UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
Registration Statement under the Securities Act of 1933
MOLECULAR BIOSYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
36-3078632
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
10030 Barnes Canyon Road
San Diego, California 92121
(Address of principal executive offices)
Molecular Biosystems, Inc.
1998 Stock Option Plan
(Full title of the plan)
Bobba Venkatadri
President and Chief Executive Officer
Molecular Biosystems, Inc.
10030 Barnes Canyon Road
San Diego, California 92121
(858) 812-7001
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------- ---------------------- ----------------------
Title of Securities Amount To Be Proposed Maximum
To Be Registered Registered Offering Price
Per Share(1)
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- -------------------------- ---------------------- ------------------------
Common Stock, par 2,000,000 shares $1.59
value $.01 per share
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- -------------------------- ----------------------
Proposed Maximum Amount of
Aggregate Offering Registration
Price(1) Fee(1)
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- -------------------------- ----------------------
$3,180,000.00 $963.64
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(1) Computed pursuant to Rule 457(c), in accordance with Rule 457(h)(1), on the
basis of the average of the high and low sales prices of a share of the
Registrant's Common Stock reported on the New York Stock Exchange, Inc. on
September 30, 1999.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information
The information required by Item 1 is omitted from this Registration
Statement in accordance with the Note to Part I of Form S-8.
Item 2. Registrant Information and Employee Plan Annual Information
The information required by Item 2 is omitted from this Registration
Statement in accordance with the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The Registrant incorporates by reference in this Registration Statement
the following documents which the Registrant has filed with the Securities and
Exchange Commission (the "Commission"):
(a) the Annual Report on Form 10-K which the Registrant filed for the
fiscal year ended March 31, 1999;
(b) the Annual Report on Form 10K/A, dated March 31, 1999 and filed
on July 29, 1999;
(c) the Quarterly Report on Form 10-Q which the Registrant filed for
the quarterly period ended June 30, 1999;
(d) the Current Report on Form 8-K, dated May 3, 1999, and filed on May
13, 1999;
(e) the description of the Registrant's Common Stock, par value $.01
per share, contained in the Registration Statement on Form 8-A which
the Registrant filed on July 9, 1984 (Registration No. 2-83721),
together with any amendment or report that the Registrant may file for
the purpose of updating this description.
All documents that the Registrant files with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the filing of this Registration Statement but prior to the filing
of a post-effective amendment (1) which indicates that all of the shares of the
Registrant's Common Stock covered by this Registration Statement (the "Shares")
have been sold or (2) which deregisters all of the Shares then remaining unsold,
shall be deemed to be incorporated by reference in and to be part of this
Registration Statement from their respective dates of filing.
Any statement in a document incorporated or deemed to be incorporated
by reference in this Registration Statement shall be deemed to be modified or
superseded to the extent that a statement in this Registration Statement, or in
any document filed after the filing of this Registration Statement which is
deemed to be incorporated by reference in this Registration Statement, modifies
or supersedes the earlier statement. The earlier statement shall be deemed to be
incorporated in this Registration Statement only as so modified or superseded.
Item 4. Description of Securities
This item is not applicable.
Item 5. Interests of Named Experts and Counsel
The legality of the Shares is being passed upon for the Registrant by
Johnson and Colmar, 300 South Wacker Drive, Suite 1000, Chicago, Illinois 60606,
who serve as the Registrant's outside general counsel.
Craig P. Colmar, who is a partner of Johnson and Colmar, is also the
Company's Assistant Secretary. Mr. Colmar owns of record and beneficially 1,000
shares of Common Stock, and other partners of Johnson and Colmar own of record
and beneficially a further 1,000 shares. In addition, Mr. Colmar holds options
to purchase 57,250 shares of the Registrant's Common Stock. These stock options
were granted at option prices equal to the fair market value of the Registrant's
Common Stock on the dates of grant.
