SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c)
or 240.14a-12
....................Pharmos Corporation........................
(Name of Registrant as Specified In Its Charter)
...............................................................
(Name of the Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies: N/A
2) Aggregate number of securities to which transaction
applies: N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1 N/A
4) Proposed maximum aggregate value of transaction: N/A
1 Set forth the amount on which the filing fee is calculated
and state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
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4) Date Filed: N/A
<PAGE>
PHARMOS CORPORATION
2 Innovation Drive
Alachua, FL 32615
(904) 462-1210
____________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________________________________________________
NOTICE IS HEREBY GIVEN, that the Annual Meeting of the
Stockholders of Pharmos Corporation (the "Company") will be held in
Alachua, Florida at 9:00 a.m. on December 18, 1996 at the Progress
Center, One Progress Boulevard , Alachua, Florida 32615, (i) for
the election of Directors of the Company to hold office until the
next annual meeting of the stockholders and until their successors
are duly elected and qualified; (ii) to adopt the incentive and
non-qualified stock option plan; and (iii) to transact such other
business as may properly come before the meeting or any adjournment
or adjournments thereof.
The Board of Directors has fixed the close of business on
November 19, 1996 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting.
If you do not expect to be personally present at the meeting,
but wish your stock to be voted for the business to be transacted
thereat, the Board of Directors requests that you fill in, sign and
date the enclosed proxy and promptly return it by mail in the
postage paid envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS
Haim Aviv, Ph.D.
Chairman of the Board
November 20, 1996
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY
RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
<PAGE>
PHARMOS CORPORATION
2 Innovation Drive
Alachua, FL 32615
(904) 462-1210
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held on December 18, 1996
INTRODUCTION
The Annual Meeting is called to elect members of the Board of
Directors and to adopt the incentive and non-qualified stock option
plan. The Meeting, however, will be open for the transaction of
such other business as may properly come before it although, as of
the date of this proxy statement, management does not know of any
other business that will come before the Annual Meeting. If any
other matters do come before the Annual Meeting, the persons named
in the enclosed form of proxy are expected to vote said proxy in
accordance with their judgment on such matters.
This proxy statement and the accompanying proxy card are
first being mailed to stockholders on or about November 20, 1996.
A copy of the Annual Report for the fiscal year ended December 31,
1995, which includes audited financial statements, is included
herewith for those stockholders of record as of November 19, 1996,
the record date for the Annual Meeting.
The solicitation of proxies in the accompanying form is made
by, and on behalf of, the Board of Directors, and no compensation
will be paid therefor. There will be no solicitation of proxies
other than by mail or personal solicitation by officers and
employees of the Company. The Company will make arrangements with
brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of proxy material to the beneficial owners of shares
held of record by such persons, and such persons will be reimbursed
for reasonable expenses incurred by them in connection therewith.
A stockholder executing the accompanying proxy has the power to
revoke it at any time prior to the exercise thereof by filing with
the Secretary of the Company: (i) a duly executed proxy bearing a
later date; or (ii) a written instrument revoking the proxy.
With regard to the election of Directors, votes may be cast
in favor of or withheld from each nominee. Abstentions and broker
nonvotes are included in the determination of the number of shares
present at the Annual Meeting for quorum purposes.
<PAGE>
VOTING SECURITIES
The Board of Directors has fixed the close of business on
November 19, 1996 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting.
As of November 1, 1996, the outstanding capital stock of the
Company consisted of 29,219,969 shares of Common Stock, $.03 par
value ("Common Stock"). Each holder of Common Stock is entitled to
one vote for each share of Common Stock held by him or her at the
close of business on the record date.
The shares for which the accompanying proxy is solicited will
be voted providing the proxy is executed and returned by the
stockholder prior to the Annual Meeting.
The following table sets forth certain information with
respect to the beneficial ownership of the Company's Common Stock
as of November 1, 1996, by (i) each person who was known by the
Company to own beneficially more than 5% of any class of the
Company's Stock, (ii) each of the Company's Directors, and (iii)
all current Directors and executive officers of the Company as a
group. Except as otherwise noted, each person listed below has
sole voting and dispositive power with respect to the shares listed
next to such person's name.
<TABLE>
<CAPTION>
Amount of
Name and Address of Beneficial Percentage
Beneficial Ownership Ownership of Total (1)
____________________ ___________ ____________
<S> <C> <C>
Grace Brothers Ltd.(2) 1,923,077 6.6%
1000 W. Diversey Parkway
Suite 233
Chicago, IL 60614
Haim Aviv, Ph.D.(3) 888,805 3.0%
c/o Pharmos Ltd.
Kiryat Weitzman
Rehovot, Israel
Marvin P. Loeb(4) 300,271 1.0%
Trimedyne, Inc.
2810 Barranca Road
Irvine, CA 92714
E. Andrews Grinstead III(5) 75,738 *
Hybridon, Inc.
One Innovation Drive
Worcester, MA 01605
3
<PAGE>
Stephen C. Knight, M.D. -0- -0-
Arthur D. Little, Incorporated
Acorn Park
Cambridge, MA 02140
David Schlachet -0- -0-
Weizmann Institute of Science
Rehovot, Israel
Fredric D. Price 1,750 *
Applied Microbiology, Inc.
771 Old Saw Mill River Road
Tarrytown, New York 10591
All Directors and 1,305,590 4.5%
Executive Officers
as a group
(8 persons)(6)
<FN>
____________________________
* Indicates ownership of less than 1%.
(1) Based on 29,219,969 shares of Common Stock outstanding, plus
each individual's currently exercisable, or exercisable within
60 days, warrants and/or options. Assumes that no other
individual will exercise any warrants and/or options.
(2) Information determined according to a Schedule 13G filed with
the Securities and Exchange Commission.
(3) Includes 276,153 shares of Common Stock held in the name of
Avitek Ltd., of which Dr. Aviv is the Chairman of the Board of
Directors and the principal stockholder, and, as such, shares
the right to vote and dispose of such shares. Also includes
currently exercisable options to purchase 39,376 shares of
Common Stock.
(4) Held jointly with his wife. Also includes currently
exercisable options to purchase 20,000 shares of Common Stock.
Does not include shares held by his adult children, his
grandchildren or a trust for the benefit of his grandchildren.
(5) Consists of currently exercisable options to purchase Common
Stock.
(6) Based on the number of shares of Common Stock outstanding,
plus 135,114 currently exercisable warrants and/or options
held by the Directors and executive officers.
</FN>
</TABLE>
4
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
Five Directors are to be elected at the Annual Meeting to
hold office until the next annual meeting of stockholders and until
their successors have been duly elected and qualified. The
election of Directors requires the affirmative vote of a plurality
of shares cast of Common Stock voting together present or
represented at a meeting at which a quorum (one-third (1/3) of the
outstanding shares of Common Stock) is present or represented. It
is the intention of the persons named in the accompanying proxy
form to vote FOR the election of the five persons named in the
table below as Directors of the Company, unless authority to do so
is withheld. Proxies cannot be voted for a greater number of
persons than the nominees named. In the event that any of the
below listed nominees for Director should become unavailable for
election for any presently unforeseen reason, the persons named in
the accompanying proxy form have the right to use their discretion
to vote for a substitute.
The following table sets forth the name, age and position
of each Director and executive officer:
<TABLE>
<CAPTION>
Name Age Position
____ ___ ________
<S> <C> <C>
Haim Aviv, Ph.D. 55 Chairman, Chief Executive
Officer, Acting President,
Chief Scientist and
Director
Marvin P. Loeb 70 Director
E. Andrews Grinstead III 51 Director
Stephen C. Knight, M.D. 36 Director
David Schlachet 50 Director
Fredric D. Price 51 Director
Gad Riesenfeld, Ph.D. 52 Chief Operating Officer and
Executive Vice President
Anat Biegon, Ph.D. 42 Vice President/Research and
Development
</TABLE>
Haim Aviv, Ph.D., is Chairman, Chief Executive Officer,
Acting President, Chief Scientist and a Director of the Company and
co-founded in 1990, Pharmos Corporation, a New York corporation
("Old Pharmos"), which merged into the Company on October 29, 1992
(the "Merger"). Dr. Aviv also served as Chairman, Chief Executive
Officer, Chief Scientist and a Director of Old Pharmos prior to the
Merger. Dr. Aviv was the co-founder in 1980 of Bio-Technology
5
<PAGE>
General Corp. ("BTG"), a publicly-traded company engaged in the
development of products using recombinant DNA, its General Manager
and Chief Scientist from 1980 to 1985, and a Director and Senior
Scientific Consultant until August 1993. Prior to that time, Dr.
Aviv was a professor of molecular biology at the Weizmann Institute
of Science. Dr. Aviv is the principal stockholder of Avitek Ltd.,
a stockholder of the Company. Dr. Aviv is also an officer and/or
significant stockholder of several privately-held Israeli
pharmaceutical and venture capital companies.
