as of the Record Date on Proposal 2. The Common Stock and the Class
B Preferred Stock will vote as separate classes for the Reincorporation
Proposal (Proposal 2). Abstentions and broker non-votes are each included in
the determination of the number of shares present and voting for the purpose of
determining whether a quorum is present. Under the General Corporation Law of
the State of California, for votes cast on matters other than the election of
directors that require the affirmative vote of a majority of the shares present
and voting at the
12
<PAGE> 3
annual meeting, or the affirmative vote of a majority of the outstanding
shares, abstentions and broker non-votes will have the same effect as votes
against a proposal.
All shareholders entitled to vote at the Annual Meeting of
Shareholders may cumulate the votes in the election of directors. With
cumulative voting, each shareholder is entitled to a number of votes equal to
the number of directors to be elected multiplied by the number of shares of
Common Stock held by such shareholder, and those votes may be cast for a single
candidate for director or distributed among as many candidates as such
shareholder desires. In accordance with the General Corporation Law of the
State of California, however, no shareholder may cumulate votes for any
candidate for director unless the name of such candidate is placed in
nomination before the voting and any shareholder before the voting gives oral
or written notice to the Secretary of the Company at the Annual Meeting of
Shareholders of such shareholder's intention to cumulate his or her votes of
shares. If such notice is given by any shareholder entitled to vote at the
Annual Meeting of Shareholders, then every shareholder entitled to vote at the
Annual Meeting will be entitled to cumulate his or her votes in the election of
directors. In the event that cumulative voting is utilized to elect the
directors, the proxies solicited by the Board of Directors confer discretionary
authority to the proxy holders to cumulate votes and to allocate such votes
among the nominees of the Board of Directors as such proxy holders deem
appropriate to elect the maximum number of director nominees. Such proxy
holders do not intend to cumulate votes at the Annual Meeting of Shareholders,
but they reserve the right to do so if cumulative voting is properly elected by
a shareholder of the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of July 1, 1996, information
regarding the ownership of the Company's outstanding Common Stock and Class B
Convertible Preferred Stock by each person known to management to own,
beneficially or of record, more than five percent (5%) of the Common Stock and
Class B Convertible Preferred Stock and by certain executive officers of the
Company and by all officers and directors of the Company as a group.
Information regarding the beneficial ownership of the Company's Common Stock by
each of the nominees for election as directors is set forth below under the
caption "Election of Directors."
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE NUMBER OF PERCENT
OF BENEFICIAL OWNER OF CLASS SHARES (A) OF CLASS (B)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Legere Enterprises, Ltd. Common Stock 3,490,916 15.88%
222 South Rainbow, Suite 218
Las Vegas, Nevada 89128
Roger C. Adams Common Stock 1,071,030 (C) 4.87%
320 Bellaire Street
Denver, Colorado 80220
Lon H. Stone Common Stock 1,074,978 (D) 4.89%
14282 Franklin Avenue
Tustin, CA 92780-7017
R.C. Shepard Common Stock 712,400 (E) 3.24%
660 Newport Center Dr.
Newport Beach, CA 92660
William V. Moding Common Stock 397,100 (F) 1.81%
14282 Franklin Avenue
Tustin, CA 92780-7017
</TABLE>
13
<PAGE> 4
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE NUMBER OF PERCENT
OF BENEFICIAL OWNER OF CLASS SHARES (A) OF CLASS (B)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clive R. Taylor, M.D., Ph.D. Common Stock 828,000 (G) 3.77%
14282 Franklin Avenue
Tustin, CA 92780-7017
Edward Joseph Legere II Common Stock 3,490,916 (H) 15.88%
222 South Rainbow, Suite 218
Las Vegas, Nevada 89128
Nelson Partners Class B Preferred 1,500 34.09%
Wellington Financial
225 West Washington, 9th Floor
Chicago, Illinois 60606
Susquehanna Securities Trading Class B Preferred 750 17.05%
GmbH
Oberlindau 7
6000 Frankfurt Am Main
Germany
Wood Gundy (London) Ltd Class B Preferred 750 17.05%
Cottons Centre
Cotton Lane
London, England SEI 2QA
Olympus Securities Ltd. Class B Preferred 500 11.36%
129 Front Street
Hamilton, Bermuda HM-12
West Merchant Bank Class B Preferred 500 11.36%
33-36 Gracechurch Street
London, England SEI 2QA
Gracechurch & Co. Class B Preferred 400 9.09%
IMF Asset Management
159 New Bond Street
London, England W1YORR
All Directors and Executive Officers Common Stock 5,397,294 25.86%
as a Group (5 in number)
</TABLE>
- -------------------
(A) Except as otherwise noted below, the persons named in the table have
sole voting and investment power with respect to all shares of
Common Stock and Class B Convertible Preferred Stock shown as
beneficially owned by them, subject to community property laws where
applicable.
(B) Percentages for the Common Stock computed on the basis of 20,869,675
shares outstanding at July 1, 1996, plus additional 1,116,100 shares
that could be acquired by principal shareholders through exercise of
stock options and warrants during the 60 day period ended June 29,
1996. Percentages for the Class B Preferred Stock computed on the
basis of 4,400 shares outstanding on July 1, 1996.
14
<PAGE> 5
(C) Includes 425,000 shares owned by members of Mr. Adams' family as to
which he may be deemed to be the beneficial owner. Also includes
10,000 shares of Common Stock subject to outstanding warrants to
purchase Common Stock exercisable during the 60 day period ended June
29, 1996.
(D) Includes 541,535 shares owned by members of Mr. Stone's family as to
which he may be deemed to be the beneficial owner. Also includes
339,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ended June 29, 1996.
(E) Includes 90,100 shares of Common Stock subject to outstanding warrants
to purchase Common Stock exercisable during the 60 day period ended
June 29, 1996.
(F) Includes 20,000 shares owned by members of Mr. Moding's family as to
which he may be deemed to be the beneficial owner.
(G) Includes 42,000 shares owned by members of Dr. Taylor's family as to
which he may be deemed to be the beneficial owner. Also includes
677,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ended June 29, 1996.
(H) Includes the 3,490,916 shares owned by Legere Enterprises, Ltd., a
Nevada limited partnership owned by Mr. Legere and members of his
family.
(I) Includes the securities described in notes (D), (E), (F), (G) and (H).
15
<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors are elected at each annual shareholders' meeting to serve
until the next annual meeting or until their successors are elected. The Board
of Directors proposes the election of six (6) directors at the Meeting. Unless
authority to vote for directors has been withheld in the proxy, the persons
named in the enclosed proxy intend to vote at the Meeting FOR the election of
the nominees presented below. Under California law, the six nominees receiving
the highest number of votes will be elected as directors at the Meeting. As a
result, proxies voted to "Withhold Authority," which will be counted, and
broker non-votes, which will not be counted, will have no practical effect.
Each of the nominees, except for Carmelo J. Santoro is an incumbent
director elected at the last annual meeting of shareholders. Each of the
nominees has consented to serve as a director for the ensuing year. If any
nominee becomes unavailable for any reason before the election, then the
enclosed proxy will be voted for the election of such substitute nominees, if
any, as shall be designated by the Board of Directors. The Board of Directors
has no reason to believe that any of the nominees will become unavailable to
serve.
The names and certain information concerning the persons to be
nominated for election as directors are set forth below. YOUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES
NAMED BELOW. NOMINEES
The following table sets forth the names and certain share ownership
information as of July 1, 1996, regarding the persons to be nominated for
election as directors of the Company:
<TABLE>
<CAPTION>
NAME, AGE DIRECTOR NUMBER OF SHARES TITLE PERCENT
AND POSITION AGE SINCE (A) OF CLASS OF CLASS (B)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lon H. Stone 53 1982 1,074,978 (C) Common Stock 4.89%
Chairman of the Board,
President, Chief Executive
Officer and Director
Rudolph C. Shepard 55 1985 712,400 (D) Common Stock 3.24%
Assistant Secretary and Director
William V. Moding 43 1985 397,100 (E) Common Stock 1.81%
Vice President-Finance, Chief
Financial Officer, Secretary and
Director
Clive R. Taylor, M.D. 50 1988 828,000 Common Stock 3.77%
Ph.D., Director
Edward Joseph Legere II, 31 1992 3,490,916 (G) Common Stock 15.88%
Director
Carmelo J. Santoro, Ph.D. 54 1996 -0- Common Stock -0-%
Director Nominee
</TABLE>
16
<PAGE> 7
- -----------------
(A) Except as otherwise noted below, the persons named in the table have
sole voting power and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
(B) Percentages computed on the basis of 20,869,675 shares outstanding at
July 1, 1996, plus an additional 1,116,100 shares that could be
acquired by principal shareholders through exercise of stock options
and warrants during the 60 day period ended June 29, 1996.
(C) Includes 541,535 shares owned by members of Mr. Stone's family as to
which he may be deemed to be the beneficial owner. Also includes
339,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ended June 29, 1996.
(D) Includes 90,100 shares of Common Stock subject to outstanding warrants
to purchase Common Stock exercisable during the 60 day period ended
June 29, 1996.
(E) Includes 20,000 shares owned by members of Mr. Moding's family as to
which he may be deemed to be the beneficial owner.
(F) Includes 42,000 shares owned by members of Dr. Taylor's family as to
which he may be deemed to be the beneficial owner. Also includes
677,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ended June 29, 1996.
(G) Includes 3,490,916 shares owned by Legere Enterprises, Ltd., a Nevada
limited partnership owned by Mr. Legere and members of his family.
Lon H. Stone has acted as President of the Company since June 1989 and
has served as its Chairman of the Board and Chief Executive Officer since
February 1, 1982. From January 1977 until February 1982 he was Director of
Research and Vice President of Research and Development for American
Diagnostics Corporation, Newport Beach, California, a company which produces
medical diagnostic products. His experience at American Diagnostics
Corporation was in biomedical technology, as well as in business and finance.
From 1972 to 1977, Mr. Stone was an Assistant Professor of Biological Science
at Crafton Hills College, Yucaipa, California.
William V. Moding was appointed Vice President-Finance in June 1983
and was appointed Chief Financial Officer and Secretary in November 1983. Mr.
Moding was elected a director of the Company in March 1985. He has a Master's
Degree in Business Taxation from the University of Southern California. Mr.
Moding has been a partner in the certified public accounting firm of Kanady &
Moding since 1979. This C.P.A. firm has rendered financial accounting and
consulting services to the Company since Techniclone's inception in 1981. From
1975 to 1979, Mr. Moding was a staff accountant with Deloitte, Haskins & Sells,
Costa Mesa, California.
Rudolph C. Shepard was appointed a director of Techniclone on December
24, 1985. Mr. Shepard is a member of the Compensation Committee of the
Company. Mr. Shepard is a shareholder in the law firm of Stradling, Yocca,
Carlson & Rauth, a Professional Corporation. Mr. Shepard's law firm has acted
as the general corporate counsel for Techniclone. Mr. Shepard has been a
shareholder of Stradling, Yocca, Carlson & Rauth since March 1, 1983.
17
<PAGE> 8
Clive R. Taylor, M.D., Ph.D., has served as a director of the Company
since November 2, 1988. He is professor of pathology at the University of
Southern California and Chairman of the Department of Pathology. Currently,
Dr. Taylor serves as an Associate Director of Laboratories for the Los Angeles
County Medical Center and is on the attending staff of the Kenneth Norris, Jr.
Cancer Hospital and Research Institute. He received his M.D. degree from
Cambridge University and his Ph.D. from Oxford University and is board
certified by the American Board of Pathology in Anatomic and Clinical
Pathology. He has been awarded numerous grants to engage in immunohistologic
studies of various types of cancer. Dr. Taylor has authored more than 200
publications and ten books in the cancer field.
Edward Joseph Legere II has served as a director of the Company since
October 28, 1992. Mr. Legere is a member of the Compensation Committee of the
Company. Mr. Legere has been President of Unified Management Corp., a business
management and trade company, since September of 1992. Mr. Legere has been a
Vice President of Legere Enterprises, Ltd., a Palm Beach, Florida, investment
company and an affiliate of Techniclone (by stock ownership) since December of
1991. Mr. Legere holds a B.S. degree in international business from Florida
Atlantic University in Boca Raton, Florida.
Carmelo J. Santoro, Ph.D., served as a director of AST Research, Inc.
since September 1990 and from June 1992 until November 1993 served as Chairman
of the Board of AST Research, Inc., an Irvine, California based company which
designs, manufactures, markets, services and supports a broad line of personal
computers including desktop, notebook and server computer systems. In November
1993, Dr. Santoro was elected Vice Chairman of the Board of AST Research and
served as such through December 1995. Dr. Santoro is Chairman and Chief
Executive Officer of Platinum Software Corporation. Dr. Santoro was President
and Chief Executive Officer of Silicon Systems, Inc. from 1982 through 1991 and
was Chairman from 1984 through 1989, when Silicon Systems, Inc. was acquired by
TDK Corporation of Tokyo, Japan. From 1980 to 1982, Dr. Santoro was Vice
President, Integrated Circuits at the Solid State Division of RCA. In addition
to Platinum Software Corporation, Dr. Santoro is currently a director of Dallas
Semiconductor Corporation, S3, Inc. and Smartflex Systems, Inc.
Directors are elected on an annual basis. The present term of office
for each director will expire at the next Annual Meeting of Techniclone's
shareholders, or at such time as his successor is duly elected. Directors do
not receive separate compensation for fulfilling their duties as directors of
Techniclone. There are no family relationships among Techniclone's officers
and directors. Officers are elected annually and serve at the discretion of
the Board of Directors.
The Board of Directors of the Company held five meetings during the
year ended April 30, 1996. The Board of Directors has established a standing
Compensation Committee, which held one meeting in the year ended April 30,
1996. Each director attended at least seventy five percent (75%) of the
aggregate number of meetings of the Board and of the Committees of which he was
a member in the year ended April 30, 1996.
The Compensation Committee reviews programs in the areas of employee
and incentive compensation plans, administers the Company's Stock Purchase
Plans, and reviews and makes recommendations to the Board of Directors with
respect to base salary adjustments and bonuses for all officers and other key
personnel of the Company. R. C. Shepard and Edward Joseph Legere II are
currently the members of the Compensation Committee.
DIRECTOR'S COMPENSATION
Directors who also are Company employees receive no compensation for
serving as directors. No compensation is paid for attending meetings of
Committees of the Board of Directors on which directors serve. Pursuant to the
Company's 1993 Employee Stock Option Plan, each year each non-employee director
is automatically granted an option to purchase 2,000 shares of Company stock at
an exercise price that is equal to the fair market value of the shares on the
date of grant. These options vest twenty percent (20%) on the first
18
<PAGE> 9
anniversary of the date of grant and 1/60 of the remaining amount each month
thereafter. Upon joining the Board, each new non-employee director receives an
option to purchase 10,000 shares, which becomes exercisable in full one year
after the date of grant.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent (10%) shareholders are
required by regulations promulgated by the Securities and Exchange Commission
to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on the review of copies of such reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during the fiscal year ended April 30, 1996 the Company's
officers, directors and all persons who own more than ten percent (10%) of a
registered class of the Company's equity securities complied with all Section
16(a) filing requirements, with the following exceptions: Reports covering
transactions during the fiscal year ended April 30, 1996 were filed late by
Clive Taylor and Edward Joseph Legere II.
COMPENSATION OF EXECUTIVE OFFICERS
The Company paid cash compensation to Lon H. Stone in the year ended
April 30, 1996 of $162,000. In the year ended April 30, 1996 Mr. Stone was
granted options to purchase 200,000 shares of stock under the Company's 1993
Stock Option Plan at an exercise price of $1.00 per share, which was the fair
market value on the date of grant. These options vest in 1995 through 1998.
Also during the year ended April 30, 1996, Mr. Stone was allocated options to
purchase 400,000 shares of stock under the Company's 1996 Stock Incentive Plan.
These options were granted contingent upon approval by the shareholders of the
1996 Plan and vest in 1996, 1998 and 2000. In 1991 the Board of Directors
granted Lon H. Stone options to purchase 100,000 shares of the Common Stock of
the Company at an exercise price of $0.275 per share (an aggregate option
exercise price of $27,500). These options are exercisable in the event of a
greater than fifty percent change of ownership of the Company. The value of
the 100,000 shares subject to these options as of April 30, 1996 would have
been $612,500 (assuming a stock price of $6.125 per share). As of the date
hereof these options are not yet exercisable.
Effective on November 1, 1994, the Company entered into an Employment
Agreement with Lon H. Stone, Chief Executive Officer of the Company. The
Agreement, which expires on September 30, 1999, provided for an initial annual
base salary of $144,000 plus an annual incentive bonus at the discretion of the
Board of Directors of the Company. The annual base salary under the Agreement
was increased to $198,000 beginning on January 1, 1996. The Agreement also
provides for a salary continuation payment plan in the event of employment
termination prior to the expiration of the Agreement. If employment
termination occurs due to death or disability, then one-half the existing
salary rate is payable for a three year period or the remaining duration of the
Agreement, whichever is longer. If termination is due to other than death,
disability or reasonable cause, then the Company must pay a cash severance
benefit equal to twice the annual salary rate, all unexercised outstanding
stock options will immediately vest, the option stock will be issued and any
applicable payroll withholding taxes will be paid by the Company as additional
compensation to Mr. Stone. If termination occurs within two years of a twenty
five percent (25%) or greater change in ownership of the Company, then the
terms of the Agreement require payment of the annual base salary for the longer
of three years or the remaining term of the Agreement.
19
<PAGE> 10
The following table sets forth compensation received for the year
ended April 30, 1996, by the Company's Chief Executive Officer, and the other
executive officers whose salary and bonus exceeded $100,000 for fiscal year
ended April 30, 1996 (collectively, the "Named Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ----------------------
AWARDS
------
SECURITIES
UNDERLYING
OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS (#)
--------------------------- ---- --------- ----- ----------
<S> <C> <C> <C> <C>
Lon H. Stone 1996 $162,000 $-0- $600,000 (A)
Chairman of the Board and 1995 112,200 -0- -0-
Chief Executive Officer 1994 108,600 -0- -0-
</TABLE>
- -------------
(A) Represents options to purchase 200,000 shares granted in August 1995
which vest in 1995 through 1998 and 400,000 shares allocated under
the Company's 1996 Plan. These shares vest contingent upon approval
of the 1996 Plan by the shareholders of the Company, fifty percent in
1996, twenty-five percent in 1998 and twenty-five percent in 2000.
OPTION GRANTS
The following table provides information on option grants in the year
ended April 30, 1996 to the Named Officers.
<TABLE>
<CAPTION>
PERCENT
TOTAL OPTIONS GRANTED
NUMBER SECURITIES TO
GRANT UNDERLYING OPTIONS ALL EMPLOYEES IN EXERCISE
NAME DATE GRANTED (5) FISCAL YEAR (3) PRICE ($SHARE)(4) EXPIRATION DATE
---- ---- ------------------ --------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Lon H. Stone 8-31-95 200,000 (1) 12% (3) $1.00 8-31-05
Lon H. Stone (2) 400,000 (2) (2) $5.00 1-19-06
</TABLE>
- ------------
(1) These options vested 50,000 shares on August 31, 1995 and vest an
additional 50,000 shares per year on August 31, 1996 through 1998.
(2) These options vest 200,000 shares upon shareholder approval of the
1996 Plan and vest an additional 100,000 shares on July 31, 1998 and
100,000 shares on January 31, 2000. These options were allocated
contingent upon shareholder approval of the 1996 Plan. As of April
30, 1996, 1,295,000 shares were allocated for grant under the 1996
Plan.
(3) Options to purchase an aggregate of 366,550 shares were granted to all
employees in the year ended April 30, 1996, including the Named
Officers under the Company's 1993 Stock Option Plan.
(4) The exercise price may be paid in cash, or shares of the Company's
Common Stock valued at fair market value on the date of exercise. All
options are issued for an exercise price equal to fair market
20
<PAGE> 11
value on the date of grant. Fair market value is the closing price of
the Company's Common Stock on the date of grant.
(5) Each option is subject to termination in the event of the optionee's
termination of employment with the Company.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in the
year ended April 30, 1996 by the Named Officers and the value of unexercised
options held by the Named Officers as of April 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED ON VALUE REALIZED UNEXERCISED OPTIONS AT OPTIONS
NAME EXERCISE (#) ($) APRIL 30, 1996 AT APRIL 30, 1996 (1)
---- ------------------ -------------- ----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lon H. Stone -0- -0- 539,000 450,000 $3,301,375 $2,756,250
</TABLE>
- ---------------
(1) The closing price of the Company's Common Stock on April 30, 1996 on
NASDAQ was $6.125.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the year ended April 30, 1996 the members of the Compensation
Committee were R. C. Shepard and Edward Joseph Legere II, who are non- employee
directors of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is a standing committee of the Board of
Directors of the Company. R.C. Shepard and Edward Joseph Legere are the
current members of the Compensation Committee. The Compensation Committee is
responsible for adopting and evaluating the effectiveness of compensation
policies and programs for the Company and for making determinations regarding
the compensation of the Company's executive officers, subject to review by the
full Board of Directors.
The following report is submitted by the members of the Compensation
Committee with respect to the executive compensation policies established by
the Compensation Committee and compensation paid or awarded to executive
officers for the year ended April 30, 1996.
Compensation Policies and Objectives. The Compensation Committee
determines the Chief Executive Officer's compensation by taking into
consideration (i) what other chief executive officers in the industry receive
as compensation, (ii) the cash position of the Company, and (iii) what the
Company can afford to pay. As the Company has a history of operating losses,
no specific relationship of the Company's financial performance was used in
determining the Chief Executive Officer's compensation. The Compensation
Committee took into consideration the compensation of executive officers of
ImmunoMedics, IDEC, ImmunoGen and NeoRx as its group within the industry for
consideration of executive salaries. In addition, the Board utilized the
J.Robert Scott, Coopers & Lybrand Executive Salary Survey in making its
decision with respect to the Chief Executive Officer's compensation. While the
Compensation Committee considers the
21
<PAGE> 12
salary of other executive officers in the industry important in the
consideration of its decision with respect to the Chief Executive Officer's
compensation, the controlling factors were clearly the cash position of the
Company and what the Company can afford to pay. None of the other executive
officers of the Company receive compensation for fulfilling their duties as
officers.
Stock Options and Equity-Based Programs. In order to align the
financial interests of executive officers and other key employees with those
of the shareholders, the Company grants stock options to its executive officers
and other key employees on a periodic basis. Moreover, the Compensation
Committee generally has followed the practice of granting options on terms
which provide that the options become exercisable in cumulative annual
installments, generally over a three-to-five-year period. The Compensation
Committee believes that these features of the option grants not only provide an
incentive for executive officers and other key employees to remain in the
employ of the Company, but also make the Company's earnings performance and
longer term growth in share prices important for the executives who receive
stock options.
During the year ended April 30, 1996, the Committee granted options to
Lon H. Stone under the Company's 1993 Stock Option Plan. In addition, the
members of the Compensation Committee, R.C. Shepard and Edward Joseph Legere
were granted "formula grants" under the 1993 Stock Option Plan.
During the year ended April 30, 1996, the Committee granted and
allocated options subject to shareholder approval of the 1996 Plan to Lon H.
Stone, C.E.O., William V. Moding, C.F.O., Dr. Alan L. Epstein, Director of
Scientific Affairs, and Dr. Clive R. Taylor, Director of Medical Affairs, as
well as to other key employees, which were designed to increase management
ownership of the Company's Common Stock and provide them with a continuing
interest in the Company's share performance.
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the foregoing
Report, and the performance graph below, shall not be incorporated by reference
into any such filings.
Stock Option Plans. Techniclone has five stock option plans, (i) the
1982 Stock Option Plan (the "1982 Plan"), (ii) the Incentive Stock Option,
Nonstatutory Stock Option and Restricted Stock Purchase Plan - 1986 (the "1986
Plan"), (iii) Incentive Stock Option and Nonqualified Stock Option Plan-1993
(the "1993 Plan"), (iv) the Cancer Biologics Incorporated, Incentive Stock
Option, Nonqualified Stock Option and Restricted Stock Purchase Plan - 1987
(the "CBI Plan") and (v) the 1996 Stock Incentive Plan (the "1996 Plan"). The
purpose of the Plans is to enable Techniclone to attract and retain employees
and consultants of ability and to motivate such persons to use their best
efforts on behalf of the Company and its subsidiaries by providing them with
equity participation in the Company. Pursuant to the 1982 Plan, 450,000 shares
of Common Stock were reserved for issuance upon the exercise of options granted
to key officers, directors, consultants and employees. Pursuant to the 1986
Plan, 500,000 shares of Common Stock were reserved for issuance upon the
exercise of options granted to key employees, including officers and directors
who are employees of the Company. Pursuant to the CBI Plan, 2,000,000 shares
of Common Stock were reserved for issuance upon exercise of options. Pursuant
to the 1993 Plan, 750,000 shares of Common Stock are reserved for issuance upon
the exercise of options to employees of the Company. Pursuant to the 1996
Plan, 4,000,000 shares of Common Stock are reserved for issuance upon the
exercise of options. Certain options granted under the 1986 Plan, the 1982
Plan, the CBI Plan and the 1993 Plan and to be issued under the 1996 Plan are
intended to qualify as "incentive stock options" within the meaning of Section
422A of the Internal Revenue Code of 1986. At April 30, 1996, stock options to
purchase 444,000 shares had been granted under the 1982 Plan, stock options to
purchase 486,000 shares had been granted under the 1986 Plan, stock options to
purchase 1,972,000 shares had been granted under the CBI Plan and assumed by
the Company, stock options to purchase 701,205 shares had been granted under
the 1993 Plan and stock options to purchase 1,295,000 shares had been allocated
for grant under the 1996 Plan subject to shareholder approval of the 1996 Plan.
