<PAGE> 1
As filed with the Securities and Exchange Commission on July 28, 1998
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)
INSITE VISION INCORPORATED
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 of
Title of Securities to be Amount to be Offering Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
==============================================================================================================
<S> <C> <C> <C> <C>
Common Stock 265,521 shares $3.84375 $1,020,596.34 $301.08
$0.01 par value
==============================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the InSite Vision Incorporated 1994 Stock
Option Plan by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the Registrant's receipt of
consideration which results in an increase in the number of the outstanding
shares of the Registrant's 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 the Registrant's Common Stock on July
24, 1998 as reported on the American Stock Exchange.
<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, 1997 filed with the Commission on February 6,
1998, pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act");
(b) The Registrant's Quarterly Report on 10-Q for the fiscal quarter
ended March 31, 1998 filed with the Commission on May 14, 1998
pursuant to Section 13 of the 1934 Act; and
(c) The Registrant's Registration Statements on Forms 8-A, No.
00-12308 filed with the Commission on August 27, 1993 and No.
001-14207 filed with the Commission on June 8, 1998, which
describe 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 1934 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, the directors shall not be liable for monetary damages
for breach of their fiduciary duties as directors to the Registrant and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the fiduciary duties of the directors, 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 such 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
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to Registrant's
Registration Statements on Form 8-A No. 0-12308 and No. 001-14207, including the exhibits
thereto, 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 InSite Vision Incorporated 1994 Stock Option Plan (as amended and restated December 15,
1997).
99.2* Form of Notice of Grant of Stock Option and Stock Option Agreement.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary Termination Following Corporate
Transaction).
99.5* Form of Addendum to Stock Option Agreement (Special Tax Elections).
99.6* Form of Addendum to Stock Option Agreement (Limited Stock Appreciation Right).
99.7* Form of Notice of Automatic Option Grant and Non-Employee Director Option Agreement.
99.8 Form of Non-Employee Director Stock Option Agreement.
</TABLE>
* Exhibits 99.2, 99.5, 99.6 and 99.7 are incorporated herein by reference to
Exhibits 99.2, 99.3, 99.4 and 99.5, respectively, of Registrant's Registration
Statement No. 33-75268 on Form S-8, filed with the Commission on February 14,
1994.
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 1934 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
II-2.
<PAGE> 4
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.
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 1934 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 28th day
of July, 1998.
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
Securities and Exchange 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 and Chief Executive July 28, 1998
S. Kumar Chandrasekaran, Ph.D. Officer (Principal Executive Officer)
</TABLE>
II-4.
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Michael D. Baer
- ----------------------------- Chief Financial Officer July 28, 1998
Michael D. Baer
/s Mitchell H. Friedlander
- ----------------------------- Director July 28, 1998
Mitchell H. Friedlander, M.D.
/s/ John E. Lucas
- ----------------------------- Director July 28, 1998
John E. Lucas
/s/ John L. Mattana
- ----------------------------- Director July 28, 1998
John L. Mattana
/s/ Anders P. Wiklund
- ----------------------------- Director July 28, 1998
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 Statements on Form 8-A No. 0-12308 and No. 001-14207, including the exhibits
thereto, 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 InSite Vision Incorporated 1994 Stock Option Plan (as amended and restated December 15,
1997).
99.2* Form of Notice of Grant of Stock Option and Stock Option Agreement.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary Termination Following Corporate
Transaction).
99.5* Form of Addendum to Stock Option Agreement (Special Tax Elections).
99.6* Form of Addendum to Stock Option Agreement (Limited Stock Appreciation Right).
99.7* Form of Notice of Automatic Option Grant and Non-Employee Director Option Agreement.
99.8 Form of Non-Employee Director Stock Option Agreement.
</TABLE>
* Exhibits 99.2, 99.5, 99.6 and 99.7 are incorporated herein by reference to
Exhibits 99.2, 99.3, 99.4 and 99.5, respectively, of Registrant's Registration
Statement No. 33-75268 on Form S-8, filed with the Commission on February 14,
1994.
