As filed with the Securities and Exchange Commission on June 11, 1997
Registration No. 333-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MACROCHEM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2744744
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 HARTWELL AVENUE
LEXINGTON, MASSACHUSETTS 02173-3134
(Address, including Zip Code, of Principal Executive Offices)
MACROCHEM CORPORATION
1994 EQUITY INCENTIVE PLAN
(Full title of the plan)
-----------------------------
ALVIN J. KARLOFF, CHIEF EXECUTIVE OFFICER
MACROCHEM CORPORATION
110 HARTWELL AVENUE, LEXINGTON, MASSACHUSETTS 02173-3134
(617) 862-4003
(Name, address and telephone number of agent for service)
------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Title of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per share (1) offering price fee
- --------------------------------------------------------------------------------
Common Stock,
$.01 par value 1,500,000 sh. $6.25 $9,375,000 $2,841
- --------------------------------------------------------------------------------
(1) The offering price for shares being registered, none of which are subject to
options on the date hereof, has been estimated solely for the purpose of
determining the registration fee pursuant to Rule 457(h) on the basis of the
average of the high and low prices of MacroChem Corporation, as reported on
NASDAQ on June 5, 1997.
Page 1 of 24
Exhibit Index at page 8
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Note: The documents containing the Registrant's 1994 Equity Incentive Plan
information required by Item 1 of this Form S-8 and the statement of
availability of Registrant information, and other information required by Item 2
of this Form will be sent or given to employees as specified by Rule 428 of the
Securities Act of 1933, as amended. In accordance with Rule 428 and the
requirements of Part I of Form S-8, such documents are not being filed with the
Securities and Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424. The Registrant will maintain a file of such documents in accordance
with the provisions of Rule 428. Upon request, the Registrant shall furnish to
the Commission or its staff a copy of any or all of the documents included in
such file.
Page 2 of 24
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated in and made a part of this
registration statement by reference:
a. The Registrant's Annual Report on Form 10-K for the year ended December
31, 1996.
b. The Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997.
c. The Description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-A, File No. 0-13634.
All documents filed by the Registrant with the Securities and Exchange
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934 prior to the filing of a post-effective amendment to this
registration statement that indicates that all securities offered have been sold
or which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference in this registration statement from the date of filing
of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not required.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
No material interests.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders to eliminate or limit personal liability of
members of its Board of Directors for violations of a director's fiduciary duty
of care. However, the elimination or limitation shall not apply where there has
been a breach of duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase that is deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
Page 3 of 24
<PAGE>
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit."
The Delaware General Corporation Law, Section 145, permits a corporation
organized under Delaware law to indemnify directors and officers with respect to
any matter in which the director or officer acted in good faith and in a manner
he reasonably believed to be not opposed to the best interests of the Company,
and, with respect to any criminal action, had reasonable cause to believe his
conduct was lawful. The Bylaws of the Company include the following provisions:
"Reference is made to Section 145 and any other relevant provisions of
the General Corporation Law of the State of Delaware. Particular reference
is made to the class of persons, hereinafter called "Indemnitees", who may
be indemnified by a Delaware corporation pursuant to the provisions of such
Section 145, namely, any person, or the heirs, executors, or administrators
of such person, who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the
fact that such person is or was a director, officer, employee, or agent of
such corporation or is or was serving at the request of such corporation as
a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise. The Corporation
shall, and is hereby obligated to, indemnify the Indemnitees, and each of
them, in each and every situation where the Corporation is obligated to
make such indemnification pursuant to the aforesaid statutory provisions.
The Corporation shall indemnify the Indemnitees, and each of them, in each
and every situation where, under the aforesaid statutory provisions, the
Corporation is not obligated, but is nevertheless permitted or empowered,
to make such indemnification, it being understood that, before making such
indemnification with respect to any situation covered under this sentence,
(i) the Corporation shall promptly make or cause to be made, by any of the
methods referred to in Subsection (d) of such Section 145, a determination
as to whether such Indemnitee acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful, and (ii) that no
such indemnification shall be made unless it is determined that such
Indemnitee acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, in the
case of any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful."