E. Andrews Grinstead, III, a Director of the Company
since 1991, is Chairman and Chief Executive Officer of Hybridon,
Inc., a publicly-held biotechnology company. Mr. Grinstead
joined Hybridon in 1991. From 1987 to October 1990, he was Managing
Director and group head of the life sciences group at Paine Webber,
Inc. From 1986 to 1987, Mr. Grinstead was Managing Director and
group head of the life sciences group at Drexel Burnham Lambert.
From 1984 to 1986, he was a Vice President at Kidder, Peabody &
Co., Inc., where he developed the life sciences corporate finance
specialty group. Prior to his seven years on Wall Street, Mr.
Grinstead served in a variety of operational and executive
positions with Eli Lilly & Company, most recently as general
manager of Venezuelan Pharmaceutical, Animal Health and
Agricultural Chemical Operations. Since 1991, Mr. Grinstead has
served as a Director of EcoScience Corporation, a development-stage
company engaged in the development of biopesticides. Since 1994,
Mr. Grinstead has served as a member of the Board of Trustees for
the Albert B. Sabine Vaccine Foundation, a 501(c)(3) charitable
foundation dedicated to disease prevention. Mr. Grinstead was
appointed to the President's Council of the National Academy of
Sciences and the Institute of Medicine in 1992.
Marvin P. Loeb, a Director, was Chairman of the Board of
the Company (then known as Pharmatec, Inc.) from December 1982
through October 1992. He has been Chairman of Trimedyne, Inc. (and
its subsidiaries), a publicly-held company engaged in the
manufacture of lasers, optical fibers and laser delivery systems,
since April 1981; a Director of Gynex Pharmaceuticals, Inc., from
April 1986 until its merger with and into Biotechnology General
Corporation in 1993, a publicly-held company engaged in the
development and commercialization of pharmaceutical products; a
Director of Petrogen, Inc., a privately-held company engaged in the
genetic engineering of bacteria for cleanup of oil waste and toxic
waste, from April 1987 to April 1992 (Chairman from November 1980
to December 1982 and from July 1983 to April 1987); Chairman of
Automedix Sciences, Inc., an inactive, publicly-held company
engaged in the development of products for treating cancer and
other diseases, since September 1980; Chairman of Cardiomedics,
Inc., a privately-held, development stage company engaged in the
development of heart assist devices, from May 1986; Chairman of
Xtramedics, Inc., a publicly-held company developing a feminine
hygiene product, from November 1986 to February 1994 and a Director
of Xtramedics from November 1986 until May 1994; Chairman of
6
<PAGE>
Ultramedics, Inc., an inactive, privately-held company developing
blood treatment products, since November 1988; and President and
Director of Marvin P. Loeb & Co. since 1965, and Master Health
Services, Inc. since 1972, both of which are family-held companies
engaged in licensing of inventions and financial consulting.
Stephen C. Knight, M.D., a Director of the Company since
November 10, 1994, is a Senior Consultant in the Process Industries
section of the North American Management Consulting Directorate at
Arthur D. Little, Inc. Dr. Knight recently returned from a two-
year assignment in the Arthur D. Little office in Brussels,
Belgium. During the past five years, he has been involved in a
variety of corporate and research and development strategic
planning, technology assessment, and merger and acquisition studies
in the pharmaceutical, biotechnology, health care information,
medical equipment and diagnostic industries. Prior to joining
Arthur D. Little, Dr. Knight worked as a consultant at APM, Inc.
Dr. Knight has performed medical research at the National
Institutes of Health, AT&T Bell Laboratories, and Yale and Columbia
Universities.
David Schlachet, a Director of the Company since December
15, 1994, is Vice President of Finance and Administration at the
Weizmann Institute of Science in Rehovot, Israel, a position he has
held since 1990. Mr. Schlachet is responsible for the Institute's
administration and financial activities, including personnel,
budget and finance, funding, investments, acquisitions and
collaboration with the industrial and business communities. From
1989 to 1990, Mr. Schlachet was President and Chief Executive
Officer of YEDA Research and Development Co. Ltd., a marketing and
licensing company at the Weizmann Institute of Science. Mr.
Schlachet is a Director of Taya Investment Company Ltd., an Israeli
publicly-held investment company.
Fredric D. Price, a Director of the Company since August
1996, is Chief Executive Officer and member of the Board of
Directors of Applied Microbiology, Inc., a publicly-traded health
care company engaged in the development of food ingredients,
special dietary foods, and therapeutic agents that may be useful
against infectious diseases. He is also a member of the Executive
Committee (and Secretary) of the Board of Directors of the New York
Biotechnology Association. From July 1991 to September 1994, he
was Vice President Finance & Administration and Chief Financial
Officer of Regeneron Pharmaceuticals, Inc. For the five years
prior to joining Regeneron, Fred was the President of FxFDP, a
consulting practice that provided strategic planning, market
development, and new product introduction services to
pharmaceutical and other health care businesses. From 1973 to
1986, he worked for Pfizer Pharmaceuticals, where he was Vice
President, responsible for both the Pfipharmecs Division and the
Controllers's Department for all of Pfizer Pharmaceuticals. Fred
received a BA from Dartmouth College in 1967 and an MBA in 1969
from the Wharton School of the University of Pennsylvania.
7
<PAGE>
Gad Reisenfeld, Ph.D., was named Chief Operating Officer
in March 1995 and has served as Executive Vice President since
December 1994. He had been the Vice President of Corporate
Development and General Manager of Florida Operations since October
1992 and was employed by Pharmos Ltd. from March 1992 until the
Merger. Prior thereto, he was engaged in free-lance consulting
relating to the commercialization of intellectual property,
primarily in the pharmaceutical and medical fields. From March
1990 through May 1991 Dr. Reisenfeld was a Director and Manager of
Kamapharm Ltd., a private company specializing in human blood
products. Prior thereto, from May 1986, he was Managing Director
of Galisar Ltd., a private company involved in extracorporeal blood
therapy.
Anat Biegon, Ph.D., was named Vice President of Research
and Development in December 1994. Dr. Biegon became head of
Research and Development for the Company in 1994. From 1992 to
1994, Dr. Biegon was a director in Pharmos Ltd.'s Department of
Pharmacology. From 1991 to 1992, she was a Staff Physiologist at
the University of California at Berkeley's Lawrence Berkeley
Laboratory, Division of Research Medicine and Radiation Biophysics.
From 1990 to 1991, Dr. Biegon was a Research Associate Professor in
the Department of Psychiatry at New York University Medical Center.
From 1988 to 1990, she was an Associate Professor in the Department
of Neurobiology at the Weizmann Institute of Science.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the 1995 fiscal year, there were twelve meetings
of the Board of Directors. A quorum of Directors was present,
either in person or by telephonic hookup, for all of the meetings.
Actions were also taken during the year by the unanimous written
consent of the Directors.
The members of the Audit Committee are Messrs. Loeb and
Grinstead. Actions of the Audit Committee were taken during the
year by the unanimous written consent of the Directors. The Audit
Committee has been delegated the responsibility of reviewing with
the independent auditors the plans and results of the audit
engagement, reviewing the adequacy, scope and results of the
internal accounting controls and procedures, reviewing the degree
of independence of the auditors, reviewing the auditor's fees and
recommending the engagement of the auditors to the full Board of
Directors.
The Compensation and Stock Option Committee consists of
Messrs. Loeb and Grinstead. Actions of the Compensation and Stock
Option Committee were taken during the year by the unanimous
written consent of the Directors. The Compensation and Stock
Option Committee has the full power and authority to interpret the
provisions and supervise the administration of the Company's stock
8
<PAGE>
option plans and to grant options outside of these plans and the
authority to review all matters relating to personnel of the
Company.
The Board of Directors does not have a standing
nominating committee.
The following table summarizes the total compensation of
the Chief Executive Officer of the Company for 1995 and the two
previous years, as well as all other executive officers of the
Company who received compensation in excess of $100,000 for 1995.
9
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
--Long Term Compensation--
Restricted Stock
Name/ ---- Annual Compensation ----- Stock Underlying
Principal Position Year Salary Bonus Other Awards($) Options
__________________ ____ ______ _______ ___________ ___________ __________
<S> <C> <C> <C> <C> <C> <C>
Haim Aviv, Ph.D./ 1995 $200,230 20,551 (1) 324,376
Chairman, Chief 1994 195,476 $25,750 225,000
Executive Officer, 1993 187,320 $17,500 25,750 -0-
Acting President,
and Chief Scientist
Gad Reisenfeld, Ph.D./ 1995 136,664 34,481 (2) 79,333
Executive Vice 1994 110,000 40,828 (2) -0- 29,333
President 1993 110,000 17,000 28,410 (2) -0- -0-
S. Colin Neill/ 1995 109,375 (3) 10,000 (4)
Acting Vice
President/Finance and
Administration, Chief
Financial Officer,
Secretary and Treasurer (5)
John F. Howes, Ph.D./ 1995 115,000 -0- 34,933
Vice President/Clinical 1994 109,200 5,000 -0- 14,933
Affairs (6) 1993 105,300 -0- -0-
<FN>
_______________
1 Consists of car allowance.
2 Consists of housing allowance ($15,300), contributions in
insurance premiums ($13,500) and car allowance.
