FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ________ to ___________
Commission file number: 0-11749
Scios Inc.
(Exact name of Registrant as specified in its charter)
Delaware 95-3701481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Scios Inc.
2450 Bayshore Parkway
Mountain View, CA 94043
(Address of principal executive offices) (Zip code)
(650) 966-1550
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock, $001 par value 36,762,162
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
2
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $14,631 $1,587
Marketable securities 16,914 6,888
Accounts receivable 6,010 4,808
Prepaid expenses 438 786
------------- -----------
Total current assets 37,993 14,069
Marketable securities, non-current 40,345 53,695
Investment in affiliate 10,752 6,939
Property and equipment, net 36,054 36,839
Other assets 2,259 2,419
------------- -----------
TOTAL ASSETS $127,403 $113,961
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $3,000 $3,000
Accounts payable 1,683 2,507
Other accrued liabilities 7,411 10,011
Deferred contract revenue 11,786 3,666
Current portion of long-term debt and capital leases 685 723
------------- -----------
Total current liabilities 24,565 19,907
Long-term debt and capital leases 30,714 349
Minority interests -- 77
------------- -----------
Total liabilities 55,279 20,333
------------- -----------
Stockholders' equity:
Preferred stock; $.001 par value; 20,000,000 shares authorized; issued and
outstanding:
10,132 and 12,632, respectively (liquidation -- --
preference of $9,625 and $12,000, respectively)
Common stock; $.001 par value; 150,000,000 shares authorized; issued and
outstanding:
36,762,162 and 36,506,297, respectively 37 37
Additional paid-in capital 409,441 404,456
Treasury stock (4,758) (2,991)
Notes receivable from stockholders (13) (13)
Unrealized gains (losses) on securities 16 (70)
Accumulated deficit (332,599) (307,791)
------------- -----------
Total stockholders' equity 72,124 93,628
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $127,403 $113,961
------------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
--------------- -------------- --------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product sales $7,537 $8,445 $13,696 $17,088
Co-promotion commissions 1,423 1,243 3,119 2,286
Research & development contracts 1,922 2,104 2,396 3,902
--------------- -------------- --------------- --------------
10,882 11,792 19,211 23,276
--------------- -------------- --------------- --------------
Costs and expenses:
Cost of goods sold 4,369 5,130 8,223 10,303
Research and development 13,059 9,119 23,939 17,785
Marketing, general and administration 5,022 4,471 10,348 8,890
Profit distribution to third parties 896 922 1,463 1,917
--------------- -------------- --------------- --------------
23,346 19,642 43,973 38,895
--------------- -------------- --------------- --------------
Loss from operations (12,464) (7,850) (24,762) (15,619)
Other income:
Investment income 1,136 966 1,927 2,069
Interest expense (750) (148) (884) (307)
Realized losses on securities (74) (181) (179) (100)
Other income, net 1 243 149 299
--------------- -------------- --------------- --------------
313 880 1,013 1,961
Equity in net loss of affiliates (525) (646) (1,136) (1,375)
Minority interests -- -- 77 --
--------------- -------------- --------------- --------------
Net loss ($12,676) ($7,616) ($24,808) ($15,033)
--------------- -------------- --------------- --------------
Net loss per common share ($0.35) ($0.21) ($0.69) ($0.42)
--------------- ---------------------------------- --------------
Weighted average number of
common shares outstanding 35,826,469 35,834,351 35,829,065 35,862,428
--------------- -------------- --------------- --------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($24,808) ($15,033)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 2,738 2,301
Deferred contract revenue 8,120 (1,859)
Equity in net loss of affiliates 1,136 1,375
Minority interests (77) --
Change in assets and liabilities:
Accounts receivable (1,202) (299)
Accounts payable (824) (2,585)
Other accrued liabilities (2,600) (673)
Other 508 462
------------ -----------
Net cash used by operating activities (17,009) (16,311)
------------ -----------
Cash flows from investing activities:
Payments for property and equipment, net (1,953) (2,070)
Sales/maturities of marketable securities 101,525 97,306
Purchases of marketable securities (98,115) (76,544)
------------ -----------
Net cash provided by investing activities 1,457 18,692
------------ -----------
Cash flows from financing activities:
Purchase of treasury stock (1,767) (1,455)
Issuance of notes payable 30,638 --
Other (275) 51
------------ -----------
Net cash provided (used) by financing activities 28,596 (1,404)
------------ -----------
Net increase in cash and cash equivalents 13,044 977
Cash and cash equivalents at beginning of period 1,587 2,847
------------ -----------
Cash and cash equivalents at end of period $ 14,631 $ 3,824
------------ -----------
Supplemental cash flow data:
Cash paid during the period for interest ($246) ($307)
Supplemental disclosure of non-cash investing
and financing:
Change in net unrealized losses on securities (86) (821)
Investment in affiliate $ 4,948 $ 4,708
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Accounting Policies
The unaudited consolidated financial statements of Scios Inc.