The
22
<PAGE> 13
1982, 1986 and CBI Plans have been terminated by the Board of Directors with
respect to the grant of additional options under such Plans. The CBI Plan was
assumed by the Company in connection with the merger of Cancer Biologics
Incorporated with and into the Company.
The 1982, 1986, CBI Plan, 1993 and 1996 Plans are administered by the
Compensation Committee which determines the terms of options granted under the
Plans, including the exercise or purchase price, conditions of purchase
(including repurchase rights in favor of the Company), number of shares subject
to the option or right and the exercisability thereof. Except with respect to
the 1996 Plan, the exercise price of all options granted under the Plans must
be at least equal to the fair market value of such shares on the date of grant
and the maximum term of each option is ten years.
No options were granted to officers or directors during the year ended
April 30, 1996 under the 1982 Plan. On January 31, 1996, Dr. Clive Taylor
exercised options to purchase 60,000 shares under the 1982 Plan, at an exercise
price of $1.00 per share. No other person holds options to purchase shares of
Common Stock under the 1982 Plan.
No options were granted or exercised by officers or directors during
the year ended April 30, 1996 under the 1986 Plan. As of April 30, 1996, Lon
Stone held options to purchase a total of 260,000 shares at $.275 per share.
Of the options to purchase 260,000 shares, options to purchase 160,000 shares
became vested in February 1994 by reason of the Company's achievement of
certain financial goals and the remaining options to purchase 100,000 shares
are exercisable by Mr. Stone only in the event of a major change in ownership
of the Company. Options to purchase a total of 350,000 shares are outstanding
under the 1986 Plan. Options outstanding under the 1986 Plan expire at various
dates through 2003. No stock purchase rights have been granted under the 1986
Plan in the year ended April 30, 1996.
No options were granted or exercised by officers or directors during
the year ended April 30, 1996 under the CBI Plan. Options to purchase
1,327,200 shares are outstanding under the CBI Plan, all of which were
exercisable as of April 30, 1996. Options outstanding under the CBI Plan
expire in 2003.
During the year ended April 30, 1996, Lon Stone was granted options to
purchase 200,000 shares of stock under the Company's 1993 Stock Option Plan at
an exercise price of $1.00 per share, which was the fair market value on the
date of grant. These options vest in 1995 through 1998. R.C. Shepard and
Edward Joseph Legere II were granted "formula grants" under the 1993 Plan to
purchase 2,000 shares of Common Stock of the Company. These grants vest twenty
percent (20%) on the first anniversary of the date of grant and 1/60 of the
remaining amount each month thereafter. No options were exercised by officers
or directors during the year ended April 30, 1996 under the 1993 Plan. Options
to purchase 560,550 shares are outstanding under the 1993 Plan, of which
262,850 shares were exercisable as of April 30, 1996. Options outstanding
under the 1993 Plan expire at various dates through 2005.
During the year ended April 30, 1996, Lon Stone was allocated options
to purchase 400,000 shares and William Moding was allocated options to purchase
320,000 shares under the Company's 1996 Plan. These stock options allocated to
Mr. Stone and Mr. Moding vest, subject to shareholder approval of the 1996
Plan, fifty percent (50%) in 1996, vest twenty-five percent (25%) in 1998 and
vest twenty-five percent (25%) in 2000. During the year ended April 30, 1996,
Dr. Clive Taylor was allocated options to purchase 320,000 shares under the
Company's 1996 Plan. These options vest, subject to shareholder approval of
the 1996 Plan, 80,000 shares in 1998, 80,000 shares in 2000 and 160,000 shares
in 2001. As of April 30, 1996 options to purchase an aggregate of 1,295,000
shares were allocated under the 1996 Plan. All options issued under the 1996
Plan were issued contingent upon shareholder approval of the 1996 Plan.
Certain Relationships and Related Transactions. During the fiscal
year ended April 30, 1996, the Company incurred and paid expenses of $89,000 to
Kanady & Moding C.P.A.'s, an accounting firm in which
23
<PAGE> 14
Mr. William V. Moding, an executive officer and director of the Company, is a
partner, for accounting and consulting services rendered to the Company.
Similar expenses in the amount of $60,000 and $62,800 were incurred and paid to
Mr. Moding's firm during the fiscal year ended April 30, 1995 and 1994,
respectively.
During the year ended April 30, 1996, the Company incurred expenses of
$145,781 ($65,495 of which remained due and payable at April 30, 1996) to
Stradling, Yocca, Carlson & Rauth, a law firm in which Mr. R .C. Shepard, an
officer and director of the Company, is an officer and shareholder which
renders legal services to the Company. Similar expenses in the amount of
$89,333 and $149,764 were incurred to Mr. Shepard's firm during the year ended
April 30, 1995 and 1994, respectively. In December of 1991, Mr. Shepard's law
firm refinanced $258,500 in cumulative unpaid legal fees into a long-term note
receivable from the Company. This note was convertible at the option of the
holder, at any time prior to the due date, into 235,000 shares of Techniclone
Common Stock. On January 2, 1996, Stradling, Yocca, Carlson & Rauth converted
the note into 235,000 shares of Common Stock of the Company.
24
<PAGE> 15
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for
the Company, NASDAQ Market Index and NASDAQ Peer group for the period that
commenced on April 30, 1991 and ended April 30, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURNS
(NASDAQ MARKET INDEX)
The total cumulative returns on investment shown for the Company, the
NASDAQ Market Index and Peer Group Index are based on the assumptions that on
May 1, 1991, $100 was invested in the Company's Common Stock and in each Index
and that all dividends were reinvested.
The Peer Group chosen were companies in the NASDAQ Market Index with
the Standard Industrial Classification Code 2836 (Biological Products, except
diagnostic substances). The Peer Group included the following issuers:
Advanced Tissue Sciences, American Biogenetic Sciences, Amgen Inc., Anergen
Inc., Aphton Corp., Applied Microbiology Inc., Biogen Inc., Biomatrix Inc.,
Biomira Inc., Biotime Inc., Cel-Sci Corp., Cell Genesys Inc., Celox
Laboratories, Inc., Creative Biomolecules, Cryolife, Inc., Cypress Bioscience,
Inc., Cytotherapeutics Inc., Cytrx Corporation, DNX Corporation, Embrex Inc.,
Enzon Inc., Galagen, Inc., Genelabs Technologies, Genmedicine, Inc., Genetics
Institute Inc., Genta, Incorporated, Gilead Sciences Inc., Gilatech, Inc.,
Houghten Pharamaceuticals, Human Genome Sciences, Hybridon, Inc., Idec
Pharmaceuticals CP, IGI Inc, Imclone Systems Inc., Immune Response Corp.,
Immunex Corp., Innovir Laboratories Inc., Insite Vision Inc., Interferon
Sciences, Inc., Lifecell Corporation, Lifecore Biomedical Inc., Magainin
Pharmaceuticals, Medarex Inc., Medimmune Inc., Nabi Inc., Neurex Corp.,
Neurobioligical Technology, North American Vaccine, Northfield Laboratories,
NYER Medical Group, Inc., Oravax, Inc., Protein Design Labs Inc., Repligen
Corp., Ribi Immunochem Res Inc., Semetek Plc Adr, Seragen Inc., Serologicals
CP, Somatix Therapy Corp., Somatogen Inc., Syntro Corp., Targeted Genetics CP,
Techne Corp., Titan Pharmaceutical Inc., Univax Biologics Inc., Viagene Inc.,
Vical Inc. and Zonagen Inc. Management believes that an actual Peer Group for
the Company would be difficult to identify because the Company is a development
stage research and development Company with a limited operating history.
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PROPOSAL TWO
REINCORPORATION IN DELAWARE
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that
the best interests of the Company and its shareholders will be served by
changing the state of incorporation of the Company from California to Delaware
(the "Reincorporation Proposal" or the "Proposed Reincorporation").
Shareholders are urged to read carefully the following sections of this Proxy
Statement, including the related exhibits, before voting on the Reincorporation
Proposal. Throughout this Proxy Statement, the term "Techniclone California"
refers to the existing California corporation and the term "Techniclone
Delaware" refers to the new Delaware corporation, a wholly-owned subsidiary of
Techniclone California that has been formed under the name "TECHNICLONE
CORPORATION," in preparation for the Proposed Reincorporation and which is the
proposed successor to Techniclone California.
The Reincorporation Proposal will be effected by merging Techniclone
California into Techniclone Delaware (the "Merger"), which is to be effected in
accordance with the terms of an Agreement and Plan of Merger, a form of which
is attached hereto as Exhibit A (the "Merger Agreement"). Upon completion of
the Merger, (i) Techniclone California will cease to exist; (ii) Techniclone
Delaware will operate the business of the Company under the name "TECHNICLONE
CORPORATION"; (iii) each outstanding share of Techniclone California Common
Stock will be converted automatically into one share of Techniclone Delaware
Common Stock and each outstanding share of Techniclone California Class B
Preferred Stock will be converted automatically into one share of Techniclone
Delaware Class B Preferred Stock and, as a result, the shareholders of
Techniclone California automatically will become the stockholders of
Techniclone Delaware; (iv) the shareholders' rights, as stockholders of
Techniclone Delaware and no longer as shareholders of Techniclone California,
will be governed by Delaware law and the Certificate of Incorporation and
Bylaws of Techniclone Delaware, rather than by California law, and the existing
Restated Articles of Incorporation, as amended, and the Bylaws of Techniclone
California; (v) all options and rights to purchase shares of Techniclone
California's Common Stock automatically will be converted into options or
rights to acquire an equal number of shares of Techniclone Delaware's Common
Stock; (vi) no change will occur in the physical location, business,
management, assets, liabilities or net worth of the Company; and (vii) the
incumbent directors and officers of Techniclone California will serve in their
respective capacities as directors and officers of Techniclone Delaware.
The shareholders' approval of the Proposed Reincorporation will
constitute their approval of all of the provisions of the Certificate of
Incorporation and Bylaws of Techniclone Delaware, including those provisions
creating a class of authorized, but unissued, shares of preferred stock;
provisions relating to the limitation of director liability and expanded scope
of indemnification of directors, officers and key employees under Delaware law;
and provisions having "anti-takeover" implications, which may be of
significance to the Company and its shareholders in the future. The governance
of Techniclone Delaware by Delaware law and the Certificate of Incorporation
and Bylaws of Techniclone Delaware will or may, in the future, alter certain
rights of the shareholders. See "The Charters and Bylaws of Techniclone
California and Techniclone Delaware" and "Significant Differences Between the
Corporations Laws of California and Delaware."
Pursuant to the Merger Agreement, each outstanding share of
Techniclone California Common Stock, no par value, automatically will be
converted into one share of Techniclone Delaware Common Stock, $0.001 par
value, upon the filing of the Merger Agreement and related documentation with
both Delaware's and California's respective Secretaries of State (the
"Effective Date"). Each stock certificate representing issued and outstanding
shares of Techniclone California Common Stock will continue to represent the
same number of
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shares of Common Stock of Techniclone Delaware. IT WILL NOT BE NECESSARY FOR
SHAREHOLDERS TO EXCHANGE THEIR EXISTING TECHNICLONE CALIFORNIA STOCK
CERTIFICATES FOR TECHNICLONE DELAWARE STOCK CERTIFICATES. Shareholders may,
however, exchange their certificates if they so choose. The Common Stock of
Techniclone California is listed for trading on NASDAQ ("NASDAQ"). Before the
Merger, the shares of Techniclone Delaware's Common Stock will be pre-qualified
for such listing on NASDAQ under the same symbol "TCLN" as the shares of
Techniclone California Common Stock are traded on NASDAQ. After the Merger,
Techniclone Delaware's Common Stock will be traded on NASDAQ without any
interruption having occurred to the trading of the Techniclone California's
Common Stock because of the Merger.
As part of the Proposed Reincorporation, Techniclone Delaware will
assume all of the obligations of Techniclone California under the 1982 Stock
Option Plan, the Incentive Stock Option, Non-Statutory Stock Option and
Restricted Stock Purchase Plan - 1986, the Incentive Stock Option and
Nonqualified Stock Option Plan - 1993, the Cancer Biologics Incorporated
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan - 1987 and the 1996 Stock Incentive Plan (collectively, the "Plans"). If
the shareholders approve the Proposed Reincorporation, outstanding stock
options to purchase Techniclone California Common Stock assumed under the Plans
will be exercisable for equivalent shares of Techniclone Delaware Common Stock,
and all parties having participated in the Plans and holding such options will
be entitled to purchase shares of Techniclone Delaware Common Stock. As part
of the Proposed Reincorporation, Techniclone Delaware also will assume all
other employee benefit plans and arrangements of Techniclone California. The
shareholders' approval of the Proposed Reincorporation will constitute their
approval of the assumption by Techniclone Delaware of the Plans and all other
employee benefit plans and arrangements of Techniclone California.
Under California law, the affirmative vote of a majority of the
outstanding shares of Common Stock of Techniclone California and a vote of a
majority of the outstanding shares of Class B Preferred Stock of Techniclone
California each voting as separate classes is required for approval of the
Merger Agreement and the other terms of the Proposed Reincorporation. See
"Vote Required for the Reincorporation Proposal." The Proposed Reincorporation
has been unanimously approved by Techniclone California's Board of Directors.
If approved by the shareholders, and if certain other conditions set forth in
the Merger Agreement are satisfied, the Proposed Reincorporation will become
effective upon the Effective Date. The Board of Directors intends that the
Proposed Reincorporation be consummated as soon as practicable following the
Annual Meeting of Shareholders. Nonetheless, the Merger Agreement allows for
the Board of Directors to abandon or postpone the Proposed Reincorporation or
to amend the Merger Agreement (except that its principal terms may not be
amended without shareholder approval) either before or after the shareholders'
approval has been obtained and before the Effective Date, if circumstances
arise causing the Board of Directors to deem either such action advisable.
Shareholders of Techniclone California will have no dissenters' rights
of appraisal with respect to the Reincorporation Proposal. See "Significant
Differences Between the Corporation Laws of California and Delaware --
Appraisal Rights."
The discussion set forth below is qualified in its entirety by
reference to the Merger Agreement, the Certificate of Incorporation of
Techniclone Delaware (the "Certificate of Incorporation") and the Bylaws of
Techniclone Delaware (the "Bylaws"), copies of which are attached hereto as
Exhibits A, B and C, respectively. As soon as practicable following approval
of the Reincorporation Proposal by the holders of a majority of the outstanding
shares of Techniclone California's Common Stock and a majority of the
outstanding shares of Techniclone California's Class B Preferred Stock, the
Certificate of Incorporation will be filed with the Delaware Secretary of State
immediately prior to the effectiveness of the Merger. In addition, the Bylaws
of Techniclone Delaware will be those in effect immediately prior to the
effectiveness of the Merger.
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APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL
CONSTITUTE APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION
AND THE BYLAWS OF TECHNICLONE DELAWARE, AND ALL PROVISIONS THEREOF.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
The affirmative vote of the holders of a majority of the outstanding
shares of Techniclone California's Common Stock and a majority of the shares of
Techniclone California's Class B Preferred Stock entitled to vote will be
required for approval of the Reincorporation Proposal, which also will
constitute approval of (i) the Merger Agreement, the Certificate of
Incorporation and the Bylaws of Techniclone Delaware, (ii) the assumption of
Techniclone California's Plans by Techniclone Delaware, (iii) the creation of a
class of preferred stock which is provided for in the Certificate of
Incorporation and which will be available for issuance in the future at such
times and on such terms as the Board of Directors shall determine, without the
requirement of further action on the part of the stockholders of the Company,
(iv) the increase in the authorized number of shares of Common Stock of the
Company, and (v) revisions in the Company's indemnification agreements with its
officers and directors to conform such agreements to Delaware law.
Accordingly, abstentions and broker non-votes will have the same effect as
votes against the proposal. Proxies solicited by management will be voted FOR
approval of the Proposed Reincorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
REINCORPORATION.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
Advantages of Delaware Corporation Law. For many years, Delaware has
followed a policy of encouraging incorporation under its jurisdiction. In
furtherance of that policy, Delaware has long been the leading state in
adopting, construing and implementing comprehensive and flexible corporate laws
responsive to the legal and business needs of corporations. As a result,
Delaware's Corporation Law has become widely regarded as the most extensive and
well-defined body of corporate law in the United States. Because of Delaware's
prominence as the state of incorporation for many major corporations, both the
legislature and courts in Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs.
Moreover, the Delaware courts have rendered a substantial number of decisions
interpreting and explaining Delaware law. The Proposed Reincorporation
accordingly will be beneficial to the Company in that it will give the Company
(i) a greater degree of predictability and certainty regarding how the
Company's affairs should be conducted in order to comply with applicable laws
(such predictability and certainty resulting from a large body of case law
decided under those laws), and (ii) the comfort and security resulting from the
Company's awareness of the responsiveness of Delaware's legislature and courts
to the needs of corporations organized under Delaware's jurisdiction. For
these reasons, many United States corporations that have initially chosen their
home state for their state of incorporation have subsequently changed their
corporate domicile to Delaware in a manner similar to the Proposed
Reincorporation.
Anti-takeover Implications. Delaware, like many other states, permits
a corporation to adopt a number of measures (through amendment of the corporate
charter or bylaws or otherwise) designed to reduce a corporation's
vulnerability to unsolicited takeover attempts. The Reincorporation Proposal
is not being proposed in order to prevent any known attempt to acquire control
of the Company, obtain representation on the Board of Directors or take any
significant action affecting the Company. These measures, which would enhance
the ability of the Board of Directors to negotiate with an unsolicited bidder,
include, but are not limited to, the adoption of severance agreements for the
Company's management and key employees that become effective upon the
occurrence of a change in control of the Company and the designation and
issuance of preferred stock, the rights and preferences of which are determined
by the Board of Directors. Although
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these measures may be implemented under California law, substantial judicial
precedent exists in the Delaware courts as to the legal principles applicable
to such defensive measures and as to the conduct of the Board of Directors
under the business judgment rule with respect to unsolicited takeover attempts.
In the context of a future unsolicited takeover event, such precedent will give
the Board of Directors greater assurance and confidence that the defensive
strategies and conduct of the Board of Directors are in full compliance with
applicable laws and will be effective under the circumstances.
Certain effects of the Proposed Reincorporation may be considered to
have anti-takeover implications. Section 203 of the Delaware General
Corporation Law, to which Techniclone Delaware would be subject, restricts
certain "business combinations" with "interested shareholders" for three (3)
years following the date on which a person becomes an interested shareholder,
unless the Board of Directors approves the business combination. See
"Significant Differences Between the Corporation Laws of California and
Delaware -- Shareholder Approval of Certain Business Combinations."
The Board of Directors believes that unsolicited takeover attempts may
be unfair or disadvantageous to the Company and its shareholders because:
1. A non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices.
2. A non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids.
3. A non-negotiated takeover bid may involve the acquisition of
only a controlling interest in the Company's stock, without
affording all shareholders the opportunity to receive the same
economic benefits.
By contrast, in a transaction in which an acquiror must negotiate with
an independent board of directors, such board of directors can and should take
account of the underlying and long-term values of the Company's assets, the
possibilities for alternative transactions on more favorable terms, the
possible advantages of a tax-free reorganization, the anticipated favorable
developments in the Company's business not yet reflected in the stock price and
the equality of treatment of all the Company's shareholders.
Directors' Liability and Indemnification. Over the past decade, the
frequency and magnitude of claims and litigation against directors and officers
of corporations have increased. Over the same period, the cost of directors'
and officers' insurance policies has increased substantially, with the amount
of risk covered by such policies having significantly decreased. As a result,
and because potential personal liability associated with service as a director
or officer of a corporation can be significant, it has become increasingly
difficult for corporations to find and retain talented and experienced
directors and officers. The Board of Directors believes that the Proposed
Reincorporation will enable the Company to reduce the potential personal
liability of members of the Board of Directors associated with their service as
directors and to expand the scope of the Company's indemnification of its
directors and officers, which should enable the Company to continue finding and
retaining talented and experienced directors and officers.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the
Proposed Reincorporation is in the best interests of the Company and its
shareholders, it should be noted that Delaware law has been criticized by some
commentators on the grounds that it does not afford minority shareholders the
same substantive rights and protections available in a number of other states.
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The Proposed Reincorporation also may be disadvantageous to the extent
that it has the effect of discouraging a future takeover attempt that is not
approved by the Board of Directors. A majority of the shareholders may deem
such attempts to be in their best interests because the possible takeover could
cause shareholders to receive a substantial premium for their shares over their
then current market value or over the shareholders' cost basis in such shares.
As a result of such effects of the Proposed Reincorporation, shareholders who
might wish to participate in a tender offer may not have an opportunity to do
so. In addition, to the extent that the Proposed Reincorporation will enable
the Board of Directors to resist a takeover or a change in control of the
Company, the Proposed Reincorporation could make it more difficult to change
the existing Board of Directors and management.
For a comparison of shareholders' rights and the powers of management
under Delaware and California law, see "Significant Differences Between the
Corporation Law of California and Delaware."
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Proposed Reincorporation will effect only a change in the legal
domicile and name of the Company, and increase the authorized number of shares
of Common Stock of the Company and provide for the creation of a class of
preferred stock which will be available for issuance in the future on such
terms as the Board of Directors shall determine, and other changes of a legal
nature, certain of which are described in this Proxy Statement. The Proposed
Reincorporation will NOT result in any change in the business, management,
fiscal year, assets or liabilities or location of the principal facilities of
the Company. The six (6) directors who are elected at the Annual Meeting of
Shareholders will become the directors of Techniclone Delaware. All the Plans
and all other employee benefit plans of Techniclone California will be
continued by Techniclone Delaware and upon the Effective Date each option
issued pursuant to such Plans automatically will be converted into an option to
purchase the same number of shares of Techniclone Delaware Common Stock, at the
same price per share, under the same terms and subject to the same conditions
as set forth in such Plans. Shareholders should note that their approval of
the Reincorporation Proposal also will constitute their approval of the
assumption of the Plans by Techniclone Delaware. Other employee benefit
arrangements of Techniclone California also will be continued by Techniclone
Delaware under the terms and subject to the conditions currently in effect. As
noted above, after the Merger, the shares of Common Stock of Techniclone
Delaware will continue to be traded, without interruption, in the same
principal market and under the same symbol "TCLN" as the shares of Common Stock
of Techniclone California were traded before the Merger.
THE CHARTERS AND BYLAWS OF TECHNICLONE CALIFORNIA AND TECHNICLONE DELAWARE
The provisions of the Techniclone Delaware Certificate of
Incorporation and Bylaws are similar to those of the Techniclone California
Articles of Incorporation and Bylaws, except that the Certificate of
Incorporation of Techniclone Delaware provides that the authorized number of
shares of Common Stock is 50,000,000 (30,000,000 for Techniclone California)
and the authorized number of shares of preferred stock is 5,000,000 (100,000
for Techniclone California), and certain other changes of a legal nature. The
Reincorporation Proposal includes the implementation of certain other
provisions in the Techniclone Delaware Certificate of Incorporation and Bylaws
that are not included in Techniclone California's Articles of Incorporation or
Bylaws. The material differences between Techniclone California's Articles of
Incorporation and Bylaws and Techniclone Delaware's Certificate of
Incorporation and Bylaws are described below. Certain changes altering the
rights of shareholders and powers of management could be implemented in the
future by amendment of the Certificate of Incorporation following shareholder
approval, and certain of such changes could be implemented by amendment of the
Bylaws of Techniclone Delaware without shareholder approval. For a discussion
of such changes, see "Significant Differences Between the Corporation Law of
California and Delaware." Approval by the shareholders of the Proposed
Reincorporation will constitute an approval of the inclusion in the Techniclone
Delaware Certificate of Incorporation and Bylaws of each of the provisions
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described below, including the provisions relating to the authorized number of
shares of Common Stock and the class of preferred shares. This discussion of
the Certificate of Incorporation and Bylaws of Techniclone Delaware is
qualified by reference to Exhibits B and C hereto, respectively.
Name Change. The Articles of Incorporation of Techniclone California
provide that the name of the Company is "TECHNICLONE INTERNATIONAL
CORPORATION." The Certificate of Incorporation for Techniclone Delaware
provides that the name shall be "TECHNICLONE CORPORATION" Accordingly, if the
Reincorporation Proposal is approved, the name of the Company shall be changed
to "TECHNICLONE CORPORATION" upon the effectiveness of the Merger.
Size of Board of Directors. See "Significant Differences Between the
Corporation Laws of California and Delaware -- Size of the Board of Directors."
