<PAGE> 1
As filed with the Securities and Exchange Commission on June 23, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_______________________
INSITE VISION INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-3015807
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
965 ATLANTIC AVENUE
ALAMEDA, CALIFORNIA 94501
(Address of principal executive offices) (Zip Code)
________________________
1994 STOCK OPTION PLAN
(Full title of the Plan)
_______________________
S. KUMAR CHANDRASEKARAN, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INSITE VISION INCORPORATED
965 ATLANTIC AVENUE, ALAMEDA, CA 94501
(Name and address of agent for service)
(510) 865-8800
(Telephone number, including area code, of agent for service)
________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Maximum
Maximum Aggregate
Amount to be Offering Price Offering Amount of
Title of Securities to be Registered Registered(1) per Share(2) Price(2) Registration Fee
=================================================================================================================================
<S> <C> <C> <C> <C>
Options to Purchase Common Stock 500,000 N/A N/A N/A
Common Stock, $0.01 par value 500,000 shares $6.00 $3,000,000 $909.09
=================================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1994 Stock Option Plan by
reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which
results in an increase in the number of the outstanding shares of InSite
Vision Incorporated Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of Common Stock of InSite Vision
Incorporated on June 19, 1997 as reported by the Nasdaq National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
InSite Vision Incorporated (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 filed with the Commission on
March 5, 1997, pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997 filed with the Commission on
April 28, 1997 pursuant to Section 13 of the Exchange Act; and
(c) The Registrant's Registration Statement No. 0-12308 on Form
8-A filed with the Commission on August 27, 1993 in which
there is described the terms, rights and provisions applicable
to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which is also deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Registration Statement.
Item 4. Description of Capital Stock
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
The Registrant's Restated Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary
damages for breach of the directors' fiduciary duty as a director to the
Registrant and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the directors' fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment
of dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
<PAGE> 3
The Registrant has entered into separate indemnification agreements
with its directors and officers. These agreements require the Registrant,
among other things, to indemnify them against certain liabilities that may
arise by reason of their status or service as directors or officers (other than
liabilities arising from actions not taken in good faith or in a manner the
indemnitee believed to be opposed to the best interests of the Registrant), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified and to obtain directors' insurance if
available on reasonable terms. Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "1933 Act") may be
permitted to directors, officers or persons controlling the Registrant pursuant
to the foregoing provisions, the Registrant has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the 1933 Act and is therefore unenforceable.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
Exhibit Number Exhibit
4.0 Instruments Defining Rights of Stockholders. Reference is
made to Registrant's Registration Statement No. 0-12308 on
Form 8-A incorporated herein by reference pursuant to Item
3(c) of this Registration Statement.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1994 Stock Option Plan (as amended and restated March 17,
1997).
99.2 Notice of Grant of Stock Option and Stock Option Agreement
(incorporated by reference to Exhibit No. 99.2 to
Registration Statement No. 33-75268).
99.3 Addendum to Stock Option Agreement (Special Tax Elections)
(incorporated by reference to Exhibit No. 99.3 to
Registration Statement No. 33-75268).
99.4 Addendum to Stock Option Agreement (Limited Stock
Appreciation Right) (incorporated by reference to Exhibit
No. 99.4 to Registration Statement No. 33-75268).
99.5 Notice of Automatic Option Grant and Non-Employee Director
Option Agreement.
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 1933 Act, (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 clauses (1)(i) and (1)(ii)
shall not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference into the registration statement; (2) that for the
purpose of determining any liability under the 1933 Act each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
1994 Stock Option Plan.
II-2.
<PAGE> 4
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnity provisions summarized in Item 6, or
otherwise, the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the 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 1933
Act and will be governed by the final adjudication of such issue.
II-3.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alameda, State of
California, on this 20th day of June, 1997.
INSITE VISION INCORPORATED
By /S/ S. KUMAR CHANDRASEKARAN
------------------------------
S. Kumar Chandrasekaran, Ph.D.
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officer and directors of INSITE VISION
INCORPORATED, a Delaware corporation, do hereby constitute and appoint S.
Kumar Chandrasekaran, Ph.D. the lawful attorney and agent, with full power and
authority to do any and all acts and things and to execute any and all
instruments which said attorney and agent determines may be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulations or requirements of the
Commission in connection with this Registration Statement. Without limiting
the generality of the foregoing power and authority, the powers granted include
the power and authority to sign the names of the undersigned officers and
directors in the capacities indicated below to this Registration Statement, to
any and all amendments, both pre-effective and post-effective, and supplements
to this Registration Statement, and to any and all instruments or documents
filed as part of or in conjunction with this Registration Statement or
amendments or supplements thereof, and each of the undersigned hereby ratifies
and confirms all that said attorney and agent shall do or cause to be done by
virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ S. KUMAR CHANDRASEKARAN Chairman of the Board, Chief Executive June 20, 1997
- ----------------------------------- Officer and Chief Financial Officer
S. Kumar Chandrasekaran, Ph.D. (Principal Executive and Financial Officer)
/s/ MITCHELL H. FRIEDLANDER Director June 20, 1997
- -----------------------------------
Mitchell H. Friedlander, M.D.
/s/ GRANT M. INMAN Director June 20, 1997
- -----------------------------------
Grant M. Inman
</TABLE>
II-4.
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ JOHN E. LUCAS Director June 20, 1997
- -----------------------------------
John E. Lucas
/s/ ANDERS P. WIKLUND Director June 20, 1997
- -----------------------------------
Anders P. Wiklund
</TABLE>
II-5.