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
Page 4 of 24
<PAGE>
ITEM 8. EXHIBITS.
Exhibit List
5. Legal opinion of James W. Spindler, Esq.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of James W. Spindler, Esq., is contained in the opinion
filed as Exhibit 5 to this Registration Statement.
99. MacroChem Corporation 1994 Equity Incentive Plan, as amended
May 23, 1997.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement, (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof), which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Page 5 of 24
<PAGE>
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 persons in connection with the securities being
registered, 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 Act and will be governed by the final adjudication of
such issue.
Page 6 of 24
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, 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 on Form S-8 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Lexington, Massachusetts on June 9, 1997.
MACROCHEM CORPORATION
By: /s/ Alvin J. Karloff
--------------------------
Alvin J. Karloff
President, Chief Executive Officer,
Principal Financial Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed below by the following
persons in the capacities indicated on June 9, 1997.
/s/ Alvin J. Karloff Chief Executive Officer, President,
- -------------------- Principal Financial Officer and
Alvin J. Karloff Director
/s/ Dr. Carlos M. Samour Chairman of the Board of Directors
- ------------------------ and Scientific Director
Dr. Carlos M. Samour
/s/ Dr. Stephen J. Riggi Vice President, Operations and
- ------------------------ Director
Stephen J. Riggi
/s/ Dr. Willard M. Bright Director
- -------------------------
Dr. Willard M. Bright
/s/ Peter G. Martin Director
- -------------------
Peter G. Martin
/s/ Dr. Michael A. Davis Director
- ------------------------
Dr. Michael A. Davis
Page 7 of 24
<PAGE>
EXHIBIT INDEX
Exhibit List
Number Title of Exhibit Page
- ------ ---------------- ----
5. Legal Opinion of James W. Spindler, Esq. 9
23.1 Consent of James W. Spindler, Esq. is contained in the
opinion filed as Exhibit 5 to this Registration Statement.
23.2 Consent of Deloitte & Touche LLP. 10
99. MacroChem Corporation 1994 Equity Incentive Plan, 11
as amended May 23, 1997.
Page 8 of 24
JAMES W. SPINDLER
COUNSELOR AT LAW
66 WESTON ROAD
LINCOLN, MASSACHUSETTS 01773
TEL: (617) 259-9832
FAX: (617) 259-9846
June 9, 1997
MacroChem Corporation
110 Hartwell Avenue
Lexington, Massachusetts 02173-3134
Dear Sirs:
I am acting as counsel to MacroChem Corporation (the "Company") in
connection with the issuance from time to time of up to an aggregate of
1,500,000 shares of the Company's Common Stock, $.01 par value (the "Shares"),
under the Company's 1994 Equity Incentive Plan, as amended. The issuance of the
Shares is being registered under the Securities Act of 1933, as amended, on a
Registration Statement on Form S-8 (the "Registration Statement").
In connection with this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction, of
such documents, corporate records and other instruments and have made such other
investigations as I have deemed necessary to enable me to express the opinion
set forth below.
On the basis of the foregoing and my review of such other matters as I have
deemed relevant, I am of the opinion that the Shares have been duly authorized
and, when certificates therefor have been duly executed and delivered and the
consideration therefor paid pursuant to the terms of such Plan, will be validly
issued, fully paid and non-assessable.
I express no opinion on the laws of any jurisdiction other than the General
Corporation Law of the State of Delaware.