Authorized Stock. The Articles of Incorporation of Techniclone
California authorize 30,000,000 shares of Common Stock, no par value, and
100,000 shares of Preferred Stock, $1.00 par value per share. The Certificate
of Incorporation of Techniclone Delaware will provide for 50,000,000 shares of
Common Stock, $.001 par value per share, and 5,000,000 shares of Preferred
Stock, with a par value of $.001 per share. Of the 5,000,000 shares of
Preferred Stock authorized by the Certificate of Incorporation of Techniclone
Delaware 5,000 shares will be designated Class B Convertible Preferred Stock
with rights, preferences and privileges identical to the rights, preferences
and privileges of the Class B Preferred Stock of Techniclone California. The
Certificate of Incorporation of Techniclone Delaware authorizes the Board of
Directors of Techniclone Delaware to fix the rights, preferences, privileges
and restrictions of one or more series of the authorized shares of Preferred
Stock, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, without further vote or action by the
shareholders. Although the Board has no present intention of doing so,
issuance of the authorized Preferred Stock with terms giving it substantial
voting power, conversion or other rights could have the effect of (i) delaying,
deferring or preventing a change in control of the Company or (ii) otherwise
modifying the rights of holders of the Company's Common Stock. See "Preferred
Stock of Techniclone Delaware."
Common Stock of Techniclone Delaware. Of the authorized shares of
Common Stock of Techniclone Delaware, 21,042,409 shares will be issued upon
conversion of the outstanding shares of Techniclone California's Common Stock
in the Proposed Reincorporation and 3,532,750 shares of Common Stock will be
reserved for issuance under the Plans to be assumed by Techniclone Delaware.
Of the authorized shares of Preferred Stock of Techniclone Delaware 3,900
shares will be issued upon conversion of the outstanding shares of Techniclone
California's Class B Preferred Stock in the Proposed Reincorporation. The
balance, 25,424,841 shares of Common Stock, and 4,996,100 shares of Preferred
Stock, of Techniclone Delaware will be available for issuance from time to time
in connection with acquisitions of other businesses, to raise additional
capital or for other corporate purposes, without further action by the
stockholders of Techniclone Delaware. At this time, there are no specific
plans or commitments or any agreements or arrangements for the issuance of any
of these remaining shares.
Preferred Stock of Techniclone Delaware. The remaining shares of
Preferred Stock of Techniclone Delaware will be issuable from time to time in
one or more series as determined by the Board of Directors of Techniclone
Delaware without further vote or action by the stockholders. Dividend rates,
conversion rights, if any, liquidation preferences, rights and terms of
redemption (including sinking fund provisions) and redemption prices will also
be determined by the Board of Directors of Techniclone Delaware at the time
that preferred stock, if any, is issued.
The Board of Directors believes that the availability of authorized
but unissued preferred stock can be of considerable value by providing an
alternative form of consideration in connection with the raising of capital or
the acquisition of other businesses through the issuance of securities of
Techniclone Delaware, the terms and
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characteristics of which can be determined by the Board of Directors at the
time of actual issuance based on market conditions and to meet other
circumstances then existing.
If the Reincorporation Proposal is approved by the Company's
shareholders and the Proposed Reincorporation is consummated, no further
stockholder vote or action will be necessary for the issuance of the Preferred
Stock, unless required by Delaware law or NASDAQ rules. In general, Delaware
law and NASDAQ rules would require that the issuance of shares of Preferred
Stock in a merger or business combination or other transaction be approved by
the Company's stockholders at an annual or a special meeting of the
stockholders if the Preferred Stock could be converted into a number of shares
of Common Stock that would increase the shares of Common Stock outstanding by
twenty percent (20%) or more. The Board of Directors of Techniclone Delaware
will determine matters such as the Preferred Stock dividend rights, conversion
ratios, voting rights, redemption prices, and similar matters. The issuance of
shares of Preferred Stock may affect the rights of existing stockholders by
diluting their percentage interests of Common Stock, if the Preferred Stock is
convertible into Common Stock; granting the holders of Preferred Stock
preferences as to dividends or proceeds of liquidation; and diluting their
voting rights if the Preferred Stock provides for voting rights.
The availability of authorized but unissued shares of Preferred Stock
could affect the ability of a third party to gain voting control of the
Company, because the Board of Directors would be able to authorize the
issuance, in a private placement or otherwise, of shares of Preferred Stock
with voting rights to one or more persons and, thereby, dilute the voting power
of a potential acquiror without first having to obtain stockholder approval.
Additionally, unissued shares of Preferred Stock would be available in
connection with the adoption of a stockholders' rights plan pursuant to which
the Company would be able to issue to existing stockholders rights to purchase
Preferred Stock that could be issued in circumstances that would dilute the
equity position of a potential acquiror. In either of these situations, the
issuance of shares of Preferred Stock could adversely affect a potential
takeover bid.
At this time, there are no specific plans, commitments, agreements or
arrangements to issue any shares of Preferred Stock, either as defensive or
anti-takeover measures or for any other purpose.
Monetary Liability of Directors. The Articles of Incorporation of
Techniclone California and the Certificate of Incorporation of Techniclone
Delaware both provide for the elimination of personal monetary liability of
directors to the fullest extent permissible under the laws of each
corporation's respective state of incorporation. The provision eliminating
monetary liability of directors set forth in the Certificate of Incorporation
of Techniclone Delaware is potentially more expansive in that it incorporates
future amendments to Delaware law with respect to the elimination of such
liability. See "Significant Differences Between The Corporation Laws of
California and Delaware -- Indemnification and Limitation of Liability."
Shareholder Voting by Ballot. The Articles of Incorporation of
Techniclone California contain no provision relating to shareholder election of
directors by ballot. Techniclone California's Bylaws, however, provide that
the election of directors at shareholders' meetings may be by voice or ballot,
unless before such vote a shareholder demands a vote by ballot, in which case
such vote must be by ballot. The Certificate of Incorporation of Techniclone
Delaware provides that election of directors need not be by written ballot.
See "Significant Differences Between the Corporation Laws of California and
Delaware -- Voting by Ballot."
Certain Anti-Takeover Provisions. The Bylaws of Techniclone
California provide that shareholders may take action either at a duly called
and held meeting or by written consent of the shareholders and that the record
holders of ten percent (10%) or more of the outstanding shares of Techniclone
California Common Stock ("10% shareholders") may call a special meeting of the
shareholders to take action on any matter upon which shareholders of a
California corporation may vote, which include the election and removal of
directors, the amendment of the articles of incorporation or bylaws of a
corporation and mergers, reorganizations and
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business combinations. The Certificate of Incorporation and Bylaws of
Techniclone Delaware provide that the shareholders may only take action at a
duly called and held meeting of stockholders and not by written consent and
that stockholders may not call special meetings of stockholders. These
provisions will make it more difficult to effect a takeover of the Company by
means of certain transactions, such as a merger or sale of substantially all
the Company's assets, or by a proxy contest, by requiring a shareholders'
meeting to be held before such a transaction can be consummated and by delaying
any such meeting until the next annual or special meeting of stockholders is
called by action of the Board of Directors.
Delaware Law provides other anti-takeover protection through Section
203 of the Delaware General Corporation Law. See "Significant Differences
Between the Corporation Laws of California and Delaware -- Shareholder Approval
of Certain Business Combinations."
COMPLIANCE WITH DELAWARE AND CALIFORNIA LAW
California. Following the Annual Meeting of Shareholders, if the
Reincorporation Proposal is approved, the Company will submit the Merger
Agreement to the office of the California Secretary of State for filing.
Delaware. Following the Annual Meeting of Shareholders, if the
Reincorporation Proposal is approved, the Company will submit the Merger
Agreement to the office of the Delaware Secretary of State for filing.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The General Corporation Laws of California and Delaware differ in many
respects. It is not practical to summarize all of such differences in this
Proxy Statement, but some of the principal differences that could materially
affect the rights of shareholders are discussed below.
Size of the Board of Directors. The Bylaws of Techniclone California
provide for a Board of Directors of seven (7) members, with the exact number
currently set at six (6) directors. Under California law, although changes in
the number of directors must in general be approved by a majority of the
outstanding shares, the Board of Directors may fix the exact number of
directors within a stated range set forth in the articles of incorporation or
bylaws, if that stated range has been approved by the shareholders. Delaware
law permits the Board of Directors alone to change the authorized number of
directors unless the directors are not authorized to amend the bylaws or the
number of directors is fixed in the certificate of incorporation (in which case
a change in the number of directors may be made only by amendment to the
certificate of incorporation following approval of such change by the
shareholders). The Certificate of Incorporation of Techniclone Delaware
provides that the number of directors shall be designated in the manner
provided in the Bylaws and authorizes the Board of Directors to make, alter,
amend or repeal the Bylaws. The Bylaws of Techniclone Delaware provide for a
Board of Directors from six (6) to eleven (11) members, with the exact number
of members of the Board to be set at six (6) and such number may be changed
from time to time by resolution adopted by the Board of Directors. Following
the Proposed Reincorporation, the Board of Directors of Techniclone Delaware
could (although it has no current intention to do so) change the number of
directors without shareholder approval. If the Reincorporation Proposal is
approved, the six (6) directors of Techniclone California who are elected at
the Annual Meeting of Shareholders will continue as the directors of
Techniclone Delaware after the Proposed Reincorporation is consummated.
Cumulative Voting. Under California law, if any shareholder has given
notice of his or her intention to cumulate votes for the election of directors,
any other shareholder of the corporation also is entitled to cumulative his or
her votes at such election. Beginning in 1990 under California law,
corporations such as Techniclone California that have eight hundred (800) or
more shareholders of record and have their stock listed
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may eliminate such cumulative voting rights by adopting amendments to their
articles and bylaws, which amendments must be approved by the shareholders.
Under Delaware law, cumulative voting in the election of directors is not
mandatory and not allowed unless specifically provided for in a corporation's
certificate of incorporation. The Certificate of Incorporation and Bylaws of
Techniclone Delaware do not permit cumulative voting and, therefore, the
stockholders of Techniclone Delaware will not have cumulative voting rights.
Classified Board of Directors. A classified board is one on which a
certain number, but not all, of the directors are elected on a rotating basis
each year. Under California law, directors generally are elected annually, but
corporations that have eight hundred (800) or more shareholders of record and
have their stock listed may designate a classified board by adopting amendments
to their articles and bylaws, which amendments must be approved by the
shareholders. Delaware law permits, but does not require, a classified board
of directors, with staggered terms under which one-half or one-third of the
directors are elected for terms of two or three years, respectively. This
method of electing directors makes a change in the composition of the board of
directors and a potential change in control of a corporation a lengthier and
more difficult process. The Certificate of Incorporation and Bylaws of
Techniclone Delaware, as currently is the case with Techniclone California's
Articles of Incorporation and Bylaws, do not provide for a classified board of
directors.
Written Consent of Shareholders. Both the California and Delaware
General Corporation Laws provide that the shareholders of a corporation may
take action by written consent without a meeting, unless the corporation's
charter documents provide otherwise. The Articles of Incorporation and Bylaws
of Techniclone California do not prohibit shareholder actions by written
consent, and accordingly, the shareholders of Techniclone California may take
action without a meeting. The Certificate of Incorporation and Bylaws of
Techniclone Delaware explicitly prohibit shareholder actions by written
consent. As a result, the shareholders of Techniclone Delaware will be able to
take action only at a duly called meeting of the shareholders.
The provision which prohibits shareholder action by written consent
would give all shareholders of the Company the opportunity to participate in
determining any proposed shareholder action and would prevent the holders of a
majority of the voting power of the Company from using the written consent
procedure to take shareholder action. Persons attempting unfriendly takeovers
of corporations have attempted to use written consent procedures in order to
deal directly with the shareholders and avoid negotiations with the boards of
directors of such companies.
The provision prohibiting shareholder action by written consent may
have the effect of delaying consideration of a shareholder proposal until the
next annual meeting unless a special meeting is called by the Board of
Directors. Because the elimination of the procedures for shareholders to act
by written consent could make an attempt to obtain control of the Company more
difficult, such action could have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of the Company.
Elimination of the written consent procedure also means that a meeting of
shareholders would be required in order for the Company's shareholders to
replace the Board. This provision will thus make the removal of incumbent
directors more difficult. In addition, since this provision will increase the
amount of time required for a takeover bidder to obtain control of the Company,
such provision could discourage certain tender offers and other attempts to
obtain control of the Company, even though such attempts may be beneficial to
the Company and its stockholders. Because tender offers for control usually
involve a purchase price higher than the prevailing market price, the
continuation of this provision could also discourage open market purchases by a
potential takeover bidder. Such tender offers or open market purchases could
increase the market price of the Company's Common Stock, enabling shareholders
to sell their shares at a price higher than that which would otherwise prevail.
In addition, this provision could make the Company's Common Stock less
attractive to persons who invest in securities in anticipation of an increase
in price if a takeover attempt develops and could discourage accumulation of
large blocks of the Company's Common Stock, thus tending to reduce temporary
fluctuations in the market price of the Company's Common Stock which are
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caused by such accumulations. Therefore, shareholders could be deprived of
certain opportunities to sell their shares at temporarily higher prices.
Power to Call Special Shareholders' Meetings. Under California law, a
special meeting of shareholders may be called by the board of directors, the
chairman of the board, the president, the holders of ten percent (10%) of the
voting stock of the Company and such additional persons as are authorized by
the articles of incorporation or the bylaws. Under Delaware law, a special
meeting of shareholders may be called by the board of directors or by any other
person authorized to do so in the certificate of incorporation or the bylaws.
Unlike the Bylaws of Techniclone California, the Bylaws and Certificate of
Incorporation of Techniclone Delaware will NOT contain provisions entitling ten
percent shareholders to call a special meeting of shareholders.
The elimination of the provision entitling shareholders holding ten
percent (10%) of the voting stock to call special meetings of the shareholders
is designed to prevent persons attempting unfriendly takeovers to by-pass and
avoid negotiations with the Board of Directors and to avoid the disruption and
expense that would be associated with the holding of such special meetings with
respect to matters that have not been given full consideration by the Board of
Directors.
The elimination of the provision entitling holders of ten percent of
the outstanding voting stock of the Company to call special meetings may have
the effect of delaying consideration of a shareholder proposal until the next
annual meeting, unless a special meeting of stockholders is called by the Board
of Directors. Because the elimination of such provision could make an attempt
to obtain control of the Company more difficult, such action could have the
effect of discouraging a third party from making a tender offer or otherwise
attempting to obtain control of the Company. Elimination of this provision
also means that shareholders seeking to remove or replace incumbent directors
would be required to wait until the next annual stockholders meeting to attempt
to take such action, thereby making removal of incumbent directors more
difficult. In addition, since elimination of this provision could increase the
amount of time required for a takeover bidder to obtain control of the Company,
it could discourage certain tender offers and other attempts to obtain control
of the Company, even though such attempts may be beneficial to the Company and
its stockholders. Because tender offers for control usually involve a purchase
price higher than the prevailing market price, the elimination of this
provision could also discourage open market purchases by a potential takeover
bidder. Such tender offers or open market purchases could increase the market
price of the Company's Common Stock, enabling shareholders to sell their shares
at a price higher than that which would otherwise prevail. In addition,
elimination of this provision could make the Company's Common Stock less
attractive to persons who invest in securities in anticipation of an increase
in price if a takeover attempt develops and could discourage accumulation of
large blocks of the Company's Common Stock, thus tending to reduce temporary
fluctuations in the market price of the Company's Common Stock which are caused
by such accumulations. Therefore, shareholders could be deprived of certain
opportunities to sell their shares at temporarily higher prices.
Shareholder Approval of Certain Business Combinations. In the last
several years, a number of states (but not California) have adopted special
laws designed to make certain kinds of "unfriendly" corporate takeovers, or
other transactions involving a corporation and one or more of its significant
shareholders, more difficult. Under Section 203 of the Delaware General
Corporation Law ("Section 203"), certain "business combinations" with
"interested shareholders" of Delaware corporations are subject to a three year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a
"business combination" with an "interested shareholder" for three years
following the date on which such person becomes an interested shareholder.
With certain exceptions, an interested shareholder is a person or group who or
which owns fifteen percent (15%) or more of the corporation's outstanding
voting stock (including rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion
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or exchange rights, and stock with respect to which the person has voting
rights only) or is an affiliate or associate of the corporation and was the
owner of fifteen percent (15%) or more of such voting stock at any time within
the previous three years.
For the purposes of Section 203, the term "business combination" is
defined broadly to include mergers with or caused by the interested
shareholder; sales or other dispositions to the interested shareholder (except
proportionately with a corporation's other shareholders) of assets of the
corporation or a subsidiary equal to ten percent (10%) or more of the aggregate
market value of the consolidated assets or its outstanding stock; the issuance
or transfer by the corporation or a corporation's subsidiary of stock of the
corporation or such subsidiary to the interested shareholder (except for
transfers in a conversion or exchange or a pro-rata distribution or certain
other transactions, none of which increase the interested shareholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock); or receipt by the interested shareholder (except
proportionately as a shareholder), directly or indirectly, of loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation or a subsidiary.
The three (3) year moratorium imposed on business combinations by
Section 203 does not apply if: (i) before the date on which such shareholder
becomes an interested shareholder the board of directors approves either the
business combination or the transaction that caused the person to become an
interested shareholder; (ii) the interested shareholder owns eighty-five
percent (85%) of the corporation's voting stock upon consummation of the
transaction that caused him or her to become an interested shareholder
(excluding from the eighty-five percent (85%) calculation shares owned by
directors who are also officers of such corporation and shares held by employee
stock plans that do not permit employees to decide confidentially whether to
accept a tender or exchange offer); or (iii) on or after the date on which such
person becomes an interested shareholder, the board approves the business
combination and it also is approved at a shareholder meeting by sixty-six and
two-thirds percent (66_%) of the voting stock not owned by the interested
shareholder.
Section 203 applies only to Delaware corporations that have a class of
voting stock listed on a national securities exchange, or are quoted on an
interdealer quotation system such as Nasdaq National Market (as Techniclone
California is and as Techniclone Delaware will be), or are held of record by
more than two thousand (2,000) shareholders (this also applies to the Company).
Such a corporation may, however, elect not to be governed by Section 203 by a
provision in its original certificate of incorporation or an amendment thereto
or to its bylaws, which amendment must be approved by majority shareholder vote
and may not be further amended by the board of directors. Techniclone Delaware
voting stock will be quoted on the NASDAQ, therefore, Section 203 will apply to
Techniclone Delaware
Section 203 has been challenged in lawsuits arising out of ongoing
takeover disputes, and it is not yet clear whether and to what extent its
constitutionality will be upheld by the courts. Although the United States
District Court for the District of Delaware consistently has upheld the
constitutionality of Section 203, the Delaware Supreme Court has not yet
considered the issue. The Company believes that so long as the
constitutionality of Section 203 is upheld Section 203 will encourage any
potential acquiror to negotiate with the Board of Directors. Section 203 also
has the effect of limiting the ability of a potential acquiror to make a
two-tiered bid for Techniclone Delaware in which all shareholders would not be
treated equally. Section 203 also should discourage certain potential
acquirors unwilling to comply with its provisions.
Removal of Directors. Under California law, any director or the
entire board of directors may be removed, with or without cause, with the
approval of a majority of the outstanding shares entitled to vote.
Nonetheless, California law does not permit the removal of any individual
director (unless the entire board is removed) if the number of votes cast
against such removal would be sufficient to elect the director under cumulative
voting. Under Delaware law, a director of a corporation that does not have
cumulative voting may be removed with or without cause with the approval of a
majority of the outstanding shares entitled to vote.
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Filling Vacancies on the Board of Directors. Under California law,
any vacancy on the board of directors other than one created by removal of a
director may be filled by the board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the
directors at a meeting held pursuant to notice or waivers of notice or by a
sole remaining director. A vacancy created by removal of a director may be
filled by the board only if so authorized by a corporation's articles of
incorporation or by a bylaw approved by the corporation's shareholders.
Techniclone California's Bylaws provide that vacancies occurring in the Board
of Directors by reason of removal of directors may be filled only by approval
of the shareholders. Under Delaware law, vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) unless otherwise provided in the certificate of
incorporation or bylaws (and unless the certificate of incorporation directs
that a particular class is to elect such director, in which case other
directors elected by such class, or a sole remaining director, shall fill such
vacancy). The Bylaws of Techniclone Delaware provide that vacancies occurring
in the Board of Directors for any reason may be filled by vote of a majority of
the remaining members of the Board of Directors.
Loans to Officers and Employees. Under California law, any loan or
guaranty to or for the benefit of a director or officer of the corporation or
its parent requires approval of the shareholders unless such loan or guaranty
is provided under a plan approved by shareholders owning a majority of the
outstanding shares of the corporation. In addition, under California law,
shareholders of any corporation with one hundred (100) or more shareholders of
record may approve a bylaw authorizing the board of directors alone to approve
loans or guaranties to or on behalf of officers (whether or not such officers
are directors) if the board of directors determines that any such loan or
guaranty reasonably may be expected to benefit the corporation. The Bylaws of
Techniclone California do not authorize the Board of Directors to make such
loans or guarantees. Under Delaware law, a corporation may make loans to,
guarantee the obligations of or otherwise assist its officers or other
employees and those of its subsidiaries (including directors who are also
officers or employees) when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation.
Indemnification and Limitation of Liability. California and Delaware
have similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their articles or certificate of
incorporation eliminating the liability of a director to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty
of care. Nonetheless, certain differences exist between the laws of the two
states respecting indemnification and limitation of liability.
The Articles of Incorporation of Techniclone California contain a
provision that eliminates the liability of directors to the corporation to the
fullest extent permissible under California law. California law does not
permit the elimination of monetary liability where such liability is based on:
(a) intentional misconduct or knowing and culpable violation of law; (b) acts
or omissions that a director believes to be contrary to the best interests of
the corporation or its shareholders, or that involve the absence of good faith
on the part of the director; (c) receipt of an improper personal benefit; (d)
acts or omissions that show reckless disregard for the director's duty to the
corporation or its shareholders, where the director in the ordinary course of
performing a director's duties should be aware of a risk of serious injury to
the corporation or its shareholders; (e) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the
director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (g) liability for improper distributions,
loans or guarantees.
The Certificate of Incorporation of Techniclone Delaware also contains
a provision that eliminates the liability of directors to the fullest extent
permissible under Delaware law, as such law exists currently or as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit a director's monetary liability for (a) breaches of the director's duty
of loyalty to the corporation or its shareholders; (b)
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acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law; (c) payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit a director's liability for violation of, or otherwise relieve
Techniclone Delaware or its directors from the necessity of complying with,
federal or state securities laws, or affect the availability of non-monetary
remedies such as injunctive relief or rescission.
Although the laws of both states allow for the elimination of the
liability of directors for damages resulting from a breach of the directors'
fiduciary duty of care to the corporation, California's General Corporation Law
and Delaware's General Corporation Law differ with regard to the extent to
which they allow directors' personal liability for monetary damages resulting
from a breach of the duty of care to be limited. While Delaware law implies
that a Delaware corporation may limit the liability of a director even for
gross negligence, California law contains no such implication and in fact
contains provisions that imply the contrary. Those provisions expressly
proscribe the inclusion in a California corporation's articles of incorporation
of any provision intended to eliminate or limit a director's liability "for
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders" or for "acts or omissions that constitute a
breach of duty to the corporation or its shareholders." Delaware's General
Corporation Law contains no such restrictions. Accordingly, a director of a
Delaware corporation apparently can commit acts or make omissions that would
result in such director's liability under California law but may not under
Delaware law.
California law permits indemnification of expenses incurred in
derivative or third-party actions, except that with respect to derivative
actions (a) no indemnification may be made without court approval when a person
is adjudged liable to the corporation in the performance of that person's duty
to the corporation and its shareholders, unless a court determines that such
person is entitled to indemnity for expenses, and then such indemnification may
be made only to the extent that such court shall determine, and (b) no
indemnification may be made without court approval in respect of amounts paid
or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action that is
settled or otherwise disposed of without court approval.
Indemnification is permitted by California law only for acts taken in
good faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law, which requires
indemnification relating to a successful defense on the merits or otherwise).
Delaware law generally permits indemnification of expenses incurred in
the defense or settlement of a derivative or third-party action, provided there
is a determination by a disinterested quorum of the directors, by independent
legal counsel or by a majority vote of a quorum of the shareholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in, or (in contrast to California law) not opposed to, the best
interests of the corporation. Without the court approval, however, no
indemnification maybe made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of
his or her duty to the corporation. Delaware law requires indemnification of
expenses when the individual being indemnified has successfully defended the
action on the merits or otherwise.
California corporations may include in their articles of incorporation
a provision that extends the scope of indemnification through agreements,
bylaws or other corporate action beyond that specifically authorized by
statute. The Articles of Incorporation of Techniclone California include such
a provision.
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In 1994, following shareholder approval, Techniclone California
amended its Articles of Incorporation to permit indemnification beyond that
expressly mandated by the California Corporations Code and to limit director
monetary liability to the extent permitted by California law. Techniclone
California also entered into indemnification agreements with its officers and
directors, following approval of such agreements by the Company's shareholders.
A provision of Delaware law states that the indemnification provided
by statute shall not be deemed exclusive of other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. Under
Delaware law, therefore, the indemnification agreements entered into by
Techniclone California with its officers and directors may be assumed by
Techniclone Delaware upon completion of the Proposed Reincorporation. If the
Proposed Reincorporation is approved, the indemnification agreements will be
amended to the extent necessary to conform the agreements to Delaware law, and
a vote in favor of the Proposed Reincorporation is also approval of such
amendments to the indemnification agreements. In particular, the
indemnification agreements will be amended to include within their purview
future changes in Delaware law that will expand the permissible scope of
indemnification of directors and officers of Delaware corporations.
