SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------------
PHARMOS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 36-3207413
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
99 Wood Avenue South
Suite 301
Iselin, New Jersey 08830
(Address of Principal Executive Offices)
1997 Incentive and Non-Qualified Stock Option Plan
(Full Title of Plan)
Gad Riesenfeld
99 Wood Avenue South
Suite 301
Iselin, New Jersey 08830
(732) 452-9556
(Name, address and telephone number of agent for service)
With a copy to:
Adam D. Eilenberg, Esq.
Ehrenreich Eilenberg & Krause LLP
11 East 44th Street
New York, New York 10017
(212) 986-9700
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Title of Securities to be registered Amount to be Proposed Proposed Amount of
registered maximum maximum registration
offering aggregate fee
price per offering
share price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock issuable upon exercise of 362,000 $1.25 $ 452,500 $ 126
370,000 Options at $1.25 per share
- --------------------------------------------------------------------------------------------------------------------
Shares of Common Stock issuable upon exercise of 107,500 $1.75 $ 188,125 $ 52
107,500 Options at $1.75 per share
- --------------------------------------------------------------------------------------------------------------------
Shares of Common Stock issuable upon exercise of 500,000 $2.781 $1,390,500 $ 387
500,000 Options at $2.781 per share
- --------------------------------------------------------------------------------------------------------------------
Shares of Common Stock issuable upon exercise of 530,500 $3.08(1) $1,633,940(1) $ 454(1)
512,500 Options
- --------------------------------------------------------------------------------------------------------------------
$3,665,065 $1019
===================================================================================================================
</TABLE>
(1) These amounts are based on the average of the high and low price of Pharmos
Corporation Common Stock on February 7, 2000 as reported on the Nasdaq
Stock Market and are used solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The information containing the information specified in Part I of Form S-8
will be sent or given to participants in the Plans as specified by Rule 428(b)
under the Securities Act of 1933, as amended. Such documents are not being filed
with the Securities and Exchange Commission, but constitute (along with the
documents incorporated by reference into this Registration Statement pursuant to
Item 3 of Part II hereof) a prospectus that meets the requirements of Section
10(a) of the Securities Act.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents heretofore filed with the SEC by Pharmos
Corporation are incorporated in this Registration Statement by reference:
1. The company's most recent Annual Report on Form 10-K for the fiscal
year ended December 31, 1998;
2. The company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999, June 30, 1999, and September 30, 1999, and the
Definitive Proxy Statement on Form 14A filed on August 19, 1999;
3. The description of the company's common stock, contained in the
company's Registration Statement on Form 8-A dated January 30, 1984,
filed pursuant to Section 12 of the Exchange Act.
In addition, all documents filed by the company pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act, after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all such
securities then remaining unsold, shall be deemed to be incorporated in this
Registration Statement by reference and to be a part hereof from the date of
filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of the Registration
Statement.
THE REGISTRANT UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PARTICIPANT,
UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL OF THE
DOCUMENTS OR INFORMATION REFERRED TO ABOVE THAT HAS BEEN OR MAY BE INCORPORATED
BY REFERENCE INTO THIS REGISTRATION STATEMENT (EXCLUDING EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE).
REQUESTS SHOULD BE DIRECTED TO GAD RIESENFELD, PRESIDENT, PHARMOS CORPORATION,
99 WOOD AVENUE SOUTH, SUITE 301, ISELIN, NEW JERSEY, TELEPHONE: (732) 452-9556.
II-1
<PAGE>
Item 4. Description of Securities.
The company's common stock is registered under Section 12 of the Exchange
Act.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
Article 12 of the Company's Articles of Incorporation, as amended, directs
the Company to provide in its bylaws for provisions relating to the
indemnification of directors and officers to the full extent permitted by law.
Section 78.751 of the Nevada Revised Statutes, as amended, authorizes the
Company to indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Company if it is determined that such person
acted in accordance with the applicable standard of conduct set forth in such
statutory provisions.
The Company may also purchase and maintain insurance for the benefit of any
director or officer which may cover claims for which the Company could not
indemnify such person.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
4.1 Specimen of Common Stock Certificate (incorporated by reference to
exhibit 4(a) of the Pharmos Registration Statement on Form S-3 dated
November 25, 1994, Registration No. 33-86720).
4.2 Restated Articles of Incorporation (incorporated by reference to
Appendix E to the Joint Proxy Statement/Prospectus included in the
Pharmos Registration Statement on Form S-4 dated September 28, 1992,
Registration No. 33-52398).
4.3 Certificate of Amendment of Restated Articles of Incorporation
(incorporated by reference to exhibit 3(b) of the Pharmos Annual
Report on Form 10-K for the year ended December 31, 1994).