I hereby consent to the filling of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ James W. Spindler
---------------------
James W. Spindler
Page 9 of 24
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of MacroChem Corporation on Form S-8 of our report dated March 6, 1997,
appearing in the Annual Report on Form 10-K of MacroChem Corporation for the
year ended December 31, 1996.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Boston, Massachusetts
June 9, 1997
Page 10 of 24
As amended May 23, 1997
MACROCHEM CORPORATION
1994 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this 1994 Equity Incentive Plan (the "Plan") is to advance
the interests of MacroChem Corporation (the "Company") by enhancing its ability
to attract and retain employees and other persons or entities who are in a
position to make significant contributions to the success of the Company and its
subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. So long as the Stock is registered under the Securities
Exchange Act of 1934 (the "1934 Act"), all members of the Committee shall be
non-employee directors within the meaning of Rule 16b-3 under the 1934 Act. The
Committee will have authority, not inconsistent with the express provisions of
the Plan and in addition to other authority granted under the Plan, to (a) grant
Awards at such time or times as it may choose; (b) determine the size of each
Award, including the number of shares of Stock subject to the Award; (c)
determine the type or types of each Award; (d) determine the terms and
conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an award is canceled, grant another Award in
its place on such terms as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
Page 11 of 24
<PAGE>
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants, and change such
forms from time to time; (h) adopt, amend and rescind rules and regulations for
the administration of the Plan; and (i) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, will be conclusive and will bind all
parties. Nothing in this paragraph shall be construed as limiting the power of
the Committee to make adjustments under Section 7.3 or Section 8.6.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under this plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any action by the
Committee or Board fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the Plan may be made prior
to that date, subject to such approval of the Plan. No Award may be granted
under the Plan after February 11, 2004, but Awards previously granted may extend
beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
4,000,000. If any Award requiring exercise for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of Stock as to
which such Award was not exercised or for which cash was substituted will be
available for future grants. The maximum number of shares (subject to adjustment
as provided in Section 8.6 below) with respect to which Awards may be made to
any one Participant during the term of the Plan shall be 750,000 shares. The
preceding sentence shall be construed consistent with the regulations under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
Page 12 of 24
<PAGE>
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
persons in the employ of the Company or any of its subsidiaries ("Employees")
and other persons or entities (including without limitation non-Employee
directors of the Company or a subsidiary of the Company) who, in the opinion of
the Committee, are in a position to make a significant contribution to the
success of the Company or its subsidiaries. A "subsidiary" for purposes of the
Plan will be a corporation in which the Company owns, directly or indirectly,
stock possessing 50% or more of the total combined voting power of all classes
of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) NATURE OF OPTIONS. An Option is an Award entitling the holder on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code (any
Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options, may
be granted under the Plan. ISOs shall be awarded only to Employees.
(b) EXERCISE PRICE. The exercise price of an Option will be determined by
the Board subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent stockholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent stockholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Committee may reduce the exercise price of an Option at any
time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent stockholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
Page 13 of 24
<PAGE>
(d) EXERCISE OF OPTIONS. Options granted under any single Award will
become exercisable at such time or times, and on such conditions, as the
Committee may specify. The Committee may at any time and from time to time
accelerate the time at which all or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Committee at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Committee expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (ii) by delivery of a promissory note of the Option holder to
the Company, payable on such terms as are specified by the Committee, or (iii)
by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(iv) by any combination of the permissible forms of payment; provided, that if
the Stock delivered upon exercise of the Option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock must be paid other than by the Option holder's promissory
note.
(f) DISCRETIONARY PAYMENTS. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock Appreciation
Right as described in Section 6.2 below) exceeds the exercise price of the
Option at the time of its exercise, the Committee may cancel the Option and
cause the Company to pay in cash or in shares of Common Stock (at a price per
share equal to the fair market value per share) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is canceled) and the aggregate exercise price which would
have been paid. The Committee may exercise its discretion to take such action
only if it has received a written request from the person exercising the Option,
but such a request will not be binding on the Committee.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Committee), determined in whole or in part by reference to appreciation in Stock
value.
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<PAGE>
In general, a Stock Appreciation Right entitles the Participant to receive,
with respect to each share of Stock as to which the Right is exercised, the
excess of the share's fair market value on the date of exercise over its fair
market value on the date the Right was granted. However, the Committee may
provide at the time of grant that the amount the recipient is entitled to
receive will be adjusted upward or downward under rules established by the
Committee to take into account the performance of the Stock in comparison with
the performance of other stocks or an index or indices of other stocks. The
Committee may also grant Stock Appreciation Rights providing that following a
change in control of the Company, as determined by the Committee, the holder of
such Right will be entitled to receive, with respect to each share of Stock
subject to the Right, an amount equal to the excess of a specified value (which
may include an average of values) for a share of Stock during a period preceding
such change in control over the fair market value of a share of Stock on the
date the Right was granted.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock
Appreciation Right not granted in tandem with an Option will become exercisable
at such time
Page 15 of 24
<PAGE>
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. Restricted and Unrestricted Stock.