3 Consists of non-employee compensation.
4 Consists of warrant to purchase 10,000 shares of common stock
at $1.88 per share expiring on 10/31/2001.
5 Mr. Neill resigned from the Company effective July 1, 1996.
6 Mr. Howes resigned from the Company effective August 31, 1996.
[/FN]
10
</TABLE>
<PAGE>
The following tables set forth information with respect
to the named executive officers concerning the grant and exercise
of options during the last fiscal year and unexercised options held
as of the end of the fiscal year.
<TABLE>
<CAPTION>
Option Grants for the Year
Ended December 31, 1995:
% of Total Potential Realizable Value at
Options Assumed Annual Rate of
Number of Granted to Exercise Stock Price Appreciation
Options Employees Price Expiration -------for Option Term-------
Name Granted During Year Per Share Date 5% 10%
____ __________ ___________ _________ __________ _________ _________
<S> <C> <C> <C> <C> <C> <C>
Haim Aviv, Ph.D. 60,000 8.6% $ 1.94 10/31/05 $73,100 $185,300
(1)264,376 37.8% $ 2.50 10/31/05 $171,500 $668,900
Gad Reisenfeld, Ph.D. 40,000 5.8% $ 1.94 10/31/05 $49,000 $123,500
(1)39,333 5.6% $ 2.50 10/31/05 $25,800 $99,300
John F. Howes, Ph.D.(2) 20,000 2.9% $ 1.94 10/31/05 $24,000 $61,800
(1)14,933 2.1% $ 2.50 10/31/05 $9,800 $37,700
<FN>
_____________________
1) Represents previously issued options canceled and regranted in 1995.
2) Mr. Howes resigned from the Company effective August 31, 1996.
</FN>
<CAPTION>
Aggregated Option Exercises
for the Year Ended December 31, 1995
and Option Values as of December 31, 1995:
Number of Value of Unexercised
Shares Number of Unexercised In-the-Money Options at
Acquired on Value Options at December 31, 1995 December 31, 1995(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
____ ___________ ________ ___________ _____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
Haim Aviv, Ph.D. 0 0 31,501 292,875 -0- -0-
Gad Reisenfeld, Ph.D. 0 0 0 79,333 -0- -0-
John F. Howes, Ph.D.(2) 0 0 0 34,933 -0- -0-
<FN>
_____________________
(1) Based upon closing price on December 31, 1995 as reported on the Nasdaq SmallCap Market and the
exercise price per option.
(2) Mr. Howes resigned from the Company effective August 31, 1996.
</FN>
</TABLE>
11
<PAGE>
REPORT OF COMPENSATION COMMITTEE
The following report of the Compensation Committee is
provided solely to the shareholders of the Company pursuant to the
requirements of Schedule 14A promulgated under the Securities
Exchange Act of 1934, and shall not be deemed to be "filed" with
the Securities and Exchange Commission for the purpose of
establishing statutory liability. This Report shall not be deemed
to be incorporated by reference in any document previously or
subsequently filed with the Securities and Exchange Commission that
incorporates by reference all or any portion of this Proxy
Statement.
The Compensation and Stock Option Committee of the Board
of Directors establishes the general compensation policies of the
Company, establishes the compensation plans and specific
compensation levels for executive officers, and administers the
1992 Incentive and Non-Qualified Stock Option Plan as well as the
Company's other Stock Option Plans. The Compensation and Stock
Option Committee is composed of two independent, non-employee
Directors who have no interlocking relationships as defined by the
Securities and Exchange Commission other than as described below
(see "Compensation Committee Interlocks and Insider
Participation").
The Compensation and Stock Option Committee, being
responsible for overseeing and approving executive compensation and
grants of stock options, is in a position to appropriately balance
the current cash compensation considerations with the longer-range
incentive-oriented growth outlook associated with stock options.
The main objectives of the Company's compensation structure include
rewarding individuals for their respective contributions to the
Company's performance, providing executive officers with a stake in
the long-term success of the Company and providing compensation
policies that will attract and retain qualified executive
personnel.
The Compensation and Stock Option Committee believes that
the chief executive officer's (CEO) compensation should be heavily
influenced by Company performance. Although Dr. Aviv's existing
agreements with the Company (see "Employment/Consulting
Contracts/Directors' Compensation") provide for a base level of
salary and consulting compensation, the Committee determines the
appropriate level of bonuses and increases, if any, based in large
part on Company performance. The Committee also considers the
salaries of CEOs of comparably-sized companies and their
performance.
Stock options are granted to the CEO, as to other
executives, primarily based on the executive's ability to influence
the Company's long-term growth.
12
<PAGE>
The Compensation and Stock Option Committee has adopted
similar policies with respect to compensation of other officers of
the Company. The Committee establishes base salaries that are
within the range of salaries for persons holding similarly
responsible positions at other companies. In addition, the
Committee considers factors such as relative Company performance,
the individual's past performance and future potential in
establishing the base salaries of executive officers.
As with the CEO, the number of options granted to the
other officers is determined by the subjective evaluation of the
executive's ability to influence the Company's long-term growth.
All options are granted at no less than the current market price.
Since the value of an option bears a direct relationship to the
Company's stock price, it is an effective incentive for managers to
create value for stockholders. The Committee therefore views stock
options as an important component of its long-term, performance-
based compensation philosophy.
During 1995, the Committee considered the fact that the exercise
price for the existing stock options for executive officers,
employees, current directors and consultants of the Company granted
in prior years had become considerably in excess of market prices
for the Company's Common Stock and that as a result such options
did not provide the holders with the desired incentive of linking
their long term compensations with the performance goals of the
Company's stockholders. This consideration along with the
Committee's consideration of the performance of the executive
officers during a very critical period of the Company's history,
including: the filing of the new drug application for the Company's
leading product candidate LotemaxTM, the signing of the Marketing
Agreement with Bausch & Lomb, the progress made by the Company with
other new compounds, and the improved cash and equity positions of
the Company as a result of equity offerings and the implementation
of cost savings, lead to the Committee's recommendation that
previously issued options be cancelled and reissued at exercise
prices closer to the market value of the Company's Common Stock.
As a result in October 1995, the Committee and Board approved
the cancellation and reissuance of certain previously issued
options held by current executives, employees, directors and
consultants of the Company at an exercise price of $2.50 per share.
Such price represented a 29% premium over the market price of the
Company's Common Stock as of the date of the grant. The options
regranted subject to the 1992 Plan are subject to an exercise
schedule which provides that none of the regranted options may be
exercised until one year from the date of the grant, October 31,
1995.
Members of the Compensation and
Stock Option Committee
Marvin P. Loeb
E. Andrews Grinstead III
13
<PAGE>
EMPLOYMENT/CONSULTING CONTRACTS/DIRECTORS' COMPENSATION
Haim Aviv, Ph.D. In addition to serving as Chairman of
the Board and Chief Executive Officer of the Company, Dr. Aviv has
provided consulting services under a consulting agreement with an
initial three year term ended May 3, 1993. The term automatically
renews for additional one-year periods unless either the Company or
Dr. Aviv terminates the agreement at least 90 days prior to a
scheduled expiration date. Dr. Aviv is entitled to severance pay
equal to 25% of his salary in the event of termination or non-
renewal without cause. Under the agreement, Dr. Aviv is required
to render certain consulting services to the Company and in
consideration therefor, Dr. Aviv is entitled to receive $170,000
per year, subject to yearly increases and review.
The Company's subsidiary, Pharmos Ltd., employs Dr. Aviv
as its Chief Executive Officer under an employment agreement with
Dr. Aviv pursuant to which Dr. Aviv receives $30,000 per year,
subject to yearly increases and review. Dr. Aviv is required to
devote at least 50% of his business time and attention to the
business of Pharmos, Ltd. and to serve on its Board of Directors.
Dr. Aviv was issued at par value effective as of the time of his
engagement, the equivalent of 18,000 shares of Common Stock,
subject to a four year vesting program.
Gad Reisenfeld, Ph.D. In October 1992, Old Pharmos
entered into a one year employment agreement with Dr. Reisenfeld,
which is automatically renewable for successive one year terms
unless either party gives three months prior notice of non-renewal.