Item 6. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides generally
that a person sued as a director, officer, employee or agent of a corporation
may be indemnified by the corporation in non-derivative suits for expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement if
he or she acted in good faith and in a manner that he or she reasonably believed
to be in, or not opposed to, the corporation's best interests. In the case of
criminal actions and proceedings, the person must also not have had reasonable
cause to believe that his or her conduct was unlawful. Indemnification of
expenses is also authorized in stockholder derivative actions if the person
acted in good faith and in a manner that he or she reasonably believed to be in,
or not opposed to, the corporation's best interests and if he or she has not
been found liable to the corporation. Even in this latter instance, the court
may determine that in view of all of the circumstances the person is entitled to
indemnification for such expenses as the court deems proper. A person sued as a
director, officer, employee or agent of a corporation who has been successful in
defense of the action must be indemnified by the corporation against his or her
expenses.
Article 11 of the Registrant's certificate of incorporation, as
amended, requires the Registrant to indemnify its directors, officers, employees
and agents to the maximum extent permitted by Delaware law. Article 11 also
requires the Registrant to advance the litigation expenses of a director or
officer upon receipt of his or her written undertaking to repay all amounts
advanced if it is ultimately determined that he or she is not entitled to
indemnification.
Section 102(b)(7) of the Delaware General Corporation Law permits a
Delaware corporation to include a provision in its certificate of incorporation
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of the director's duty of
care. Such a provision may not eliminate or limit the liability of a director
for breaching his or her duty of loyalty, failing to act in good faith, engaging
in intentional misconduct or knowingly violating a law, declaring an illegal
dividend or approving an illegal stock repurchase, or obtaining an improper
personal benefit.
Article 10 of the Registrant's certificate of incorporation, as
amended, eliminates the personal liability of the Registrant's directors to the
fullest extent permitted by Delaware law.
Through directors' and officers' liability insurance which the
Registrant maintains, the Registrant's directors and officers are also insured
against actual liabilities, including liabilities under the federal securities
laws, for acts or omissions related to the conduct of their duties.
Item 7. Exemption from Registration Claimed
This item is not applicable.
Item 8. Exhibits
4.1 Molecular Biosystems, Inc. 1998 Stock Option Plan
5.1 Opinion of Johnson and Colmar
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Johnson and Colmar (filed as part of Exhibit 5.1)
24.1 Power of attorney (included under the caption "Power of Attorney
" on page 7).
Item 9. Undertakings
Rule 415 Offering
The Registrant undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities
Act");
(b) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement
(or the most recent post-effective amendment) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement; and
(c) to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that undertakings (1)(a) and (1)(b) shall not apply
if the information required to be included in a post-effective
amendment by those undertakings is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") which are incorporated by reference in
this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, 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; and
(3) 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; and
Filings Incorporating Subsequent Exchange Act Documents by Reference
The Registrant undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act which is
incorporated by reference in this 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 bona
fide offering thereof.
Commission Position on Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law or the Registrant's
certificate of incorporation, as amended, as described in Item 6, or otherwise
permitted, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Shares, the
Registrant 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 in the Securities Act and will be governed by the final adjudication
of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that 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 San Diego, State of California, on October 5,
1999.
Molecular Biosystems, Inc.
By: /s/ ELIZABETH L. HOUGEN
Elizabeth L. Hougen
Executive Director of Finance and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE>
Power of Attorney
Each person whose signature appears below who is then an officer or
director of the Registrant authorizes Bobba Venkatadri and Elizabeth L. Hougen,
or either of them, with full power of substitution and resubstitution, to sign
in his name and to file any amendments (including post-effective amendments to
this Registration Statement) and all related documents necessary or advisable to
enable the Registrant to comply with the Securities Act of 1933, as amended, in
connection with the registration of the securities which are covered by this
Registration Statement, which amendments may make such changes in this
Registration Statement (as it may be so amended) as Bobba Venkatadri or
Elizabeth L. Hougen, or either of them, may deem appropriate, and to do and
perform all other related acts and things necessary to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
NAME TITLE DATE
/s/BOBBA VENKATARDI President, Chief Executive Officer October 5, 1999
Bobba Venkatardi and a Director (Principal
Executive Officer)
/s/ELIZABETH L. HOUGEN Executive Director of Finance and October 5, 1999
Elizabeth L. Hougen Chief Financial Officer(Principal
Financial and Accounting Officer)
/s/DAVID W. BARRY M.D. Director October 5, 1999
David W. Barry M.D.