Although the General Corporation Laws of both California and Delaware
provide that corporations may include in their bylaws, or in agreements with
their directors and officers, provisions expanding the scope of indemnification
beyond that otherwise provided by law, California's General Corporation Law,
just as it restricts the power of California corporations to eliminate or limit
directors' liability stemming from gross negligence in the performance of
directorial duties, does not allow California corporations to indemnify
directors and officers for liabilities stemming from gross negligence.
Delaware General Corporation Law, on the other hand, does not so restrict
Delaware corporations. Accordingly, Delaware corporations apparently may
provide greater indemnification to their directors and officers than may
California corporations.
Currently, no actions are pending or threatened against officers or
directors of the Company in their capacities as such. The Board of Directors
is not aware of any threatened litigation or proceeding that may result in any
potential liability of a director or a claim for indemnification by any
director or officer.
The indemnification and limitation of liability provisions of
California law, and not Delaware law, will apply to actions of the directors
and officers of Techniclone California made before the Proposed
Reincorporation.
Inspection of Shareholders List. Both California and Delaware law
allow any shareholder to inspect the shareholders' list for a purpose
reasonably related to such person's interest as a shareholder. California law
also gives an absolute right to inspect and copy the corporation's shareholder
list by persons holding an aggregate of five percent (5%) or more of a
corporation's voting shares, or shareholders holding an aggregate of one
percent (1%) or more of such shares who have filed a Schedule 14B with the
Securities and Exchange Commission relating to the election of directors.
Delaware law does not provide for any such absolute right of inspection, and no
such right is granted under the Certificate of Incorporation or Bylaws of
Techniclone Delaware. Lack of access to shareholder records although unrelated
to a shareholder's interest as a shareholder could result in impairment of the
shareholder's ability to coordinate opposition to management proposals,
including proposals with respect to a change in control of the Company.
Dividends and Repurchases of Shares. California law dispenses with
the concepts of par value of shares as well as statutory definitions of
capital, surplus and the like. The concepts of par value, capital and surplus
are retained under Delaware law.
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares) unless either the corporation's retained earnings
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immediately before the proposed distribution equal or exceed the amount of the
proposed distribution or, immediately after giving effect to such distribution,
the corporation's assets (exclusive of goodwill, capitalized research and
development expenses and deferred charges) would be at least equal to 1 1/4
times its liabilities (not including deferred taxes, deferred income and other
deferred credits), and the corporation's current assets would be at least equal
to its current liabilities (or 1 1/4 times its current liabilities if the
average pre-tax and pre-interest expense earnings for the preceding two fiscal
years were less than the average interest expense for such years). Such tests
apply to California corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus, or, if no surplus exists, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year, as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law
generally provides that a corporation may redeem or repurchase its shares only
if such redemption or repurchase would not impair the capital of the
corporation.
To date, the Company has not paid cash dividends on its capital stock.
It is the present policy of the Board of Directors to retain earnings for use
in the Company's business, and, therefore, the Company does not anticipate
making payment of cash dividends on its Common Stock in the foreseeable future.
Shareholder Voting. Both California and Delaware law generally
require that a majority of the shareholders of both acquiring and target
corporations approve statutory mergers. Delaware law does not require a
shareholder vote of the surviving corporation in a merger (unless the
corporation provides otherwise in its certificate of incorporation) if (a) the
merger agreement does not amend the existing certificate of incorporation, (b)
each share of the surviving corporation outstanding before the merger is an
identical outstanding or treasury share after the merger, and (c) the number of
shares to be issued by the surviving corporation in the merger does not exceed
twenty percent (20%) of the shares outstanding immediately before the merger.
California law contains a similar exception to its voting requirements for
reorganizations where shareholders or the corporation itself, or both,
immediately before the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Both California and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved
by a majority vote of each class of shares outstanding. In contrast, Delaware
law generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares.
California law also requires that holders of nonredeemable common
stock receive nonredeemable common stock in a merger of the corporation with
the holder of more than fifty percent (50%) but less than ninety percent (90%)
of such common stock or its affiliate unless all of the holders of such common
stock consent to the transaction. This provision of California law may have
the effect of making a "cash- out" merger by a majority shareholder more
difficult to accomplish. Although Delaware law does not parallel California
law in this respect, under some circumstances Section 203 of the Delaware
General Corporation Law does provide similar protection against coercive
two-tiered bids for a corporation in which the shareholders are not treated
equally. See "Shareholder Approval of Certain Business Combinations."
California law also provides that, except in certain circumstances,
when a tender offer or a proposal for a reorganization or for a sale of assets
is made by an interested party (generally a controlling or managing
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party of the target corporation), an affirmative opinion in writing as to the
fairness of the consideration to be paid to the shareholders must be delivered
to shareholders. This fairness opinion requirement does not apply to a
corporation that does not have shares held of record by at least one hundred
(100) persons or to a transaction that has been qualified under California
state securities laws. California law also provides that if a tender of shares
or vote is sought pursuant to an interested party's proposal and a later
proposal is made by another party at least ten (10) days before the date of
acceptance of the interested party proposal, the shareholders must be informed
of the later offer and be afforded a reasonable opportunity to withdraw any
vote, consent or proxy, or to withdraw any tendered shares. Delaware law has
no comparable provisions, and the shareholders of Techniclone Delaware might
therefore be deprived of an opportunity to consider such other proposal.
Amendment of Articles of Incorporation. In general, Delaware law
requires an amendment to a certificate of incorporation to be approved by a
majority of the outstanding stock entitled to vote thereon. In addition, a
separate class vote is required if the amendment would:
1. Increase or decrease the aggregate number of authorized shares
of such class.
2. Increase or decrease the par value of the shares of such
class.
3. Alter or change the powers and rights of such class so as to
affect them adversely.
Delaware law allows the number of authorized shares of a class to be
increased or decreased by the affirmative vote of holders of a majority of the
stock of the corporation (without class voting) if the certificate of
incorporation so provides (and such provision was adopted by the affirmative
vote of holders of a majority of such class). Techniclone Delaware's
Certificate of Incorporation does not so provide.
The California General Corporation Law also requires approval of a
majority of the outstanding shares for an amendment of articles of
incorporation. It further provides that approval of a majority of a class of
shares is required, whether or not otherwise required in the articles of
incorporation, if the amendment would:
1. Increase or decrease the aggregate number of authorized shares
of such class.
2. Effect an exchange, reclassification or cancellation of all or
part of such class.
3. Effect an exchange, or create a right of exchange, of all or
part of the shares of another class into shares of such class.
4. Change the rights, preferences, privileges or restrictions of
the shares of such class.
5. Create a class of shares having rights, preferences or
privileges before such class, or increase the rights,
preferences or privileges or the number of authorized shares
of a class having rights preferences or privileges before the
shares of such class.
6. In the case of preferred shares, divide the shares into series
having different rights, preferences and privileges.
7. Cancel or otherwise affect dividends on the shares of such
class which have accrued but have not been paid.
In addition, if a series of a class of stock would be adversely
affected by such amendment differently than other series of the same class, the
amendment must also be approved by holders of such series.
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Supermajority Provisions. Delaware law permits a Delaware corporation
to specify a supermajority vote requirement for approval of certain
transactions by shareholders. California law similarly permits supermajority
provisions. If a California corporation has one hundred (100) or more
shareholders, however, an amendment to its articles of incorporation for the
purpose of including therein a supermajority voting requirement must be
approved by the same proportion of the outstanding shares as the supermajority
vote provision requires. A supermajority vote provision may not require a vote
in excess of sixty-six and two-thirds percent (66_%). Additionally, any
supermajority provision automatically becomes inoperative after two years,
unless renewed by another shareholder vote.
Interested Director Transactions. Under both California and Delaware
law, certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the
board of directors must approve any such contract or transaction after full
disclosure of the material facts, and in the case of board approval the
contract or transaction must also be "just and reasonable" (in California) or
"fair" (in Delaware) to the corporation, or (b) the contract or transaction
must have been just and reasonable or fair as to the corporation at the time it
was approved. In the latter case, California law explicitly places the burden
of proof on the interested director. Under California law, if shareholder
approval is sought, the interested director is not entitled to vote his shares
at a shareholder meeting with respect to any action regarding such contract or
transaction. If board approval is sought, the contract or transaction must be
approved by a majority vote of a quorum of the directors, without counting the
vote of any interested directors (except that interested directors may be
counted for the purpose of establishing a quorum). Under Delaware law, if
board approval is sought, the contract or transaction must be approved by a
majority of the disinterested directors (even though less than a majority of a
quorum). Therefore, certain transactions that the Board of Directors of
Techniclone California might not be able to approve because the number of
disinterested directors is not large enough to constitute a quorum could be
approved by a majority of the disinterested directors of Techniclone Delaware,
although less than a majority of a quorum. The Company is not aware of any
plan to propose any transaction involving directors of the Company that could
not be so approved under California law but could be so approved under Delaware
law.
Voting by Ballot. California law provides that the election of
directors may proceed in the manner described in a corporation's bylaws.
Techniclone California's Bylaws provide that the election of directors at
shareholders' meetings may be by voice vote or ballot, unless before such vote
a shareholder demands a vote by ballot, in which case such vote must be by
ballot. Under Delaware law, the right to vote by written ballot may be
restricted as so provided in the certificate of incorporation. The Certificate
of Incorporation and Bylaws of Techniclone Delaware provide that election need
not be by ballot. It may be more difficult for a shareholder to contest the
outcome of a vote that has not been conducted by written ballot.
Shareholder Derivative Suits. California law provides that a
shareholder bringing a derivative action on behalf of a corporation need not
have been a shareholder at the time of the transaction in question, provided
that certain tests are met. Under Delaware law, a shareholder may only bring a
derivative action on behalf of the corporation if the shareholder was a
shareholder of the corporation at the time of the transaction in question or
his or her stock thereafter devolved upon him or her by operation of law.
California law also provides that the corporation or the defendant in a
derivative suit may make a motion to the court for an order requiring the
plaintiff shareholder to furnish a security bond. Delaware does not have a
similar bonding requirement.
Appraisal Rights. Under both California and Delaware law, a
shareholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to appraisal rights
pursuant to which such shareholder may receive cash in the amount of the fair
market value of his or her
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shares in lieu of the consideration he or she otherwise would receive in the
transaction. Under Delaware law, such appraisal rights are not available (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation, (b) with respect to a merger or consolidation by a
corporation the shares of which either are listed on a national securities
exchange or are held of record by more than two thousand (2,000) holders if
such shareholders receive only shares of the surviving corporation or shares of
any other corporation that either are listed on a national securities exchange
or are held of record by more than two thousand (2,000) holders, plus cash in
lieu of fractional shares, or (c) to shareholders of a corporation surviving a
merger if no vote of the shareholders of the surviving corporation is required
to approve the merger because the merger agreement does not amend the existing
certificate of incorporation, each share of the surviving corporation
outstanding before the merger is an identical outstanding or treasury share
after the merger and the number of shares to be issued in the merger does not
exceed twenty percent (20%) of the shares of the surviving corporation
outstanding immediately before the merger and if certain other conditions are
met.
The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. California law
generally affords appraisal rights in sales of asset reorganizations as well as
corporate mergers and other business combinations involving a California
corporation. However, shareholders of a California corporation whose shares
are listed on a national securities exchange or on a list of over-the-counter
margin stocks issued by the Board of Governors of the Federal Reserve System
generally do not have such appraisal rights unless the holders of at least five
percent (5%) of the class of outstanding shares make written demands for cash
payments by exercise of their appraisal rights or the corporation or any law
restricts the transferability of the corporation's shares. In addition,
shareholders of a California corporation that is a party to a merger or other
corporate reorganization will not have such appraisal rights if the
corporation's shareholders or the corporation itself, or both, immediately
before the reorganization will own, immediately after the reorganization,
equity securities (other than warrants or rights to subscribe to such equity
securities) constituting more than five-sixths (5/6ths) of the voting power of
the surviving or acquiring corporation or its parent entity (as will be the
case in the Proposed Reincorporation).
Appraisal or dissenters' rights are, therefore, not available to
shareholders of Techniclone California with respect to the Proposed
Reincorporation.
Dissolution. Under California law, shareholders holding fifty percent
(50%) or more of the total voting power of a corporation may authorize a
dissolution of the corporation, with or without the approval of the
corporation's board of directors, and this right may not be modified by the
articles of incorporation. Under Delaware law, unless the board of directors
approves a proposal to dissolve the corporation, the dissolution must be
approved by shareholders holding one hundred percent (100%) of the total voting
power of the corporation. Only if the dissolution is initiated by the board of
directors may it be approved by a simple majority of the corporation's
shareholders. In the event of such a board-initiated dissolution, Delaware law
allows a Delaware corporation to include in its certificate of incorporation a
supermajority voting requirement in connection with dissolutions. Techniclone
Delaware's Certificate of Incorporation contains no such supermajority voting
requirement, however, and a majority of shares voting at a meeting at which
quorum is present would be sufficient to approve a dissolution of Techniclone
Delaware if such a dissolution were to be first approved by its Board of
Directors.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e. corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California.
If Techniclone Delaware does not qualify for one of the statutory exemptions,
it would be subject to a number of key provisions of the California General
Corporation Law applicable to corporations incorporated in California. Among
the more important provisions are those relating to the election and removal of
directors, cumulative
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voting, classified boards of directors, standards of liability and
indemnification of directors, dividends and repurchases of shares, shareholder
meetings, approval of certain corporate transactions, dissenters' and appraisal
rights and inspection of corporate records. See "Significant Differences
Between the Corporation Laws of California and Delaware" above. Exceptions
from Section 2115 are provided for corporations whose shares are listed on a
major national securities exchange, and for corporations that have eight
hundred (800) or more shareholders of record and whose shares are traded in the
Nasdaq National Market. It is anticipated that Techniclone Delaware will not
be subject to Section 2115.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax
consequences to holders of Techniclone California Common Stock who receive
Techniclone Delaware Common Stock in exchange for their Techniclone California
Common Stock as a result of the Proposed Reincorporation. The discussion does
not address all the tax consequences of the Proposed Reincorporation that may
be relevant to particular Techniclone California shareholders, such as dealers
in securities, holders of stock options or those Techniclone Delaware
shareholders who acquired their shares of Techniclone California Common Stock
upon the exercise of stock options. In view of the varying nature of such tax
consequences, each shareholder is urged to consult his or her own tax advisor
as to the specific tax consequences of the Proposed Reincorporation, including
the applicability of federal, state, local or foreign tax laws.
The Proposed Reincorporation will constitute a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). No gain or loss will be recognized by holders of Common Stock of
Techniclone California upon receipt of Common Stock of Techniclone Delaware
pursuant to the Proposed Reincorporation. The aggregate tax basis of the
Common Stock of Techniclone Delaware received by each shareholder will be the
same as the aggregate tax basis of the Common Stock of Techniclone California
held by each shareholder of Techniclone California and will include the period
for which such shareholder held the Common Stock of Techniclone California
surrendered in exchange therefor, provided that such Techniclone California
stock was held by such shareholder as a capital asset at the time of the
Proposed Reincorporation.
State, local or foreign income tax consequences to shareholders may
vary from the federal tax consequences described above.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Techniclone Delaware
should succeed, without adjustment, to the federal income tax attributes of
Techniclone California.
REGULATORY REQUIREMENTS
In connection with the Proposed Reincorporation, the Company will be
required to comply with certain state securities and corporate laws and
regulations. It is anticipated that the Company will comply with such
requirements either before or immediately following approval of the Proposed
Reincorporation by the shareholders.
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PROPOSAL THREE
ADOPTION OF THE 1996 STOCK INCENTIVE PLAN
INTRODUCTION
Subject to approval by the Company's shareholders, the Board of
Directors adopted the 1996 Stock Incentive Plan (the "1996 Plan") on January
19, 1996. There are 4,000,000 shares which may be granted under the 1996 Plan.
This number represents approximately twenty percent (20%) of the Company's
Common Stock outstanding as of April 30, 1996. In the event that additional
shares of the Company's Common Stock are subsequently issued, twenty percent
(20%) of such newly issued shares will be allocated to the 1996 Plan.
Approval of the 1996 Plan and the 4,000,000 shares issuable thereunder
including any additional shares which may be issued in the future pursuant to
the above formula will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present or represented, and
entitled to vote, at the Annual Meeting. Proxies solicited by management for
which no specific direction is included will be voted FOR the approval of the
1996 Plan and the shares reserved for issuance thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
1996 PLAN.
The essential features of 1996 Plan are summarized below. The summary
does not purport to be a complete description of the 1996 Plan. A copy of the
1996 Plan is attached hereto as Exhibit D. The discussion set forth below is
qualified in its entirety by reference to the 1996 Plan, which is attached
hereto as Exhibit D.
DESCRIPTION OF THE 1996 PLAN
The Company currently has three stock-based incentive compensation
plans--the 1982 Stock Option Plan, the 1986 Stock Option Plan and the 1993
Stock Option Plan.
Techniclone has five stock option plans, (i) the 1982 Stock Option
Plan (the "1982 Plan"), (ii) the Incentive Stock Option, Nonstatutory Stock
Option and Restricted Stock Purchase Plan - 1986 (the "1986 Plan"), (iii)
Incentive Stock Option and Nonqualified Stock Option Plan-1993 (the "1993
Plan"), (iv) the Cancer Biologics Incorporated, Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan - 1987 (the "CBI
Plan") and (v) the 1996 Stock Incentive Plan (the "1996 Plan"). The purpose
of the Plans is to enable Techniclone to attract and retain employees of
ability and to motivate such persons to use their best efforts on behalf of the
Company and its subsidiaries by providing them with equity participation in the
Company. Pursuant to the 1982 Plan, 450,000 shares of Common Stock were
reserved for issuance upon the exercise of options granted to key officers,
directors, consultants and employees. Pursuant to the 1986 Plan, 500,000
shares of Common Stock are reserved for issuance upon the exercise of options
granted to key employees, including officers and directors who are employees of
the Company. Pursuant to the CBI Plan, 2,000,000 shares of Common Stock are
reserved for issuance upon exercise of options. Pursuant to the 1993 Plan,
750,000 shares of Common Stock are reserved for issuance upon the exercise of
options to employees of the Company. Pursuant to the 1996 Plan, 4,000,000
shares of Common Stock are reserved for issuance upon the exercise of options.
Certain options granted under the 1986 Plan, the 1982 Plan, the CBI Plan, the
1993 Plan and the 1996 Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422A of the Internal Revenue Code of
1986. At April 30, 1996, stock options to purchase 444,000 shares had been
granted under the 1982 Plan, stock options to purchase 486,000 shares had been
granted under the 1986 Plan, stock options to purchase 1,972,000 shares had
been granted under the CBI Plan and assumed
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by the Company, stock options to purchase 701,205 shares had been granted under
the 1993 Plan and stock options to purchase 1,295,000 shares had been allocated
for grant under the 1996 Plan. The 1982, 1986 and CBI Plans have been
terminated by the Board of Directors with respect to the grant of additional
options under such Plans. The CBI Plan was assumed by the Company in
connection with the merger of Cancer Biologics Incorporated with and into the
Company.
The 1982, 1986, CBI Plan, 1993 and 1996 Plans are administered by the
Compensation Committee which determines the terms of options granted under the
Plans, including the exercise or purchase price, conditions of purchase
(including repurchase rights in favor of the Company), number of shares subject
to the option or right and the exercisability thereof. Except with respect to
the 1996 Plan, the exercise price of all options granted under the Plans must
be at least equal to the fair market value of such shares on the date of grant
and the maximum term of each option is ten years.
No options were granted to officers or directors during the fiscal
year ended April 30, 1996 under the 1982 Plan. On January 31, 1996, Dr. Clive
Taylor exercised options to purchase 60,000 shares under the 1982 Plan, at an
exercise price of $1.00 per share. No other persons hold options to purchase
shares of Common Stock under the 1982 Plan.
No options were granted or exercised by officers or directors during
the fiscal year ended April 30, 1996 under the 1986 Plan. As of April 30,
1996, Lon Stone held options to purchase a total of 260,000 shares at $.275 per
share. Of the options to purchase 260,000 shares, options to purchase 160,000
shares became vested in February 1994 by reason of the Company's achievement of
certain financial goals and the remaining options to purchase 100,000 shares
are exercisable by Mr. Stone only in the event of a major change in ownership
of the Company. Options to purchase a total of 350,000 shares are outstanding
under the 1986 Plan. Options outstanding under the 1986 Plan expire at various
dates through 2003. No stock purchase rights have been granted under the 1986
Plan in the fiscal year ended April 30, 1996.
No options were granted or exercised by officers or directors during
the fiscal year ended April 30, 1996 under the CBI Plan. Options to purchase
1,327,200 shares are outstanding under the CBI Plan, all of which were
exercisable as of April 30, 1996. Options outstanding under the CBI Plan
expire in 2003.
During the year ended April 30, 1996, Lon Stone was granted options to
purchase 200,000 shares of stock under the Company's 1993 Plan at an exercise
price of $1.00 per share, which was the fair market value on the date of grant.
These options vest in 1995 through 1998. R.C. Shepard and Edward Joseph
Legere II were granted "formula grants" under the 1993 Plan to purchase 2,000
shares of Common Stock of the Company. These grants vest twenty percent (20%)
on the first anniversary of the date of grant and 1/60 of the remaining amount
each month thereafter. No options were exercised by officers or directors
during the fiscal year ended April 30, 1996 under the 1993 Plan. Options to
purchase 560,550 shares are outstanding under the 1993 Plan, of which 262,850
shares were exercisable as of April 30, 1996. Options outstanding under the
1993 Plan expire at various dates through 2005.
During the year ended April 30, 1996, Lon Stone was allocated options
to purchase 400,000 shares and William Moding was allocated options to purchase
320,000 shares under the Company's 1996 Plan. These stock options allocated to
Mr. Stone and Mr. Moding vest, subject to shareholder approval of the 1996
Plan, fifty percent (50%) in 1996, vest twenty-five percent (25%) in 1998 and
vest twenty-five percent (25%) in 2000. During the year ended April 30, 1996,
Dr. Clive Taylor was allocated options to purchase 320,000 shares under the
Company's 1996 Plan. These options vest, subject to shareholder approval of
the 1996 Plan, 80,000 shares in 1998, 80,000 shares in 2000 and 160,000 shares
in 2001. As of April 30, 1996 options to purchase an aggregate of 1,295,000
shares were allocated under the 1996 Plan. All options issued under the 1996
Plan were issued contingent upon shareholder approval of the 1996 Plan.
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The Board believes that a key element of executive compensation is
stock-based incentive compensation. Such compensation advances the interests
of the Company by encouraging, and providing for, the acquisition of equity
interests in the Company by key employees, thereby providing substantial
motivation for superior performance. In order to provide the Board with
greater flexibility, to adapt to changing economic and competitive conditions,
and to implement stock-based compensation strategies which will attract and
retain those employees who are important to the long term success of the
Company, the Board, at its January 1996 meeting, adopted, subject to
stockholder approval, the 1996 Plan (the "1996 Plan"). If approved by the
stockholders, the 1996 Plan will become effective as of January 19, 1996, and
will terminate ten years after that date. A summary of the 1996 Plan follows,
but this summary is qualified in its entirety by reference to the full text of
the 1996 Plan, which is attached as an Appendix to this proxy statement.
Shares. The 1996 Plan will be authorized initially for four million
(4,000,000) shares of the Company's Common Stock, a number equal to
approximately twenty percent (20%) of the Company's Common Stock outstanding as
of April 30, 1996. In the event that further shares of the Company's Common
Stock are subsequently issued, twenty percent (20%) of such newly issued shares
will be allocated to the 1996 Plan, provided that the maximum number of shares
which may be allocated to the 1996 Plan may not exceed twenty percent (20%) of
the Company's authorized Common Stock. If shares subject to an option under
the 1996 Plan cease to be subject to such option, or if shares awarded under
the 1996 Plan are forfeited, or otherwise terminate without a payment being
made to the participant in the form of the Company's stock, such shares will
again be available for future distribution under the 1996 Plan.
Participation. 1996 Plan awards may be made to key employees,
including officers, of the Company, its subsidiaries and affiliates, and
consultants and other persons with important business relationships with the
Company. Except for formula grants to non-employee directors stock options may
not be granted to any Director unless the Director is also an employee of the
Company, its subsidiaries or affiliates. The 1996 Plan also provides for
formula grants to non-employee directors. Each director who is not an employee
or executive officer of the Company shall automatically be granted
non-qualified options to purchase 10,000 shares of Stock upon the commencement
of service as a director and an additional 5,000 shares at the end of each
fiscal year such person is a non-employee director. All of such options vest
and become fully exercisable six months after the date of grant. The 1996 Plan
imposes no limit on the number of officers and other key employees to whom
awards may be made. An additional purpose of the 1996 Plan is to allow
increased flexibility in the award of stock-based incentive compensation.
Thus, it can be anticipated that the number of employees participating in the
1996 Plan will be greater than the number of employees who have participated in
the Company's stock plans in the past.