("Scios" or the "Company") reflect, in the opinion of management, all
adjustments, consisting only of normal and recurring adjustments,
necessary to present fairly the Company's financial position at June
30, 1997 and the Company's results of operations for the three and
six-month periods ended June 30, 1997 and 1996. Interim-period results
are not necessarily indicative of results of operations or cash flows
for a full-year period.
These financial statements and the notes thereto should be
read in conjunction with the Company's annual report on Form 10-K for
the year ended December 31, 1996. Investors are encouraged to review
the Form 10-K for a broader discussion of the Company's business and
the opportunities and risks inherent in the Company's business. Copies
of the 10-K are available from the Company on request.
The year-end balance sheet data were derived from audited
financial statements, but do not include all disclosures required by
generally accepted accounting principles.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share", which specifies the computation,
presentation and disclosure requirements for earnings per share. SFAS
128 supersedes Accounting Principles Board Opinion No. 15 and is
effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 requires restatement of all prior-period
earnings per share data presented after the effective date. FAS 128
will not have a material impact on the Company's financial position,
results of operations or cashflows.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income". This statement establishes
requirements for disclosure of comprehensive income and becomes
effective for the Company for fiscal years beginning after December 15,
1997, with reclassification of earlier financial statements for
comparative purposes. Comprehensive income generally represents all
changes in stockholders' equity except those resulting from investments
or contributions by stockholders. The Company is evaluating alternative
formats for presenting this information, but does not expect this
pronouncement to materially impact the Company's results of operations.
6
<PAGE>
In June 1997, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information".
This statement establishes standards for disclosure about operating
segments in annual financial statements and selected information in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic area and major
customers. This statement supersedes Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business
Enterprise". The new standard becomes effective for fiscal years
beginning after December 15, 1997, and requires that comparative
information from earlier years be restated to conform to the
requirements of this standard. The Company is evaluating the
requirements of SFAS 131 and the effects, if any, on the Company's
current reporting and disclosures.
2. Litigation
In September 1996, the United States District Court for the
Northern District of California dismissed with prejudice a lawsuit that
had been filed by certain stockholders in May 1995 against the Company
and Richard L. Casey, its chairman and chief executive officer, on
behalf of the individual plaintiffs and other purchasers of the
Company's stock during the period from October 6, 1993 to May 2, 1996.
The action alleged violations of federal securities laws, claiming that
the defendants issued a series of false and misleading statements,
including filings with the Securities and Exchange Commission,
regarding the Company and clinical trials involving AURICULIN(R)
anaritide. The plaintiffs are appealing the District court's ruling in
favor of the Company. The ultimate outcome of this action cannot
presently be determined. Accordingly, no provision for any liability or
loss that may result from adjudication or settlement thereof has been
made in the accompanying consolidated financial statements.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains forward-looking statements about
plans, objectives, future results and intentions of Scios. These forward-looking
statements are based on the current expectations of the Company, and the Company
assumes no obligation to update this information. Realization of these plans and
results involves risks and uncertainties, and the Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below, as well as those discussed in the Company's Form 10-K for the year ended
December 31, 1996.
Operating Results
The net loss for the quarter ended June 30, 1997 was $12.7 million
compared to a net loss of $7.6 million in the corresponding quarter of 1996. For
the six-month periods ended June 30, 1997 and 1996, the net losses were $24.8
million and $15.0 million, respectively. For both the three and six-month
periods, the increase in net losses was primarily due to lower product sales and
higher research and development expenses.
Total revenues for the three months ended June 30, 1997 were $10.9
million, versus $11.8 million for the corresponding period in 1996. Product
sales from psychiatric products under license from SmithKline Beecham
Corporation (the "SB Products") declined to $7.5 million from $8.4 million for
the three months ended June 30, 1997 and 1996, respectively. The decline in
sales was the result of competition from new market entrants and generic
alternatives to the SB Products.
For the six months ended June 30, 1997 and 1996, revenues were $19.2
million and $23.3 million, respectively. The year-to-year decrease resulted from
a decline in product sales and research and development contract revenues which
were partially offset by higher revenue from co-promotion commissions. The
increase in co-promotion commissions resulted from sales growth of HALDOL(R)
Decanoate, a product co-promoted with Ortho-McNeil Pharmaceutical, an affiliate
of Johnson and Johnson, and on sales of EFFEXOR(R) (venlafaxine HCl), a product
co-promoted with Wyeth-Ayerst Laboratories, a division of American Home Products
Corporation. Contract revenues for the six-month period decreased $1.5 million
from 1996 to 1997 due to receipt of a one-time licensing payment in 1996 and the
cessation of funding for Alzheimer's research under a contract that ended in
December 1996.