/s/ROBERT W. BRIGHTFELT Director October 5, 1999
Robert W. Brightfelt
/s/CHARLES C. EDWARDS M.D. Director October 5, 1999
Charles C. Edwards M.D.
/s/JERRY T. JACKSON Director October 5, 1999
Jerry T. Jackson
/s/GORDON C. LUCE Director October 5, 1999
Gordon C. Luce
/s/DAVID RUBINFIEN Director October 5, 1999
David Rubinfien
Index to Exhibits
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Exhibit Number Description
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4.1 Molecular Biosystems, Inc. 1998 Stock Option Plan
5.1 Opinion of Johnson and Colmar
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Johnson and Colmar (filed as part of Exhibit 5.1)
24.1 Power of Attorney (included under the caption "Power of
Attorney" on page 7).
Exhibit 4.1
MOLECULAR BIOSYSTEMS, INC.
1998 STOCK OPTION PLAN
(As Amended and Restated through
September 22, 1998)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Option Plan is intended to promote the
interests of Molecular Biosystems, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity
programs:
(i) the Discretionary Option Grant
Program under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program
under which eligible employees may elect to have a portion of their base salary
invested each year in special options,
(iii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary), and
(iv) the Automatic Option Grant Program under
which eligible non-employee
Board members shall automatically receive options at periodic intervals to
purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The following provisions shall govern the
administration of the Plan:
(i) The Board shall have the authority
to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders but
may delegate such authority in whole or in part to the Primary Committee.
(ii) Administration of the Discretionary
Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons.
(iii) The Primary Committee shall have the sole
and exclusive authority to
determine which Section 16 Insiders and other highly compensated Employees shall
be eligible for participation in the Salary Investment Option Grant Program for
one or more calendar years. However, all option grants under the Salary
Investment Option Grant Program shall be made in accordance with the express
terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
(iv) Administration of the Automatic
Option Grant Program shall be self-executing in accordance with the terms of
that program.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it
may deem appropriate for proper administration of the Plan, to make all
factual determinations, to construe and interpret the provisions of the Plan
and the awards thereunder and to resolve
any and all ambiguities thereunder;
(ii) to determine, with respect to
awards made under the Discretionary Option Grant and Stock Issuance Programs,
which eligible persons are to receive such awards, the time or times when such
awards are to be made, the number of shares to be covered by each such
award, the vesting schedule (if any)
applicable to the award, the status of a granted option as either an Incentive
Option or a Non-Statutory Option and the maximum term for which the option is to
remain outstanding;
(iii) to amend, modify or cancel any
outstanding award with the consent of the holder or accelerate the vesting of
such award; and
(iv) to take such other discretionary
actions as permitted pursuant to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
D. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board
or the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Only non-employee Board members shall be eligible to
participate in the Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
the number of shares authorized under the Predecessor Plans being subsumed under
this Plan plus Two Million (2,000,000) shares newly authorized by the Board
subject to stockholder approval. There are approximately Four Hundred Eighty
Eight Thousand (488,000) shares which are authorized but not yet subject to any
outstanding option under the Predecessor Plans. There are approximately Three
Million One Hundred Thousand (3,100,000) shares authorized under the Predecessor
Plans which are subject to currently outstanding option grants.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than Six Hundred and Fifty Thousand (650,000) shares of
Common Stock in the aggregate per calendar year, beginning with the 1998
calendar year.
C. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans) shall
be available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance. Shares of Common Stock
underlying one or more stock appreciation rights exercised under the Plan shall
not be available for subsequent issuance.