Administration. The 1996 Plan will be administered by a Committee of
disinterested individuals to be appointed by the Board (the "Committee"). See
the text of the 1996 Plan attached as an Appendix hereto, for a complete
description of the powers of the Committee in administering the 1996 Plan.
Awards Under the 1996 Plan. The Committee will have the authority to
grant the following type of awards under the 1996 Plan: (i) Stock Options;
(ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Stock Purchase
Rights and/or (v) Other Stock-Based Awards.
1. Stock Options. Incentive stock options ("ISO") and
non-qualified stock options may be granted for such number of shares as the
Committee will determine and may be granted alone, in conjunction with, or in
tandem with, other awards under the 1996 Plan and/or cash awards outside the
1996 Plan.
A stock option will be exercisable at such times and subject to such
terms and conditions as the Committee will determine and over a term to be
determined by the Committee, which term will be no more than ten years after
the date of grant. The option price for any option will not be less than one
hundred percent (100%) of the fair market value of the Company's Common Stock
as of the date of grant. Payment of the
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option price may be in cash, or, as determined by the Committee, by (i)
unrestricted Common Stock of the Company having a fair market value equal to
the option price, (ii) promissory note, (iii) cancellation of debt, (iv)
cashless exercise procedure through a NASD dealer, (v) margin commitment
through a NASD dealer, or (vi) any combination of any of the foregoing.
Upon termination of an employee, such employee's stock options will
terminate, except that stock options will be exercisable to the extent
exercisable on the date of termination for three months following termination
or until the end of the option period, whichever is shorter. On the disability
or retirement of the employee, stock options will be exercisable within the
lesser of the remainder of the option period or three years from the date of
disability or retirement. Upon death of an employee, stock options will be
exercisable by the deceased employee's representative within the lesser of the
remainder of the option period or one year from the date of the employee's
death. Unless otherwise determined by the Committee, only options which are
exercisable on the date of termination, death, disability, or retirement may be
subsequently exercised.
Stock options will not be transferable except by will or the laws of
descent and distribution.
2. Stock Appreciation Rights. Stock Appreciation Rights
("SAR's") may be granted in conjunction with all or part of a stock option and
will be exercisable only when the underlying stock option is exercisable. Once
an SAR has been exercised, the related portion of the stock option underlying
the SAR will terminate.
Upon the exercise of an SAR, the Committee will pay to the employee in
cash, Common Stock or a combination thereof (the method of payment to be at the
discretion of the Committee), an amount of money equal to the excess between
the fair market value of the stock on the exercise date and the option price,
multiplied by the number of SAR's being exercised.
SAR's are transferable only to the extent that the underlying stock
option is transferable, i.e., upon the holder's death.
In addition to the foregoing SAR's, the Committee may grant limited
SAR's which will be exercisable only in the event of a "change in control" or
"potential change in control" of the Company as defined in the 1996 Plan.
In awarding the SAR's or limited SAR's, the Committee may provide that
in the event of a "change in control" or "potential change in control," SAR's
or limited SAR's may be cashed out on the basis of the change in control price,
as defined in the 1996 Plan.
3. Restricted Stock. Restricted stock may be granted alone, in
conjunction with, or in tandem with, other awards under the 1996 Plan and/or
cash awards outside the 1996 Plan and may be conditioned upon the attainment of
specific performance goals or such other factors as the Committee may
determine. The provisions attendant to a grant of restricted stock may vary
from participant to participant.
In making an award of restricted stock the Committee will determine
the periods during which the stock is subject to forfeiture, and may grant such
stock at a purchase price equal to or less than the par value of the Company's
Common Stock.
During the restriction period, the employee may not sell, transfer,
pledge or assign the restricted stock. The certificate evidencing the
restricted stock will remain in the possession of the Company until the
restrictions have lapsed.
Upon the termination of the employee's employment for any reason
during the restriction period, all restricted stock either will vest or be
subject to forfeiture, in accordance with the terms and conditions of the
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initial award. During the restriction period, the employee will have the right
to vote the restricted stock and to receive any cash dividends. At the time of
award, the Committee may require the deferral and reinvestment of any cash
dividends in the form of additional shares or restricted stock. Stock
dividends will be treated as additional shares of restricted stock and will be
subject to the same terms and conditions as the initial grant.
At the time of the award of the restricted stock, the Committee may
provide for other awards, payable either in stock or cash, to be made to the
employee so as to ensure payment of a minimum value at the time the
restrictions lapse on the restricted stock, subject to such performance,
service and/or other terms and conditions as the Committee may specify.
4. Stock Purchase Rights. The Committee may grant eligible
individuals rights to purchase the Company's common stock at (i) the fair
market value, (ii) fifty percent (50%) of fair market value, (iii) book value,
or (iv) par value, all values being as of the date of grant. The Committee may
condition such rights, or their exercise, on such terms and conditions as it
sees fit. Rights to purchase stock will be exercisable for a period to be
determined by the Committee, except that the period may not be greater than 30
days. For those individuals who are subject to Section 16(b) of the Securities
Exchange Act of 1934 (generally, officers and directors of the Company and
owners of ten percent (10%) or more of the Company's Common Stock), the
Committee may provide that the ability to exercise such rights will occur at
some later date.
5. Other Stock-Based Awards. The Committee may also grant other
types of awards that are valued, in whole or in part, by reference to or
otherwise based on the Company's Common Stock. These awards may be granted
alone, in addition to, or in tandem with, stock options, SAR's, restricted
stock, or stock purchase rights and/or cash awards outside of the 1996 Plan.
Such awards will be made upon terms and conditions as the Committee may in its
discretion provide.
Change in Control Provisions. If there is a change in control or a
potential change in control, SAR's and limited SAR's outstanding for at least
six months, and any stock options which are not then exercisable will become
fully exercisable and vested. Likewise, the restrictions applicable to
restricted stock, stock purchase rights and other stock-based awards will lapse
and such shares and awards will be deemed fully vested. Stock options, SAR's,
limited SAR's, restricted stock, stock purchase rights and other stock-based
awards, will, unless otherwise determined by the Committee in its sole
discretion, be cashed out on the basis of the change in control price, as
defined in the 1996 Plan and as described below.
The change in control price will be the highest price per share paid
in any transaction reported on the NASDAQ, or paid or offered to be paid in any
bona fide transaction relating to a potential or actual change in control of
the Company, at any time during the immediately preceding 60 day period as
defined by the Committee. A change in control occurs if (i) any person becomes
a beneficial owner directly or indirectly of twenty percent (20%) or more of
the total voting stock of the Company (subject to certain exceptions), (ii)
during any 24 month period the individuals who comprised the Board of Directors
of the Company at the beginning of such period no longer represent a majority
of the Board (subject to certain exceptions), or (iii) a transaction occurs
which requires stockholder approval, and involves the acquisition of the
Company by asset purchase, merger or otherwise. A potential change in control
means (i) approval by the stockholders of an agreement which, if completed,
would constitute a change in control, or (ii) the acquisition by a person of
five percent (5%) or more of the total voting stock of the Company and the
adoption by the Board of a resolution that a potential change of control, as
defined in the 1996 Plan, has occurred.
Amendment. The 1996 Plan may be amended by the Board of Directors,
except that the Board may not, without the approval of the Company's
stockholders, increase the number of shares available for distribution,
decrease the option price of a stock option below one hundred percent (100%) of
the fair market value at grant or change the pricing rule applicable for stock
purchase rights, change the class of employees eligible to receive awards under
the 1996 Plan, or extend the term of any option award.
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Adjustment. In the case of a stock split, stock dividend,
reclassification, recapitalization, merger, reorganization, or other changes in
the Company's structure affecting the Common Stock, appropriate adjustments
will be made by the Committee, in its sole discretion, in the number of shares
reserved under the 1996 Plan and in the number of shares covered by options and
other awards then outstanding under the 1996 Plan and, where applicable, the
exercise price for awards under the 1996 Plan.
Federal Income Tax Aspects. The following is a brief summary of the
Federal income tax aspects of awards made under the Plan based upon the Federal
income tax laws in effect on the date hereof. This summary is not intended to
be exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Common Stock is issued to
a participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of the shares is made by the participant within two years of the
date of grant or within one year after the transfer of the shares to the
participant, then: (i) upon the sale of the shares, any amount realized in
excess of the option price will be taxed to the participant as a long-term
capital gain, and any loss sustained will be a long-term loss, and (ii) no
deduction will be allowed to the Company for Federal income tax purposes. The
exercise of an ISO will give rise to an item of tax preference that may result
in an alternative minimum tax liability for the participant unless the
participant makes a disqualifying disposition of the shares received upon
exercise.
If Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then generally:
(i) the participant will realize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of the shares
at exercise (or, if less, the amount realized on the disposition of the shares)
over the option price paid for such shares, and (ii) the Company will be
entitled to deduct any such recognized amount. Any further gain or loss
realized by the participant will be taxed as short-term or long-term capital
gain or loss, as the case may be, and will not result in any deduction by the
Company.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
2. Non-Qualified Stock Options. Except as noted below, with
respect to non-qualified stock options: (i) no income is realized by the
participant at the time the option is granted; (ii) generally upon exercise of
the option, the participant realizes ordinary income in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares on the date of exercise and the Company will be entitled to
a tax deduction in the same amount; and (iii) at disposition, any appreciation
(or depreciation) after date of exercise is treated either as short-term or
long-term capital gain or loss, depending upon the length of time that the
participant has held the shares. See "Special Rule Applicable to Corporate
Insiders." See also "Restricted Stock" for tax rules applicable where the
spread value of an option is settled in an award of restricted stock.
3. Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of an SAR. When the SAR is exercised,
the participant will generally be required to include as taxable ordinary
income in the year of exercise, an amount equal to the amount of cash and the
fair market value of any shares received. The Company will be entitled to a
deduction at the time and in the amount included in the participant's income by
reason of the exercise. If the participant receives Common Stock upon exercise
of an SAR, the post- exercise appreciation or depreciation will be treated in
the same manner discussed above under "Non-Qualified Stock Options." See
"Special Rules Applicable to Corporate Insiders."
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4. Restricted Stock. A participant receiving restricted stock
generally will recognize ordinary income in the amount of the fair market value
of the restricted stock at the time the stock is no longer subject to
forfeiture, less the consideration paid for the stock. However, a participant
may elect, under Section 83(b) of the Internal Revenue Code, within 30 days of
the grant of the stock, to recognize taxable ordinary income on the date of
grant equal to the excess of the fair market value of the shares of restricted
stock (determined without regard to the restrictions) over the purchase price
of the restricted stock. Thereafter, if the shares are forfeited, the
participant will be entitled to a deduction, refund, or loss for tax purposes
only in an amount equal to the purchase price of the forfeited shares
regardless of whether he made a Section 83(b) election. With respect to the
sale of shares after the forfeiture period has expired, the holding period to
determine whether the participant has long-term or short-term capital gain or
loss, generally begins when the restriction period expires and the tax basis
for such shares will generally be based on the fair market value of such shares
on such date. However, if the participant makes an election under Section
83(b), the holding period will commence on the date of grant, the tax basis
will be equal to the fair market value of shares on such date (determined
without regard to restrictions), and the Company generally will be entitled to
a deduction equal to the amount that is taxable as ordinary income to the
participant in the year that such income is taxable.
5. Special Rules Applicable to Corporate Insiders. Generally, an
individual subject to Section 16(b) of the Securities Exchange Act of 1934 is
not taxed until six months after the exercise of a non-qualified stock option.
At that time, the individual recognizes the excess of the fair market value of
the stock over the option purchase price determined as of the end of the six
month period as ordinary income, and the holding period for treating any
subsequent gain (or loss) as long-term capital gain (or loss) begins at the end
of such period. A similar rule applies with respect to the exercise of SAR's
settled in stock. However, an individual subject to Section 16(b) who makes an
election under Section 83(b) on a timely basis (see discussion above under
"Restricted Stock") will instead be taxed on the basis of the excess of the
fair market value over the purchase price at exercise, with the holding period
beginning on such date.
Depending on their individual circumstances, individuals subject to
Section 16(b) who receive restricted stock awards may not become subject to tax
at the times discussed above under "Restricted Stock" but may have the amount
of income calculated (and recognized) based on the fair market value of the
Common Stock at a later date.
6. Dividends and Dividend Equivalents. Dividends paid on
restricted stock generally will be treated as compensation that is taxable as
ordinary income to the participant, and will be deductible by the Company. If,
however, the participant makes a Section 83(b) election, the dividends will be
taxable as ordinary income to the participant and will not be deductible by the
Company.
7. Other Stock Based Awards. The Federal income tax treatment of
other stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
conditions applicable to the award, be taxable as an option or an award of
restricted stock.
The 1996 Plan provides for the grant by the Company of options to
purchase Common Stock, and also provides for sales of restricted Common Stock,
to officers and other key employees and to directors of the Company and to
consultants and other persons with important business relationships with the
Company. The 1996 Plan also provides for formula grants to non-employee
directors. The number of shares initially available for issuance under the
1996 Plan is 4,000,000 shares. This number represents approximately twenty
percent (20%) of the Company's Common Stock outstanding as of April 30, 1996.
In the event additional shares of the Company's Common Stock are subsequently
issued, twenty percent (20%) of such issued shares will be allocated to the
1996 Plan. The aggregate number and kind of shares covered by the 1996 Plan,
and the number and kind of shares and the exercise price per share covered by
outstanding stock options, are subject to adjustment in the event of any
changes in the character or number of outstanding shares of Common Stock by
reason of stock splits, reverse stock splits, stock dividends, reclassification
or similar changes in the capital
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structure of the Company. At July 1, 1996, options to purchase an aggregate of
1,295,000 shares had been allocated for grant, subject to shareholder approval
of the 1996 Plan, and 2 executive officers and approximately 23 employees of
the Company and its subsidiaries were eligible to participate in, the 1996
Plan. Carmen Santoro, a director, was allocated for grant, subject to
shareholder approval of the 1996 Plan, an option under the 1996 Plan to
purchase 250,000 shares, of which 62,500 vest upon shareholder approval of the
1996 Plan and 62,500 vest on each of the three anniversary dates of the
allocation date following the date of allocation.
The 1996 Plan provides that it is to be administered by the Board of
Directors or a committee of at least two directors appointed by the Board (the
"Committee"). The 1996 Plan is administered by the Company's Compensation
Committee, the members of which are R.C. Shepard and Edward Joseph Legere II,
both of whom are non-employee directors of the Company. The Committee has
broad discretion, subject to the terms of the 1996 Plan, to determine the
persons entitled to receive options, SAR's and/or restricted stock, and the
terms and conditions on which options, SAR's and/or restricted stock are
granted and to interpret and prescribe rules and regulations relating to the
1996 Plan.
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PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as
independent auditors, to audit the financial statements of the Company for the
fiscal year ending April 30, 1997, and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since fiscal year 1983. Its representatives are expected to be
present at the meeting with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
ANNUAL REPORT
The 1996 Annual Report to Shareholders of the Company is being sent
with this Proxy Statement to each shareholder of record as of August 7, 1996
with this Proxy Statement. The Annual Report is not to be regarded as proxy
solicitation material.
SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for action at the 1997
Annual Meeting of Shareholders and presentation in the Company's Proxy
Statement with respect to such meeting should arrange for such proposal to be
delivered to the Company at its principal place of business no later than April
30, 1997 in order to be considered for inclusion in the Company's proxy
statement relating to that meeting. Matters pertaining to such proposals,
including the number and length thereof, eligibility of persons entitled to
have such proposals included and other aspects are regulated by the Securities
Exchange Act of 1934, Rules and Regulations of the Securities and Exchange
Commission and other laws and regulations to which interested persons should
refer.
OTHER MATTERS
Management is not aware of any other matters to come before the
meeting. If any other matter not mentioned in this Proxy Statement is brought
before the meeting, the proxy holders named in the enclosed Proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
By Order of the Board of Directors
William V. Moding
Secretary
August 12, 1996
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K, AS AMENDED, FOR THE FISCAL YEAR ENDED APRIL 30, 1996
WILL BE PROVIDED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
SECRETARY, TECHNICLONE INTERNATIONAL CORPORATION, 14282 FRANKLIN AVENUE,
TUSTIN, CALIFORNIA 92780-7017.
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EXHIBIT A
MERGER AGREEMENT
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AGREEMENT AND PLAN OF MERGER
OF
TECHNICLONE CORPORATION,
A DELAWARE CORPORATION
AND
TECHNICLONE INTERNATIONAL CORPORATION,
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 27, 1996
(this "Agreement"), is between TECHNICLONE CORPORATION, a Delaware corporation
("Techniclone Delaware"), and TECHNICLONE INTERNATIONAL CORPORATION, a
California corporation ("Techniclone California"), which corporations are
sometimes referred to herein as the "Constituent Corporations".
R E C I T A L S
A. Techniclone Delaware is a corporation duly organized and
existing under the laws of the State of Delaware and has an authorized capital
of 55,000,000 shares, 50,000,000 of which are designated "Common Stock", $.001
par value per share, and 5,000,000 of which are designated "Preferred Stock",
$.001 par value per share. As of July __, 1996, 100 shares of Common Stock
were issued and outstanding, all of which were held by Techniclone California.
No shares of Preferred Stock were outstanding.
B. Techniclone California is a corporation duly organized and
existing under the laws of the State of California and has an authorized
capital of 30,100,000 shares, 30,000,000 of which are designated "Common
Stock", no par value and 100,000 of which are designated "Preferred Stock",
$1.00 par value per share. As of August __, 1996, ___________ shares of Common
Stock were outstanding and_______ shares of Class B Convertible Preferred Stock
were outstanding.
C. The Board of Directors of Techniclone California has
determined that, for the purpose of effecting the reincorporation of
Techniclone California in the State of Delaware, it is advisable and in the
best interests of Techniclone California and its shareholders that Techniclone
California merge with and into Techniclone Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Techniclone Delaware and
Techniclone California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, Techniclone Delaware and Techniclone California
hereby agree, subject to the terms and conditions hereinafter set forth, as
follows:
I.
MERGER
1.1 MERGER. In accordance with the provisions of this Agreement,
the Delaware General Corporation Law and the California General Corporation
Law, Techniclone California shall be merged with and into Techniclone Delaware
(the "Merger"), the separate existence of Techniclone California shall cease
and Techniclone Delaware shall be, and is herein sometimes referred to as, the
"Techniclone Delaware", and the name of Techniclone Delaware shall be
"TECHNICLONE CORPORATION."
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective
when the following actions have been completed:
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(a) This Agreement has been adopted and approved by the
stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California General
Corporation Law;
(b) All of the conditions precedent to the consummation
of the Merger specified in this Agreement have been satisfied or duly waived by
the party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed
counterpart of this Agreement meeting the requirements of the Delaware General
Corporation Law has been filed with the Secretary of State of the State of
Delaware; and
(d) An executed Certificate of Merger or an executed
counterpart of this Agreement meeting the requirements of the California
General Corporation Law has been filed with the Secretary of State of the State
of California.
The date and time when the Merger shall become effective, as
aforesaid, is herein called the "Effective Date of the Merger".
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger,
the separate existence and corporate organization of Techniclone California
shall cease and Techniclone Delaware, as Techniclone Delaware, shall continue
its corporate existence under the laws of the State of Delaware.
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Techniclone Delaware as in effect immediately before the
Effective Date of the Merger shall continue in full force and effect as the
Certificate of Incorporation of Techniclone Delaware until duly amended or
repealed in accordance with the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of Techniclone Delaware as in effect
immediately before the Effective Date of the Merger shall continue in full
force and effect as the Bylaws of Techniclone Delaware until duly amended or
repealed in accordance with the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of
Techniclone California immediately before the Effective Date of the Merger
shall be the directors and officers of Techniclone Delaware until the
expiration of their current terms and until their successors have been duly
elected and qualified, or until their prior resignation, removal or death,
subject to the Certificate of Incorporation and the Bylaws of Techniclone
Delaware.
III.
MANNER OF CONVERSION OF STOCK
3.1 TECHNICLONE CALIFORNIA SHARES. Upon the Effective Date of the
Merger, each share of Techniclone California Common Stock, no par value, issued
and outstanding immediately before the Effective Date of the Merger shall by
virtue of the Merger and without any action by the Constituent Corporations, by
the holder of such shares or by any other person be converted into and
exchanged for one fully paid and nonassessable share of Common Stock, $.001 par
value, of Techniclone Delaware. Upon the Effective Date of the Merger, each
share of Class B Convertible Preferred Stock, $1.00 par value per share, of
Techniclone California issued and outstanding immediately before the Effective
Date of the Merger shall by virtue of the Merger and without any action by the
Constituent Corporations, by the holder of such shares or by any other
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person be converted into and exchanged for one fully paid and nonassessable
share of Class B Convertible Preferred Stock, $0.001 par value, of Techniclone
Delaware. No fractional shares, or cash in lieu thereof, shall be issued in
the Merger.
3.2 TECHNICLONE CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND
CONVERTIBLE SECURITIES. Upon the Effective Date of the Merger, Techniclone
Delaware shall assume and continue the 1982 Stock Option Plan, the Incentive
Stock Option, Non-Statutory Stock Option and Restricted Stock Purchase Plan -
1986, the Cancer Biologics Incorporated Incentive Stock Option, Nonqualified
Stock Option and Restated Stock Purchase Plan - 1987, the Incentive Stock
Option and Non-Qualified Stock Option Plan - 1993 and the 1996 Stock Incentive
Plan and all other employee benefit plans of Techniclone California. Each
outstanding and unexercised option, other right to purchase or security
convertible into Techniclone California Common Stock shall become an option,
right to purchase or a security convertible into Techniclone Delaware's Common
Stock on the basis of one share of Techniclone Delaware's Common Stock for each
share of Techniclone California Common Stock issuable pursuant to any such
option, stock purchase right or convertible security, under the same terms and
conditions, and at an exercise price per share equal to the exercise price per
share applicable to any such Techniclone California stock option, stock
purchase right or other convertible security at the Effective Date of the
Merger. Each Warrant to Purchase Common Stock of Techniclone California shall
become a Warrant to Purchase Common Stock of Techniclone Delaware on the basis
of one share of Techniclone Delaware for each share of Techniclone California
Common Stock issuable pursuant to any such Warrant.
A number of shares of Techniclone Delaware's Common Stock shall be
reserved for issuance upon the exercise of stock options, stock purchase rights
and convertible securities equal to the number of shares of Techniclone
California Common Stock so reserved immediately before the Effective Date of
the Merger.
3.3 TECHNICLONE DELAWARE COMMON STOCK. Upon the Effective Date of
the Merger, each share of Common Stock, $.001 par value, of Techniclone
Delaware issued and outstanding immediately before the Effective Date of the
Merger shall, by virtue of the Merger and without any action by Techniclone
Delaware, by the holder of such shares or by any other person be canceled and
returned to the status of authorized but unissued shares.
IV.
TRANSFER OF ASSETS AND LIABILITIES
4.1 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date,
(i) the rights, privileges, powers and franchises, both of a public as well as
of a private nature, of each of the Constituent Corporations shall be vested in
and possessed by Techniclone Delaware, subject to all the disabilities, duties
and restrictions of or upon each of the Constituent Corporations; (ii) all
rights, privileges, powers and franchises of each of the Constituent
Corporations, all property, real, personal and mixed, of each of the
Constituent Corporations, all debts due to each of the Constituent Corporations
on whatever account and all things in action or belonging to each of the
Constituent Corporations shall be transferred to and vested in Techniclone
Delaware; (iii) all property, rights, privileges, powers and franchises, as
well as all other interests, shall be as effectively the property of
Techniclone Delaware as they were of the Constituent Corporations before the
Effective Date; and (iv) the title to any real estate vested by deed or
otherwise in either of the Constituent Corporations shall not revert to either
of the Constituent Corporations or be in any way impaired by reason of the
Merger. Notwithstanding the foregoing, (i) the liabilities of the Constituent
Corporations and of their stockholders, directors and officers shall not be
affected by the Merger; (ii) all rights of creditors and all liens upon any
property of either of the Constituent Corporations shall be preserved
unimpaired notwithstanding the Merger; and (iii) any claim existing or action
or proceeding pending by or against either of the Constituent Corporations may
be prosecuted to judgment as if the Merger had not taken place; provided,
however, that the claims and rights of the creditors of either or both of the
Constituent
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Corporations may be modified with the consent of such creditors; and, provided
further, that all debts, liabilities and duties of or upon each of the
Constituent Corporations shall attach to Techniclone Delaware and accordingly
may be enforced against it to the same extent as if such debts, liabilities and
duties had been incurred or contracted by it.
4.2 FURTHER ASSURANCES. From time to time, as and when required
by Techniclone Delaware or by its successors or assigns, there shall be
executed and delivered on behalf of Techniclone California such deeds and other
instruments, and there shall be taken or caused to be taken by it such further
and other actions as shall be appropriate or necessary in order to vest or
perfect in or conform of record or otherwise by Techniclone Delaware the title
to and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Techniclone California and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of Techniclone Delaware are fully authorized in the name and on
behalf of Techniclone California or otherwise to take all such actions and to
execute and deliver all such deeds and other instruments.
V.
GENERAL
5.1 COVENANTS OF TECHNICLONE DELAWARE. Techniclone Delaware
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(a) Qualify to do business as a foreign corporation in
the State of California and in connection therewith irrevocably appoint an
agent for service of process as required under the provisions of Section 2105
of the California General Corporation Law.