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
INSITE VISION INCORPORATED
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to Registrant's Registration
Statement No. 00-12308 on Form 8-A incorporated herein by reference pursuant to Item 3(c) of this
Registration Statement.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1994 Stock Option Plan (as amended and restated March 17, 1997).
99.2 Notice of Grant of Stock Option and Stock Option Agreement (incorporated by reference to Exhibit No. 99.2
to Registration Statement No. 33-75268).
99.3 Addendum to Stock Option Agreement (Special Tax Elections) (incorporated by reference to Exhibit No. 99.3
to Registration Statement No. 33-75268).
99.4 Addendum to Stock Option Agreement (Limited Stock Appreciation Right) (incorporated by reference to
Exhibit No. 99.4 to Registration Statement No. 33-75268).
99.5 Notice of Automatic Option Grant and Non-Employee Director Option Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
Opinion of Brobeck, Phleger & Harrison LLP
June 20, 1997
InSite Vision Incorporated
965 Atlantic Avenue
Alameda, CA 94501
Re: INSITE VISION INCORPORATED (THE "COMPANY")
REGISTRATION STATEMENT FOR OFFERING OF 500,000
SHARES OF COMMON STOCK
Ladies and Gentlemen:
We refer to your Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of Five Hundred
Thousand (500,000) shares of Common Stock under the Company's 1994 Stock Option
Plan. We advise you that, in our opinion, when such shares have been issued
and sold pursuant to the applicable provisions of the 1994 Stock Option Plan
and in accordance with the Registration Statement, such shares will be validly
issued, fully paid and nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8), pertaining to the 1994 Stock Option Plan of InSite Vision
Incorporated, of our report dated January 24, 1997, with respect to the
consolidated financial statements of InSite Vision Incorporated included in its
Annual Report (Form 10-K) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
---------------------------
Ernst & Young LLP
Walnut Creek, California
June 20, 1997
<PAGE> 1
EXHIBIT 99.1
INSITE VISION INCORPORATED
1994 STOCK OPTION PLAN
(Amended and Restated as of March 17, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
A. The 1994 Stock Option Plan (the "Plan") was adopted
as the 1993 Stock Plan as of July 28, 1993 to be effective October 25, 1993
(the "Effective Date") to promote the interests of InSite Vision Incorporated,
a Delaware corporation (the "Corporation"), by providing eligible individuals
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation (or its parent or subsidiary
corporations). This amendment and restatement changes the name of the Plan to
the 1994 Stock Option Plan and is effective as of January 1, 1994.
B. This Plan serves as the successor to the
Corporation's 1989 Stock Plan (the "1989 Plan"), and no further option grants
shall be made under the 1989 Plan from and after the Effective Date. All
options outstanding under the 1989 Plan on such Effective Date are hereby
incorporated into this Plan and shall accordingly be treated as outstanding
options under this Plan. However, each outstanding option so incorporated
shall continue to be governed solely by the express terms and conditions of the
instrument evidencing such grant, and no provision of this Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of the
Corporation's common stock thereunder or their exercise of any outstanding
stock appreciation rights thereunder.
C. For purposes of the Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT corporation of the Corporation, provided
each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
<PAGE> 2
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two
and the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may be granted options
to purchase shares of the Corporation's common stock. Under the Automatic
Option Grant Program, each eligible member of the Corporation's Board of
Directors (the "Board") will automatically receive an option grant to purchase
shares of the Corporation's common stock.
B. The provisions of Articles One and Four of the Plan
shall apply to the Discretionary Option Grant Program and the Automatic Option
Grant Program and shall accordingly govern the interests of all individuals in
the Plan.
III. ADMINISTRATION OF THE PLAN
A. Article Two of the Plan shall be administered by a
committee ("Committee") of two (2) or more non-employee Board members appointed
by the Board. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.
B. The Committee which shall act as Plan Administrator
(the "Plan Administrator") shall have full power and authority (subject to the
express provisions of the Plan) to establish such rules and regulations as it
may deem appropriate for the proper administration of the Discretionary Option
Grant Program and to make such determinations and interpretations concerning
such program and any outstanding option under Article Two as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties with an interest in any outstanding option under the
Plan.
C. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the express terms and conditions of
Article Three.
2.
<PAGE> 3
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate under Article Two
of the Plan shall be limited to the following:
(i) officers and other employees of the
Corporation (or its parent or subsidiary corporations) who render
services which contribute to the management, growth and financial
success of the Corporation (or any parent or subsidiary corporation);
(ii) non-employee members of the Board or
the non-employee members of the board of directors of any parent or
subsidiary corporation:
(iii) those consultants or independent
contractors who provide valuable services to the Corporation (or any
parent or subsidiary corporation).
B. Non-employee members of the Board shall also be
eligible to receive automatic option grants pursuant to the provisions of
Article Three (such individuals shall, for purposes of Articles Three and Four,
be referred to as "Eligible Directors").
C. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive discretionary option grants
under Article Two, the number of shares to be covered by each such grant,
whether the granted option is to be an incentive stock option ("Incentive
Option") which satisfies the requirements of Section 422 of the Internal
Revenue Code or a non-statutory option not intended to meet such requirements,
the time or times at which each such option is to become exercisable, and the
maximum term for which the option is to remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's common stock, par value
$0.01 per share ("Common Stock") shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The aggregate number of
shares available for issuance under the Plan from and after the Effective Date
shall not exceed 2,488,853 shares of Common Stock, subject to adjustment from
time to time in accordance with the provisions of this Section V. Such share
reserve includes (i) the initial number of shares reserved on the Effective
Date, including outstanding options granted under the 1989 Plan that were
incorporated into this Plan, (ii) a 500,000-share increase authorized by the
Board on March 29, 1994, and
3.