D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities by which the share
reserve is to increase each calendar year pursuant to the automatic share
increase provisions of the Plan, (iii) the number and/or class of securities for
which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iv) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
and (v) the number and/or class of securities and price per share in effect
under each outstanding option incorporated into this Plan from the Predecessor
Plans. Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed
by the Plan Administrator at the time of the option grant, but in no event
shall the exercise price per share be less than one eighty-five percent (85%)
of the fair market value of the common stock on the date of grant.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section II of Article Six and the
documents evidencing the option, be payable in cash or check made payable to the
Corporation. Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the exercise price may also be
paid as follows:
(i) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise
Date, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-approved brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Cessation of Service.
1. The following provisions shall govern the exercise of any options outstanding
at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for Misconduct
or should the Optionee engage in Misconduct while his or her options
are outstanding, then all such options shall terminate immediately and
cease to be outstanding.
2. The Plan Administrator shall have complete discretion, exercisable either at
the time an option is granted or at any time while the option remains
outstanding:
(i) to extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service to
such period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term, and/or
(ii) to permit the option to be exercised, during the applicable
post-Service exercise period, for one or more additional installments
in which the Optionee would have vested had the Optionee continued in
Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. Non-Statutory Options
shall be subject to the same restrictions, except that a Non-Statutory Option
may, to the extent permitted by the Plan Administrator, be assigned in whole or
in part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for Optionee and/or one
or more such family members. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be
less than eighty five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control
but not otherwise fully-vested shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Change in
Control, assumed or otherwise continued in full force and effect by the
successor corporation (or parent thereof) pursuant to the terms of the Change in
Control, (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same vesting schedule applicable to those option shares or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in
Control, all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise expressly continued in full force and effect pursuant to the terms of
the Change in Control.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control. Appropriate
adjustments to reflect such Change in Control shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same, (ii)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year.
E. The Plan Administrator may at any time provide that one or
more options will automatically accelerate in connection with a Change in
Control, whether or not those options are assumed or otherwise continued in full
force and effect pursuant to the terms of the Change in Control. Any such option
shall accordingly become exercisable, immediately prior to the effective date of
such Change in Control, for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. In addition, the Plan Administrator may at
any time provide that one or more of the Corporation's repurchase rights shall
not be assignable in connection with such Change in Control and shall terminate
upon the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one or
more options will automatically accelerate upon an Involuntary Termination of
the Optionee's Service within a designated period (not to exceed twenty-four
(24) months) following the effective date of any Change in Control in which
those options do not otherwise accelerate. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may at any time provide that one or more of the
Corporation's repurchase rights shall immediately terminate upon such
Involuntary Termination.
G. The Plan Administrator may at any time provide that one or
more options will automatically accelerate in connection with a Hostile
Take-Over. Any such option shall become exercisable, immediately prior to the
effective date of such Hostile Take-Over, for all of the shares of Common Stock
at the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall terminate automatically upon the consummation of such
Hostile Take-Over. Alternatively, the Plan Administrator may condition such
automatic acceleration and termination upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed twenty-four (24)
months) following the effective date of such Hostile Take-Over. Each option so
accelerated shall remain exercisable for fully-vested shares until the
expiration or sooner termination of the option term.