Total costs and expenses for the three months ended June 30, 1997 were
$23.3 million versus $19.6 million for the same period in 1996. Spending for
research and development increased to $13.1 million in 1997 from $9.1 million in
1996 as a result of higher staffing levels and clinical trials costs to support
expanded product development activities. Expenses for marketing, general and
administration increased to $5.0 million in 1997 from $4.5 million in 1996. The
second quarter decline in profit distribution to third parties and cost of goods
from 1996 to 1997 was the result of lower SB Product sales.
8
<PAGE>
Total costs and expenses for the six months ended June 30, 1997 were
$44.0 million versus $38.9 million for the same period in 1996. Spending for
research and development increased to $23.9 million in 1997 from $17.8 million
in 1996 for the reasons noted in the paragraph above. Expenses for marketing,
general and administration increased to $10.4 million in 1997 from $8.9 million
in 1996 because of higher staffing levels. Profit distribution to third parties
and cost of goods decreased from 1996 to 1997 because of lower SB Product sales.
Other income decreased to $0.3 million in the quarter ended June 30,
1997 from $0.8 million in the comparable quarter of 1996. For the six-month
periods ended June 30, 1997 and 1996, other income decreased to $1.0 million
from $2.0 million. The decrease for both three and six-month periods was
principally due to an increase in interest expense associated with a loan from
Genentech, Inc. ("Genentech") at the end of the first quarter of 1997. The
decline in equity in the net loss of affiliates, for both the three and
six-month periods, was the result of the Company's decreasing share of losses of
Guilford Pharmaceuticals Inc. ("Guilford"). The Company's percentage ownership
of Guilford and subsequent share of losses has declined to 7.8% due to
Guilford's most recent share offering completed in April 1997.
The Company expects to announce key results in the second half of 1997
from two Phase III clinical trials in the United States on the use of
NATRECOR(R) BNP for the treatment of acute congestive heart failure. The outcome
of the clinical trials could have a substantial effect on the Company's stock
price - either positive or negative - depending on the nature of the results.
For example, the Company's stock price dropped earlier in the year on the
announcement that the Company was terminating clinical development of
AURICULIN(R) anaritide for the treatment of oliguric acute renal failure.
The ability of the Company to achieve profitability depends principally
on the Company's success in developing and commercializing its own products and
on its ability to complete agreements with third parties that result in
additional revenue. The Company's success in commercializing its own products
will depend on: the demonstrated safety and efficacy of products in development;
the time taken to complete clinical trials and regulatory submissions; the
timing and scope of regulatory approvals, particularly with respect to the
Company's lead products, NATRECOR and FIBLAST(R) trafermin; the Company's
ability to secure a commercial scale cost-effective drug supply; and the level
of market acceptance if products are approved. The Company's ability to raise
additional revenue through third parties will be dependent on: its success in
marketing and selling the SB Products, HALDOL, EFFEXOR and any additional
third-party product rights which it may acquire; the disposition of various
patent proceedings related to the protection of the Company's potential
products; the perceived value of the Company's current product portfolio and
research programs to outside parties; and the success of third parties, such as
Kaken Pharmaceuticals Co., Ltd. in Japan, in developing and commercializing the
Company's products.
9
<PAGE>
Liquidity and Capital Resources
Combined cash, cash equivalents and marketable securities (both current
and non-current) totaled $71.9 million at June 30, 1997, an increase of $9.7
million from December 31, 1996. The increase resulted from a $30 million loan
from Genentech which was partially offset by $17.0 million used to fund
operating activities, $2.0 million for the purchase of property and equipment
and $1.8 million for the acquisition of treasury stock.
The Company has experienced net operating losses since its inception
and expects to continue to incur losses for at least the next two years. The
Company's ability to achieve and sustain profitability, and therefore the rate
of utilization of the Company's current financial resources, will depend upon a
number of factors, particularly the success and timeliness of its product
development, clinical trials, regulatory approval and product introduction
efforts. Other contributing factors will be the Company's success in developing
new revenue sources to support research and development programs and its success
in marketing and promoting the SB Products, HALDOL, EFFEXOR and any other
third-party products that may be licensed by the Company.
The Company's cash, cash equivalents and marketable securities of $71.9
million at June 30, 1997, together with revenues from product sales,
collaborative agreements, interest income, funding from existing or future debt
arrangements and proceeds from the sale of equity holdings in affiliates will be
used to fund continuing research and development programs, current and new
clinical trials, commercialization efforts on behalf of future products and for
other general purposes. The Company believes its cash resources will be
sufficient to meet its operating and capital requirements for at least the next
two years. Key factors which will affect future cash use and the timing of the
Company's need to seek additional financing include the success of the Company's
partnering efforts and the timing and amounts realized from licensing and
partnering activities, the rate of spending required to develop the Company's
products, the Company's ability to respond to changing business conditions and
the net contribution obtained from the Company's marketing efforts for third
parties.