<PAGE> 4
approved by the stockholders on May 31, 1994, and (iii) an additional
500,000-share increase authorized by the Board on March 17, 1997, subject to
stockholder approval at the 1997 Annual Meeting. To the extent one or more
outstanding options under the 1989 Plan which have been incorporated into this
Plan are subsequently exercised, the number of shares issued with respect to
each such option shall reduce, on a share-for-share basis, the number of
shares available for issuance under this Plan.
B. The number of shares of Common Stock available for
issuance under the Plan shall automatically increase on the first day of
January each calendar year, beginning with the 1998 calendar year, by an amount
equal to two percent (2%) of the total number of shares of the Corporation's
Common Stock outstanding on December 31st of the immediately preceding calendar
year. All options granted on the basis of each such annual share increase
shall be non-statutory options under the federal tax laws.
C. The maximum number of shares available for issuance
under the Plan pursuant to the Automatic Option Grant Program in effect for
non-employee Board members pursuant to Article Three shall not exceed 150,000
shares of Common Stock, subject to adjustment from time to time in accordance
with the provisions of this Section V.
D. The maximum number of shares of Common Stock for
which any one participant in the Plan may be granted stock options and
separately exercisable stock appreciation rights over the term of the Plan
shall be limited to 850,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section V. For purposes of the
foregoing limitation, stock options and stock appreciation rights granted prior
to January 1, 1994 shall not be taken into account.
E. Should one or more outstanding options under this
Plan (including any outstanding options under the 1989 Plan incorporated into
this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section IV of Article Two of the Plan), the shares subject to the
portion of the option not so exercised shall be available for subsequent option
grant under the Plan. Shares subject to any option or portion thereof
surrendered or cancelled in accordance with Section V of Article Two and
Section III of Article Three of the Plan shall not be available for subsequent
option grant under the Plan. Should the exercise price of an outstanding
option under the Plan (including any option incorporated from the 1989 Plan) be
paid with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock issued to the
option holder.
4.
<PAGE> 5
F. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
number and/or class of securities issuable under the Automatic Option Grant
Program, (iii) the maximum number and/or class of securities issuable for which
any one individual may be granted stock options and separately exercisable
stock appreciation rights under the Plan after December 31, 1993, (iv) the
number and/or class of securities for which stock options are to be granted to
newly-elected or continuing non-employee Board members under the Automatic
Option Grant Program and (v) the number and/or class of securities and price
per share in effect under each outstanding option under the Plan (including
each outstanding option incorporated into this Plan from the 1989 Plan). The
purpose of such adjustments to the outstanding options shall be to preclude the
enlargement or dilution of rights and benefits under those options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
5.
<PAGE> 6
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non-statutory
options. Each option granted shall be evidenced by one or more instruments in
the form approved by the Plan Administrator. Each such instrument shall,
however, comply with the terms and conditions specified below, and each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.
A. Option Price.
1. The option price per share shall be fixed by
the Plan Administrator, but in no event shall the option price per share be
less than the fair market value per share of Common Stock on the date of the
option grant.
2. The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Section VI of
this Article Two and the instrument evidencing the grant, shall be payable in
one of the following alternative forms:
- cash or check made payable to the
Corporation's order;
- shares of Common Stock held by the optionee
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
fair market value on the Exercise Date (as such term is defined
below); or
- through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
instructions (I) to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased
shares plus all applicable federal and state income and employment
taxes required to be withheld by the Corporation in connection with
such purchase and (II) to the Corporation to deliver the certificates
for
6.
<PAGE> 7
the purchased shares directly to such brokerage firm in order to
complete the sale transaction.
For purposes of this Section I.A.2, the Exercise Date
shall be the date on which written notice of the option exercise is delivered
to the Corporation. Except to the extent the sale and remittance procedure is
used in connection with the exercise of the option, payment of the option price
for the purchased shares must accompany such notice.
3. The fair market value per share of Common
Stock on any relevant date under the Plan shall be determined in accordance
with the following provisions:
- If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
- If the Common Stock is not at the time listed
or admitted to trading on any national stock exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists on the Nasdaq National Market shall be
determinative of Fair Market Value.
B. Term and Exercise of Options.
Each option granted under this Article Two shall be
exercisable at such time or times, during such period, and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
instrument evidencing the option grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date.
7.
<PAGE> 8
C. Limited Transferability of Options. During the
lifetime of the optionee, Incentive Options shall be exercisable only by the
optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the optionee's death. However,
non-statutory options may, in connection with the optionee's estate plan, be
assigned in whole or in part during the optionee's lifetime to one or more
members of the optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
D. Termination of Service.
1. Except to the extent otherwise provided
pursuant to Section VII of this Article Two, the following provisions shall
govern the exercise period applicable to any options held by the optionee at
the time of cessation of Service or death.
- Should the optionee cease to remain in
Service for any reason other than death or permanent disability, then
the period for which each outstanding option held by such optionee is
to remain exercisable shall be limited to the three (3)-month period
following the date of such cessation of Service.
- In the event such Service terminates by
reason of permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), then the period for which each outstanding
option held by the optionee is to remain exercisable shall be limited
to the twelve (12)-month period following the date of such cessation
of Service.
- Should the optionee die while in Service or
during the three (3)-month period following his or her cessation of
Service, then the period for which each of his or her outstanding
options is to remain exercisable shall be limited to the twelve
(12)-month period following the date of the optionee's cessation of
Service. During such limited period, the option may be exercised by
the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and
distribution.
- Under no circumstances, however, shall any
option be exercisable after the specified expiration date of the
option term.
8.