Under the Agreement, Dr. Reisenfeld devotes his full time to
serving as Executive Vice President of the Company. Dr.
Reisenfeld's annual gross salary is $150,000.
Directors' Compensation. In 1995, Directors did not
receive compensation for service on the Board or for attending
Board meetings. Non-employee members of the Board received options
to purchase shares of the Company's Common Stock at an exercise price
of $1.94 per share. Such options expire on October 31, 2001.
These options become exercisable in three equal installments on
October 31, 1996, 1997, and 1998. The number of shares to be
acquired under such options as granted to each Director is as
follows: Messrs. Loeb and Grinstead 20,000 each, Messrs. Knight,
Schlachet and William Hulley 10,000 each. During 1995, the Board
cancelled and reissued options previously issued to current
Directors. The table on the following page reflects the impact of
such cancellation and reissuance.
14
<PAGE>
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Net Remaining
Options Time of Time of Exercise at Date of
Name Date Repriced Repricing Repricing Price Repricing
____ ________ ________ _________ _________ _____ _________
<S> <C> <C> <C> <C> <C> <C>
Marvin P. Loeb 10/31/95 30,000 $1.94 $6.50 $2.50 4.5 years
E. Andrews 10/31/95 80,000 $1.94 $6.50 $2.50 4.5 years
Grinstead III 10/31/95 5,738 $1.94 $5.23 $2.50 5.5 years
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option
Committee are Messrs. Loeb and Grinstead. Prior to the Merger
(October 1992), Mr. Loeb was Chairman of the Board of the Company.
There were no interlocks on the Compensation and Stock Option
Committee in 1995.
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative
stockholder's return for the five year period ended December 31,
1995 with the cumulative total return of the NASDAQ Equity Market
Index and the NASDAQ Pharmaceuticals Index over the same period.
<TABLE>
<CAPTION>
December 31, 1990 1991 1992 1993 1994 1995
____________ ____ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Nasdaq Stock Market US 100 160.65 186.87 214.51 209.69 296.30
Nasdaq Pharmaceuticals 100 265.74 221.14 197.11 148.38 271.03
Pharmos Corp. Stock 100 859.00 710.90 466.82 79.38 87.09
</TABLE>
[Insert Graph]
16
<PAGE>
TRANSACTIONS AND/OR INDEBTEDNESS WITH MANAGEMENT
In February 1995, the Company completed the sale of $1,270,000
principal amount convertible debentures bearing an interest rate of
10% per annum in a private placement transaction. Such debenture
were convertible into shares of the Company's Common stock at $.52
per shares. A member of the Company's Board of Directors, Marvin
P. Loeb, purchased $70,000 of such debentures and upon conversion
of such debentures received 134,616 shares of Common Stock. In
addition, the Company paid this director $3,920 in interest related
to these debentures. Another investor in these debentures, Grace
Brothers, Ltd., was a holder of over 5% of the Company's Common
Stock at the time of this transaction. This investor purchased
$1,000,000 of such debentures and upon conversion received
1,923,077 shares of Common Stock. In addition, the Company paid
this investor $49,167 in interest related to these debentures.
In connection with an agreement between the Company and Mr.
Dachowitz, who served as Vice President-Finance and Chief Financial
Officer through March 1995, during 1995 the Company made a
severance payment of $75,000 to Mr. Dachowitz on the date he
terminated his employment with the Company.
SECTION 16 FILINGS
The following individuals did not file reports on Form 4
regarding certain transactions during the fiscal year ended
December 31, 1995:
Anat Biegon - repricing and acquisition of stock options (The
Company notified the above-named individual in February 1995 that
Form 5 must be filed regarding the above transaction, but the
Company is unaware whether such Form 5 was filed.); Haim Aviv -
repricing and grant of stock options; E. Andrews Grinstead, III. -
repricing and acquisition of stock options; John F. Howes -
repricing and acquisition of stock options; William Hulley -
acquisition of stock options; Steven Knight - acquisition of stock
options; Marvin Loeb - repricing and acquisition of stock options;
S. Colin Neill - disposition of common stock and acquisition of
warrants; Gad Reisenfeld - repricing and acquisition of stock
options; David Schlachet - acquisition of stock options (Form 5's
were filed for the above-named individuals in February 1995).
17
<PAGE>
ITEM 2 - PROPOSAL TO ADOPT THE INCENTIVE AND NON-QUALIFIED STOCK
OPTION PLAN
The Company's 1983, 1984, 1986 and 1988 Incentive Stock
Option Plans (the "Incentive Plans"), which are virtually
identical, provide for the issuance, pursuant to the exercise of
stock options granted thereunder, of an aggregate of 225,000 shares
of Common Stock. The Company's Non-Qualified Stock Option Plan
(the "Non-Qualified Plan"), which was approved by the Directors,
provides for the issuance, pursuant to the exercise of stock
options under the Non-Qualified Plan, of a maximum of 175,000
shares of Common Stock. The Company's 1991 Stock Option Plan (the
"1991 Plan"), adopted by Old Pharmos, provides for the issuance,
pursuant to the exercise of stock options granted thereunder, of a
maximum of 56,062 shares of Common Stock. The Company's 1992 Stock
Option Plan (the "1992 Plan") provides for the issuance, pursuant
to the exercise of stock options granted thereunder, of a maximum
of 750,000 shares of Common Stock. Incentive Stock Options may
only be granted to employees of the Company. Non-Qualified Stock
Options may be granted to employees, Directors, consultants,
advisers and contractors of the Company. The Incentive Plans, the
Non-Qualified Plan, the 1991 Plan and the 1992 Plan are sometimes
referred to herein as the "Prior Plans".
The Board of Directors has adopted, subject to
stockholder approval, the 1996 Incentive and Non-Qualified Stock
Option Plan ("1996 Plan") which, in most material respects, is
similar to the Prior Plans. The annual meeting will consider
whether to approve the 1996 Plan. The full text of the 1996 Plan
is appended to this Joint Proxy Statement as Appendix B, and the
following summary is qualified in its entirety by reference to the
1996 Plan.
The purpose of the 1996 Plan is to allow Directors,
officers, key employees and consultants of the Company and its
subsidiaries to increase their proprietary interest in, and to
encourage such employees to remain in the employ of, or maintain
their relationship with, such entities. It is intended that
options granted under the 1996 Plan will qualify either as
incentive stock options under Section 422 of the Code or an non-
qualified options. Options granted under the 1996 Plan will only
be exercisable for Common Stock.
The 1996 Plan will be administered by a committee
appointed by the Board of Directors (the "Compensation Committee").
Members of the Compensation Committee will not be eligible to
receive options while they are members except to the extent
otherwise permitted under the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934. The Compensation Committee will
designate the persons to receive options, the number of shares
subject to the options and the terms of the options, including the
option price and the duration of each option, subject to certain
limitations. The 1996 Plan also provides that non-employee members
of the Board, including Compensation Committee members, shall
18
<PAGE>
receive "formula awards" of 20,000 shares of Common Stock per
year, to be awarded as of the first business day of January of each
year, pursuant to non-qualified stock options. Such "formula award"
options shall vest with respect to one-third of the shares granted
thereunder on each of the first, second and third anniversaries of
the date of grant.
The maximum number of shares of Common Stock available
for issuance under the 1996 Plan is 1,500,000 shares, subject to
adjustment in the event of stock splits, stock dividends, mergers,
consolidations and the like. Common Stock subject to options
granted under the 1996 Plan that expire or terminate will again be
available for options to be issued under the 1996 Plan.
The price at which shares of Common Stock may be
purchased upon exercise of an incentive stock option must be at
least 100% of the fair market value of Common Stock on the date the
option is granted (or at least 110% of fair market value in the
case of a person holding more than 10% of the outstanding shares of
Common Stock (a "10% Stockholder")).
The aggregate fair market value (determined at the time
the option is granted) of Common Stock with respect to which
incentive stock options are exercisable for the first time in any
calendar year by an optionee under the 1996 Plan or any other plan
of the Company or a subsidiary, shall not exceed $100,000. The
Compensation Committee will fix the time or times when, and the
extent to which, an option is exercisable, provided that no option
will be exercisable earlier than one year or later than ten years
after the date of grant (or five years in the case of a 10%
Stockholder). The option price is payable in cash or by check.
However, the Board of Directors may grant a loan to an employee,
pursuant to the loan provision of the 1996 Plan, for the purpose of
exercising an option or may permit the option price to be paid in
shares of Common Stock at the then current fair market value, as
defined in the 1996 Plan.