(b) File all documents with the California Franchise Tax
Board necessary for the assumption by Techniclone Delaware of all of the
franchise tax liabilities of Techniclone California.
(c) Take such other actions as may be required by the
California General Corporation Law.
5.2 DEFERRAL. Consummation of the merger may be deferred by the
Board of Directors of Techniclone California for a reasonable period of time if
the Board of Directors determines that deferral would be in the best interests
of Techniclone California and its shareholders.
5.3 AMENDMENT. The parties hereto, by mutual consent of their
respective Boards of Directors, may amend, modify or supplement this Agreement
in such manner as may be agreed upon by them in writing at any time before or
after adoption and approval of this Agreement by the stockholders of
Techniclone Delaware and Techniclone California, but not later than the
Effective Date; provided, however, that no such amendment, modification or
supplement not adopted and approved by the stockholders of Techniclone Delaware
and Techniclone California shall affect the rights of such stockholders or
change any of the principal terms of this Agreement.
5.4 ABANDONMENT. At any time before the Effective Date of the
Merger, this Agreement may be terminated and the Merger may be abandoned for
any reason whatsoever by the Board of Directors of either Techniclone
California or of Techniclone Delaware, or of both, notwithstanding the approval
of this Agreement by the shareholders of Techniclone California or by the
stockholders of Techniclone Delaware, or by both.
In the event of abandonment of this Agreement, as above provided, this
Agreement shall become wholly void and of no effect, and no liability on the
part of either Constituent Corporation or its Board of Directors or its
stockholders shall arise by virtue of such termination except as provided in
Section 5.5 hereof.
5.5 EXPENSES. If the Merger becomes effective, Techniclone
Delaware shall assume and pay all expenses in connection therewith not
theretofore paid by the respective parties. If for any reason the Merger
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shall not become effective, Techniclone California shall pay all expenses
incurred in connection with all the proceedings taken in respect of this
Agreement or relating thereto.
5.6 REGISTERED OFFICE. The registered office of Techniclone
Delaware in the State of Delaware is located at 9 East Loockerman Street,
Dover, Delaware 19901, and National Registered Agents, Inc., County of Kent is
the registered agent of Techniclone Delaware at such address.
5.7 AGREEMENT. Executed copies of this Agreement will be on file
at the principal place of business of Techniclone Delaware at 14282 Franklin
Avenue, Tustin, California 92680, and, upon request and without cost, copies
thereof will be furnished to any stockholder of either Constituent Corporation.
5.8 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the Merger provisions of
the California General Corporation Law.
5.9 COUNTERPARTS. In order to facilitate the filing and recording
of this Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by
resolutions of the Boards of Directors of Techniclone Delaware and Techniclone
California is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.
TECHNICLONE CORPORATION,
a Delaware corporation
By:
-----------------------------
Lon H. Stone
President and Chief Executive
Officer
TECHNICLONE INTERNATIONAL
CORPORATION,
a California corporation
By:
-----------------------------
Lon H. Stone
President and Chief Executive
Officer
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OFFICER'S CERTIFICATE
OF
TECHNICLONE CORPORATION,
A DELAWARE CORPORATION
The undersigned, Lon H. Stone, President of TECHNICLONE
CORPORATION, a corporation organized and existing under the laws of the State
of Delaware ("Techniclone Delaware"), hereby certifies, pursuant to the
provisions of Sections 103 and 252 of the General Corporation Law of the State
of Delaware, that Techniclone International Corporation, a California
corporation ("Techniclone California"), the sole stockholder of Techniclone
Delaware, has voted all outstanding shares of Techniclone Delaware in favor of
the merger of Techniclone California with and into Techniclone Delaware on the
terms and conditions set forth in the Agreement and Plan of Merger to which
this Certificate is appended.
IN WITNESS WHEREOF, I have subscribed my name to this
Certificate as of September 27, 1996.
------------------------------
Lon H. Stone, President
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CERTIFICATE OF APPROVAL
OF
AGREEMENT AND PLAN OF MERGER
LON H. STONE and WILLIAM V. MODING hereby certify that:
(a) They are the Chief Executive Officer and Secretary,
respectively of TECHNICLONE INTERNATIONAL CORPORATION, a California corporation
(the "Corporation").
(b) The Agreement and Plan of Merger in the form attached hereto
was duly approved by the Board of Directors and the shareholders of the
Corporation.
(c) There are two classes of shares of the Corporation, consisting
of Common Stock and Class B Convertible Preferred Stock, and the number of
shares outstanding and entitled to vote on the merger is __________ shares of
Common Stock and _________ shares of Class B Convertible Preferred Stock.
(d) The merger was approved by the holders of _________ % of the
outstanding shares of Common Stock and ________% of the outstanding shares of
Class B Convertible Preferred Stock entitled to vote thereon. The merger
required the approval of a majority of the outstanding shares of Common Stock
and a majority of the Class B Convertible Preferred Stock, each voting as a
separate class. The votes cast in favor of the merger equaled or exceeded the
percentage vote required for the Common Stock and Class B Convertible Preferred
Stock, each voting as a separate class.
The undersigned further declares under penalty of perjury under the
laws of the State of California that the matters set forth in this Certificate
are true and correct of their own knowledge.
Dated: September 27, 1996
----------------------------
Lon H. Stone,
Chief Executive Officer
----------------------------
William V. Moding, Secretary
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EXHIBIT B
CERTIFICATE OF INCORPORATION OF TECHNICLONE DELAWARE
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CERTIFICATE OF INCORPORATION
OF
TECHNICLONE CORPORATION
ARTICLE 1 - NAME
The name of this Corporation is TECHNICLONE CORPORATION.
ARTICLE 2 - REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State
of Delaware is 9 East Loockerman Street, Dover, Delaware 19901. The name of
the Corporation's registered agent at that address is National Registered
Agents, Inc., County of Kent.
ARTICLE 3 - PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as amended from time to time.
ARTICLE 4 - AUTHORIZED CAPITAL
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000, of which (i)
50,000,000 shares shall be designated "Common Stock" and shall have a par value
of $0.001 per share; and (ii) 5,000,000 shares shall be designated "Preferred
Stock" and shall have a par value of $0.001 per share. The Preferred Stock
shall be divided into series. The first such series shall consist of 5,000
shares and is designated "Class B Convertible Preferred Stock". The Board of
Directors is authorized, subject to limitations prescribed by law, to provide
for the issuance of the shares of the remaining authorized shares of Preferred
Stock in one or more series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof. The authority of
the Board with respect to each series shall include, but not be limited to,
determination of the following:
1 The number of shares constituting that series and the
distinctive designation of that series;
2 The dividend rate on the shares of that series,
whether dividends shall be cumulative and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
3 Whether that series shall have voting rights, in
addition to the voting rights provided by law and, if so, the terms of such
voting rights;
4 Whether that series shall have conversion privileges
and, if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of Directors
shall determine;
5 Whether or not the shares of that series shall be
redeemable and, if so, the terms and
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conditions of such redemption, including the date or dates upon or after which
they shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
6 Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund; and
7 The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series.
The designations, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations and
restrictions thereof in respect of the Class B Convertible Preferred Stock are
as follows:
SECTION 1. DETERMINATION AND AMOUNT. The shares of such series
shall be designated as "Class B Convertible Preferred Stock" (the "Class B
Convertible Preferred Stock") and the number of shares constituting the Class B
Convertible Preferred Stock shall be Five Thousand (5,000). Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Class B
Convertible Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants to acquire shares of Class B
Convertible Preferred Stock or upon the conversion of any outstanding
securities issued by the Corporation convertible into Class B Convertible
Preferred Stock.
SECTION 2. RANK. The Class B Convertible Preferred Stock shall
rank: (i) junior to any other class or series of capital stock of the
Corporation hereafter created specifically ranking by its terms senior to the
Class B Convertible Preferred Stock (collectively, the "Senior Securities");
(ii) prior to all of the Corporation's Common Stock ("Common Stock"); (iii)
prior to any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms junior to any Class B Convertible
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); (iv) on parity with any class or series of capital stock
of the Corporation hereafter created specifically ranking by its terms on
parity with the Class B Convertible Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (all such
distributions being referred to collectively as "Distributions").
SECTION 3. DIVIDENDS. The holders of the Class B Convertible
Preferred Stock ("Holders") shall not be entitled to receive cash dividends on
the Class B Convertible Preferred Stock.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the Holders
of shares of Class B Convertible Preferred Stock shall be entitled to receive,
immediately after any distributions to Senior Securities required by the
Corporation's Certificate of Incorporation, as amended and restated, or any
certificate of designation of preferences, and prior and in preference to any
distribution to Junior Securities but in parity with any distribution of Parity
Securities, an amount per share equal to the sum of (i) One Thousand Dollars
($1,000) for each outstanding share of Class B Convertible Preferred Stock (the
"Original Class B Issue Price") and (ii) an amount equal to ten percent (10%)
of the Original Class B Issue Price per annum for the period that has passed
since the date of issuance of any Class B Convertible Preferred Stock (such
amount being referred to herein as the "Premium"). If upon the occurrence of
such event, and after payment in full of the preferential amounts with respect
to the Senior Securities, the assets and funds thus distributed among the
Holders of the Class B Convertible Preferred Stock
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and Parity Securities, respectively, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
Holders of the Class B Convertible Preferred Stock and the Parity Securities,
pro rata, based on the respective liquidation amounts to which each such series
of stock is entitled by the Corporation's Certificate of Incorporation, as
amended and restated, and any certificate of designation of preferences.
(b) Upon the completion of the distribution
required by subsection 4(a), if assets remain in this Corporation, they shall
be distributed to holders of Junior Securities in accordance with the
Corporation's Certificate of Incorporation, as amended, including any duly
adopted certificate(s) of designation of preferences.
(c) A consolidation or merger of the Corporation
with or into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of the Corporation or the
effectuation by the Corporation of a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Corporation is disposed of (collectively referred to as a "Change in Control
Transaction"), shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 4; provided, however, that the Corporation
shall provide written notice to the Holders of the Class B Convertible
Preferred Stock of a Change in Control Transaction and the Holders of the Class
B Convertible Preferred Stock shall be entitled to convert the Class B
Convertible Preferred Stock held by such Holder pursuant to the provisions of
Section 5 hereof, at any time before five (5) days prior to any Change in
Control Transaction.
SECTION 5. CONVERSION. The record Holders of this Class B
Convertible Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(A) RIGHT TO CONVERT. Immediately after the date
of the last closing of a sale and purchase of Class B Convertible Preferred
Stock, which date shall not be later than January 15, 1996, (the "Last Closing
Date"), continuing through the first 90 days, each record Holder of Class B
Convertible Preferred Stock shall be entitled and subject to the Corporation's
right of redemption set forth in Section 6(a) and Section 6(b), at the office
of the Corporation or the transfer agent for the Class B Convertible Preferred
Stock, to convert portions of the Class B Convertible Preferred Stock held by
such Holder (but only in multiples of Fifty Thousand Dollars ($50,000)) into
that number of fully-paid and non-assessable shares of Common Stock of the
Corporation calculated in accordance with the following formula:
110% of the Fixed Conversion Price (as defined herein).
Beginning 91 days after the last closing date, each record Holder of
Class B Convertible Preferred Stock shall be entitled (at the times and in the
amounts set forth below), and, subject to the Corporation's right of redemption
set forth in Section 6(a) and Section 6(b), at the office of the Corporation or
the transfer agent for the Class B Convertible Preferred Stock, to convert
portions of the Class B Convertible Preferred Stock held by such Holder (but
only in multiples of Fifty Thousand Dollars ($50,000) into that number of
fully-paid and non- assessable shares of Common Stock of the Corporation
calculated in accordance with the following formula (the "Conversion Rate"):
Number of shares issued upon conversion of one share of Class B Convertible
Preferred Stock
= (.10 (N/365) (1,000) + 1,000
----------------------------
Conversion Price
where,
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N = the number of days between (i) the last closing date, as defined
herein, and (ii) the applicable date of conversion for the shares of
Class B Convertible Preferred Stock for which conversion is being
elected, and
Conversion Price = the lesser of (x) the average Closing Bid Price, as
that term is defined below, for the five trading days ending on
December 8, 1995 (which amount is $3.06875 and is referred to herein
as the "Fixed Conversion Price"), or (y) X times the average Closing
Bid Price, as that term is defined below, of the Corporation's Common
Stock for the five (5) trading days immediately preceding the Date of
Conversion, as defined below, where X shall equal .85 + (1-(the
average Closing Bid Price of the Corporation's Common Stock for the
five (5) trading days immediately preceding the Date of Conversion, as
that term is defined below, divided by the average Closing Bid Price
of the Corporation's Common Stock for the ten (10) trading days
immediately preceding the Date of Conversion); provided that, in no
event shall X be less than .85 or greater than 1.0.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the over-the-counter market as reported by NASDAQ, or if
then traded on a national securities exchange, the NASDAQ Small Cap or the
National Market System, the closing bid price on the principal national
securities exchange, the NASDAQ Small Cap or the National Market System which
it is so traded.
(B) MECHANICS OF CONVERSION. In order to convert Class B
Convertible Preferred Stock into full shares of Common Stock, the Holder shall
(i) fax a copy of the fully executed notice of conversion in the form attached
hereto ("Notice of Conversion") to the Company at such office that he elects to
convert the same, which Notice of Conversion shall specify the number of shares
of Class B Convertible Preferred Stock to be converted and shall contain a
calculation of the Conversion Rate (together with a copy of the first page of
each certificate to be converted) to the Company or its designated transfer
agent prior to Midnight, New York City time (the "Conversion Notice Deadline")
on the date of conversion specified on the Notice of Conversion and (ii)
surrender the original certificate or certificates therefor, duly endorsed, and
the original Notice of Conversion no later than the close of business (New York
City time) the next business day to a common courier, for either overnight
courier or 2-day courier, to the office of the Company and any transfer agent
for the Class B Convertible Preferred Stock; provided, however, that the Company
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless either the certificates evidencing
such Class B Convertible Preferred Stock are delivered to the Company or its
transfer agent as provided above, or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed.
(I) LOST OR STOLEN CERTIFICATES. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of a
certificate or certificates ("Stock Certificates") representing shares of Class
B Convertible Preferred Stock, and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Company, and upon
surrender and cancellation of the Stock Certificate(s), if mutilated, the
Company shall execute and deliver new Stock Certificate(s) of like tenor and
date.
(II) NO FRACTIONAL SHARES. If any conversion of the
Class B Convertible Preferred Stock would create a fractional share of Common
Stock or a right to acquire a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of Common Stock issuable
upon conversion shall be the next higher number of shares. In the case of a
dispute as to the calculation of the Conversion Rate, the Company's calculation
shall be deemed conclusive absent manifest error.
(III) COMPANY TO REISSUE/DELIVER SHARES. The Company
shall use all reasonable efforts to issue and deliver within three (3) business
days after delivery to the Company of such certificates, or after such agreement
and indemnification, to such Holder of Class B Convertible Preferred
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Stock at the address of the Holder on the Books of the Company, a certificate
or certificates for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid.
(IV) DATE OF CONVERSION. The date on which conversion
occurs (the "Date of Conversion") shall be deemed to be the date set forth in
such Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before midnight, New York City time, on the
Date of Conversion, and (ii) that the original Stock Certificates representing
the shares of Class B Convertible Preferred Stock to be converted are
surrendered no later than the close of business (New York City time) the next
business day to a common courier for overnight or 2-day delivery, and received
by the transfer agent or the Company within five (5) business days thereafter.
If the original Stock Certificates representing the Class B Convertible
Preferred Stock to be converted are not received by the transfer agent or the
Company within five (5) business days after the Date of Conversion or if the
facsimile of the Notice of Conversion is not received by the Company or its
designated transfer agent prior to the Conversion Notice Deadline, the Notice of
Conversion, at the Company's option, may be declared null and void.
(V) The person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
Following conversion of shares of Class B Convertible Preferred Stock,
such shares of Class B Convertible Preferred Stock will no longer be
outstanding.
(C) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Class B Convertible Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding Class B Convertible Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
Class B Convertible Preferred Stock, the Corporation will, subject to
stockholder approval, take all such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(D) AUTOMATIC CONVERSION. Each share of Class B Convertible
Preferred Stock outstanding on December 15, 1998 automatically shall be
converted into Common Stock on such date at the Conversion Rate then in effect
(calculated in accordance with the formula in Section 5(a) above) and December
15, 1998 shall be deemed the Date of Conversion with respect to such conversion.
(E) ADJUSTMENT TO CONVERSION RATE.
(A) If, prior to the conversion of all of the Class
B Convertible Preferred Stock, the number of outstanding shares of Common Stock
is increased by a stock split, stock dividend, or other similar event, the
Conversion Rate shall be proportionately adjusted, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Conversion Rate shall be
proportionately adjusted.
(B) If, prior to the conversion of all Class B
Convertible Preferred Stock, there shall be any merger, consolidation, exchange
of shares, recapitalization, reorganization, or other similar event, as a result
of which shares of Common Stock of the Corporation shall be changed into the
same or a different number of shares of the same or another class or classes of
stock or securities of the Corporation or another entity, then the Holders of
Class B Convertible Preferred Stock shall thereafter have the right to purchase
and receive upon conversion of Class B Convertible Preferred Stock, upon the
basis and upon the
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terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Class B Convertible Preferred Stock held by
such Holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests
of the Holders of the Class B Convertible Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Rate and of the number of shares issuable upon conversion of the
Class B Convertible Preferred Stock) shall thereafter be applicable, as nearly
as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The Corporation shall not
effect any transaction described in this subsection 5(e) unless the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligation to deliver to the Holders of the Class B Convertible
Preferred Stock such shares of stock and/or securities as, in accordance with
the foregoing provisions, the Holders of the Class B Convertible Preferred
Stock may be entitled to receive upon conversion of the Class B Convertible
Preferred Stock.
(C) If any adjustment under this Section 5(e) would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion shall be the next higher
number of shares.
SECTION 6. CASH REDEMPTION BY CORPORATION.
(A) CORPORATION'S RIGHT TO REDEEM UPON RECEIPT OF
NOTICE OF CONVERSION. The Corporation shall have the right, in its sole
discretion, upon receipt of a Notice of Conversion pursuant to Section 5, to
redeem in whole or in part any Class B Convertible Preferred Stock submitted for
conversion, immediately prior to conversion. If the Corporation elects to
redeem some, but not all, of the Class B Convertible Preferred Stock submitted
for conversion, the Corporation shall redeem from among the Class B Convertible
Preferred Stock submitted by the various Holders thereof for conversion on the
applicable date, a pro-rata amount from each Holder so submitting Class B
Convertible Preferred Stock for conversion. The Corporation shall effect each
such redemption by giving notice ("Notice of Redemption Upon Receipt of Notice
of Conversion") of its election to redeem, by facsimile within one (1) business
day following receipt of a Notice of Conversion from a Holder, with a copy by
2-day courier, (A) to the Holders of Class B Convertible Preferred Stock
selected for redemption, at the address and facsimile number of such Holder
appearing in the Corporation's register for the Class B Convertible Preferred
Stock and (B) the Corporation's transfer agent. Such Notice of Redemption Upon
Receipt of Notice of Conversion shall indicate the number of shares of Holder's
Class B Convertible Preferred Stock that have been selected for redemption, the
Date of Redemption Upon Receipt of Notice of Conversion (as defined below) and
the applicable Redemption Price Upon Receipt of Notice of Conversion, as defined
below. If the Notice of Redemption Upon Receipt of Notice of Conversion is not
received within the times specified above or does not meet the conditions
specified above, the Notice of Redemption Upon Receipt of Notice of Conversion
shall become null and void (unless otherwise agreed in writing by the Holder).
The Corporation shall not be entitled to send any Notice of Redemption upon
Receipt of Notice of Conversion and begin the redemption procedure unless it has
(x) the full amount of the Redemption Price Upon Receipt of Notice of
Conversion, in cash, available in a demand or other immediately available
account in a bank or similar financial institution or (y) immediately available
credit facilities, in the full amount of the Redemption Price Upon Receipt of
Notice of Conversion, with a bank or similar financial institution on the date
the Notice of Redemption Upon Receipt of Notice of Conversion is sent to the
applicable Holder.
The Redemption Price Upon Receipt of Notice of Conversion per share of
Class B Convertible Preferred Stock shall equal the Closing Bid Price on the
Date of Conversion, multiplied by the number of
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shares of Common Stock that would otherwise have been issuable had the shares
of Class B Convertible Preferred Stock redeemed been converted on the Date of
Conversion as to such shares.
For the purposes of the above formula, "N", "Closing Bid Price" and
"Conversion Price" shall have the meanings set forth in Section 5(a) and "Date
of Redemption" shall be deemed to be the Conversion Date (as that term is
defined in Section 5(b) above).
The Redemption Price Upon Receipt of Notice of Conversion shall be
paid to the Holder of Class B Convertible Preferred Stock redeemed within ten
(10) business days of the delivery of the Notice of Redemption Upon Receipt of
Notice of Conversion to such Holder; provided, however, that the Corporation
shall not be obligated to deliver any portion of the Redemption Price Upon
Receipt of Notice of Conversion unless either the certificates evidencing the
Class B Convertible Preferred Stock redeemed are delivered to the Corporation
or the transfer agent as provided in Section 5(b), or the Holder notifies the
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Notwithstanding the foregoing, in the event that the certificates evidencing
the Class B Convertible Preferred Stock delivered to the transfer agent as
provided in Section 5(b), the redemption of the Class B Convertible Preferred
Stock pursuant to this Section 6(a) shall still be deemed effective as of the
Date of Redemption Upon Receipt of Notice of Conversion.
(B) CORPORATION'S RIGHT TO REDEEM AT ITS ELECTION.
Commencing 91 days after the last closing date, the Corporation shall have the
right, in its sole discretion, to redeem, from time to time, any or all of the
Class B Convertible Preferred Stock; provided that, the Corporation shall only
be entitled to redeem shares of Class B Convertible Preferred Stock with an
aggregate Stated Value (as defined below) of at least One Million Five Hundred
Thousand Dollars ($1,500,000) on the first such redemption. If the Corporation
elects to redeem some, but not all, of the Class B Convertible Preferred Stock,
the Corporation shall redeem a pro-rata amount from each Holder of Class B
Convertible Preferred Stock. The Corporation shall effect each such redemption
by giving at least thirty (30) days prior written notice by overnight or 2-day
courier ("Notice of Redemption At Corporation's Election") to (A) the Holders of
Class B Convertible Preferred Stock selected for redemption, at the address and
facsimile number of such Holder appearing in the Corporation's register for the
Class B Convertible Preferred Stock and (B) the transfer agent, which Notice of
Redemption At Corporation's Election shall be deemed to have been delivered
three (3) business days after the Corporation's mailing of such Notice of
Redemption At Corporation's Election. Such Notice of Redemption At
Corporation's Election shall indicate the number of shares of Holder's Class B
Convertible Preferred Stock that have been selected for redemption, the date
which such redemption is to become effective (the "Date of Redemption At
Corporation's Election" and the applicable Redemption Price At Corporation's
Election, as defined below. The Corporation shall not be entitled to send any
Notice of Redemption At Corporation's Election and begin the redemption,
procedure unless it has (x) the full amount of the Redemption Price At
Corporation's Election, in cash, available in a demand or other immediately
available account in a bank or similar financial institution or (y) immediately
available credit facilities, in the full amount of the Redemption At
Corporation's Election, with a bank or similar financial institution on the date
the Notice of Redemption At Corporation's Election is delivered to the
applicable Holder. Notwithstanding the above, the Holder may convert any or all
of its Class B Convertible Preferred Stock that is eligible for conversion,
which would otherwise be subject to redemption under this Section 6(b), by
submitting a Notice of Conversion prior to the effective date of such
redemption. Corporation is not entitled to require redemption under this
Section 6(b) if the Corporation makes any planned press release either (a) on
the effective date of redemption or (b) prior to the close of trading on the
following business day. Additionally, the Corporation shall not be permitted to
elect redemption under this Section 6(b) if the Corporation has in its
possession material information concerning the Corporation which is required to
be publicly disclosed pursuant to the rules and regulations of the Securities
Exchange Act of 1934 or relevant self-regulatory organization and has not yet
been disclosed. In the event the Corporation is deemed to be in possession of
such undisclosed information subsequent to it
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providing Notice of Redemption, the date upon which the Corporation can require
the holders of the Class B Convertible Preferred Stock to redeem shall be 15
days following the date of any press release or other public disclosure.
For purposes of this Section 6(b), "Stated Value" shall mean the
Original Class B Issue Price of the shares of Class B Convertible Preferred
Stock redeemed pursuant to this Section 6(b), plus the accrued but unpaid
Premium (as defined in Section 4(a)) on such shares of Class B Convertible
Preferred Stock, as of the date of Redemption At Corporation's Election.