<PAGE> 9
- Each such option shall, during such limited
exercise period, be exercisable for any or all of the shares for which
the option is exercisable on the date of the optionee's cessation of
Service. Upon the expiration of such limited exercise period or (if
earlier) upon the expiration of the option term, the option shall
terminate and cease to be exercisable.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to permit one or more options held by the
optionee under this Article Two to be exercised, during the limited period of
exercisability provided under Section I.D.1 above, not only with respect to the
number of shares for which each such option is exercisable at the time of the
optionee's cessation of Service but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had such cessation of Service not occurred.
- The Plan Administrator shall have full power
and authority to extend the period of time for which any option
granted under this Article Two is to remain exercisable following the
optionee's cessation of Service or death from the limited period in
effect under Section I.D.1 of this Article Two to such greater period
of time as the Plan Administrator shall deem appropriate; provided,
however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
3. For purposes of the foregoing provisions of
this Section I.D (and for all other purposes under the Plan):
- The optionee shall be deemed to remain in the
SERVICE of the Corporation for so long as such individual renders
services on a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a non-employee
member of the Board or an independent consultant or advisor.
- The optionee shall be considered to be an
EMPLOYEE for so long as such individual remains in the employ of the
Corporation or one or more of its parent or subsidiary corporations,
subject to the control and direction of the employer entity as to the
work to be performed and the manner and method of performance.
9.
<PAGE> 10
E. Stockholder Rights.
An optionee shall have no stockholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the option price for the purchased shares.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee under this Plan (or any
other option plan of the Corporation or its parent or subsidiary corporations)
may for the first time become exercisable as incentive stock options under the
federal tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds two or
more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options
as incentive stock options under the federal tax laws shall be applied on the
basis of the order in which such options are granted.
B. 10% Stockholder. If any individual to whom an
Incentive Option is granted is the owner of stock (as determined under Section
424(d) of the Internal Revenue Code) possessing 10% or more of the total
combined voting power of all classes of stock of the Corporation or any one of
its parent or subsidiary corporations ("10% Stockholder"), then the option
price per share shall not be less than one hundred and ten percent (110%) of
the fair market value per share of Common Stock on the grant date, and the
option term shall not exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of the Plan shall apply to all Incentive Options granted
hereunder.
III. CORPORATE TRANSACTION/CHANGES IN CONTROL
A. In the event of any Corporate Transaction or Change
in Control (as defined below), each option which is at the time outstanding
under this Article Two shall automatically accelerate so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction or Change in Control, respectively, become fully exercisable with
respect to the total number of shares of Common Stock at the time
10.
<PAGE> 11
subject to such option and may be exercised for all or any portion of such
shares. However, an outstanding option under this Article Two shall not so
accelerate upon a Corporate Transaction if and to the extent such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation or parent
thereof. The determination of comparability shall be made by the Plan
Administrator, and its determination shall be final and binding.
B. A "Corporate Transaction" shall mean any of the
following stockholder-approved transactions:
(a) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(b) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
C. For all purposes under the Plan, a "Change in
Control" shall mean a change in control of the Corporation of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Corporation is then subject to
such reporting requirement, other than a Corporate Transaction; provided that,
without limitation, a Change in Control shall be deemed to have occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other
entity, or any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Corporation representing
forty percent (40%) or more of the combined voting power of
the Corporation's then outstanding securities entitled to vote
in the election of directors of the Corporation, pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such
stockholders to accept; or
11.
<PAGE> 12
(ii) a change in the composition of the Board occurs
over any period of two (2) consecutive years or less such that
a majority of the Board ceases for any reason to be comprised
of individuals who either (A) have been Board members
continuously since the beginning of that period or (B) have
been elected or nominated for election as Board members during
such period by a vote of at least three-fourths (3/4) of the
Board members described in clause (A) who were still in office
at the time Board approved such election or nomination.
D. Upon the consummation of the Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company. Any options accelerated in connection with the Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
E. Each outstanding option under this Article Two which
is assumed in connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the option holder, in consummation
of such Corporate Transaction, had such person exercised the option immediately
prior to such Corporate Transaction. Appropriate adjustments shall also be
made to the option price payable per share, provided the aggregate option price
payable for such securities shall remain the same. In addition, the class and
number of securities available for issuance under the Plan following the
consummation of the Corporate Transaction shall be appropriately adjusted.
F. The grant of options under this Article Two shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
G. The exercisability as incentive stock options under
the federal tax laws of any options accelerated under this Section III in
connection with a Corporate Transaction or Change in Control shall remain
subject to the dollar limitation of Section II of this Article Two. To the
extent such dollar limitation is exceeded, the accelerated option shall be
exercisable as a non-statutory option under the federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under
12.
<PAGE> 13
the Plan covering the same or different numbers of shares of Common Stock but
having an option price per share not less than the fair market value of the
Common Stock on the new grant date (or one hundred ten percent (110%) of such
fair market value in the case of an Incentive Option granted to a 10%
Stockholder).
V. STOCK APPRECIATION RIGHTS
A. Each officer of the Corporation subject to the
short-swing profit restrictions of the federal securities laws shall be granted
limited stock appreciation rights in tandem with his or outstanding options
under this Article Two. Upon the occurrence of a Hostile Take-Over, each
outstanding option with such a limited stock appreciation right shall
automatically be cancelled, and the optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to the
cancelled option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable
for such shares. The cash distribution payable upon such cancellation shall be
made within five (5) days following the consummation of the Hostile Take-Over.
The Plan Administrator shall pre-approve, at the time the limited stock
appreciation right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.A.
No additional approval of the Plan Administrator or the Board shall be required
at the time of the actual option cancellation and cash distribution.