Over the long term, the Company may need to arrange additional
financing for the future operation of its business, including the
commercialization of products currently under development, and it will consider
collaborative arrangements and additional public or private financings,
including additional equity financings. Factors influencing the availability of
additional funding include, but are not limited to, the Company's progress in
product development, investor perception of the Company's prospects and the
general conditions of the financial markets.
10
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 13, 1997.
(a) The following individuals were elected directors of the
Company, each to serve until a successor is elected:
<TABLE>
<CAPTION>
Total Vote For Total Vote Withheld
Name Each Director From Each Director
<S> <C> <C>
Samuel H. Armacost 30,203,034 2,902,100
Richard L. Casey 31,058,627 2,046,507
Myron Du Bain 31,185,728 1,919,406
Robert W. Schrier, M.D. 31,128,815 1,976,319
Solomon H. Snyder, M.D. 30,826,574 2,278,560
Burton E. Sobel, M.D. 31,168,552 1,936,582
Eugene L. Step 30,830,790 2,274,344
</TABLE>
(b) The following matters were approved by stockholder vote, with
votes cast as indicated:
To ratify and approve amendments to the Company's 1992 Equity
Incentive Plan:
Votes for: 25,713,951
Votes against 6,980,986
Abstentions: 410,197
To ratify the selection of Coopers & Lybrand as the Company's
independent auditors for fiscal year 1997:
Votes cast for: 32,612,982
Votes cast against: 283,888
Abstentions: 208,264
Broker non-votes were not relevant to the foregoing matters.
11
<PAGE>
(c) The following matters that were submitted by stockholders of
the Company were defeated by stockholder vote, with votes cast
as indicated:
Stockholder proposal to appoint a special committee to seek a
buyer for the Company:
Votes cast for: 4,986,918
Votes cast against: 16,672,246
Abstentions: 420,113
Broker Non-Votes: 11,025,887
Stockholder proposal to require an independent chairman of the
board:
Votes cast for: 5,700,377
Votes cast against: 15,875,089
Abstentions: 503,811
Broker Non-Votes: 11,025,857
Stockholder proposal to form a shareholder advisory committee:
Votes cast for: 4,986,116
Votes cast against: 16,657,933
Abstentions: 453,198
Broker Non-Votes: 11,025,887
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.11 1992 Equity Incentive Plan
11.1. Computation of Net Loss Per Share for the three months ended
June 30, 1997 and June 30, 1996.
11.2. Computation of Net Loss Per Share for the six months ended
June 30, 1997 and June 30, 1996
(b) Reports on Form 8-K
Report on Form 8-K, dated April 2, 1997 (pursuant to Item 5) regarding
the Company's announcement of the Company's suspension of development of
AURICULIN for oliguric acute renal (kidney) failure.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SCIOS INC.
August 12, 1997 By: /s/ Richard L. Casey
- --------------------
Date Richard L. Casey, Chairman and
Chief Executive Officer
August 12, 1997 By: /s/ Kevin McPherson
- --------------------
Date Kevin McPherson, Director of
Finance (Chief Accounting
Officer)
SCIOS INC.
1992 EQUITY INCENTIVE PLAN
Adopted February 11, 1992
Approved by Stockholders May 5, 1992
Amended February 3, 1997
Approved By Stockholders May 13, 1997
PURPOSES.
The purpose of the 1992 Equity Incentive Plan (the "Plan") is
to provide a means by which Employees and Directors of and Consultants to the
Company, and its Affiliates, may be given an opportunity to benefit from
increases in value of the stock of the Company through the granting of (i)
Incentive Stock Options, (ii) Supplemental Stock Options, (iii) stock bonuses,
and (iv) rights to purchase restricted stock, all as defined below.
The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or Consultants to the
Company, to secure and retain the services of new Employees, Directors and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.
The Company intends that the Stock Awards issued under the
Plan shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant to
subsection 3(c), be either (i) Options granted pursuant to section 6 or 8
hereof, including Incentive Stock Options and Supplemental Stock Options, or
(ii) stock bonuses or rights to purchase restricted stock granted pursuant to
section 7 hereof. All Options shall be separately designated Incentive Stock
Options or Supplemental Stock Options at the time of grant, and in such form as
issued pursuant to section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
DEFINITIONS.
"Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
"Company" means Scios Inc., a Delaware corporation.