Upon termination of an optionee's employment or
consultancy, all options held by such optionee will terminate,
except that any option that was exercisable on the date employment
or consultancy terminated may, to the extent then exercisable, be
exercised within three months thereafter (or one year thereafter if
the termination is the result of permanent and total disability of
the holder), and except such three month period may be extended by
the Compensation Committee in its discretion. If an optionee dies
while he is an employee or a consultant or during such three-month
period, the option may be exercised within one year after death by
the decedent's estate or his legatees or distributees, but only to
the extent exercisable at the time of death.
The 1996 Plan provides that outstanding options shall
vest and become immediately exercisable in the event of a "sale" of
the Company, including (i) the sale of more than 75% of the voting
power of the Company in a single transaction or a series of
19
<PAGE>
transactions, (ii) the sale of substantially all assets of the
Company, (iii) approval by the stockholders of a reorganization,
merger or consolidation, as a result of which the stockholders of
the Company will own less than 50% of the voting power of the
reorganized, merged or consolidated company.
The Board of Directors may amend, suspend or discontinue
the 1996 Plan, but it must obtain stockholder approval to (i)
increase the number of shares subject to the 1996 Plan, (ii) change
the designation of the class of persons eligible to receive
options, (iii) decrease the price at which options may be granted,
except that the Board may, without stockholder approval accept the
surrender of outstanding options and authorize the granting of new
options in substitution therefor specifying a lower exercise price
that is not less than the fair market value of Common Stock on the
date the new option is granted, (iv) remove the administration of
the 1996 Plan from the Compensation Committee, (v) render any
member of the Compensation Committee eligible to receive an option
under the 1996 Plan while serving thereon, or (vi) amend the 1996
Plan in such a manner that options issued under it intend to be
incentive stock options, fail to meet the requirements of Incentive
Stock Options as defined in Section 422 of the Code.
Under current federal income tax law, the grant of
incentive stock options under the 1996 Plan will not result in any
taxable income to the optionee or any deduction for the Company at
the time the options are granted. The optionee recognizes no gain
upon the exercise of an option. However the amount by which the
fair market value of Common Stock at the time the option is
exercised exceeds the option price is an "item of tax preference"
of the optionee, which may cause the optionee to be subject to the
alternative minimum tax. If the optionee holds the shares of
Common Stock received on exercise of the option at least one year
from the date of exercise and two years from the date of grant, he
will be taxed at the time of sale at long-term capital gains rates,
if any, on the amount by which the proceeds of the sale exceed the
option price. If the optionee disposes of the Common Stock before
the required holding period is satisfied, ordinary income will
generally be recognized in an amount equal to the excess of the
fair market value of the shares of Common Stock at the date of
exercise over the option price, or, if the disposition is a taxable
sale or exchange, the amount of gain realized on such sale or
exchange if that is less. If, as permitted by the 1996 Plan, the
Board of Directors permits an optionee to exercise an option by
delivering already owned shares of Common Stock valued at fair
market value) the optionee will not recognize gain as a result of
the payment of the option price with such already owned shares.
However, if such shares were acquired pursuant to the previous
exercise of an option, and were held less than one year after
acquisition or less than two years from the date of grant, the
exchange will constitute a disqualifying disposition resulting in
20
<PAGE>
immediate taxation of the gain on the already owned shares as
ordinary income. It is not clear how the gain will be computed on
the disposition of shares acquired by payment with already owned
shares.
The Company is currently in discussions with several
emerging pharmaceutical and biotechnology companies about potential
business and/or product consolidations, joint ventures,
acquisitions, mergers or other business combinations. If any such
transaction is consummated, the existence of these additional
outstanding stock options under the 1996 Plan could have the effect
of reducing the aggregate consideration received by existing
stockholders in such transaction.
The affirmative vote of the holders of a majority of the
shares present and entitled to vote at the meeting is required for
approval of the 1996 Plan. The Board of Directors believes that,
in the competitive market for highly qualified personnel, it is
critical for companies to offer a variety of benefits in order to
attract, retain and motivate key employees of outstanding ability.
Accordingly, the Board of Directors recommends a vote FOR adoption
of the 1996 Plan. Unless they are otherwise directed by the
stockholders, the proxies intend to vote FOR this proposal.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Price Waterhouse LLP as its
independent public accountants to examine the financial statements
of the Company for the current fiscal year. The selection of Price
Waterhouse LLP was approved by the Board of Directors prior to
their appointment. Price Waterhouse LLP has advised the Company
that they do not have any material financial interests in, or any
connection with (other than as independent auditors, tax advisors
and management consultants), the Company.
Price Waterhouse LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement,
if they desire to do so, and they are expected to be available to
respond to appropriate questions.
STOCKHOLDERS' PROPOSALS FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the
1997 annual meeting of stockholders must be received by the Company
by June 1, 1997 to be eligible for inclusion in the proxy material
for that meeting.
21
<PAGE>
ANNUAL REPORT ON FORM 10-K
Upon sending a written request to Pharmos Corporation, 2
Innovation Drive, Alachua, FL 32615, Attention: Acting Vice
President-Finance, stockholders may obtain, free of charge, a copy
of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, and any amendments thereto, as filed with
the Securities and Exchange
Commission.
OTHER MATTERS
As of the date of this Proxy Statement, the only business
which management expects to be considered at the Annual Meeting is
the election of Directors and the adoption of the incentive and
non-qualified stock option plan. If any other matters come before
the meeting, the persons named in the enclosed form of proxy are
expected to vote the proxy in accordance with their best judgment
on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
HAIM AVIV, PH.D.
Chairman of the Board
Dated: November 20, 1996
22
<PAGE>
PHARMOS CORPORATION
2 Innovation Drive
Alachua, FL 32615
(904) 462-1210
PROXY SOLICITED BY THE BOARD OF DIRECTORS
_________________________________________
Annual Meeting of Stockholders - December 18, 1996
The undersigned, as stockholder of PHARMOS CORPORATION
(the "Company"), hereby appoints HAIM AVIV and GAD RIESENFELD and
each of them, with full power of substitution, the true and
lawful proxies and attorneys in fact of the undersigned to vote,
as designated below, the number of shares of Common Stock of the
Company which the undersigned would be entitled to vote, as fully
and with the same effect as the undersigned might do if
personally present, at the Annual Meeting of the Stockholders of
the Company to be held on December 18, 1996 at 9:00 a.m. in
Alachua, Florida, at the Company's offices, 2 Innovation Drive,
and any adjournments thereof on the following matters as set
forth in the Proxy Statement and Notice dated November 20, 1996:
(1) ELECTION OF DIRECTORS OF THE COMPANY (ITEM NO. 1 IN THE
PROXY STATEMENT)
__ __
[__] FOR all nominees listed [__] WITHHOLD AUTHORITY to
below except as marked to vote for all nominees
the contrary: listed below
NOMINEES: Haim Aviv
E. Andrews Grinstead III
Marvin P. Loeb
Stephen C. Knight
David Schlachet
Fredric D. Price
[INSTRUCTIONS: To withhold authority to vote for any of the
individual nominees, PRINT that nominee's name on the line
below].
_________________________________________________________________
(2) PROPOSAL TO ADOPT THE PHARMOS CORPORATION 1996 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN (THE "OPTION PLAN") (ITEM
NO. 2 IN THE PROXY STATEMENT).
__ __ __
/__ / For /__ / Against /__ / Abstain
(3) IN THE DISCRETION OF SUCH PROXIES UPON ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS
IDENTIFIED ABOVE AND, IN THE DISCRETION OF THE PROXIES
NAMED, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
This Proxy is revocable at any time, and the undersigned
reserves the right to attend the Annual Meeting and vote in
person. The undersigned hereby revokes any proxy heretofore
given in respect of the shares of the Company.
Dated: __________, 1996
_____________________________
SIGNATURE*
_____________________________
SIGNATURE*
CORRECT ADDRESS IF NECESSARY
* NOTE: Please sign exactly as name(s) appear on your Stock
Certificate. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such. If more than one name is shown, as in the case of
joint tenancy, each party must sign. If a corporation,
please sign in full corporate name by the president or other
authorized officer.
THE BOARD OF DIRECTORS URGES THAT YOU FILL IN, SIGN AND
DATE THE PROXY AND RETURN IT PROMPTLY BY MAIL IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED
IN THE UNITED STATES.
PHARMOS CORPORATION
a Nevada corporation
1996 Incentive and Non-Qualified Stock Option Plan
__________________________________________________
1. Purpose. The purposes of this 1996 Incentive and Non-
Qualified Stock Option Plan are to attract and retain the best
available personnel, to provide additional incentive to the
Employees, Consultants and Outside Directors of Pharmos
Corporation, a Nevada corporation (the "Company"), and to promote
the success of the Company's business.
Options granted hereunder may, consistent with the terms of
this Plan, be either Incentive Stock Options or Nonstatutory Stock
Options, at the discretion of the Committee and as reflected in the
terms of the written option agreement.
2. Definitions. As used in this Plan, the following
definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
promulgated thereunder.