B. For purposes of Section V.A, the following
definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender
or exchange offer which the Board does not recommend the Corporation's
stockholders to accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the fair market value per share on the date of
cancellation, as determined pursuant to the valuation provisions of Section
I.A.3 of this Article Two, or (b) the highest reported price per share paid in
effecting such Hostile Take-Over. However, if the cancelled option is an
Incentive Option, the Take-Over Price shall not exceed the clause (a) price per
share.
13.
<PAGE> 14
C. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grant under the Plan.
VI. LOANS OR INSTALLMENT PAYMENTS
The Plan Administrator may assist any optionee (including any
officer) in the exercise of one or more outstanding options under this Article
Two, including the satisfaction of any federal and state income and employment
tax obligations arising therefrom, by (a) authorizing the extension of a loan
to such optionee from the Corporation or (b) permitting the optionee to pay the
option price for the purchased Common Stock in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) will be established by the Plan
Administrator in its sole discretion. Loans and installment payments may be
granted with or without security or collateral (other than to optionees who are
consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares), but the
maximum credit available to the optionee shall not exceed the sum of (i) the
aggregate option price (less par value) of the purchased shares plus (ii) any
federal and state income and employment tax liability incurred by the optionee
in connection with the exercise of the option.
14.
<PAGE> 15
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Article Three shall be limited to (i) those
individuals who are first elected or appointed as non-employee Board members on
or after the Effective Date, whether through appointment by the Board or
election by the Corporation's stockholders, provided they have not otherwise
been in the prior employ of the Corporation (or any parent or subsidiary
corporation) and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholder Meetings held while this
Automatic Grant Program remains in effect, commencing with the 1994 Annual
Meeting.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this
Article Three on the dates specified below:
(i) Each individual who first becomes a
non-employee Board member at any time after October 25, 1993, whether
through election at an Annual Stockholders Meeting or through
appointment by the Board, and who has not previously been in the
employ of the Corporation (or any parent or subsidiary corporation)
shall automatically be granted upon the terms and conditions of this
Article Three, at the time of such initial election or appointment, a
non-statutory stock option to purchase 10,000 shares of Common Stock.
A non-employee Board member who replaces a Board member shall not
receive an initial 10,000-share grant if both the new and former Board
member are affiliated with the same investment fund or similar entity.
(ii) On the date of each Annual
Stockholders Meeting held after the Effective Date, beginning with the
1994 Annual Stockholders Meeting, each individual who is to continue
to serve as a non-employee Board member shall automatically be granted
a non-statutory stock option to purchase 5,000 shares of Common Stock,
provided such individual did not receive a 10,000-share grant in the
same calendar year.
15.
<PAGE> 16
The 10,000-share limitation on the initial automatic option
grants and the 5,000-share limitation on periodic grants to be made to each
Eligible Director shall be subject to periodic adjustment pursuant to the
applicable provisions of paragraph V.E of Article One.
B. Exercise Price. The exercise price per share shall
be equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the automatic grant date.
C. Payment. The option price shall become immediately
due upon exercise of the option and shall be payable in one of the alternative
forms specified in Section I.A.2 of Article Two.
D. Option Term. Each automatic grant under this Article
Three shall have a maximum term of ten (10) years measured from the automatic
grant date.
E. Exercisability. Each automatic option grant for
10,000 or 5,000 shares shall become exercisable for the option shares one (1)
year after the date of grant, provided the Eligible Director remains a member
of the Board through such date. Each such option shall remain exercisable
until the expiration or sooner termination of the option term.
F. Limited Transferability. Each automatic grant under
this Article Three may, in connection with the optionee's estate plan, be
assigned in whole or in part during the optionee's lifetime to one or more
members of the optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior
to such assignment.
G. Effect of Termination of Board Membership.
1. Should the Eligible Director cease to be a
Board member for any reason (other than death or Permanent Disability (as
defined in Code Section 22(e)(3)) while holding an automatic option grant under
this Article Three, then he or she shall have a three (3)-month period
following the date of such cessation of Board membership in which to exercise
such option for any or all of the shares of Common Stock for which the option
is exercisable at the time the Eligible Director ceases service as a Board
member.
2. Should the Eligible Director cease to be a
Board member by reason of Permanent Disability while holding an automatic
option grant under this Article Three, then he or she shall have a six
(6)-month period following the date of such cessation
16.
<PAGE> 17
of Board membership in which to exercise such option for any or all of the
shares of Common Stock for which the option is exercisable at the time the
Eligible Director ceases service as a Board member.
3. Should the Eligible Director die while
serving as a Board member or during the three (3)-month period following his or
her cessation of Board service, then the option may subsequently be exercised,
for any or all of the shares of Common Stock for which the option is
exercisable at the time of the Eligible Director's cessation of Board
membership, by the personal representative of his or her estate or by the
person or persons to whom the option is transferred pursuant to the Eligible
Director's will or in accordance with the laws of descent and distribution.
Any such exercise must, however, occur within six (6) months after the date of
the Eligible Director's death.
4. In no event shall any automatic grant under
this Article Three remain exercisable after the specified expiration date of
the ten (10)-year option term. Upon the expiration of the applicable exercise
period in accordance with subparagraphs 1, 2 and 3 above or (if earlier) upon
the expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be exercisable.
H. Stockholder Rights. The holder of an automatic
option grant under this Article Three shall have no stockholder rights with
respect to any shares covered by such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions
of each automatic option grant shall be as set forth in the prototype Director
Automatic Grant Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. Each automatic option grant outstanding at the time
of a Corporate Transaction or a Change in Control shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for such Corporate Transaction or Change in Control, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for all or any portion of
such shares at any time prior to the expiration or sooner termination of the
option term. Upon the consummation of the Corporate Transaction, all automatic
option grants under this Article Three shall terminate and cease to be
outstanding.