The Redemption Price At Corporation's Election shall be calculated as
a percentage of Stated Value of the shares of Class B Convertible Preferred
Stock redeemed pursuant to this Section 6(b), which percentage shall vary
depending on the date of delivery of the Notice of Redemption at Corporation's
Election, and shall be determined as follows:
<TABLE>
<CAPTION>
Date of Delivery of Notice of Redemption at Corporation's Election % of Stated Value
- ------------------------------------------------------------------ -----------------
<S> <C>
91 days to 6 months following last closing date 130%
6 months and 1 day to 12 months following last closing date 125%
12 months and 1 day to 18 months following last closing date 120%
18 months and 1 day to 24 months following last closing date 115%
24 months and 1 day to 30 months following last closing date 110%
30 months and 1 day to 36 months following last closing date 105%
</TABLE>
The Redemption Price At Corporation's Election shall be paid to the
Holder of Class B Convertible Preferred Stock redeemed within ten (10) business
days of the Date of Redemption At Corporation's Election to such Holder;
provided, however, that the Corporation shall not be obligated to deliver any
portion of the Redemption Price At Corporation's Election unless either the
certificates evidencing the Class B Convertible Preferred Stock redeemed are
delivered to the transfer agent prior to the 10th business day following the
Date of Redemption At Corporation's Election, or the Holder notifies the
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Notwithstanding the foregoing, in the event that the certificates evidencing
the Class B Convertible Preferred Stock redeemed are not delivered to the
transfer agent, prior to the 10th business day following the Date of Redemption
at Corporation's Election, the redemption of the Class B Convertible Preferred
Stock pursuant to this Section 6(b) shall still be deemed effective as of the
date of Redemption at Corporation's Election, and the Redemption Price At
Corporation's Election shall be paid to the Holder of Class B Preferred Stock
redeemed within 5 business days of the date the certificates evidencing the
Class B Preferred Stock redeemed are actually delivered to the transfer agent.
SECTION 7. ADVANCE NOTICE OF REDEMPTION.
(A) HOLDER'S RIGHT TO ELECT TO RECEIVE NOTICE OF
CASH REDEMPTION BY CORPORATION. Holder shall have the right to require
Corporation to provide advance notice stating whether Corporation will elect to
redeem Holder's shares in cash, pursuant to Corporation's redemption rights
discussed in Section 6.
(B) MECHANICS OF HOLDER'S ELECTION NOTICE.
Holder shall send notice to Corporation by facsimile ("Election Notice")
stating Holder's intention to require Corporation to disclose that if Holder
were to exercise his, her or its right of conversion (pursuant to section 5)
whether Corporation would elect to redeem Holder's convertible Security for
cash in lieu of issuing Common Stock. Corporation is required to disclose to
Holder what action Corporation would take over the subsequent five day period,
including the date Corporation receives such Election Notice.
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(C) CORPORATION'S RESPONSE. Corporation must
respond within one business day of receipt of Holder's Election Notice (1) via
facsimile and (2) via overnight courier. If Corporation does not respond to
Holder within one business day via facsimile and overnight courier, Corporation
shall be required to issue to Holder Common Stock upon Holder's conversion
within the subsequent five day period.
SECTION 8. VOTING RIGHTS. Except as otherwise provided by the
Delaware General Corporation Law ("Delaware Law"), the Holders of the Class B
Convertible Preferred Stock shall have no voting power whatsoever, and no
Holder of Class B Convertible Preferred Stock shall vote or otherwise
participate in any proceeding in which actions shall be taken by the
Corporation or the stockholders thereof or be entitled to notification as to
any meeting of the stockholders.
To the extent that under Delaware Law the vote of the Holders of the
Class B Convertible Preferred Stock, voting separately as a class, is required
to authorize a given action of the Corporation, the affirmative vote or consent
of the Holders of at least a majority of the outstanding shares of the Class B
Convertible Preferred Stock at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Class B Convertible
Preferred Stock (except as otherwise maybe required under Delaware Law) shall
constitute the approval of such action by the class. To the extent that under
Delaware Law the Holders of the Class B Convertible Preferred Stock are
entitled to vote on a matter with Holders of Common Stock, voting together as
one class, each share of Class B Convertible Preferred Stock shall be entitled
to a number of votes equal to the number of shares of Common Stock into which
it is then convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is calculated.
Holders of the Class B Convertible Preferred Stock shall be entitled to notice
of all stockholder meetings or written consents with respect to which they
would be entitled to vote, which notice would be provided pursuant to the
Corporation's by-laws and applicable statutes.
SECTION 9. PROTECTIVE PROVISIONS. So long as shares of Class B
Convertible Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by
Delaware Law) of the Holders of at least a majority of the then outstanding
shares of Class B Convertible Preferred Stock;
(a) alter or change the rights, preferences or
privileges of the shares of Class B Convertible Preferred Stock or any Senior
Securities so as to affect adversely the Class B Convertible Preferred Stock;
(b) create any new class or classes or series of
stock having a preference over the Class B Convertible Preferred Stock with
respect to Distributions (as defined in Section 2 above); or
(c) do any act or thing not authorized or
contemplated by this Certificate of Incorporation which would result in
taxation of the Holders of shares of the Class B Convertible Preferred Stock
under Section 305 of the Internal Revenue Code of 1986, as amended (or any
comparable provision of the Internal Revenue Code as hereafter from time to
time amended).
SECTION 10. STATUS OF REDEEMED OR CONVERTED STOCK. In the event
any shares of Class B Convertible Preferred Stock shall be redeemed or
converted pursuant to Section 5 or Section 6 hereof, the shares so converted or
redeemed shall be canceled, shall return to the status of authorized but
unissued Preferred Stock of no designated series and shall not be issuable by
the Corporation as Class B Convertible Preferred Stock.
SECTION 11. PREFERENCE RIGHTS. Nothing contained herein shall be
construed to prevent the Board of Directors of the Corporation from issuing one
or more series of Preferred Stock with dividend and/or
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liquidation preferences equal to or junior to the dividend and liquidation
preferences of the Class B Convertible Preferred Stock.
ARTICLE 5 - BOARD OF DIRECTORS AND MEETINGS OF STOCKHOLDERS
SECTION 1. BOARD OF DIRECTORS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors and elections of directors need not be by written ballot unless
otherwise provided in the Bylaws. The number of directors of the Corporation
shall be fixed from time to time by the Board of Directors either by a
resolution or Bylaw adopted by the affirmative vote of a majority of the entire
Board of Directors.
SECTION 2. MEETINGS OF STOCKHOLDERS. Meetings of the
stockholders may be held within or without the State of Delaware, as the Bylaws
may provide. The books of the Corporation may be kept (subject to any
provision contained in the Delaware Statutes) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or by the Bylaws of the Corporation.
SECTION 3. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Commencing
September 27, 1996, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise provided in the Bylaws of the
Corporation, special meetings of the stockholders of the Corporation may only
be called by the Board of Directors pursuant to a resolution adopted by a
majority of the entire Board of Directors. At any annual meeting or special
meeting of stockholders of the Corporation, only such business shall be
conducted as shall have been brought before such meeting in the manner provided
by the Bylaws of the Corporation.
ARTICLE 6 - LIMITATION OF DIRECTORS' LIABILITY
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derives an
improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of the
directors of the Corporation shall be limited or eliminated to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended from time to time. Any repeal or modification of this Article 6 by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE 7 - AMENDMENT OF BYLAWS
The Board of Directors of the Corporation shall have the power to
make, alter, amend, change, add to or repeal the Bylaws of the Corporation.
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ARTICLE 8 - INCORPORATOR
The name and address of the Incorporator of the Corporation is as
follows:
Stewart A. Smith
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereunto set my hand this ___ day of July 1996.
--------------------------
Stewart A. Smith
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EXHIBIT C
BYLAWS OF TECHNICLONE DELAWARE
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BYLAWS
OF
TECHNICLONE CORPORATION,
A DELAWARE CORPORATION
AS ADOPTED AUGUST __, 1996
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I-OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office. . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Books. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II-MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings. . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings. . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Notification of Business to be Transacted at Meeting. . . . 1
Section 5. Notice; Waiver of Notice. . . . . . . . . . . . . . . . . . 1
Section 6. Quorum; Adjournment. . . . . . . . . . . . . . . . . . . . 2
Section 7. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Stockholder Action by Written Consent Without a Meeting. . 2
Section 9. List of Stockholders Entitled to Vote . . . . . . . . . . . 2
Section 10. Stock Ledger. . . . . . . . . . . . . . . . . . . . . . . 3
Section 11. Inspectors of Election. . . . . . . . . . . . . . . . . . 3
Section 12. Organization. . . . . . . . . . . . . . . . . . . . . . . 3
Section 13. Order of Business. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III-DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Number and Election of Directors. . . . . . . . . . . . . . 3
Section 3. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4. Time and Place of Meetings. . . . . . . . . . . . . . . . . 4
Section 5. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Regular Meetings. . . . . . . . . . . . . . . . . . . . . . 4
Section 7. Special Meetings. . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Quorum; Vote Required for Action; Adjournment. . . . . . . 4
Section 9. Action by Written Consent. . . . . . . . . . . . . . . . . 5
Section 10. Telephone Meetings. . . . . . . . . . . . . . . . . . . . 5
Section 11. Committees. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. Compensation. . . . . . . . . . . . . . . . . . . . . . . 5
Section 13. Interested Directors. . . . . . . . . . . . . . . . . . . 5
ARTICLE IV-OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Appointment of Officers. . . . . . . . . . . . . . . . . . 6
Section 3. Subordinate Officers. . . . . . . . . . . . . . . . . . . . 6
Section 4. Removal and Resignation of Officers. . . . . . . . . . . . 6
Section 5. Vacancies in Offices. . . . . . . . . . . . . . . . . . . . 6
Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . . . 6
Section 7. Vice Chairman of the Board. . . . . . . . . . . . . . . . . 6
Section 8. Chief Executive Officer. . . . . . . . . . . . . . . . . . 7
</TABLE>
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<TABLE>
<S> <C>
Section 10. Vice President. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 11. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 12. Chief Financial Officer. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V-STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Form of Certificates. . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Record Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI-INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Right to Indemnification. . . . . . . . . . . . . . . . . . . . . 8
Section 2. Right of Indemnitee to Bring Suit. . . . . . . . . . . . . . . . 9
Section 3. Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . . . . 9
Section 4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Indemnification of Employees or Agents of the Corporation. . . . 10
Section 6. Indemnification Contracts. . . . . . . . . . . . . . . . . . . . 10
Section 7. Effect of Amendment. . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII-GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. Voting of Stock Owned by the Corporation. . . . . . . . . . . . . 11
Section 7. Construction and Definitions. . . . . . . . . . . . . . . . . . . 11
Section 8. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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BYLAWS
OF
TECHNICLONE CORPORATION,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be in the City of Dover, County of
Kent.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as may be fixed from time to time by the Board of Directors,
or at such other place either within or without the State of Delaware as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be
held at a time and date designated by the Board of Directors for the purpose of
electing directors and transacting such other business as may properly be
brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called only by the Board of Directors,
pursuant to a resolution adopted by a majority of the entire Board of
Directors. As used in these Bylaws, the term "entire Board of Directors" shall
mean the total authorized number of directors. Such request shall state the
purpose or purposes of the proposed meeting.
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To
be properly brought before a meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder entitled to vote at the meeting.
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SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise required by law, such notice
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. A written waiver of any such notice
signed by the person entitled thereto, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law,
or provided by the Certificate of Incorporation or these Bylaws, the holders of
a majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting of the time and place of the adjourned meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
SECTION 7. VOTING. Except as otherwise required by law, or provided
by the Certificate of Incorporation or these Bylaws, any question brought
before any meeting of stockholders at which a quorum is present shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereat. Unless otherwise provided in the Certificate of
Incorporation, each stockholder represented at a meeting of stockholders shall
be entitled to cast one vote for each share of the capital stock entitled to
vote thereat held by such stockholder. Such votes may be cast in person or by
proxy, but no proxy shall be voted on or after three (3) years from its date,
unless such proxy provides for a longer period. Elections of directors need
not be by ballot unless the Chairman of the meeting so directs or unless a
stockholder demands election by ballot at the meeting and before the voting
begins.
SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Commencing September 27, 1996, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who
has charge of the
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stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 9 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not so
appointed, or if an appointed inspector fails to appear or fails or refuses to
act at a meeting, the Chairman of any meeting of stockholders may, and on the
request of any stockholder or his proxy shall, appoint an inspector or
inspectors of election at the meeting. The duties of such inspector(s) shall
include: determining the number of shares outstanding and the voting power of
each; the shares represented at the meeting; the existence of a quorum; the
authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining the result; and such acts as may be proper to conduct
the election or vote with fairness to all stockholders. In the event of any
dispute between or among the inspectors, the determination of the majority of
the inspectors shall be binding.
SECTION 12. ORGANIZATION. At each meeting of stockholders the
Chairman of the Board of Directors, if one shall have been elected, (or in his
absence or if one shall not have been elected, the President) shall act as
Chairman of the meeting. The Secretary (or in his absence or inability to act,
the person whom the Chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
SECTION 13. ORDER OF BUSINESS. The order and manner of transacting
business at all meetings of stockholders shall be determined by the Chairman of
the meeting.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise required by law or provided
by the Certificate of Incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any
limitations in the
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Certificate of Incorporation, the authorized number of directors of the
Corporation shall be not less than six (6) nor more than eleven (11) with the
exact number to be set by the Board of Directors, until changed by resolution
adopted by the Board of Directors. Directors shall be elected at each annual
meeting of stockholders to replace directors whose terms then expire, and each
director elected shall hold office until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. Any director
may resign at any time effective upon giving written notice to the Board of
Directors, unless the notice specifies a later time for such resignation to
become effective. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the resignation of
a director is effective at a future time, the Board of Directors may elect a
successor prior to such effective time to take office when such resignation
becomes effective. Directors need not be stockholders.
SECTION 3. VACANCIES. Subject to the limitations in the Certificate
of Incorporation, vacancies in the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Each director so selected shall hold office for the
remainder of the full term of office of the former director which such director
replaces and until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. No decrease in the authorized number of
directors constituting the Board of Directors shall shorten the term of any
incumbent directors.
SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Directors shall
hold its meetings at such place, either within or without the State of
Delaware, and at such time as may be determined from time to time by the Board
of Directors.
SECTION 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware at
such date and time as the Board of Directors may from time to time determine
and, if so determined by the Board of Directors, notices thereof need not be
given.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, the
Secretary or by any two or more directors. Notice of the date, time and place
of special meetings shall be delivered personally or by telephone to each
director or sent by first-class mail or telegram, charges prepaid, addressed to
each director at the director's address as it is shown on the records of the
Corporation. In case the notice is mailed, it shall be deposited in the United
States mail at least four (4) days before the time of the holding of the
meeting. In case the notice is delivered personally or by telephone or
telegram, it shall be
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delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. The
notice need not specify the purpose of the meeting. A written waiver of any
such notice signed by the person entitled thereto, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the total number of directors then holding office
shall constitute a quorum for the transaction of business at all meetings of
the Board of Directors and the affirmative vote of not less than a majority of
the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. A meeting at which a quorum is
initially present may continue to transact business, notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum to conduct that meeting. When a meeting is adjourned to
another time or place (whether or not a quorum is present), notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Board of Directors may transact any business which might have been transacted
at the original meeting.
SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute
presence in person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by resolution
passed unanimously by the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee. In the event of absence
or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the committee member or members present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of the absent or disqualified member. Any
committee, to the extent allowed by law
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and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provides, no such committee shall
have the power or authority to declare a dividend or to authorize the issuance
of stock. Each committee shall keep regular minutes of its meetings and report
to the Board of Directors when required.
The Board of Directors has, by resolution duly adopted and designated
a Compensation Committee, which Committee shall have full authority to consider
all compensation issues of this Corporation.
SECTION 12. COMPENSATION. The directors may be paid such
compensation for their services as the Board of Directors shall from time to
time determine.
SECTION 13. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his of their
votes are counted for such purpose if: (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, a Chief Executive Officer, one or more Vice
Presidents, one or more Assistant Financial Officers and Treasurers, one or
more Assistant Secretaries and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV.
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SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be appointed by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint,
and may empower the Chief Executive Officer or President to appoint, such other
officers as the business of the Corporation may require, each of whom shall
hold office for such period, have such authority and perform such duties as are
provided in the Bylaws or as the Board of Directors may from time to time
determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights of an officer under any contract, any officer may be removed at any
time, with or without cause, by the Board of Directors or, except in case of an
officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation shall be without prejudice
to the rights of the Corporation under any contract to which the officer is a
party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these Bylaws for regular appointments to
that office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
an officer is elected, shall, if present, preside at meetings of the
stockholders and of the Board of Directors. He shall, in addition, perform
such other functions (if any) as may be prescribed by the Bylaws or the Board
of Directors.
SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board, if such an officer is elected, shall, in the absence or disability of
the Chairman of the Board, perform all duties of the Chairman of the Board and
when so acting shall have all the powers of and be subject to all of the
restrictions upon the Chairman of the Board. The Vice Chairman of the Board
shall have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws.
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of
the Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. He shall exercise the duties usually vested in the chief
executive officer of a corporation and perform such other powers and duties as
may be assigned to him from time to time by the Board of Directors or
prescribed by the Bylaws. In the absence of the Chairman of the Board and any
Vice Chairman of the Board, the Chief Executive Officer shall preside at all
meetings of the stockholders and of the Board of Directors.
SECTION 9. PRESIDENT. The President of the Corporation shall,
subject to the control of the
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Board of Directors and the Chief Executive Officer of the Corporation, if there
be such an officer, have general powers and duties of management usually vested
in the office of president of a corporation and shall have such other powers
and duties as may be prescribed by the Board of Directors or the Bylaws or the
Chief Executive Officer of the Corporation. In the absence of the Chairman of
the Board, Vice Chairman of the Board and Chief Executive Officer, the
President shall preside at all meetings of the Board of Directors and
stockholders.
SECTION 10. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the Bylaws, and the President, or the Chairman of the
Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal executive office or such other place as the Board of Directors
may direct, a book of minutes of all meetings and actions of Directors,
committees of Directors, and stockholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at Directors' meetings or committee meetings, the
number of shares present or represented at stockholders' meetings, and a
summary of the proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep or cause to be kept the seal of the
Corporation if one be adopted, in safe custody, and shall have such powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.
SECTION 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the Corporation. The Chief Financial Officer shall deposit all
moneys and other valuables in the name and to the credit of the Corporation
with such depositories as may be designated by the Board of Directors. He
shall make such disbursements of the funds of the Corporation as are authorized
and shall render from time to time an account of all of his transactions as
Chief Financial Officer and of the financial condition of the Corporation. The
Chief Financial Officer shall also have such other powers and perform such
other duties as may be prescribed by the Board of Directors or the Bylaws.
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ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of the Corporation (i) by the Chairman or Vice Chairman of the Board of
Directors, or the President or a Vice President and (ii) by the Chief Financial
Officer or the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned
by such stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 3. LOST CERTIFICATES. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Corporation may, in the discretion of the Board of
Directors and as a condition precedent to the issuance of such new certificate,
require the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond (or other security) sufficient
to indemnify it against any claim that may be made against the Corporation
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws or in any agreement with
the stockholder making the transfer. Transfers of stock shall be made on the
books of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall
be issued.
SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the record
holder of shares to receive dividends, and to vote as such record holder, and
to hold liable for calls and assessments a person registered on its books as
the record holder of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise required by law.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director or officer of the Corporation or is or was serving at
the request of the Corporation as a director or officer of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans (hereinafter an
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"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 2 of
this Article VI with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking, by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this Article VI or otherwise (hereinafter an
"undertaking").
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 of this Article VI is not paid in full by the Corporation within
forty-five (45) days after a written claim has been received by the
Corporation, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or part in any such suit or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) any suit by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right hereunder, or by the Corporation
to recover an advancement of expenses
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pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this Article VI or otherwise shall be on the Corporation.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification
and to the advancement of expenses conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors or officers of the Corporation.
SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VI.
SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article VI by the stockholders or the
directors of the Corporation shall not adversely affect any right or protection
of a director or officer of the Corporation existing at the time of such
amendment, repeal or modification.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to limitations contained in the
General Corporation Law of the State of Delaware and the Certificate of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation, which dividends may be paid either
in cash, securities of the Corporation or other property.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
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SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate
seal in such form as shall be prescribed by the Board of Directors.
SECTION 5. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60) days nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting. Stockholders on the
record date are entitled to notice and to vote or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the Corporation
after the record date, except as otherwise provided by agreement or by
applicable law.
SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of
the Board, the Chief Executive Officer, the President and any other officer of
the Corporation authorized by the Board of Directors shall have power, on
behalf of the Corporation, to attend, vote and grant proxies to be used at any
meeting of stockholders of any corporation (except this Corporation) in which
the Corporation may hold stock.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.
SECTION 8. AMENDMENTS. Subject to the General Corporation Law of the
State of Delaware, the Certificate of Incorporation and these Bylaws, the Board
of Directors may by the affirmative vote of a majority of the entire Board of
Directors amend or repeal these Bylaws, or adopt other Bylaws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, and new Bylaws
may be adopted, at any annual meeting of the stockholders (or at any special
meeting thereof duly called for that purpose) by a majority of the combined
voting power of the then outstanding shares of capital stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors, voting as a single class, provided that, in the notice of any such
special meeting, notice of such purpose shall be given.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify that:
(1) I am the duly elected and acting Secretary of TECHNICLONE
CORPORATION, a Delaware corporation (the "Corporation"); and
(2) Attached hereto is a true and complete copy of the Bylaws of
the Corporation as duly adopted by the Corporation's Board of Directors as of
August __, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation on this __ day of August, 1996.
----------------------------
William V. Moding, Secretary
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EXHIBIT D
1996 PLAN
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TECHNICLONE INTERNATIONAL CORPORATION
1996 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE: DEFINITIONS.
The purpose of the Techniclone International Corporation 1996 Stock
Incentive Plan (the "Plan") is to enable Techniclone International Corporation,
a California corporation (the "Company") to attract, retain and reward key
employees, non-employee directors, consultants and other service providers of
the Company and its Subsidiaries and Affiliates, and strengthen the mutuality
of interests between such key employees, non-employee directors, consultants
and other service providers and the Company's stockholders, by offering such
key employees, consultants and other service providers' performance-based stock
incentives and/or other equity interests or equity-based incentives in the
Company, as well as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(A) "AFFILIATE" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least twenty
percent (20%) of the combined voting power of all classes of stock of such
entity or at least twenty percent (20%) of the ownership interests in such
entity.
(B) "BOARD" means the Board of Directors of the Company.
(C) "BOOK VALUE" means, as of any given date, on a per share basis
(i) the Stockholder's Equity in the Company as of the end of the immediately
preceding fiscal year as reflected in the Company's balance sheet, subject to
such adjustments as the Committee shall specify at or after grant, divided by
(ii) the number of outstanding shares of Stock as of such year-end date (as
adjusted by the Committee for subsequent events).
(D) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(E) "COMMITTEE" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the functions
of the Committee specified in the Plan shall be exercised by the Board.
(F) "COMPANY" means Techniclone International Corporation, a
corporation organized under the laws of the State of California or any
successor corporation.
(G) "DISABILITY" means permanent and total disability as defined
in Section 22(e)(3) of the Code. The Committee's determination of a Disability
or the absence thereof shall be conclusive and binding on all interested
parties.
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(H) "DISINTERESTED PERSON" shall have the meaning set forth in
Rule 16b-3 as promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(I) "EARLY RETIREMENT" means retirement, with the express consent
for purposes of this Plan of the Company at or before the time of such
retirement, from active employment with the Company and any Subsidiary or
Affiliate.
(J) "FAIR MARKET VALUE" means, as of any given date, unless
otherwise determined by the Committee in good faith, the closing price of the
Company's Common Stock on NASDAQ on the date of valuation or the closing price
of the Company's Common Stock on any other exchange in which the Company's
Common Stock is traded or, if no such sale of Stock occurs on NASDAQ or such
other exchange as the case may be, on such date, the Fair Market Value of the
Stock as determined by the Committee in good faith. If the Company's Common
Stock is not then listed or admitted for trading on NASDAQ or a stock exchange
which reports closing prices, the Fair Market Value shall be the average of the
closing bid and asked prices of the Common Stock in the over-the-counter market
on the date of valuation or, if no such sale of stock occurs on the over-
the-counter market on such date, the Fair Market Value as determined by the
Committee in good faith.
(K) "INCENTIVE STOCK OPTION" means any Stock Option intended to be
and designated an "Incentive Stock Option" within the meaning of Section 422A
of the Code.
(L) "NASD DEALER" means a broker-dealer that is a member of the
National Association of Securities Dealers, Inc.
(M) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is
not an Incentive Stock Option.
(N) "NORMAL RETIREMENT" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after age 65.
(O) "OPTIONEE" means a participant in the Plan who holds an
Option or other right under the Plan.
(P) "OTHER STOCK-BASED AWARD" means an award under Section 9 below
that is valued in whole or in part by reference to, or is otherwise based on,
Stock.
(Q) "PARTICIPANT" means an individual or entity who holds an
Option or other right under the Plan.
(R) "PLAN" means this Techniclone International Corporation 1996
Stock Incentive Plan, as hereinafter amended from time to time.
(S) "RESTRICTED STOCK" means an award of shares of Stock that is
subject to restrictions under Section 7 below.
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(T) "RETIREMENT" means Normal or Early Retirement.
(U) "STOCK" means the Common Stock, $0.001 par value per share, of
the Company.