H. The portion of any Incentive Option accelerated in
connection with a Change in Control or Hostile Take Over shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it
may determine, grant to selected Optionees stock appreciation rights which will
allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which the
option is surrendered over (b) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
<PAGE>
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
<PAGE>
The Primary Committee may implement the Salary Investment
Option Grant Program for one or more calendar years beginning after the Plan
Effective Date and select the Section 16 Insiders and other highly compensated
Employees eligible to participate in the Salary Investment Option Grant Program
for each such calendar year. Each selected individual who elects to participate
in the Salary Investment Option Grant Program must, prior to the start of each
calendar year of participation, file with the Plan Administrator (or its
designate) an irrevocable authorization directing the Corporation to reduce his
or her base salary for that calendar year by an amount not less than Ten
Thousand Dollars ($10,000.00) nor more than One Hundred Thousand Dollars
($100,000.00). The Primary Committee shall have complete discretion to determine
whether to approve the filed authorization in whole or in part. To the extent
the Primary Committee approves the authorization, the individual who filed that
authorization shall be granted an option under the Salary Investment Grant
Program on the first trading day in January for the calendar year for which the
salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be Thirty-three Percent (33%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the alternative forms authorized under
the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A / (B x 67%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in
the Optionee's base salary for the calendar year, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. Cessation of Service. Each option outstanding at the time
of the Optionee's cessation of Service shall remain exercisable, for any or all
of the shares for which the option is exercisable at the time of such cessation
of Service, until the earlier of (i) the expiration of the option term or (ii)
the expiration of the three (3)-year period following the Optionee's cessation
of Service. To the extent the option is held by the Optionee at the time of his
or her death, the option may be exercised by his or her Beneficiary. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that time exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over
while the Optionee remains in Service, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Change in Control or Hostile Take-Over, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding options. The Optionee shall in return be entitled
to a cash distribution from the Corporation in an amount equal to the excess of
(i) the Option Surrender Value of the shares of Common Stock at the time subject
to each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
<PAGE>
Up to Ten percent (10%) of the shares of Common Stock
available under the Plan may be issued under the Stock Issuance Program without
any intervening options. Shares of Common Stock may also be issued under the
Stock Issuance Program pursuant to share right awards which entitle the
recipients to receive those shares upon the attainment of designated performance
goals or Service requirements. Each such award shall be evidenced by one or more
documents which comply with the terms specified below.
A. Purchase Price.
1. The purchase price per share of Common Stock subject to direct issuance shall
be fixed by the Plan Administrator, but in no event shall the price per share be
less than one hundred percent (100%) of the fair market value of the common
stock on the date of issuance.
2. Subject to the provisions of Section II of Article Six, shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate
in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting/Issuance Provisions.
1. The Plan Administrator may issue shares of Common Stock which are fully and
immediately vested upon issuance or which are to vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. Alternatively, the Plan Administrator may
issue share right awards which shall entitle the recipient to receive a
specified number of vested shares of Common Stock upon the attainment of one or
more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to his or her unvested shares of Common Stock
by reason of any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares of Common Stock and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to the issued
shares of Common Stock, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock, or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the Corporation shall
repay to the Participant the cash consideration paid for the surrendered shares
and shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5.The Plan Administrator may waive the surrender and cancellation of one or more
unvested shares of Common Stock (or other assets attributable thereto) which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6.Outstanding share right awards shall automatically terminate, and no shares of
Common Stock shall actually be issued in satisfaction of those awards, if the
performance goals or Service requirements established for such awards are not
attained. The Plan Administrator, however, shall have the authority to issue
shares of Common Stock in satisfaction of one or more outstanding share right
awards as to which the designated performance goals or Service requirements are
not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights
shall terminate automatically, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Change in Control, except to the extent (i) those repurchase rights are assigned
to the successor corporation (or parent thereof) or otherwise continue in full
force and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator may at any time provide for the
automatic termination of one or more of those outstanding repurchase rights and
the immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed twenty-four (24) months) following the effective date of any Change in
Control or Hostile Take-Over in which those repurchase rights are assigned to
the successor corporation (or parent thereof) or otherwise continue in full
force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
<PAGE>
I. OPTION TERMS
A. Grant Dates. Options shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee Board
member at any time after the Plan Effective Date shall automatically be granted,
on the date of such initial election or appointment, a Non-Statutory Option to
purchase Fifteen Thousand (15,000) shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary and is not a 5% Stockholder or Affiliate (the "Commencement
Grant").