"Consultant" means any person, including an advisor, engaged
by the Company or an Affiliate to render services and who is compensated for
such services, provided that the term "Consultant" shall not include a Director
whose only services to the Company are provided in his capacity as a Director.
"Continuous Status as an Employee, Director or Consultant"
means that the service of an individual to the Company, whether as an Employee,
Director, or Consultant is not interrupted or terminated by the Company or any
Affiliate. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Status as an
Employee, Director or Consultant shall be considered interrupted in the case of:
(i) any leave of absence approved by the Board or the chief executive officer,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
its successor.
"Covered Employee" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
"Director" means a member of the Board.
"Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
"Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"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 regulations promulgated thereunder.
"Non-Employed Director" means a Director who is not an
Employee or Consultant of the Company or an Affiliate of the Company.
"Non-Employee Director" means a Director who either (i) is not
a current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
"Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
"Option" means a stock option granted pursuant to the Plan.
"Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
"Optionee" means an Employee, Director or Consultant who holds
an outstanding Option.
"Outside Director" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
"Plan" means this 1992 Equity Incentive Plan.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company at the time
discretion is being exercised regarding the Plan.
"Securities Act" means the Securities Act of 1933, as amended,
with respect to the Company at the time.
"Stock Award" means any right granted under the Plan,
including any Option, any stock bonus and any right to purchase restricted
stock.
"Stock Award Agreement" means a written agreement between
the Company and a holder of a Stock Award evidencing the terms and conditions
of an individual Stock Award grant. Each Stock Award Agreement shall
be subject to the terms and conditions of the Plan.
"Supplemental Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
ADMINISTRATION.
The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).
Subject to the provisions of section 8, the Board shall have
the power, subject to, and within the limitations of, the express provisions of
the Plan:
To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Supplemental Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which Stock Awards shall be granted to each such person.
To construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
To amend the Plan of a Stock Award as provided in section 14.
Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company.
The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members of the Board (the
"Committee"), all of the members of which Committee may be, in the discretion of
the Board, Non-Employee Directors and/or Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of two (2) or more Outside
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. Notwithstanding anything in this section 3 to the contrary,
the Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Stock Awards to eligible persons who (1) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code. The Board may abolish any such committee at any time and revest in the
Board the administration of the Plan.
SHARES SUBJECT TO THE PLAN.
Subject to the provisions of section 13 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate five million (5,000,000) shares
of the Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.
The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
ELIGIBILITY.
Incentive Stock Options may be granted only to Employees.
Stock Awards other than Incentive Stock Options may be granted only to
Employees, Directors or Consultants.
No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Incentive Stock
Option is at least one hundred ten percent (110%) of the fair market value of
such stock at the date of grant and the Incentive Stock Option is not
exercisable after the expiration of five (5) years from the date of grant.
Subject to the provisions of section 13 relating to adjustment
upon changes in stock, no person shall be eligible to be granted Options
covering more than three hundred thousand (300,000) shares of the Company's
common stock in any calendar year.
OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
Term. No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.
Price. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the fair market value of the
stock subject to the Option on the date the Option is granted. The exercise
price of each Supplemental Stock Option shall be not less than eighty-five
percent (85%) of the fair market value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Supplemental Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
Consideration. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of grant of an
Incentive Stock Option or either at the time of the grant or exercise of a
Supplemental Stock Option, (A) by delivery to the Company of other common stock
of the Company, (B) according to a deferred payment arrangement, except that
payment of the common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not be made by deferred payment, or other arrangement
(which may include, without limiting the generality of the foregoing, the use of
other common stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d), or (C) in any
other form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest
shall be compounded at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Supplemental Stock Option shall
not be transferable except by will or by the laws of descent and distribution
(and shall be exercisable during the lifetime of the person to whom the
Supplemental Stock Option is granted only by such person) unless the applicable
Option Agreement expressly provides for other transferability. Notwithstanding
the foregoing, the person to whom an Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
Vesting. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. During the remainder of the term of the Option (if its term
extends beyond the end of the installment periods), the option may be exercised
from time to time with respect to any shares then remaining subject to the
Option. The Option may be subject to such other terms and conditions on the time
or times when it may be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
Termination of Status as an Employee, Director or Consultant.