<PAGE> 1
July 28, 1998
EXHIBIT 5.1
OPINION OF BROBECK, PHLEGER & HARRISON LLP
InSite Vision Incorporated
965 Atlantic Avenue
Alameda, CA 94501
Re: INSITE VISION INCORPORATED (THE "COMPANY")
REGISTRATION STATEMENT FOR OFFERING OF 265,521 SHARES OF COMMON STOCK
Ladies and Gentlemen:
We have acted as counsel to InSite Vision Incorporated, a Delaware
corporation (the "Company") in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of
265,521 shares of common stock (the "Shares") and related stock options for
issuance under the Company's 1994 Stock Option Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plan. Based on such review, we are of the opinion that, if, as an when the
Shares have been issued and sold (and the consideration therefor received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan and in accordance with the Registration Statement, or (b) duly authorized
direct stock issuances in accordance with the Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
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 30, 1998 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, 1997, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Walnut Creek, California
July 28, 1998
<PAGE> 1
EXHIBIT 99.1
INSITE VISION INCORPORATED
1994 STOCK OPTION PLAN
(Amended and Restated as of December 15, 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 of the Plan is effective as of December 15, 1997.
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 have been incorporated into this Plan and are
treated as outstanding options under this Plan. However, each outstanding option
so incorporated continues 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.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate under Article Two of the Plan
shall be limited to the following:
2
<PAGE> 3
(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, and 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
2,754,254 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 for issuance under the Plan on the
Effective Date, including the shares reserved for issuance under outstanding
options granted under the 1989 Plan and incorporated into this Plan, (ii) the
500,000-share increase authorized by the Board on March 29, 1994 and approved by
the stockholders on May 31, 1994, (iii) an additional 500,000-share increase
authorized by the Board on March 17, 1997 and approved by the stockholders on
June 2, 1997 and (iv) the 265,521 share increase effected on January 2, 1998
pursuant to the automatic annual share increase provisions of the Plan. 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
3
<PAGE> 4
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 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.
D. 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.
E. 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 for which any one individual may be granted stock options
and separately exercisable stock appreciation rights under the Plan after
December 31, 1993, (iii) 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 (iv) 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.
4
<PAGE> 5
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 the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
5
<PAGE> 6
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. 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.
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
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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.
- 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
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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 also 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.
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.
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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 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:
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(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 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 the 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
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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 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 her 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.
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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 grants 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.
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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 on one or
more automatic annual option grant dates below while this Automatic Grant
Program remains in effect.
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. However, the grants specified in subparagraphs (ii)
and (iii) below shall be subject to stockholder approval of this December 15,
1997 restatement at the 1998 Annual Meeting.
(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 December 15, 1997, each individual serving as
a non-employee Board member shall automatically be granted a
non-statutory stock option to purchase 10,000 shares of Common
Stock.
(iii) On the date of the first Board meeting in
December each year, beginning December 1998, each individual
continuing to serve as a non-employee Board member shall
automatically be granted a non-statutory stock option to
purchase 10,000 shares of Common Stock, provided such
individual did not receive his or her initial option grant
under this Article III within the preceding six
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(6) months. In the event there is no Board meeting in December
of any year, then the automatic option grant for that year
shall be made on December 15th: If December 15th in any year
is not a day on which the New York Stock Exchange is open for
business (a "Trading Day"), then the grant for that year shall
be made on the immediately succeeding Trading Day.
The 10,000-share limitation applicable to each initial
automatic option grant and each annual automatic option grant per eligible
non-employee Board member shall be subject to periodic adjustment pursuant to
the applicable provisions of paragraph V.E of Article One.
Stockholder approval of this December 15, 1997 restatement of
the Plan shall constitute pre-approval of each option granted on or after that
date pursuant to the provisions of this Article Three and the subsequent
exercise of that option in accordance with the terms and conditions of this
Article Three.
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 under this Article Three
shall become exercisable for the option shares one (1) year after the date of
grant, provided the optionee 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 optionee 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
optionee ceases service as a Board member.