(V) "STOCK APPRECIATION RIGHT" means the right pursuant to an
award granted under Section 6 below to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option (or such
portion thereof) is surrendered, of the shares of Stock covered by such Stock
Option (or such portion thereof), subject, where applicable, to the pricing
provisions in Section 6 the aggregate exercise price of such Stock Option (or
such portion thereof).
(W) "STOCK OPTION" OR "OPTION" means any option to purchase shares
of Stock (including Restricted Stock, if the Committee so determines) granted
pursuant to Section 5 below.
(X) "STOCK PURCHASE RIGHT" means the right to purchase Stock
pursuant to Section 8.
(Y) "SUBSIDIARY" means any corporation (other than the Company) in
which the Company owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in such corporation.
In addition, the terms "CHANGE IN CONTROL," "POTENTIAL CHANGE IN
CONTROL" AND "CHANGE IN CONTROL PRICE" shall have meanings set forth,
respectively, in Sections 10(b), (c) and (d) below.
SECTION 2. ADMINISTRATION.
(A) COMPENSATION OF THE COMMITTEE. The Plan shall be administered
by a Committee of not less than two (2) Disinterested Persons, who shall be
appointed by the Board of Directors of the Company (the "Board") and who shall
serve at the pleasure of the Board. The functions of the Committee specified
in the Plan shall be exercised by the Board, if and to the extent that no
Committee exists which has the authority to so administer the Plan.
(B) AUTHORITY OF THE COMMITTEE. The Committee shall have full
authority to grant, pursuant to the terms of the Plan, to officers, other key
employees, consultants and other service providers eligible under Section 4:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv)
Stock Purchase Rights, and/or (v) Other Stock Based Awards.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees,
consultants and service providers of the Company and its Subsidiaries
and Affiliates to whom Stock Options, Stock Appreciation Rights,
Restricted Stock, Stock Purchase Rights and/or Other Stock-Based
Awards may from time to time be granted hereunder.
(ii) to determine whether and to what extent Incentive
Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Stock Purchase Rights and/or Other Stock-Based
Awards, or any combination thereof, are to be granted hereunder to one
or more eligible employees;
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(iii) to determine the number of shares to be covered by
each such award granted hereunder;
(iv) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, the share price and any
restriction or limitation, or any vesting acceleration or waiver of
forfeiture restrictions regarding any Stock Option or other award
and/or the shares of Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole
discretion);
(v) to determine whether and under what circumstances a
Stock Option may be settled in cash and/or, Restricted Stock under
Section 5, as applicable, instead of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or
other cash awards made by the Company are to be made, and operate, on
a tandem basis vis-a-vis other awards under the Plan and/or cash
awards made outside of the Plan, or on an additive basis;
(vii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Stock purchased by exercising such
Rights.
(C) INTERPRETATION OF THE PLAN. The Committee shall have the
authority to adopt, alter and repeal such rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable to interpret
the terms and provision of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
(D) DECISIONS OF THE COMMITTEE. All decisions made by the
Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding on all persons,
including the Company and the Plan Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
(A) STOCK SUBJECT TO THE PLAN. The total number of shares of
Stock reserved and available for distribution under the Plan shall be 4,000,000
Shares, plus twenty percent (20%) of any increase (other than any increase due
to stock awards under this Plan or any other similar plan of the Company in the
number of authorized and issued shares of Stock above 20,869,675 shares (the
number of authorized and outstanding shares as of April 30, 1996), up to
10,000,000. Such shares may consist, in whole or in part, of authorized and
unissued shares. Subject to Section 6 below, if any shares of Stock subject to
a Stock Option, cease to be subject to a Stock Option, or if any such shares of
Stock that are subject to any Restricted Stock award, Stock Purchase Right or
Other Stock-Based Award granted hereunder are forfeited or any such award
otherwise terminates without a payment being made to the Participant in the
form of Stock, such shares shall again be available for distribution in
connection with future awards under the Plan.
(B) CHANGES IN CAPITAL STRUCTURE. In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, stock split or
other change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares
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reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Options granted under the Plan, in the number and
exercise price of shares subject to outstanding Stock Purchase Rights under the
Plan, and in the number of shares subject to other outstanding awards granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number. Such adjusted option price shall be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company and its Subsidiaries
and Affiliates who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan. The Committee may
also grant awards under the Plan to consultants and other service providers of
the Company. Notwithstanding any provision hereof to the contrary, no director
shall be eligible to receive any option under the Plan, unless if granted by an
action of the Committee and such person is not a member of the Committee or
such grant is a formula grant to a non-employee director pursuant to Section
5(l).
SECTION 5. STOCK OPTIONS.
(A) STOCK OPTIONS. Stock Options may be granted alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside the Plan. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve. Stock Options
granted under the Plan may be of two types: (i) Incentive Stock Options and
(ii) Non-Qualified Stock Options. The Committee shall have the authority to
grant to any Optionee Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options (in each case with or without Stock Appreciation
Rights).
(B) TERMS AND CONDITIONS OF OPTIONS. Options granted under the
Plan shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as the Committee shall deem desirable:
(I) OPTION PRICE. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee
at the date of grant but shall not be less than one hundred percent
(100%) of the Fair Market Value of the Stock on the date of grant.
(II) OPTION TERM. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option shall be exercisable more
than ten years after the date the Option is granted.
(III) EXERCISABILITY. Stock Options shall be exercisable
at such time or times and subject to such terms and conditions as
shall be determined by the Committee at or after grant. If the
Committee provides, in its sole discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such
installment exercise provisions at any
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time at or after grant in whole or in part, based on such factors as
the Committee shall determine, in its sole discretion.
(IV) METHOD OF EXERCISE. Subject to whatever installment
exercise provisions apply under the Plan and the Option Agreement,
Stock Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the exercise
price as provided herein.
(C) PAYMENT OF EXERCISE PRICE. Payment of the exercise price
shall be made upon exercise of a Stock Option and may be made, in the
discretion of the Committee, subject to any legal restrictions, by: (a) cash;
(b) check; (c) the surrender of shares of Stock owned by the Optionee that
have been held by the Optionee for at least six (6) months, which surrendered
shares shall be valued at Fair Market Value as of the date of such exercise;
(d) the Optionee's promissory note in a form and on terms acceptable to the
Committee; (e) the cancellation of indebtedness of the Company to the Optionee;
(f) the waiver of compensation due or accrued to the Optionee for services
rendered; (g) provided that a public market for the Stock exists, a "same day
sale" commitment from the Optionee and an NASD Dealer whereby the Optionee
irrevocably elects to exercise the Option and to sell a portion of the shares
so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the exercise price
directly to the Company; (h) provided that a public market for the Stock
exists, a "margin" commitment from the Optionee and an NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option and to pledge the shares so
purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the exercise price, and whereby the NASD
Dealer irrevocably commits upon receipt of such shares to forward the exercise
price directly to the Company; or (i) any combination of the foregoing methods
of payment or any other consideration or method of payment as shall be
permitted by applicable corporate law.
Except as set forth above, no shares of Stock shall be issued until
full payment therefor has been made. An Optionee shall generally have the
rights to dividends or other rights of a shareholder with respect to shares
subject to the Option when the Optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in Section 13(a).
(D) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the Optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
Optionee's lifetime, only by the Optionee.
(E) TERMINATION BY DEATH. Subject to the requirements of the Code
relating to Incentive Stock Options, if an Optionee's employment by the Company
or any Subsidiary or Affiliate terminates by reason of death, any Stock Option
held by such Optionee may thereafter be exercised, to the extent such option
was exercisable, at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the Optionee under the all of
the Optionee, for a period of one year (or such other period
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as the Committee may specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(F) TERMINATION BY REASON OF DISABILITY. Subject to the
requirements of the Code relating to Incentive Stock Options, if an Optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Disability, any Stock Option held by such Optionee may thereafter be
exercised by the Optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee), for a period of three years (or such other period as the
Committee may specify at grant) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter, provided, however, that, if the Optionee dies within
such three-year period (or such other period as the Committee shall specify at
grant), any unexercised Stock Option held by such Optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of death for
a period of twelve months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter. In
the event of termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422A of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(G) TERMINATION BY REASON OF RETIREMENT. Subject to the
requirements of the Code relating to Incentive Stock Options, if an Optionee's
employment by the Company or any Subsidiary of Affiliate terminates by reason
of Normal or Early Retirement, any Stock Option held by such Optionee may
thereafter be exercised by the Optionee, to the extent it was exercisable at
the time of such Retirement or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee), for a period of three years (or such
other period as Committee may specify at grant) from the date of such
termination of employment or the expiration of the stated term of such Stock
Option, whichever period is the shorter; provided, however, that, if the
Optionee dies within such three-year period (or such other period as the
Committee may specify at grant), any unexercised Stock Option held by such
Optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve months from the date
of such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422A of
the code, the option will thereafter be treated as a Non-Qualified Stock
Option.
(H) OTHER TERMINATION. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an Optionee's employment by the Company or any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate, except that such
Stock Option may be exercised, to the extent otherwise then exercisable, for
the lesser of three months or the balance of such Stock Option's term.
(I) INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to the Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the
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Plan under Section 422A of the Code, or without the consent of the Optionee(s)
affected, to disqualify any Incentive Stock Option under such Section 422A.
(J) CODE REQUIREMENTS. To the extent required "incentive stock
option" status under Section 422A(b)(7) of the Code (taking into account
applicable Internal Revenue Service regulations and pronouncements), the Plan
shall be deemed to provide that the aggregate Fair Market Value (determined as
of the date of grant) of the Stock with respect to which Incentive Stock
Options granted are exercisable for the first time by the Optionee during any
calendar year under the Plan and/or any other stock option plan of the Company
or any Subsidiary or parent corporation (within the meaning of Section 425 of
the Code) shall not exceed $100,000.
To the extent permitted under Section 422A of the Code or the
applicable regulations thereunder or any applicable Internal Revenue Service
pronouncement:
(i) (x) a Participant's employment is terminated by
reason of death, Disability or Retirement and (y) the portion of any
Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Section 5, applied without
regard to the $100,000 limitation contained in Section 422A(b)(7) of
the Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" during such
post-termination period under Section 422A, such excess shall be
treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of such
option that is not exercisable as an Incentive Stock Option by reason
of the $100,000 limitation contained in Section 422A(b)(7) of the Code
shall be treated as a Non-Qualified Stock Option.
(K) BUYOUT PROVISIONS. The Committee may at any time offer to
buyout for a payment in cash, Stock, or Restricted Stock subject to an option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the Optionee at the time that such offer is made.
(L) FORMULA GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provision of the Plan, from and after the date this Plan is approved by
the shareholders of the Company, each director of the Company who is neither an
employee nor executive officer of the Company shall automatically be granted
Non-Qualified Stock Options to purchase ten thousand (10,000) shares of Stock
upon commencement of service as a non-employee director of the Company. In
addition, each director who is neither an employee or executive officer of the
Company shall automatically be granted Non-Qualified Stock Options to purchase
five thousand (5,000) shares of Stock at the end of each fiscal year, provided
such non-employee director has served as a director of the Company for six (6)
months during that fiscal year. Each of the grants to non- employee directors
shall vest and become fully exercisable six months after the date of grant.
Notwithstanding any other term or condition contained in the Plan, neither the
Board of Directors, nor the Committee may amend the amount, price or vesting of
Non-Qualified Stock Options granted to non-employee directors under this
section, except to comport with changes in the Code or Rule 16b-3 promulgated
under the Securities Exchange Act of 1934.
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SECTION 6. STOCK APPRECIATION RIGHTS.
(A) GRANT AND EXERCISE. Stock Appreciation Rights may be granted
in conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such rights may be granted either at
or after the time of the grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the
grant of such Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock Appreciation
Right is granted with respect to less than the full number of shares covered by
a related Stock Option.
A Stock Appreciation Right may be exercised by an Optionee, subject to
Section 6(b), in accordance with the procedures established by the Committee
for such purpose. Upon such exercise, the Optionee shall be entitled to
receive an amount determined in the manner prescribed in Section 6(b). Stock
Options relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights have been
exercised.
(B) TERMS AND CONDITIONS. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the Stock Options to
which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan; provided,
however, that any Stock Appreciation Right granted to an Optionee
subject to Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") subsequent to the grant of the related Stock Option
shall not be exercisable during the first six months of its term,
except that this special limitation shall not apply in the event of
death or Disability of the Optionee prior to the expiration of the
six-month period. The exercise of Stock Appreciation Rights held by
Optionees who are subject to Section 16(b) of the Exchange Act shall
comply with Rule 16b-3 thereunder, to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an
Optionee shall be entitled to receive an amount in cash and/or shares
of Stock equal in value to the excess of the Fair Market Value of one
share of Stock over the option price per share specified in the
related Stock Option multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment. When
payment is to be made in shares, the number of shares to be paid shall
be calculated on the basis of the Fair Market Value of the shares on
the date of exercise. When payment is to be made in cash, such amount
shall be calculated on the basis of the Fair Market Value of the
Shares during the applicable period referred to in Rule 16b-3 under
the Exchange Act.
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(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be
transferable under Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 of the Plan on the number of shares
of Stock to be issued under the Plan, but only to the extent of the
number of shares issued under the Stock Appreciation Right at the time
of exercise based on the value of the Stock Appreciation Right at such
time.
(v) In its sole discretion, the Committee may grant
"Limited" Stock Appreciation Rights under this Section 6, i.e., Stock
Appreciation Rights that become exercisable only in the event of a
Change in Control and/or a Potential Change in Control, subject to
such terms and conditions as the Committee may specify at grant. Such
Limited Stock Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also
provide that, in the event of a Change in Control and/or a Potential
Change in Control, the amount to be paid upon the exercise of a Stock
Appreciation Right or Limited Stock Appreciation Right shall be based
on the Change in Control Price, subject to such terms and conditions
as the Committee may specify at grant.
SECTION 7. RESTRICTED STOCK.
(A) ADMINISTRATION. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Stock (subject to section
7(b)), the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards. The Committee may condition
the grant of Restricted Stock upon the attainment of specified performance
goals or such other factors as the Committee may determine, in its sole
discretion. The provisions of restricted Stock awards need not be the same
with respect to each recipient.
(B) AWARDS AND CERTIFICATE. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
(i) The exercise price for shares of Restricted Stock
shall be equal to or less than their par value and may be zero.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify
at grant) after the award date, by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
7(b)(i).
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(iii) Each Participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such Participant, and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the Company
until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Stock
covered by such award.
(C) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the Participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions in whole or in part, based on service, performance and/or
such other factors or criteria as the Committee may determine, in its
sole discretion.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i), the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares, and the right to receive any
cash dividends. The Committee, in its sole discretion, as determined
at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines,
reinvested, subject to Section 13(e), in additional Restricted Stock
to the extent shares are available under Section 3, or otherwise
reinvested. Pursuant to Section 3 above, Stock dividends issued with
respect to Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and other
terms and conditions that apply to the shares with respect to which
such dividend are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a Participant's
employment with the Company and any Subsidiary or Affiliate for any
reason during the Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in accordance with the terms
and conditions established by the Committee at or after grant.
(iv) If and when the Restriction Period expires without
prior forfeiture of the Restricted Stock subject to such Restriction
Period, certified for an appropriate number of unrestricted shares
shall be delivered to the Participant promptly.
(D) MINIMUM VALUE PROVISIONS. In order to better ensure that
award payments actually reflect the performance of the Company and service of
the Participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other award designed to guarantee a minimum value,
payable in cash or Stock to the recipient of a restricted stock award, subject
to
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such performance, future service and other terms and conditions as may be
specified by the Committee.
SECTION 8. STOCK PURCHASE RIGHTS.
(A) AWARDS AND ADMINISTRATION. Subject to Section 3 above, the
Committee may grant eligible Participants Stock Purchase Rights which shall
enable such Participants to purchase Stock (including Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at fifty percent (50%) of such Fair Market Value on
such date;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on
such date.
The Committee shall also impose such forfeiture and/or other terms and
conditions as it shall determine, in its sole discretion, on such Stock
Purchase Rights or the exercise thereof. The terms of Stock Purchase Rights
awards need not be the same with respect to each Participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(B) EXERCISABILITY. Stock Purchase Rights shall generally be
exercisable for such period after grant as is determined by the Committee not
to exceed 30 days. However, the Committee may provide, in its sole discretion,
that the Stock Purchase Rights of persons potentially subject to Subject 16(b)
of the Securities Exchange Act of 1934 shall not become exercisable until six
months and one day after the grant date, and shall then be exercisable for ten
(10) trading days at the exercise price specified by the Committee in
accordance with Section 8(a).
SECTION 9. OTHER STOCK-BASED AWARDS.
(A) ADMINISTRATION. Other awards of Stock and other awards that
are valued in whole or in party by reference to, or are otherwise based on,
Stock ("Other Stock-Based Awards"), including without limitation, performance
shares, convertible debentures, exchangeable securities and Stock awards or
options valued by reference to Book Value or subsidiary performance, may be
granted either alone or in addition to or in tandem with Stock Options, Stock
Appreciation Rights, Restricted Stock or Stock Purchase Rights granted under
the Plan and/or cash awards made outside of the Plan. Subject to the
provisions of the Plan, the Committee shall have authority to determine the
persons to whom and the time or times at which such awards shall be made, the
number of shares of Stock to be awarded pursuant to such awards, and all other
conditions of the awards. The Committee may also provide for the grant of
Stock upon the completion of a specified performance period. The provisions of
Other Stock-Based Awards need not be the same with respect to each recipient.
(B) TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant
to this Section 9 shall be subject to the following terms and conditions:
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(i) Subject to the provisions of this Plan and the award
agreement referred to in Section 9(b)(v) below, shares subject to
awards made under this Section 9 may not be sold, assigned,
transferred,pledged or otherwise encumbered prior to the date on which
the shares are issued, or, if later, the date on which any applicable
restriction or performance period or condition lapses.
(ii) Subject to the provisions of this Plan and the award
agreement and unless otherwise determined by the Committee at grant,
the recipient of an award under this Section 9 shall be entitled to
receive, interest or dividends or interest or dividend equivalents
with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole
discretion, and the Committee may provide that such amounts (if any)
shall be deemed to have been reinvested in additional Stock or
otherwise reinvested.
(iii) Any award under Section 9 and any Stock covered by
any such award shall vest or be forfeited to the extent so provided in
the award agreement, as determined by the Committee, in its sole
discretion.
(iv) In the event of the Participant's Retirement,
Disability or death, or in cases of special circumstances, the
Committee may, in its sole discretion, waive in whole or in part any
or all of the remaining limitations imposed hereunder (if any) with
respect to any or all of an award under this Section 9.
(v) Each award under this Section 9 shall be confirmed
by, and subject to the terms of, an agreement or other instrument by
the Company and by the Participant.
(vi) Stock (including securities convertible into Stock)
issued on a bonus basis under this Section 9 may be issued for no cash
consideration. Stock (including securities convertible into Stock)
purchased pursuant to a purchase right awarded under this Section 9
shall be priced at least fifty percent (50%) of the Fair Market Value
of the Stock on the date of grant.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(A) IMPACT OF EVENT. In the event of:
(i) a "Change in Control" as defined in Section 10(b) or
(ii) a "Potential Change in Control" as defined in Section
10(c), but only if and to the extent so determined by the Committee or
the Board at or after grant (subject to any right of approval
expressly reserved by the Committee or the Board at the time of such
determination).
the following acceleration and valuation provisions shall apply:
(iii) Any Stock Appreciation Rights (including, without
limitation, any Limited
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Stock Appreciation Rights) outstanding for at least six months and any
Stock Options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested.
(iv) The restrictions applicable to any Restricted Stock,
Stock Purchase rights and Other Stock-Based Awards, in each case to
the extent not already vested under the Securities and Exchange
Commission, shall lapse and such shares and awards shall be deemed
fully vested.
(v) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Stock Purchase Rights and Other
Stock Based Awards, in each case to the extent vested, shall, unless
otherwise determined by the Committee in its sole discretion at or
after grant but prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price" as defined in Section 10(d) as
of the date such Change in Control or such Potential Change in Control
is determined to have occurred or such other date as the Committee may
determine prior to the Change in Control.
(B) DEFINITION OF "CHANGE IN CONTROL." For purposes of Section
10(a), a "Change in Control" means the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the Exchange Act
but excluding the Company and any Subsidiary and any employee benefit
plan sponsored or maintained by the Company or any Subsidiary
(including any trustee of such plan acting as trustee), directly or
indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, as amended from time to time), of securities
of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities;
(ii) When, during any period of 24 consecutive months
during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the "Incumbent
Directors") cease or any reason other than death to constitute at
least a majority thereof, provided, however, that a director who was
not a director at the beginning of such 24-month period shall be
deemed to have satisfied such 24-month period) or by prior operation
of this Section 10(b)(ii); or
(iii) The occurrence of a transaction requiring a
stockholder approval for the acquisition of the Company by an entity
other than the Company or a Subsidiary through purchase of assets, or
by merger, or otherwise.
(C) DEFINITION OF "POTENTIAL CHANGE IN CONTROL". For purposes of
Section 10(a) a "Potential Change in Control" means the happening of any one of
the following:
(i) The approval by stockholders of an agreement by the
Company, the consummation of which would result in a Change in Control
of the Company as defined in Section 10(b); or
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(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or
a Subsidiary or any Company employee benefit plan (including any
trustee of such plan acting as such trustee) of securities of the
Company representing five percent (5%) or more of the combined voting
power of the Company's outstanding securities and the adoption by the
Board of Directors of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of this
Plan.
(D) CHANGE IN CONTROL PRICE. For purposes of this Section 10,
"Change in Control Price" means the highest price per share paid in any
transaction reported on NASDAQ, or paid or offered in any bona fide transaction
related to a potential or actual Change in Control of the Company at any time
during the 60 day period immediately preceding the occurrence of the Change in
Control (or, where applicable, the occurrence of the Potential Change in
Control event), in each case as determined by the Committee except that, in the
case of Incentive Stock Options and Sock Appreciation rights relating to
Incentive Stock Options, such price shall be based only on transactions
reported for the date on which the Optionee exercises such Stock Appreciation
Rights (or Limited Stock Appreciation Rights) or, where applicable, the date on
which a cashout occurs under Section 10(a)(iii).
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of
an Optionee or Participant under a Stock Option, Stock Appreciation Right,
Restricted Stock award, Stock Purchase Right o
Other Stock-Based award theretofore granted, without the Optionee's or
Participant's consent, or which, without the approval of the Company's
stockholders, would:
(i) except as expressly provided in this Plan, increase
the total number of shares for the purpose of the Plan;
(ii) decrease the option price of any Stock Option to less
than one hundred percent (100%) of the Fair Market Value on the date
of grant, or change the pricing terms of Section 8(a);
(iii) change the employees or class of employees eligible
to participate in the Plan; or
(iv) extend the maximum option period under Section 5(b)
of the Plan.
The Committee may amend the terms of any Stock Option or other award
therefore, granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices. Subject
to the above provisions, the Board shall have broad authority to amend the Plan
to take into account changes in applicable securities and tax laws and
accounting rules, as well as other developments.
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SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant or
Optionee by the Company, nothing contained herein shall give any such
Participant or Optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or payments in lieu of or with respect to
awards hereunder; provided, however, that, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
SECTION 13. GENERAL PROVISIONS.
(a) REPRESENTATIONS OF OPTIONEES. The Committee may require each
person purchasing shares pursuant to a Stock Option or other award under the
Plan to represent to and agree with the Company in writing that the Optionee or
Participant is acquiring the shares without a view to distribution thereof.
The certificates for such shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer. All certificates
for shares of Stock or other securities delivered under the Plan shall be
subject to such stock- transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) LIMITATIONS. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
(c) NO ENLARGEMENT OF EMPLOYEE RIGHTS. The adoption of the Plan
shall not confer upon any employee of the Company or any Subsidiary or
Affiliate any right to continued employment with the Company or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or a Subsidiary or Affiliate to terminate the employment of any
of its employees at any time.
(d) PAYMENT OF TAXES. No later than the date as of which an
amount first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any award under the Plan, the
Participant shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state, or local taxes of any
kind required by law to be withheld with respect to such amount including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participants.
(e) LIMITATIONS ON REINVESTMENT OF DIVIDENDS. The actual or deemed
reinvestment of
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dividends or divided equivalents in additional Restricted Stock (or other types
of Plan awards) at the time of any divided payment shall only be permissible if
sufficient shares of Stock are available under Section 3 for such reinvestment
(taking into account then outstanding Stock Options, Stock Purchase Rights and
other Plan awards).
(f) GOVERNING LAW. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of
the State of California.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of September 27, 1996, subject to the
approval of the Plan by a majority of the votes cast by the holders of the
Company's Common Stock at the its annual stockholders' meeting held on
September 27, 1996. Any grants made under the Plan prior to such approval
shall be effective when made (unless otherwise specified by the Committee at
the date of grant), but shall be conditioned on, and subject to, such approval
of the Plan by such stockholders.
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock award,
Stock Purchase Right or Other Stock-Based Award shall be granted pursuant to
the Plan on or after the tenth anniversary of the date of shareholder approval,
but awards granted prior to such tenth anniversary may extend beyond the date.
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