2. On the date of each Annual Stockholders Meeting held after the Plan Effective
Date, each individual who is to continue to serve as a non-employee Board
member, whether or not that individual is standing for re-election to the Board,
shall automatically be granted a Non-Statutory Option to purchase Six Thousand
Five Hundred (6,500) shares of Common Stock, provided such individual has served
as a non-employee Board member for at least six (6) months and is not a 5%
Stockholder or Affiliate (the "Annual Grant"), and provided that such individual
has not received an automatic option grant under the Plan or the Predecessor
Plans within the immediately preceding six month period.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
C. Option Term. Each option shall have a term of ten
(10) years measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each Commencement Grant and each
Annual Grant shall vest, and the Corporation's repurchase right shall lapse, at
the time of the next Annual Stockholders Meeting.
E. Cessation of Board Service. The following provisions shall
govern the exercise of any options outstanding at the time of the Optionee's
cessation of Board service:
(i) Any option outstanding at the time of the Optionee's
cessation of Board service for any reason shall remain exercisable for
a twelve (12)-month period following the date of such cessation of
Board service, but in no event shall such option be exercisable after
the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) Following the Optionee's cessation of Board service, the
option may not be exercised in the aggregate for more than the number
of shares in which the Optionee was vested on the date of such
cessation of Board service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding for any and all shares in which
the Optionee is not otherwise at that time vested.
(iv) However, should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or any portion of
those shares as fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over,
the shares of Common Stock at the time subject to each outstanding option but
not otherwise vested shall automatically vest in full so that each such option
may, immediately prior to the effective date of such Change in Control the
Hostile Take-Over, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option accelerated in connection
with a Change in Control shall terminate upon the Change in Control, except to
the extent assumed by the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the terms of the Change in
Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control or Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding options. The Optionee shall in return be entitled
to a cash distribution from the Corporation in an amount equal to the excess of
(i) the Option Surrender Value of the shares of Common Stock at the time subject
to each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise
price payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
<PAGE>
ARTICLE SIX
MISCELLANEOUS
<PAGE>
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan with the right to use shares of Common Stock in satisfaction of all or
part of the Taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. However, the Salary Investment Option Grant Program shall not be
implemented until such time as the Primary Committee or the Board may deem
appropriate. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date.
B. The Plan shall serve as the successor to the Predecessor
Plans, and no further options or direct stock issuances shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plans on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Changes in Control, may, in the Plan Administrator's discretion, be extended
to one or more options incorporated from the Predecessor Plans which do not
otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with a
Change in Control. Upon such plan termination, all outstanding options and
unvested stock issuances shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
<PAGE>
33
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Beneficiary shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
descent and distribution.
C. Board shall mean the Corporation's Board of Directors.
D. Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved
by the Corporation's stockholders, unless securities representing more
than fifty percent (50%) of the total combined voting power of the
voting securities of the successor corporation are immediately
thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially
owned the Corporation's outstanding voting securities immediately prior
to such transaction,
(ii) any stockholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board recommends such stockholders accept.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
F. Common Stock shall mean the Corporation's common stock.
G. Corporation shall mean Molecular Biosystems, Inc., a Delaware
corporation, and its successors.
H. Discretionary Option Grant Program shall mean the discretionary
option grant program in effect under the Plan.
I. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
L. 5% Stockholder or Affiliate shall mean a non-employee Board member
who, directly or indirectly, owns stock (as determined under Code Section
424(d)) possessing equal to or more than five percent (5%) of the total combined
voting power of the outstanding securities of the Corporation (or any Parent or
Subsidiary) or is affiliated with or is a representative of such a five percent
or greater stockholder.
M. Hostile Take-Over shall mean:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation or Parent or
Subsidiary employing the individual which materially reduces his or her
duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any
performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
the individual's consent.
P. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
R. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. Option Surrender Value shall mean the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation or, in the
event of a Hostile Take-Over, effected through a tender offer, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over, if greater. However, if the surrendered option is an
Incentive Option, the Option Surrender Value shall not exceed the Fair Market
Value per share.
T. Optionee shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant or Automatic
Option Grant Program.
U. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
W. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
X. Plan shall mean the Corporation's 1998 Stock Option Plan, as
set forth in this document.
Y. Plan Administrator shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant, Salary Investment Option Grant and
Stock Issuance Programs with respect to one or more classes of eligible persons,
to the extent such entity is carrying out its administrative functions under
those programs with respect to the persons under its jurisdiction. However, the
Primary Committee shall have the plenary authority to make all factual
determinations and to construe and interpret any and all ambiguities under the
Plan to the extent such authority is not otherwise expressly delegated to any
other Plan Administrator.
Z. Plan Effective Date shall mean the date on which the Plan is
approved by the shareholders of the Corporation.
AA. Predecessor Plans shall mean the Corporation's pre-existing 1993
Stock Option Plan and 1997 Outside Directors' Stock Option Plan, in each case as
in effect immediately prior to the Plan Effective Date hereunder.
BB. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
CC. Salary Investment Option Grant Program shall mean the salary
investment grant program in effect under the Plan.
DD. Secondary Committee shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
EE. Section 16 Insider shall mean an officer or director
of the Corporation subject to the short-swing profit liabilities of Section
16 of the 1934 Act.
FF. Service shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
GG. Stock Exchange shall mean either the American Stock Exchange
or the New York Stock Exchange.
HH. Stock Issuance Program shall mean the stock issuance program
in effect under the Plan.
II. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
JJ. Taxes shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
KK. 10% Stockholder shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).
Exhibit 5.1
September 27, 1999
Board of Directors
Molecular Biosystems, Inc.
10030 Barnes Canyon Road
San Diego, California 92121
Re: Registration Statement on Form S-8 -
1998 Directors Stock Option Plan
Gentlemen:
We have acted as counsel to Molecular Biosystems, Inc. (the "Company")
in connection with the preparation and filing with the Securities and Exchange
Commission of a Registration Statement on Form S-8 (the "Registration
Statement") for the registration under the Securities Act of 1933, as amended,
of 2,000,000 shares of the Company's Common Stock, par value $.01 per share (the
"Shares"), to be issued upon the exercise of options granted or to be granted
under the Discretionary Option Grant Program, Salary Investment Option Grant
Program and Automatic Option Grant Program under the Molecular Biosystems, Inc.
1998 Stock Option Plan (the "Plan"), or to be issued pursuant to the Stock
Issuance Program under the Plan.
As such counsel, we have examined the Plan, the Registration Statement,
the Company's certificate of incorporation and by-laws, each as amended to date,
minutes of meetings and records of proceedings of the Company's Board of
Directors and stockholders, and such other matters of fact and questions of law
as we have considered necessary to form the basis of our opinion. In the course
of this examination, we have assumed the genuineness of all signatures, the
authenticity of all documents and certificates submitted to us as originals by
representatives of the Company, public officials and third parties, and the
conformity to and authenticity of the originals of all documents and
certificates submitted to us as copies.
<PAGE>
Board of Directors
September 27, 1999
Page Two
On the basis of our examination, we are of the opinion that (i) the Company
has duly authorized and reserved the Shares for issuance upon the exercise of
options granted or to be granted or under the Discretionary Option Grant
Program, Salary Investment Option Grant Program and Automatic Option Grant
Program under the Plan, or pursuant to the Stock Issuance Program under the Plan
and that (ii) when issued upon the exercise and in accordance with the terms of
options granted or to be granted under the Discretionary Option Grant Program,
Salary Investment Option Grant Program or Automatic Option Grant Program under
the Plan (including, but not limited to, the terms of payment of the option
price), or pursuant to the Stock Issuance Program under the Plan, the Shares
will be validly issued, fully paid and nonassessable.
We consent to the use of our opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ JOHNSON AND COLMAR
Johnson and Colmar
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated April 30, 1999
included in Molecular Biosystems, Inc.'s Form 10-K for the year ended March 31,
1999 and to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
San Diego, California
September 27, 1999