II-2
<PAGE>
4.4 Certificate of Amendment of Restated Articles of Incorporation
(incorporated by reference to exhibit 4(d) of the Pharmos Registration
Statement on Form S-3 dated March 5, 1998, Registration No.
333-47359).
4.4 Amended and Restated By-Laws dated May 27, 1997 (incorporated by
reference to exhibit 4.4 of the Pharmos Registration Statement on Form
S-8 dated October 21, 1997, Registration No. 333-38373).
4.5 1997 Incentive and Non-Qualified Stock Option Plan.
5 Opinion of Ehrenreich Eilenberg & Krause LLP as to the legality of the
shares of common stock being offered under the Plan.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Ehrenreich Eilenberg & Krause LLP (included in their
opinion filed as Exhibit 5).
24 Power of Attorney (included on the signature page of this Registration
Statement).
Item 9. Undertakings.
1. The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually, or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by this
paragraph is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
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<PAGE>
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The Company hereby undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
and each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial on a fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defence of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed on the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Iselin, State of New Jersey, on this eighth day of
February, 2000.
PHARMOS CORPORATION
By: /s/ HAIM AVIV
--------------------------------------------
Dr. Haim Aviv, Chairman, Chief Scientist,
Chief Executive Officer
(Principal Executive Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Dr. Haim Aviv and Robert Cook as his true and lawful attorney-in-fact
and agent, with full power of substitution and revocation, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement of Form S-8 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto each such attorney-in-fact and agent full power and
authority to do an perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming each act that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 8, 2000.
Signature Title
- --------- -----
/s/ MARVIN P. LOEB Director
- ------------------------------------
Marvin P. Loeb
Director
- ------------------------------------
E. Andrews Grinstead III
/s/ STEPHEN C. KNIGHT Director
- ------------------------------------
Stephen C. Knight
<PAGE>
/s/ DAVID SCHLACHET Director
- ------------------------------------
David Schlachet
/s/ ANTHONY MARCEL Director
- ------------------------------------
Anthony Marcel
/s/ MONY BEN-DOR Director
- ------------------------------------
Mony Ben-Dor
/s/ ELKAN GAMZU Director
- ------------------------------------
Elkan Gamzu
/s/ ROBERT COOK Chief Financial Officer (Principal
- ------------------------------------ Financial Officer and Principal
Robert Cook Accounting Officer)
EXHIBIT 4.5
PHARMOS CORPORATION
a Nevada corporation
1997 Incentive and Non-Qualified Stock Option Plan
1. Purpose. The purposes of this 1997 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 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.
<PAGE>
(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 1997 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.
(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 0 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.
3
<PAGE>
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 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 0 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 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 Incentive Stock
Options may be granted only to Employees. In selecting the individuals to whom
Options shall be granted,
4
<PAGE>
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 0 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) Each 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(b), 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.
(c) 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 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 October 31, 2007. 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.
4
<PAGE>
(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.
(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 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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<PAGE>
(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted
under this Plan 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, 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 0 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 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
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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.
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.
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(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 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
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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 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 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
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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.
(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.
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.
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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 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.
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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 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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Pharmos Corporation
October 21, 1997
Page 2
EXHIBIT 5
[Ehrenreich Eilenberg & Krause LLP letterhead]
February 8, 2000
Pharmos Corporation
99 Wood Avenue South
Suite 301
Iselin, New Jersey 08830
Re: Pharmos Corporation
Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Pharmos Corporation, a Nevada corporation (the
"Company") in connection with the preparation and filing of a Form S-8
Registration Statement (the "Registration Statement") relating to 1,500,000
shares of the Company's common stock, $.03 par value per share (the "Shares"),
issuable upon the exercise of options granted under the 1997 Incentive and
Non-Qualified Stock Option Plan (the "Plan").
We have examined such corporate records, documents, instruments and
certificates of the Company and have received such representations from the
officers and directors of the Company and have reviewed such questions of law as
we have deemed necessary, relevant or appropriate to enable us to render the
opinion expressed herein. In such examination, we have assumed the genuineness
of all signatures and authenticity of all documents, instruments, records and
certificates submitted to us as originals.
On the basis of the foregoing, we are of the opinion that the Shares, when
issued in accordance with the terms and conditions of the Plan, will be legally
issued, fully paid and nonassessable.
The opinion expressed herein is limited to the corporate laws of the State
of Nevada and we express no opinion as to the effect on the matters covered by
any other jurisdiction.
This firm consents to the filing of this opinion as an exhibit to the
Registration Statement and to all references to the firm in the Registration
Statement.
Very truly yours,
EHRENREICH EILENBERG & KRAUSE LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 1, 1999 relating to the
financial statements, which appears in Pharmos Corporations Annual Report on
Form 10-K for the year ended December 31, 1998.
PricewaterhouseCoopers LLP
New York, New York
February 7, 2000