An Option shall terminate three (3) months after termination of the Continuous
Status as an Employee, Director or Consultant with the Company or an Affiliate,
unless (i) such termination is due to such person's Disability, in which case
the Option may, but need not, provide that it may be exercised at any time
within one (1) year following termination of the Continuous Status as an
Employee, Director or Consultant, or (ii) the Optionee dies while in the employ
of or while serving as a Consultant or Director to the Company or an Affiliate,
or within not more than three (3) months after termination of the Continuous
Status as an Employee, Director or Consultant in which case the Option may, but
need not, provide that it may be exercised at any time within eighteen (18)
months following the death of the Optionee by the person or persons to whom the
Optionee's rights under such option pass by will or by the laws of descent and
distribution; or (iii) the Option by its terms specifies either (A) that it
shall terminate sooner than three (3) months after termination of the Continuous
Status as an Employee, Director or Consultant, or (B) that it may be exercised
more than three (3) months after termination of the Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate. This
subsection 6(f) shall not be construed to extend the term of any Option or to
permit anyone to exercise the Option after expiration of its term, nor shall it
be construed to increase the number of shares as to which any Option is
exercisable from the amount exercisable on the date of termination of the
Continuous Status as an Employee, Director or Consultant.
Early Exercise. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
Re-Load Options. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a further
Option (a "Re-Load Option") in the event the Optionee exercises the Option
evidenced by the Option Agreement, in whole or in part, by surrendering other
shares of common stock in accordance with this Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the fair market value of the common stock subject to
the Re-Load Option on the date of exercise of the original Option or, in the
case of a Re-Load Option which is an Incentive Stock Option and which is granted
to a 10% stockholder (as described in subsection 5(b)), shall have an exercise
price which is equal to one hundred ten percent (110%) of the fair market value
of the stock subject to the Re-Load Option on the date of exercise of the
original Option.
Any such Re-Load Option may be an Incentive Stock Option or a
Supplemental Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option, provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and the limits on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
Purchase Price. The purchase price under each stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such Stock Award Agreement. Notwithstanding the foregoing, the
Board or the Committee may determine that eligible participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
Transferability. No rights under a stock bonus or restricted
stock purchase agreement shall be transferable, except by will or the laws of
descent and distribution, unless the applicable Stock Award Agreement expressly
provides for other transferability.
Consideration. The purchase price of stock acquired pursuant
to a stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in their discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
Vesting. Shares of stock sold or awarded under the Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
NON-EMPLOYED DIRECTOR OPTIONS.
Only Non-Employed Directors shall be eligible to receive
Options as provided for in this section 8. All Options granted pursuant to this
section 8 shall be subject to all other provisions of the Plan, as modified by
this section 8.
The following Non-Employed Director Options shall be granted
under the Plan:
Each person who is on or after the date hereof
elected for the first time to be a Non-Employed Director shall, upon the date of
his initial election to be a Non-Employed Director by the Board or stockholders
of the Company, automatically be granted a Supplemental Stock Option to purchase
twenty thousand (20,000) shares of the Company's common stock (subject to
adjustment as provided in section 13 hereof) on such date.
Each Non-Employed Director who serves on the
Company's Board of Directors on the final vesting date of an Option granted
pursuant to subsection 8(b)(i) or pursuant to subsection (b) of the Company's
1989 Non-Employee Director Stock Option Plan, as the case may be, shall
automatically be granted a Supplemental Stock Option to purchase ten thousand
(10,000) shares of the Company's common stock (subject to adjustment as provided
in section 13 hereof) on such date.
The exercise price of each Non-Employed Director Option shall
be one hundred percent (100%) of the fair market value of the stock subject to
such Option on the date such Option is granted.
The term of each Non-Employed Director Option commences on the
date it is granted and, unless sooner terminated as set forth herein, expires on
the date ("Expiration Date") ten (10) years from the date of grant. The term of
each Non-Employed Director Option may terminate sooner than such Expiration Date
if the Optionee's service as a Non-Employed Director (or subsequent services as
an Employee) of the Company terminates for any reason or for no reason. In the
event of such termination of service, the Option shall terminate on the earlier
of the Expiration Date or the date twelve (12) months following the date of
termination of service; provided, however, that if such termination of service
is due to the Optionee's death, the Option shall terminate on the earlier of the
Expiration Date or eighteen (18) months following the date of the Optionee's
death. In any and all circumstances, a Non-Employed Director Option may be
exercised following termination of the Optionee's service to the Company only as
to that number of shares as to which it was exercisable on the date of
termination of such service under the provisions of subsections 8(f) and 8(g).
Notwithstanding the foregoing, if exercise within the foregoing periods is
prohibited under subsection 10(b) below, the term of the Option shall be
extended to a date thirty (30) days following the first date on which the
condition of subsection 10(b) of the Plan has been met, and the Option shall be
exercisable as to the number of shares that could have been exercised on the
date of termination of service had the condition of subsection 10(b) been
satisfied on that date.