(c) "Commission" means the United States Securities and
Exchange Commission.
(d) "Committee" means the Committee appointed by the Board or
otherwise determined in accordance with Section 4(a) of this Plan.
(e) "Common Stock" means the common stock of the Company, par
value $0.03 per share.
(f) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services
and is compensated for such consulting services; provided that the
term Consultant shall not include directors who are not compensated
for their services or are paid only a director's fee by the
Company.
(g) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of
service as an Employee, Consultant or Outside Director, as
applicable. Continuous Status as an Employee, Consultant or
Outside Director shall not be considered interrupted in the case of
sick leave or military leave, any other leave provided pursuant to
a written policy of the Company in effect at the time of
determination, or any other leave of absence approved by the Board
or the Committee; provided that such leave is for a period of not
more than the greatest of (i) 90 days, (ii) the date of the
resumption of such service upon the expiration of such leave which
is guaranteed by contract or statute or is provided in a written
<PAGE>
policy of the Company which was in effect upon the commencement of
such leave, or (iii) such period of leave as may be determined by
the Board or the Committee in its sole discretion.
(h) "Disinterested Person" shall have the meaning set forth
in Rule 16b-3(d)(3), or any successor definition adopted by the
Commission, provided the person is also an "outside director" under
Section 162(m) of the Code.
(i) "Employee" means any person employed by the Company or
any Parent or Subsidiary of the Company, including employees who
are also officers or directors or both of the Company or any Parent
or Subsidiary of the Company. The payment of a director's fee by
the Company shall not be sufficient to constitute "employment" by
the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations
promulgated thereunder.
(k) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section
422 of the Code, and the rules and regulations promulgated
thereunder.
(l) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(m) "Option" means a stock option granted pursuant to this
Plan.
(n) "Optioned Stock" means the Common Stock subject to an
Option.
(o) "Optionee" means an Employee, Consultant or Outside
Director who receives an Option.
(p) "Outside Director" means any member of the Board of
Directors of the Company who is not an Employee or Consultant.
(q) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this Pharmos Corporation 1996 Stock Option
Plan, as amended from time to time.
(s) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the Commission.
2
<PAGE>
(t) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations
promulgated thereunder.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of this Plan.
(v) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the
Code.
3. Scope of Plan. Subject to the provisions of Section 10
of this Plan, and unless otherwise amended by the Board and
approved by the stockholders of the Company as required by law, the
maximum aggregate number of Shares issuable under this Plan is
1,500,000, and such Shares are hereby made available and shall be
reserved for issuance under this Plan. The Shares may be
authorized but unissued, or reacquired, Common Stock.
If an Option shall expire or become unexercisable for any
reason without having been exercised in full, the unpurchased
Shares subject thereto shall (unless this Plan shall have
terminated) become available for grants of other Options under this
Plan.
4. Administration of Plan.
(a) Procedure. This Plan shall be administered by the
Committee appointed pursuant to this Section 4(a). The Committee
shall consist of two or more Outside Directors appointed by the
Board, but all Committee members must be Disinterested Persons. If
the Board fails to appoint such persons, the Committee shall
consist of all Outside Directors who are Disinterested Persons.
(b) Powers of Committee. Subject to Section 5(b) below and
otherwise subject to the provisions of this Plan, the Committee
shall have full and final authority in its discretion to: (i)
grant Incentive Stock Options and Nonstatutory Stock Options, (ii)
determine, upon review of relevant information and in accordance
with Section 7 below, the Fair Market Value of the Common Stock;
(iii) determine the exercise price per share of Options to be
granted, in accordance with this Plan, (iv) determine the Employees
and Consultants to whom, and the time or times at which, Options
shall be granted, and the number of shares to be represented by
each Option; (v) cancel, with the consent of the Optionee,
outstanding Options and grant new Options in substitution therefor;
(vi) interpret this Plan; (vii) accelerate or defer (with the
consent of Optionee) the exercise date of any Option; (viii)
prescribe, amend and rescind rules and regulations relating to this
Plan; (ix) determine the terms and provisions of each Option
granted (which need not be identical) by which Options shall be
evidenced and, with the consent of the holder thereof, modify or
3
<PAGE>
amend any provisions (including without limitation provisions
relating to the exercise price and the obligation of any Optionee
to sell purchased Shares to the Company upon specified terms and
conditions) of any Option; (x) require withholding from or payment
by an Optionee of any federal, state or local taxes; (xi) appoint
and compensate agents, counsel, auditors or other specialists as
the Committee deems necessary or advisable; (xii) correct any
defect or supply any omission or reconcile any inconsistency in
this Plan and any agreement relating to any Option, in such manner
and to such extent the Committee determines to carry out the
purposes of this Plan, and; (xiii) construe and interpret this
Plan, any agreement relating to any Option, and make all other
determinations deemed by the Committee to be necessary or advisable
for the administration of this Plan.
A majority of the Committee shall constitute a quorum at any
meeting, and the acts of a majority of the members present, or acts
unanimously approved in writing by the entire Committee without a
meeting, shall be the acts of the Committee. A member of the
Committee shall not participate in any decisions with respect to
himself under this Plan.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final
and binding on all Optionees and any other holders of any Options
granted under this Plan.
5. Eligibility.
(a) Options may be granted to any Employee, Consultant or
Outside Director as the Committee may from time to time designate,
provided that (i) Incentive Stock Options may be granted only to
Employees, and (ii) Options may be granted to Outside Directors
only in accordance with the provisions of Section 5(b) below. In
selecting the individuals to whom Options shall be granted, as well
as in determining the number of Options granted, the Committee
shall take into consideration such factors as it deems relevant in
connection with accomplishing the purpose of this Plan. Subject to
the provisions of Section 3 above, an Optionee may, if he or she is
otherwise eligible, be granted an additional Option or Options if
the Committee shall so determine.
(b) All grants of Options to Outside Directors under this
Plan shall be automatic and non-discretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted options or to determine the
number of Shares to be covered by options granted to Outside
Directors; provided, that nothing in this Plan shall be construed
to prevent an Outside Director from declining to receive an Option
under this Plan.
4
<PAGE>
(ii) Each Outside Director shall be automatically granted on
the first business day of each calendar year, commencing in 1997,
an option to purchase 10,000 Shares (subject to adjustment as
provided in Section 10 below).
(iii) The terms of each Option granted under this Section
5(b) shall be as follows:
(A) the term of the option shall be ten (10) years;
(B) the Option shall become exercisable
cumulatively with respect to one-third of the Shares
on each of the first, second and third anniversaries
of the date of grant; provided, however, that in no
event shall any option be exercisable prior to
obtaining stockholder approval of this Plan; and
(C) the exercise price per share of Common Stock
shall be 100% of the "Fair Market Value" (as defined
in Section 7(b) below) on the date of grant of the
Option.
(c) Each Option granted under Section 5(b) above shall be a
Nonstatutory Stock Option. Each other Option shall be designated
in the written option agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option. Notwithstanding such designations,
if and to the extent that the aggregate Fair Market Value of the
Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during
any calendar year (under all plans of the Company) exceeds
$100,000, such options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(c), Options shall be taken
into account in the order in which they are granted, and the Fair
Market Value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.
(d) This Plan shall not confer upon any Optionee any right
with respect to continuation of employment by or the rendition of
services to the Company or any Parent or Subsidiary, nor shall it
interfere in any way with his or her right or the right of the
Company or any Parent or Subsidiary to terminate his or her
employment or services at any time, with or without cause. The
terms of this Plan or any Options granted hereunder shall not be
construed to give any Optionee the right to any benefits not
specifically provided by this Plan or in any manner modify the
Company's right to modify, amend or terminate any of its pension or
retirement plans.
6. Term of Plan. This Plan shall become effective upon its
adoption by the Board of Directors of the Company (such adoption to
include the approval of at least two Outside Directors) subject to
the approval thereof by vote of the holders of a majority of the
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outstanding shares of the Company present, or represented, and
entitled to vote at a meeting to be duly held in accordance with
the applicable laws of the State of Nevada. Such meeting shall be
held within twelve months of the adoption of the Plan by the Board
of Directors. The Plan shall terminate no later than September 1,
2006. No grants shall be made under this Plan after the date of
termination of this Plan. Any termination, either partially or
wholly, shall not affect any Options then outstanding under this
Plan.
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Committee as follows:
(i) In the case of an Incentive Stock Option granted to any
Employee, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of grant, but if
granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(ii) With respect to (i) above, the per Share exercise price
is subject to adjustment as provided in Section 10 below. For
purposes of this Section 7(a), if an Option is amended to reduce
the exercise price, the date of grant of such option shall
thereafter be considered to be the date of such amendment.