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2. Should the optionee 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 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 optionee ceases service as a Board member.
3. Should the optionee 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
optionee'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.
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
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in Section V.B of Article Two. Stockholder approval of this December 15, 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.
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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 (the "1994 Restatement") 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 December 31, 1993. The 1994 Restatement was approved
by the Corporation's stockholders in May 1994. On March 17, 1997, the Board
adopted amendments to the Plan (the "1997 Restatement") 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
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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 Restatement was approved by the
Corporation's stockholders on June 2, 1997.
B. On December 15, 1997, the Board adopted a series of
amendments (the "1997 Amendment") to the Plan which effect the following changes
to the Automatic Option Grant Program for non-employee Board members under
Article Three of the Plan: (i) increase the number of shares of Common Stock for
which options are to be granted annually (the "Annual Automatic Grant") to each
non-employee Board member from five thousand (5,000) shares to ten thousand
(10,000) shares; (ii) change the date on which such Annual Automatic Grants are
to be made to the non-employee Board members from the date of the Annual
Stockholders Meeting to the date of the first Board meeting in December each
year (commencing December 1997); provided, however, that if there is no Board
meeting in December of any year, the Annual Automatic Grants for that year shall
be made on December 15 or, if December 15th is not a Trading Day, the
immediately succeeding Trading Day; (iii) authorize and effect an Annual
Automatic Grant for each individual serving as a non-employee Board member on
December 15, 1997, whether or not that individual received his or her initial
automatic grant within the preceding six (6) months; (iv) provide that after
December 15, 1997, each non-employee Board member shall be eligible to receive
an Automatic Option Grant in December of any year only if that individual did
not receive his or her initial automatic grant within the preceding six (6)
months; and (v) eliminate the provisions of the Plan which impose a
150,000-share limitation on the maximum number of shares issuable under the
Automatic Option Grant Program. The 1997 Amendment is subject to stockholder
approval at the 1998 Annual Meeting. 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.
C. 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
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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.
D. 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.
E. 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. 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.
V. 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.
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.
19
<PAGE> 20
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.
20
<PAGE> 21
EXHIBIT A
Director Automatic Grant Agreement
21
<PAGE> 1
EXHIBIT 99.3
INSITE VISION INCORPORATED
1994 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. InSite Vision Incorporated (the "Corporation") has adopted the
Corporation's 1994 Stock Option Plan (the "Plan") for the purpose of attracting
and retaining the services of selected employees (including officers and
directors), non-employee members of the Board of Directors and consultants and
other independent contractors who contribute to the financial success of the
Corporation or its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services
to the Corporation or its parent or subsidiary corporations, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the Corporation's grant of a stock option to Optionee.
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 grant date (the "Grant Date") specified in the accompanying Notice of Grant
of Stock Option (the "Grant Notice"), a stock option to purchase up to that
number of shares of the Corporation's 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.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5 or 7.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall become exercisable for the
Option Shares in one or more installments in accordance with the exercise
schedule specified in the Grant
<PAGE> 2
Notice. As the option becomes exercisable for the Option Shares in one or more
such installments, the installments shall accumulate and the option shall remain
so exercisable until the Expiration Date or sooner termination of the option
term under Paragraph 5 or Paragraph 7 of this Agreement. In no event shall this
option become exercisable for any additional Option Shares following Optionee's
cessation of Service.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should one of the following provisions become applicable:
(i) This option shall immediately terminate and cease to be
outstanding for any Option Shares for which it is not exercisable at the time of
Optionee's cessation of Service.
(ii) Should Optionee cease Service for any reason other than death
or permanent disability while this option remains outstanding, then Optionee
shall have a three (3)-month period measured from the date of such cessation of
Service in which to exercise this option for any or all of the Option Shares for
which this option is exercisable at the time of such cessation of Service. Upon
the expiration of such three (3)-month period or (if earlier) upon the specified
Expiration Date of the option term, this option shall terminate and cease to be
outstanding.