Payment of the exercise price of each Non-Employed Director
Option is due in full in cash upon any exercise when the number of shares being
purchased upon such exercise is less than 1,000 shares; but when the number of
shares being purchased upon an exercise is 1,000 or more shares, the Optionee
may elect to make payment of the exercise price under one of the following
alternatives:
Payment of the exercise price per share in cash at
the time of exercise; or
Provided that at the time of exercise the Company's
common stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of already-owned shares of common stock of the Company owned
by the Optionee for at least six (6) months and owned free and clear of any
liens, claims, encumbrances or security interests, which common stock shall be
valued at fair market value on the date of exercise; or
Payment by a combination of the methods of payment
specified in subsections 8(e)(i) and 8(e)(ii) above.
(i) Subject to the provisions of section 13, the Non-Employed
Director Options described in subsection 8(b)(i) shall become exercisable in
installments as follows: twenty percent (20%) of the shares covered by the
Option on the date one (1) year after the date of grant, and one and six hundred
sixty-seven thousandths percent (1.667%) of the shares covered by the Option at
the end of every subsequent month period thereafter until all the shares have
become vested on the date five (5) years from the date of grant; provided that
shares shall become exercisable only during period that the Optionee is a
Non-Employed Director of the Company.
(ii) The Non-Employed Director Options described in subsection
8(b)(ii) shall become exercisable in installments as follows: one and six
hundred sixty-seven thousandths percent (1.667%) of the shares covered by the
Option at the end of every subsequent month period after the date of grant until
all the shares have become vested on the date five (5) years from the date of
grant; provided that shares shall become exercisable only during periods that
the Optionee is a Non-Employed Director of the Company.
(iii) Subject to the limitations contained herein including,
without limitation, those contained in subsection 10(b) and section 16, each
Option shall be exercisable with respect to each installment on or after the
date of vesting applicable to such installment, provided, however, that the
minimum number of shares with respect to which a Non-Employed Director Option
may be exercised at any one time is one hundred (100), except that the last
exercise thereunder may be less than one hundred (100).
No Non-Employed Director, individually or as a member of a
group, and no beneficiary or other person claiming under or through him, shall
have any right, title or interest in or to any option reserved for the purposes
of the Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
It shall be a condition precedent to the Company's obligation
to issue or transfer shares to a Non-Employed Director, or to evidence the
removal of any restrictions on transfer, that such Non-Employed Director make
arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such
sale or transfer, or such removal or lapse, is made available to the Company for
timely payment of such tax.
CANCELLATION AND RE-GRANT OF OPTIONS.
Except with respect to Non-Employed Director Options, the
Board or the Committee shall have the authority to effect, at any time and from
time to time, with the consent of the affected holders of Options, (i) the
repricing of any outstanding Options under the Plan and/or (ii) the cancellation
of any outstanding Options under the Plan and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of stock, but having an exercise price per share not less than the minimum
exercise price required pursuant to subsections 5(b) and 6(b) on the new grant
date. Notwithstanding the foregoing, the Board or the Committee may grant an
Option with an exercise price lower than that set forth above if such Option
and/or Stock Appreciation Right is granted as part of a transaction to which
section 424(a) of the Code applies.
Shares subject to an Option canceled under this Section 9
shall continue to be counted against the maximum award of Options permitted to
be granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 9, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.
COVENANTS OF THE COMPANY.
During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards up to the number of shares of stock authorized under the Plan.
The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock under the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock under such Stock Awards unless and
until such authority is obtained.
USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
MISCELLANEOUS.
Except with respect to Non-Employed Director Options, the
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest, notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.
Neither an Optionee nor any person to whom a Stock Award is
transferred under subsection 6(d) or 7(b) shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ of
the Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee, with or without cause, or the right of the Company's
Board of Directors and/or the Company's stockholders to remove any Director as
provided in the Company's Bylaws and the provisions of the Delaware General
Corporation Law or the right to terminate the relationship of any Consultant
subject to the terms of such Consultant's agreement with the Company or
Affiliate.
To the extent that the aggregate fair market value (determined
at the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Supplemental Stock Options.
Withholding. To the extent provided by the terms of a Stock
Award Agreement, the person to whom a Stock Award is granted may satisfy any
federal, state or local tax withholding obligation relating to the exercise of
acquisition of such Stock Award by any of the following means or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the common stock of the Company.
The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock under
any Stock Award, (i) to give written assurances satisfactory to the Company as
to such person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that
such person is acquiring the stock subject to the Stock Award for such person's
own account and not with any present intention of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if a. the issuance of the
shares upon the exercise or acquisition of stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act, or b. as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
type(s) and the maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the limitation of subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the type(s) and number of securities
and price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company.")
In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, at the sole discretion of the
Board and to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Stock Awards outstanding under the Plan or shall
substitute similar Stock Awards for those outstanding under the Plan, (ii) such
Stock Awards shall continue in full force and effect, or (iii) any outstanding
unexercised rights under any Stock Awards shall be terminated if not exercised
prior to such event, provided, however, that with respect to Stock Awards then
held by persons performing services for the Company or an Affiliate, the time
during which such Stock Awards become vested or may be exercised shall be
accelerated prior to such termination.