(a) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award entitles
the recipient to acquire, for a purchase price equal to par value, shares of
Stock subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) ACCEPTANCE OF AWARD. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the Award. Payment may be by certified or bank check or other
instrument acceptable to the Committee.
(c) RIGHTS AS A STOCKHOLDER. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee otherwise determines, certificates evidencing shares
of Restricted Stock will remain in the possession of the Company until such
shares are free of all restrictions under the Plan.
(d) RESTRICTIONS. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any
reason, must be offered to the Company for purchase for the amount of cash paid
for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify. The Committee may at any time accelerate the time at
which the restrictions on all or any part of the shares will lapse.
(e) NOTICE OF ELECTION. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
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(g) UNRESTRICTED STOCK. The Committee may, in its sole discretion, approve
the sale to any Participant of shares of Stock free of restrictions under the
Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals. Performance Goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance deemed by the Committee to be important to the success
of the Company. The Committee will determine the Performance Goals, the period
or periods during which performance is to be measured and all other terms and
conditions applicable to the Award.
(b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITION. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(a) LOANS. The Company may make a loan to a Participant ("Loan"), either
on the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
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the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) SUPPLEMENTAL GRANTS. In connection with any Award, the Committee may
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, and all Options originally issued to the Participant and
transferred pursuant to Section 8.5 hereof may be exercised by the person or
persons to whom the Option has been so transferred, at any time within the one
year period ending with the first anniversary of the Participant's death (or
such shorter or longer period as the Committee may determine), and shall
thereupon terminate. In no event, however, shall an Option or Stock Appreciation
Right remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section 7. Except as otherwise determined by
the Committee, all Options originally issued to a Participant and all Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled, as of the time
of death, unless otherwise determined by the Committee.
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7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
(a) Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights originally issued to the Participant that were not
exercisable immediately prior to the Status Change shall terminate at the time
of the Status Change. Any Options or Rights that were exercisable immediately
prior to the Status Change will continue to be exercisable for a period of six
months (or such longer period as the Committee may determine), and shall
thereupon terminate, unless (i) the Award provides by its terms for immediate
termination in the event of a Status Change, (ii) the Status Change results from
(w) retirement of the Participant on or after age 65, (x) retirement on or after
age 55 after 10 years of continuous employment by the Company, (y) disability
(as determined by the Company), or (z) termination of the Participant's service
as a director if the Participant is a non-Employee director, in which cases that
portion of the Options originally issued to the Participant that was exercisable
immediately prior to the Status Change will continue to be exercisable for the
original term of the Option or (iii) unless the Status Change results from a
discharge for cause which in the opinion of the Committee casts such discredit
on the Participant as to justify immediate termination of the Award. In no
event, however, shall an Option or Stock Appreciation Right remain exercisable
beyond the latest date on which it could have been exercised without regard to
this Section 7. For purposes of this paragraph, in the case of a Participant who
is an Employee, a Status Change shall not be deemed to have resulted by reason
of (i) a sick leave or other bona fide leave of absence approved for purposes of
the Plan by the Committee, so long as the Employee's right to reemployment is
guaranteed either by statute or by contract, or (ii) a transfer of employment
between the Company and a subsidiary or between subsidiaries, or to the
employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which section
424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award,or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award canceled as
of the date of such Status Change unless otherwise determined by the Committee.
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7.3. Certain Corporate Transactions.