17.
<PAGE> 18
B. Upon the occurrence of a Hostile Take-Over, each
outstanding automatic option grant made pursuant to the provisions of this
Article Three shall automatically be cancelled and the optionee shall in return
be entitled to a cash distribution from the Corporation calculated in
accordance with Section V.B of Article Two and payable at the time and in the
manner set forth in Section V.B of Article Two. Stockholder approval of this
March 17, 1997 restatement of the Plan shall constitute pre-approval of each
option subsequently granted under this Article Three with such a cancellation
provision and the subsequent cancellation of that option in accordance with the
terms of this Section III.B. No additional approval of the Board or any Plan
Administrator shall be required at the time of the actual option cancellation
and cash distribution.
C. The automatic option grants outstanding under this
Article Three shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
D. The shares of Common Stock subject to each option
cancelled in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
18.
<PAGE> 19
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Plan shall be subject to the satisfaction of all applicable federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and
upon such terms and conditions as it may deem appropriate (including the
applicable safe-harbor provisions of Rule 16b-3 of the Exchange Act) provide
any or all holders of outstanding option grants under Article Two with the
election to have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, one or more of such
shares with an aggregate fair market value equal to the designated percentage
(any multiple of 5% specified by the optionee) of the federal and state income
and employment taxes ("Taxes") incurred in connection with the acquisition of
such shares. In lieu of such direct withholding, one or more optionees may
also be granted the right to deliver shares of Common Stock to the Corporation
in satisfaction of such Taxes. The withheld or delivered shares shall be
valued at the Fair Market Value on the applicable determination date for such
Taxes.
III. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Corporation's 1989
Plan, became effective as of the October 25, 1993 Effective Date. The Plan was
subsequently amended and restated by the Board on December 15, 1993 with the
purpose of, among other provisions, deleting direct stock issuances and
renaming the Plan to the 1994 Stock Option Plan. On March 29, 1994 the Board
amended and restated the Plan to increase the number of shares of Common Stock
issuable thereunder by 500,000 shares and to impose a limitation on the maximum
number of shares of Common Stock for which any one participant in the Plan may
be granted stock options and separately exercisable stock appreciation rights
after
19.
<PAGE> 20
December 31, 1993. The 1994 restatement was approved by the Corporation's
stockholders in May 1994.
B. On March 17, 1997, the Board adopted amendments to
the Plan (the "1997 Amendment") to effect the following changes: (i) increase
the maximum number of shares of Common Stock available for issuance over the
term of the Plan by an additional 500,000 shares; (ii) implement an automatic
share increase feature pursuant to which the number of shares of Common Stock
available for issuance under the Plan will automatically increase on the first
day of January each year, beginning January 1, 1998, by two percent (2%) of the
total number of shares of Common Stock outstanding on the last day of December
in the immediately preceding year; (iii) increase the maximum number of shares
available for issuance under the Automatic Option Grant Program in effect under
the Plan by an additional 33,334 shares to 150,000 shares; (iv) impose a
specific limitation of 850,000 shares on the maximum number of shares for which
any one participant may be granted stock options and separately exercisable
stock appreciation rights in the aggregate under the 1994 Plan; (v) render the
non-employee Board members eligible to receive option grants under the
Discretionary Option Grant Program; (vi) remove certain restrictions on the
eligibility of non-employee Board members to serve as Plan Administrator;
and(vii) effect a series of additional changes to the provisions of the Plan
(including the stockholder approval requirements, the transferability of
non-statutory stock options and the elimination of the six (6)-month holding
period requirement as a condition to the exercise of stock appreciation rights)
in order to take advantage of the recent amendments to Rule 16b-3 of the
Securities and Exchange Commission which exempts certain officer and director
transactions under the 1993 Plan from the short-swing liability provisions of
the Federal securities laws. The 1997 Amendment is subject to stockholder
approval at the 1997 Annual Meeting, and no option grants made on the basis of
the 500,000-share increase shall become exercisable in whole or in part unless
and until the 1997 Amendment is approved by the stockholders. Should such
stockholder approval not be obtained at the 1997 Annual Meeting, then each
option grant made pursuant to the 500,000-share increase shall terminate and
cease to remain outstanding, and no further option grants shall be made on the
basis of that share increase. In addition, the automatic share increase
feature pursuant to which the share reserve under the Plan will automatically
increase on the first day of January each year will not be implemented.
Finally, the maximum number of shares set aside for issuance under the
Automatic Option Grant Program will remain limited to 116,666 shares, and the
non-employee Board members will not become eligible to participate in the
Discretionary Option Grant Program. However, the provisions of the Plan as in
effect immediately prior to the 1997 Amendment shall automatically be
reinstated, and option grants may thereafter continue to be made pursuant to
the reinstated provisions of the Plan. All option grants made prior to the
1997 Amendment shall remain outstanding in accordance with the terms and
conditions of the respective instruments evidencing those options, and nothing
in the 1997 Amendment shall be deemed to modify or in any way affect those
outstanding options or issuances.
20.
<PAGE> 21
B. Each option issued and outstanding under the 1989
Plan immediately prior to the Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such option
shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder
or their exercise of outstanding stock appreciation rights thereunder.
C. The Plan shall terminate upon the earlier of (i) July
27, 2003 or (ii) the date on which all shares available for issuance under the
Plan have been issued pursuant to the exercise of options granted under Article
Two. If the date of termination is determined under clause (i) above, then no
options outstanding on such date shall be affected by the termination of the
Plan, and such securities shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
D. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided each option granted is not to become
exercisable, in whole or in part, at any time prior to stockholder approval of
an amendment authorizing a sufficient increase in the number of shares issuable
under the Plan.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option hereunder, and the issuance of stock upon the exercise or surrender of
any such option shall be subject to the procurement by the Corporation of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the stock issued pursuant to
it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of federal and state securities
laws, including the filing and effectiveness of a Form S- 8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
21.