(b) Fair Market Value. The "Fair Market Value" of the Common
Stock shall be determined by the Committee in its discretion;
provided, that if the Common Stock is listed on a stock exchange,
the Fair Market Value per Share shall be the closing price on such
exchange on the date of grant of the Option as reported in the Wall
Street Journal (or, (i) if not so reported, as otherwise reported
by the exchange, and (ii) if not reported on the date of grant,
then on the last prior date on which a sale of the Common Stock was
reported); or if not listed on an exchange but traded on the
National Association of Securities Dealers Automated Quotation
SmallCap Market System ("NASDAQ"), the Fair Market Value per Share
shall be the closing price per share of the Common Stock for the
date of grant, as reported in the Wall Street Journal (or, (i) if
not so reported, as otherwise reported by NASDAQ, and (ii) if not
reported on the date of grant, then on the last prior date on which
a sale of the Common Stock was reported); or, if the Common Stock
is otherwise publicly traded, the mean of the closing bid price and
asked price for the last known sale.
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(c) Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Committee (and in the
case of an Incentive Stock Option, shall be determined at the time
of grant) and may consist entirely of (i) cash; (ii) check; (iii)
the Optionee's personal interest bearing full recourse promissory
note with such terms and provisions as the Committee may authorize
(provided that no person who is not an Employee of the Company may
purchase Shares with a promissory note); (iv) other Shares of
Common Stock which (X) either have been owned by the Optionee for
more than six (6) months on the date of surrender or were not
acquired directly or indirectly from the Company, and (Y) have a
Fair Market Value on the date of surrender (determined without
regard to any limitations on transferability imposed by securities
laws) equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised; (v) any combination of such
methods of payment; or (vi) such other consideration and method of
payment for the issuance of Shares to the extent permitted under
applicable laws.
(d) Withholding. No later than the date as of which an
amount first becomes includable in the gross income of the Optionee
for Federal income tax purposes with respect to an option, the
Optionee shall pay to the Company (or other entity identified by
the Committee), or make arrangements satisfactory to the Company or
other entity identified by the Committee regarding the payment of,
any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount required in order
for the Company to obtain a current deduction. Unless otherwise
determined by the Committee, withholding obligations may be settled
with Common Stock, including Common Stock underlying the subject
option, provided that any applicable requirements under Section 16
of the Exchange Act are satisfied so as to avoid liability
thereunder. The obligations of the Company under this Plan shall
be conditional upon such payment or arrangements, and the Company
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the Optionee.
8. Options.
(a) Term of Option. The term of each Option granted (other
than an Option granted under Section 5(b) above) shall be for a
period of no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option
agreement. However, in the case of an Option granted to an
Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant
thereof or such shorter time as may be provided in the Option
Agreement.
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(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a Stockholder. Any
Option granted under this Plan (other than an Option granted
pursuant to Section 5(b) above) shall be exercisable at such times
and under such conditions as determined by the Committee, including
performance criteria with respect to the Company and/or the
Optionee, and as shall otherwise be permissible under the terms of
this Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment
may, as authorized by the Committee, consist of any consideration
and method of payment allowable under Section 7 of this Plan.
Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such stock certificate promptly upon exercise of the
Option. If the exercise of an Option is treated in part as the
exercise of an Incentive Stock Option and in part as the exercise
of a Nonstatutory Stock Option pursuant to Section 5(b) above, the
Company shall issue a separate stock certificate evidencing the
Shares treated as acquired upon exercise of an Incentive Stock
Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option
and shall identify each such certificate accordingly in its stock
transfer records. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 10 of
this Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for
purposes of this Plan and for sale under the Option, by the number
of Shares as to which the Option is exercised.
(ii) Method of Exercise. An Optionee may exercise an
Option, in whole or in part, at any time during the option period
by the Optionee's giving written notice of exercise on a form
provided by the Committee (if available) to the Company specifying
the number of shares of Common Stock subject to the Option to be
purchased. Such notice shall be accompanied by payment in full of
the purchase price by cash or check or such other form of payment
as the Company may accept. If approved by the Committee, payment
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in full or in part may also be made (A) by delivering Common Stock
already owned by the Optionee having a total Fair Market Value on
the date of such delivery equal to the exercise price of the
subject Option; (B) by the execution and delivery of a note or
other evidence of indebtedness (and any security agreement
thereunder) satisfactory to the Committee; (C) by authorizing the
Company to retain shares of Common Stock which would otherwise be
issuable upon exercise of the Option having a total Fair Market
Value on the date of delivery equal to the exercise price of the
subject Option; (D) by the delivery of cash by a broker-dealer to
whom the Optionee has submitted an irrevocable notice of exercise
(in accordance with Part 220, Chapter II, Title 12 of the Code of
Federal Regulations, so-called "cashless" exercise); or (E) by any
combination of the foregoing. In the case of an Incentive Stock
Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock
subject to the Option may be authorized only at the time the Option
is granted. No shares of Common Stock shall be issued until full
payment therefor has been made. An Optionee shall have all of the
rights of a stockholder of the Company holding the class of Common
Stock that is subject to such Option (including, if applicable, the
right to vote the shares and the right to receive dividends), when
the Optionee has given written notice of exercise, has paid in full
for such shares and such shares have been recorded on the Company's
official stockholder records as having been issued or transferred.
(iii) Termination of Status as an Employee, Consultant or
Outside Director. If an Optionee's Continuous Status as an
Employee, Consultant or Outside Director (as the case may be) is
terminated for any reason whatever, such Optionee may, but only
within such period of time as provided in the Option agreement,
after the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the
Option agreement and determined by the Committee), exercise the
Option to the extent that such Employee, Consultant or Outside
Director was entitled to exercise it at the date of such
termination pursuant to the terms of the Option agreement. To the
extent that such Employee, Consultant or Outside Director was not
entitled to exercise the Option at the date of such termination, or
if such Employee, Consultant or Outside Director does not exercise
such Option (which such Employee, Consultant or Outside Director
was entitled to exercise) within the time specified in the Option
agreement, the Option shall terminate.
(iv) Company Loan or Guarantee. Upon the exercise of any
Option and subject to the pertinent Option agreement and the
discretion of the Committee, the Company may at the request of the
Optionee; (A) lend to the Optionee, with recourse, an amount equal
to such portion of the option exercise price as the Committee may
determine; or (B) guarantee a loan obtained by the Optionee from a
third-party for the purpose of tendering the option exercise price.
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9. Non-transferability of Options. An Option granted
hereunder shall by its terms not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than
by will or the laws of descent and distribution. An Option may be
exercised during the Optionee's lifetime only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
(a) Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock
which have been authorized for issuance under this Plan but as to
which no Options have yet been granted or which have been returned
to this Plan upon cancellation or expiration of an Option, and the
number of shares of Common Stock subject to each outstanding
Option, as well as the price per share of Common Stock covered by
each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock of
the Company or the payment of a stock dividend with respect to the
Common Stock. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Committee. The Committee
may, in the exercise of its sole discretion in such instances,
declare that any Option shall terminate as of a date fixed by the
Committee and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
(c) Sale or Merger. "Sale" means: (i) sale (other than a
sale by the Company) of securities entitled to more than 75% of the
voting power of the Company in a single transaction or a related
series of transactions; or (ii) sale of substantially all of the
assets of the Company; or (iii) approval by the stockholders of the
Company of a reorganization, merger or consolidation of the
Company, as a result of which the persons who were the stockholders
of the Company immediately prior to such reorganization, merger or
consolidation do not own securities immediately after the
reorganization, merger or consolidation entitled to more than 50%
of the voting power of the reorganized, merged or consolidated
company. Immediately prior to a Sale, each Optionee may exercise
his or her Option as to all Shares then subject to the Option,
regardless of any vesting conditions otherwise expressed in the
Option. Voting power, as used in this Section 10(c), shall refer
to those securities entitled to vote generally in the election of
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directors, and securities of the Company not entitled to vote but
which are convertible into, or exercisable for, securities of the
Company entitled to vote generally in the election of directors
shall be counted as if converted or exercised, and each unit of
voting securities shall be counted in proportion to the number of
votes such unit is entitled to cast.
(d) Purchased Shares. No adjustment under this Section 10
shall apply to any purchased Shares already deemed issued at the
time any adjustment would occur.
(e) Notice of Adjustments. Whenever the purchase price or
the number or kind of securities issuable upon the exercise of the
Option shall be adjusted pursuant to Section 10, the Company shall
give each Optionee written notice setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the
adjustment, and the method by which such adjustment was calculated.