7.3.1. Mergers, Sales etc.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
will terminate as of the effective date of the covered transaction, and the
following rules shall apply:
(a) Subject to paragraphs (b) and (c) below, the Committee shall, at least
twenty (20) days prior to the effective date of the covered transaction, (1)
make each outstanding Option and Stock Appreciation Right exercisable in full,
(2) remove the restrictions from each outstanding share of Restricted Stock, (3)
cause the Company to make any payment and provide any benefit under each
outstanding Deferred Stock Award, Performance Award, and Supplemental Grant
which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), and (4) forgive all or any portion of the principal of or interest on a
Loan.
(b) If an outstanding Award is subject to performance or other conditions
(other than conditions relating only to the passage of time and continued
employment) which will not have been satisfied at the time of the covered
transaction, the Committee may in its sole discretion remove such conditions. If
it does not do so, however, such Award will terminate as of the date of the
covered transaction notwithstanding paragraph (a) above.
(c) With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, the Committee may, in lieu of
the action described in paragraph (a) above, arrange to have such surviving or
acquiring corporation or affiliate grant to the Participant a replacement award
which, in the judgment of the Committee, is substantially equivalent to the
Award.
7.3.2. Liquidation and Dissolution.
In the event of a dissolution or liquidation of the Company, all
outstanding Awards will terminate as of the effective date of such dissolution
or liquidation, and the following rules shall apply:
(a) Subject to paragraphs (b) and (c) below, the Committee may, prior to
the effective date of such liquidation or dissolution, (1) make each outstanding
Option and Stock Appreciation Right exercisable in full, (2) remove the
restrictions from each outstanding share of Restricted Stock, (3) cause the
Company to make any payment and provide any benefit under each outstanding
Deferred Stock Award, Performance Award, and Supplemental Grant which would have
been made or provided with the passage of time had the transaction not occurred
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and the Participant not suffered a Status Change (or died), and (4) forgive
all or any portion of the principal of or interest on a Loan.
(b) If an outstanding Award is subject to performance or other conditions
(other than conditions relating only to the passage of time and continued
employment) which will not have been satisfied at the time of such liquidation
or dissolution, the Committee may in its sole discretion remove such conditions.
If it does not do so, however, such Award will terminate as of the date of such
liquidation or dissolution notwithstanding paragraph (a) above.
(c) With respect to an outstanding Award held by a participant who,
following such liquidation or dissolution, will be employed by or otherwise
providing services to a corporation which is a surviving or acquiring
corporation in such transaction or an affiliate of such a corporation, the
Committee may, in lieu of the action described in paragraph (a) above, arrange
to have such surviving or acquiring corporation or affiliate grant to the
Participant a replacement award which, in the judgment of the Committee, is
substantially equivalent to the Award.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a holder rights as a stockholder; the holder will obtain such rights,
subject to any limitations imposed by the Plan or the instrument evidencing the
Award, upon actual receipt of Stock. However, the Committee may, on such
conditions as it deems appropriate, provide that a holder will receive a benefit
in lieu of cash dividends that would have been payable on any or all Stock
subject to the holder's Award had such Stock been outstanding. Without
limitation, the Committee may provide for payment to the holder of amounts
representing such dividends, either currently or in the future, or for the
investment of such amounts on behalf of the holder.
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8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restrictions from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (d) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. The Committee may make such share
withholding mandatory with respect to any Award at the time such Award is made
to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
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8.5. Transferability of Awards.
No Award (other than an Award in the form of an outright transfer of cash
or Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during an employee's lifetime an Award requiring
exercise may be exercised only by the Participant (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on the
Participant's behalf), except that Options awarded to Employees or members of
the Board which are not ISOs may be transferred by a Participant to (i) the
spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, provided that (x) there may be no consideration for any
such transfer, and (y) subsequent transfers of Options shall be prohibited
except those in accordance with Section 8.5 hereof. Following any such transfer,
the transferred Option shall continue to be subject to all the terms and
conditions of this Plan, including without limitation the provisions of Section
7 with respect to exercise of the Option following the death or termination of
employment of the Participant to whom the Option was originally granted, and
Section 8.4 with respect to tax withholding.
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends,
after the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan, or with respect to which Awards may be made to any one Participant, under
Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
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time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. Deferral of Payments.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code.
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