<PAGE> 22
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or Service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's employment or Service at any
time and for any reason, with or without cause.
VII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
optionee.
B. The provisions of the Plan shall be governed by the
laws of the state of California, as such laws are applied to contracts entered
into and performed in such state.
C. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
22.
<PAGE> 23
EXHIBIT A
Director Automatic Grant Agreement
23.
<PAGE> 1
EXHIBIT 99.5
INSITE VISION INCORPORATED
1994 STOCK OPTION PLAN
NON-EMPLOYEE DIRECTOR OPTION AGREEMENT
RECITALS
A. Under the Automatic Option Grant Program in effect under
the Corporation's 1994 Stock Option Plan (the "Plan"), the non-employee
members of the Corporation's Board of Directors (the "Board") will
automatically receive periodic option grants designed to reward them for
services they have rendered to the Corporation and to encourage them to
continue in the service of the Corporation.
B. Optionee is a non-employee member of the Board, and this
Agreement is executed pursuant to, and is intended to carry out the purposes
of, the Plan in connection with the automatic grant on this day of a stock
option to purchase shares of the Corporation's common stock ("Common Stock")
under Article Three of the Plan.
C. The granted option is intended to be a non-statutory
option which does not meet the requirements of Section 422 of the Internal
Revenue Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, the Corporation hereby grants to
Optionee, as of the automatic grant date (the "Grant Date") specified in the
accompanying Notice of Automatic Option Grant (the "Grant Notice"), a stock
option to purchase up to that number of shares of common stock (the "Option
Shares") as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the option price per
share (the "Option Price") specified in the Grant Notice, which is one hundred
percent (100%) of the fair market value of the Common Stock on the Grant Date.
2. OPTION TERM. This option shall have a term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the expiration date specified in the Grant Notice
("Expiration Date"), unless sooner terminated in accordance with Paragraph 5 or
6.
3. LIMITED TRANSFERABILITY. This option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
<PAGE> 2
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
4. EXERCISABILITY. This option shall become exercisable
for the Option Shares one (1) year after the Grant Date, provided Optionee
remains in Board service through such date. This option shall thereafter
remain so exercisable until the expiration or sooner termination of the option
term.
5. CESSATION OF BOARD SERVICE. Should Optionee's
service as a Board member cease while this option remains outstanding, then the
option term specified in Paragraph 2 shall terminate (and this option shall
cease to be exercisable) prior to the Expiration Date in accordance with the
following provisions:
(i) This option shall immediately terminate and
cease to be outstanding for any Option Shares for which the option is
not exercisable at the time of Optionee's cessation of Board service.
(ii) Should Optionee cease Board service (for any
reason other than Permanent Disability or death) while this option
remains outstanding, then the period for exercising this option shall
be reduced to a three (3)-month period commencing with the date of
such cessation of Board service. During such limited period of
exercisability, this option may not be exercised for more than the
number of Option Shares (if any) for which it is exercisable on the
date of Optionee's cessation of Board service. Upon the expiration of
such three (3)-month period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be exercisable.
(iii) Should Optionee cease Board service by reason
of Permanent Disability while this option is outstanding, then
Optionee shall have a period of six (6) months (commencing with the
date of such cessation of Board service) during which to exercise this
option for any or all of the Option Shares for which this option is
exercisable at the time of Optionee's cessation of Board service.
Upon the expiration of such six (6)-month period or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
exercisable. "Permanent Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
2.
<PAGE> 3
(iv) Should Optionee die while serving as a Board
member or during the three (3)-month period following Optionee's
cessation of Board service, then the personal representative of
Optionee's estate or the person or persons to whom this option is
transferred pursuant to Optionee's will or in accordance with the laws
of descent and distribution shall have the right to exercise the
option for any or all of the Option Shares for which this option is
exercisable at the time of Optionee's cessation of Board service (less
any Option Shares subsequently purchased by Optionee prior to death).
Such right shall lapse, and this option shall terminate and cease to
remain outstanding, upon the earlier of (A) the expiration of the six
(6)-month period measured from the date of Optionee's death or (B) the
Expiration Date.
6. ADJUSTMENT IN OPTION SHARES. In the event any change
is made to the Common Stock issuable under the Plan by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares, or other change affecting the outstanding Common Stock as a class
without receipt of consideration, then appropriate adjustments shall be made to
(i) the total number and/or class of Option Shares subject to this option and
(ii) the Option Price payable per share in order to reflect such change and
thereby preclude the dilution or enlargement of Optionee's rights and benefits
hereunder.
7. SPECIAL ACCELERATION OF OPTION.
A. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from those who held those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation,
the exercisability of this option shall, to the
extent the option is at such time outstanding but not otherwise fully
exercisable, automatically accelerate so that such option shall, immediately
prior to the specified effective date for the Corporate Transaction, become
fully exercisable for all of the Option Shares and may be exercised for all or
any portion of such shares.
3.
<PAGE> 4
B. This option, to the extent not previously exercised,
shall terminate upon the consummation of the Corporate Transaction and cease to
be outstanding, except to the extent assumed by the successor corporation (or
its parent company) in such Corporate Transaction.
C. This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise make changes
in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
8. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
A. In the event of any Change in Control (as defined
below), the exercisability of this option shall automatically accelerate so that
the option shall, immediately prior to the specified effective date for the
Change in Control, become fully exercisable for all of the Option Shares at the
time subject to this option and may be exercised for all or any portion of the
Option Shares at any time prior to the expiration or sooner termination of the
option term.