(f) Certain Cash Payments. If an Optionee would not be
permitted to exercise an Option or any portion thereof (for
purposes of this subsection (f) only, each such Option being
referred to as a "Subject Option") or dispose of the Shares
received upon the exercise thereof without loss or liability (other
than a loss or liability for the exercise price, applicable
withholding or any associated transactional cost), or if the Board
determines that the Optionee may not be permitted to exercise the
same rights or receive the same consideration with respect to the
Sale of the Company as a stockholder of the Company with respect to
any Subject Options or portion thereof or the Shares received upon
the exercise thereof, then notwithstanding any other provision of
this Plan and unless the Committee shall provide otherwise in an
agreement with such Optionee with respect to any Subject Options,
such Optionee shall have the right, whether or not the Subject
Option is fully exercisable or may be otherwise realized by the
Optionee, by giving notice during the 60-day period from and after
a Sale to the Company, to elect to surrender all or part of any
Subject Options to the Company and to receive cash, within 30 days
of such notice, in an amount equal to the amount by which the "Sale
Price" (as defined herein) per share of Common Stock on the date of
such election shall exceed the amount which the Optionee must pay
to exercise the Subject Options per share of Common Stock under
such Subject Options (the "Spread") multiplied by the number of
shares of Common Stock granted under the Subject Options as to
which the right granted hereunder shall be applicable and shall
have been exercised; provided, however, that if the end of such 60-
day period from and after a Sale is within six months of the date
of grant of a Subject Option held by an Optionee (except an
Optionee who has deceased during such six month period) who is an
officer or director of the Company (within the meaning of Section
16(b) of the Exchange Act), such Subject Option shall be canceled
in exchange for a payment to the Optionee, effective on the day
which is six months and one day after the date of grant of such
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Subject Option, equal to the Spread multiplied by the number of
shares of Common Stock granted under the Subject Option. With
respect to any Optionee who is an officer or director of the
Company (within the meaning of Section 16(b) of the Exchange Act),
the 60-day period shall be extended, if necessary, to include the
"window period" of Rule 16(b)-3 which first commences on or after
the date of the Sale, and the Committee shall have sole discretion,
if necessary, to approve the Optionee's exercise hereunder and the
date on which the Spread is calculated may be adjusted, if
necessary, to a later date if necessary to avoid liability to such
Optionee under Section 16(b). For purposes of the Plan, "Sale
Price" means the higher of (a) the highest reported sales price of
a share of Common Stock in any transaction reported on the
principal exchange on which such shares are listed or on NASDAQ
during the 60-day period prior to and including the date of a Sale
or (b) if the Sale is the result of a tender or exchange offer or a
corporate transaction, the highest price per share of Common Stock
paid in such tender or exchange offer or a corporate transaction,
except that, in the case of Incentive Stock Options, such price
shall be based only on the Fair Market Value of the Common Stock on
the date such Incentive Stock Option is exercised. To the extent
that the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of the
Committee.
(g) Mitigation of Excise Tax. If any payment or right
accruing to an Optionee under this Plan (without the application of
this Section), either alone or together with other payments or
rights accruing to the Optionee from the Company or an affiliate
("Total Payments") would constitute a "parachute payment" (as
defined in Section 280G of the Code and regulations thereunder),
the Committee may in each particular instance determine to (i)
reduce such payment or right to the largest amount or greatest
right that will result in no portion of the amount payable or right
accruing under the Plan being subject to an excise tax under
Section 4999 of the Code or being disallowed as a deduction under
Section 280G of the Code, or (ii) take such other actions, or make
such other arrangements or payments with respect to any such
payment or right as the Committee may determine in the
circumstances. Any such determination shall be made by the
Committee in the exercise of its sole discretion, and such
determination shall be conclusive and binding on the Optionee. The
Optionee shall cooperate as may be requested by the Committee in
connection with the Committee's determination, including providing
the Committee with such information concerning such Optionee as the
Committee may deem relevant to its determination.
11. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes
the determination granting such Option. Notice of the
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determination shall be given to each Employee, Consultant or
Outside Director to whom an Option is so granted within a
reasonable time after the date of such grant. If the Committee
cancels, with the consent of Optionee, any Option granted under
this Plan, and a new Option is substituted therefor, the date that
the canceled Option was originally granted shall be the date used
to determine the earliest date for exercising the new substituted
Option under Section 7 so that the Optionee may exercise the
substituted Option at the same time as if the Optionee had held the
substituted Option since the date the canceled Option was granted.
12. Amendment and Termination of Plan.
(a) Amendment and Termination. The Board or the Committee
may amend, waive or terminate this Plan from time to time in such
respects as it shall deem advisable; provided that, to the extent
necessary to comply with Rule 16b-3 or with Section 422 of the Code
(or any other successor or applicable law or regulation), the
Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such a degree as is required by the applicable
law, rule or regulation. Notwithstanding the foregoing, neither
the provisions of Section 5(b) of this Plan, nor any other
provisions pertaining to the automatic option grants to Outside
Directors, shall be amended more than once every six months, other
than to comport with changes in the Code or other applicable laws
or any rules or regulations promulgated thereunder.
(b) Effect of Amendment or Termination. Any such amendment
or termination of this Plan shall not affect Options already
granted and such Options shall remain in full force and effect as
if this Plan had not been amended or terminated, unless mutually
agreed otherwise between the Optionee and the Committee, which
agreement must be in writing and signed by the Optionee and the
Company.
13. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange
Act, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant
at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
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14. Restrictions on Shares. Shares of Common Stock issued
upon exercise of an Option shall be subject to the terms and
conditions specified herein and to such other terms, conditions and
restrictions as the Committee in its discretion may determine or
provide in the grant. The Company shall not be required to issue
or deliver any certificates for shares of Common Stock, cash or
other property prior to (a) the listing of such shares on any stock
exchange (or other public market) on which the Common Stock may
then be listed (or regularly traded), (b) the completion of any
registration or qualification of such shares under federal or state
law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable, and (c) the
satisfaction of any applicable withholding obligation in order for
the Company or an affiliate to obtain a deduction with respect to
the exercise of an Option. The Company may cause any certificate
for any share of Common Stock to be delivered to be properly marked
with a legend or other notation reflecting the limitations on
transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any
person exercising an Option to make such representations and
furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common
Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next
lower whole number of shares.
15. Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Option
until, after proper exercise of the Option or other action
required, such shares shall have been recorded on the Company's
official stockholder records as having been issued or transferred.
Subject to the preceding Section and upon exercise of the Option or
any portion thereof, the Company will have thirty (30) days in
which to issue the shares, and the Optionee will not be treated as
a stockholder for any purpose whatsoever prior to such issuance.
No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder
records, except as provided herein or in an agreement.
16. Best Efforts To Register. If there has been a public
offering, the Company may register under the Securities Act the
Common Stock delivered or deliverable pursuant to Options on
Commission Form S-8 if available to the Company for this purpose
(or any successor or alternate form that is substantially similar
to that form to the extent available to effect such registration),
in accordance with the rules and regulations governing such forms,
as soon as such forms are available for registration to the Company
for this purpose. The Company will, if it so determines, use its
good faith efforts to cause the registration statement to become
effective as soon as possible and will file such supplements and
amendments to the registration statement as may be necessary to
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keep the registration statement in effect until the earliest of (a)
one year following the expiration of the option period of the last
Option outstanding, (b) the date the Company is no longer a
reporting company under the Exchange Act and (c) the date all
Optionees have disposed of all shares delivered pursuant to any
Option. The Company may delay the foregoing actions at any time
and from time to time if the Committee determines in its discretion
that any such registration would materially and adversely affect
the Company's interests or if there is no material benefit to
Optionees.
17. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to permit the exercise of all
Options outstanding under this Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to
issue or sell such Shares as to which such requisite authority
shall not have been obtained for any reason.
18. Option Agreements. Options shall be evidenced by written
Option agreements in such form as the Committee shall approve.
19. Information to Optionees. To the extent required by
applicable law, the Company shall provide to each Optionee, during
the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information
which are provided to all stockholders of the Company. Except as
otherwise noted in the foregoing sentence, the Company shall have
no obligation or duty to affirmatively disclose to any Optionee,
and no Optionee shall have any right to be advised of, any material
information regarding the Company or any Parent or Subsidiary at
any time prior to, upon or otherwise in connection with, the
exercise of an Option.
20. Funding. Benefits payable under this Plan to any person
shall be paid directly by the Company. The Company shall not be
required to fund or otherwise segregate assets to be used for
payment of benefits under this Plan.
21. Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with this
Plan or any option granted hereunder, and against all amounts paid
by them in settlement thereof (provided such settlement is approved
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by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding; provided that within 60 days after institution of any
such action, suit or proceeding a Committee member shall in writing
offer the Company the opportunity, at its own expense, to handle
and defend the same. The foregoing right of indemnification shall
not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or by-laws, by contract, as
a matter of law, or otherwise.
22. Controlling Law. This Plan shall be governed by the laws
of the State of Nevada applicable to contracts made and performed
wholly in Nevada between Nevada residents.
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