(c) In the event a change in control (as hereinafter defined) occurs at
the Company after the date of adoption of this Plan and, within one (1) year of
such change in control, (i) an Optionee's employment with the Company and its
Affiliates is terminated other than for cause (as hereinafter defined), or (ii)
a Non-Employee Director's directorship with the Company is terminated by the
Company or by the Non-Employee Director for any reason or for no reason, Options
held by such terminated Employee or Director may be exercised in full following
such termination without regard to the vesting limitations to which such Options
are otherwise subject. For the purposes of the foregoing, a "change in control"
shall have occurred if (i) any person (as defined in Section 13 of the Exchange
Act) acquires shares, other than directly from the Company, and thereby becomes
the owner of more than thirty percent (30%) of the Company's outstanding shares
(on a fully diluted basis) or (ii) the Company enters into a merger (other than
one in connection with a voluntary change of corporate domicile or similar
reorganization or recapitalization transaction) in which the stockholders of the
Company (determined immediately prior to the merger) do not own at least fifty
percent (50%) of the outstanding shares of the surviving entity after the
merger. For purposes of the foregoing, a termination shall be deemed to have
been made for "cause" in the event the Optionee's employment is terminated for
any of the following reasons: (A) the Optionee's continued failure to
substantially perform his duties with the Company or its Affiliates, (B) the
engaging by the Optionee in gross misconduct materially and demonstrably
injurious to the Company, its Affiliates or their Employees, or (C) illicit drug
use or habitual alcohol use, or (D) the commission by the Optionee of any
felony.
AMENDMENT OF THE PLAN.
The Board at any time, and from time to time, may amend the
Plan, provided, however, that the Board shall not amend the Plan more than once
every six (6) months with respect to the provisions of the section 8 of Plan
(which relate to the amount, price and timing of grants of Non-Employed Director
Options), other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder. However, except as
provided in Section 13 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders of the Company
within twelve (12) months before or after the adoption of the amendment, where
the amendment will:
Increase the number of shares reserved for Stock
Awards under the Plan;
Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code.
It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide Optionee with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
TERMINATION OR SUSPENSION OF THE PLAN.
The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on February 2, 2007. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the person to whom the Stock Award was
granted.
EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercisable unless and until the
Plan has been approved by the stockholders of the Company, and, if required, an
appropriate permit has been issued by the Commissioner of Corporations of the
State of California.
Exhibit 11.1
SCIOS INC.
AND SUBSIDIARIES
Computation of Net Loss Per Share
(Calculated in accordance with the
guidelines of item 601 of
Regulation S-K. The effect of
stock options on loss per
share is anti-dilutive)
<TABLE>
<CAPTION>
Three months ended
June 30,
1997 1996
---------------- -----------------
(Unaudited)
<S> <C> <C>
PRIMARY AND FULLY DILUTED:
Average common and common equivalent
shares outstanding 35,826,469 35,834,351
---------------- -----------------
Net loss ($12,676,000) ($7,616,000)
---------------- -----------------
Net loss per share ($0.35) ($0.21)
---------------- -----------------
</TABLE>
Exhibit 11.2
SCIOS INC.
AND SUBSIDIARIES
Computation of Net Loss Per Share
(Calculated in accordance with the
guidelines of item 601 of
Regulation S-K. The effect of
stock options on loss per
share is anti-dilutive)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
---------------- -----------------
(Unaudited)
<S> <C> <C>
PRIMARY AND FULLY DILUTED:
Average common and common equivalent
shares outstanding 35,829,065 35,862,428
---------------- -----------------
Net loss ($24,808,000) ($15,033,000)
---------------- -----------------
Net loss per share ($0.69) ($0.42)
---------------- -----------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of operations, and
consolidated statement of cash flows included in the Company's Form 10-Q for the
period ending June 30, 1997, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 14,631
<SECURITIES> 57,259
<RECEIVABLES> 6,010
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,993
<PP&E> 68,216
<DEPRECIATION> 32,162
<TOTAL-ASSETS> 127,403
<CURRENT-LIABILITIES> 24,565
<BONDS> 30,714
0
0
<COMMON> 37
<OTHER-SE> 72,087
<TOTAL-LIABILITY-AND-EQUITY> 127,403
<SALES> 13,696
<TOTAL-REVENUES> 19,211
<CGS> 8,223
<TOTAL-COSTS> 43,973
<OTHER-EXPENSES> 179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 884
<INCOME-PRETAX> (24,808)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.69)
<EPS-DILUTED> (0.69)
</TABLE>