B. For all purposes under the Plan, a Change in Control
shall mean a change in control of the Corporation of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is then subject to such
reporting requirement; provided that, without limitation, a Change in Control
shall be deemed to have occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other
entity, or any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Corporation representing
forty percent (40%) or more of the combined voting power of
the Corporation's then outstanding securities entitled to vote
in the election of directors of the Corporation, pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such
stockholders to accept; or
(ii) a change in the composition of the Board occurs
over any period of two (2) consecutive years or less such that
a majority of the Board ceases for any reason to be comprised
of individuals who either (A) have been Board members
continuously since the beginning of that period or (B) have
been elected or nominated for election as Board members during
such period by
4.
<PAGE> 5
a vote of at least three-fourths (3/4) of the Board members
described in clause (A) who were still in office at the time
Board approved such election or nomination.
C. In the event there should occur a Hostile Take-Over
(as defined below), then this option shall be automatically cancelled on the
fifth (5th) business day following such Hostile Take-Over in exchange for a
cash distribution from the Corporation in an amount equal to the excess of (I)
the Take-Over Price of all the Option Shares at the time subject to the
cancelled option, over (II) the aggregate Option Price payable for such shares.
Stockholder approval of the March 17, 1997 restatement of the Plan at the 1997
Annual Meeting shall constitute pre-approval of the cancellation of this option
in accordance with the terms of this Paragraph 8.C. No additional approval of
the Board or any Plan Administrator shall be required at the time of the actual
option cancellation and cash distribution.
D. Definitions:
A "Hostile Take-Over" shall be deemed to occur in the
event any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer which the Board does not recommend the Corporation's
stockholders to accept.
The "Take-Over Price" per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on the
date of cancellation (as determined in accordance with the provisions
of Paragraph 9.B below) or (b) the highest reported price per share
paid in effecting such Hostile Take-Over.
E. This Agreement shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death,
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
5.
<PAGE> 6
(i) Execute and deliver to the Secretary of the
Corporation a written notice of exercise in substantially the form of Exhibit I
attached hereto in which there is specified the number of Option Shares for
which the option is exercised.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternative forms:
(a) Cash or check made payable to the Corporation's
order;
(b) Shares of Common Stock held by Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date (as such terms are defined below); or
(c) Through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Option Price payable
for the purchased shares plus all applicable federal and state income and
employment taxes required to be withheld by the Corporation in connection with
such purchase and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale
transaction; or
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
B. For purposes of this Agreement the Exercise Date
shall be the date on which the Exercise Notice shall have been delivered to the
Corporation. Except to the extent the sale and remittance procedure specified
in subparagraph (ii)(c) of paragraph A above may be utilized to exercise this
option, payment of the Option Price for the purchased shares must accompany
such notice. For all valuation purposes under this Agreement, the Fair Market
Value per share of Common Stock on any relevant date shall be the closing
selling price per share of Common Stock on the date in question on the Nasdaq
National Market, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which
such quotation exists on the Nasdaq National Market.
6.
<PAGE> 7
C. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
Option Shares purchased and paid for in accordance herewith.
D. In no event may this option be exercised for any
fractional shares.
10. STOCKHOLDER RIGHTS. The holder of this option
shall not have any of the rights of a stockholder with respect to the Option
Shares until such individual shall have exercised this option, paid the Option
Price for the purchased shares and been issued one or more certificates for the
purchased shares.
11. NO IMPAIRMENT OF RIGHTS. Nothing in this Agreement
shall be construed or interpreted so as to affect adversely or otherwise impair
the right of the Corporation or the stockholders to remove Optionee from Board
service at any time in accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on which
shares of the Corporation's Common Stock may be listed at the time of such
exercise and issuance.
B. In connection with the exercise of this option,
Optionee shall execute and deliver to the Corporation such representations in
writing as may be requested by the Corporation in order for it to comply with
the applicable requirements of federal and state securities laws.
13. SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraph 3 or 7, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of Optionee and the successors and
assigns of the Corporation.
14. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall
be void with respect to such excess shares unless stockholder approval of an
amendment sufficiently increasing the number of shares
7.
<PAGE> 8
of Common Stock issuable under the Plan is obtained in accordance with the
provisions of Article Four, Section III of the Plan.
B. The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. However, the Corporation shall use its best efforts to
obtain all such approvals.
15. NOTICES. Any notice required to be given or
delivered to the Corporation under the terms of this Agreement shall be in
writing and addressed to the Corporation in care of the Corporate Secretary at
the Corporate Offices at 965 Atlantic Avenue, Alameda, California 94501. Any
notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature line
on the Grant Notice. All notices shall be deemed to have been given or
delivered upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the
option evidenced hereby are made and granted pursuant to the Plan and are in
all respects limited by and subject to the express terms and provisions of the
Plan. The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California without resort to that
state's conflict-of-laws rules.
8.
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify InSite Vision Incorporated (the "Corporation")
that I elect to purchase _________ shares of the Corporation's Common Stock
(the "Purchased Shares") pursuant to that certain option (the "Option") granted
to me on ________________, 199__ to purchase up to __________ shares of such
Common Stock at an option price of $_________ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall pay to the Corporation the Option Price
for the Purchased Shares in accordance with the provisions of my agreement with
the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
___________________________ __________________________________
Date Optionee
Address: ______________________
______________________
Print name in exact manner
it is to appear on the
stock certificate:
______________________
______________________
Address to which certificate
is to be sent, if different
from address above:
______________________
______________________
Social Security Number: ______________________