(iii) Should Optionee die while in Service or within the three (3)-
month period following his or her cessation of 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 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 twelve (12)- month period measured from the date of Optionee's
death or (B) the Expiration Date.
(iv) Should Optionee become permanently disabled and cease by reason
thereof to remain in Service at any time during the option term, then Optionee
shall have a twelve (12) month period commencing with the date of such cessation
of Service in which to exercise this option for any or all of the Option Shares
for which this option is exercisable at the time of such cessation of Service.
Upon the expiration of such limited period of exercisability or (if earlier)
upon the Expiration Date, this option shall terminate and cease to be
outstanding.
2.
<PAGE> 3
(v) Should (A) Optionee's Service be terminated for misconduct
(including, but not limited to, any act of dishonesty, willful misconduct, fraud
or embezzlement or any unauthorized disclosure of confidential information or
trade secrets) or (B) Optionee make any unauthorized use or disclosure of
confidential information or trade secrets of the Corporation or any parent or
subsidiary, then in any such event this option shall terminate immediately and
cease to be outstanding.
(vi) During the limited post-Service period of exercisability
determined pursuant to subparagraphs (ii) through (iv) above, this option may
not be exercised in the aggregate for more than the number of Option Shares (if
any) for which this option is, at the time of Optionee's cessation of Service,
exercisable in accordance with either the normal exercise provisions specified
in the Grant Notice or the special acceleration provisions of Paragraph 7 of
this Agreement.
(vii) For purposes of this Agreement, the following definitions shall
be in effect:
(a) Optionee shall be deemed to remain in SERVICE for so long as
such individual renders services on a periodic basis to the Corporation (or any
parent or subsidiary) in the capacity of an Employee, a non-employee member of
the board of directors or an independent consultant or advisor.
(b) Optionee shall be considered to be an EMPLOYEE for so long as
such individual remains in the employ of the Corporation or any parent or
subsidiary, subject to the control and direction of the employer entity not only
as to the work to be performed but also as to the manner and method of
performance.
(c) Optionee shall be deemed to be PERMANENTLY DISABLED and to
have incurred a PERMANENT DISABILITY if Optionee is unable to engage in any
substantial gainful activity by reason of any medically-determinable physical or
mental impairment 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.
(d) A corporation shall be considered to be a SUBSIDIARY of the
Corporation if it is a member of an unbroken chain of corporations beginning
with the Corporation, provided each such corporation in the chain (other than
the last corporation) owns, at the time of 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.
(e) A corporation shall be considered to be a PARENT of the
Corporation if it is a member of an unbroken chain ending with the Corporation,
provided each such corporation in the chain (other than the Corporation) owns,
at
3.
<PAGE> 4
the time of 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.
(f) A LEAVE OF ABSENCE which has been authorized by statute or by
the Plan Administrator in writing shall not constitute a cessation of Optionee's
Service, provided Optionee recommences Service on or prior to the authorized
expiration date of such leave.
6. ADJUSTMENT IN OPTION SHARES.
A. 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.
B. To the extent this option is to be assumed in connection with
any Corporate Transaction (as defined below) or is otherwise to continue in
effect, the option shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable to Optionee, in consummation of such
Corporate Transaction, had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Option Price payable per share, provided the aggregate Option Price payable
hereunder shall remain the same.
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.
this option shall, to the extent outstanding at such time but not otherwise
fully exercisable, automatically accelerate so that such option shall,
immediately prior to the specified effective date
4.
<PAGE> 5
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. No such
acceleration of this option, however, shall occur if and to the extent the
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, binding and conclusive.
B. In the event of a change in control (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, effected through either of the following transactions:
(1) 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 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 which the
Board does not recommend the Corporation's stockholders to
accept; or
(2) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the
Board and any new members of the Board, whose election by the
Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least three-quarters
(3/4) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof,
this option, to the extent outstanding at such time but not otherwise fully
exercisable, shall automatically accelerate so that such option shall,
immediately prior to the specified effective date for the Change in Control,
become fully exercisable for all the Option Shares at the time subject to such
option and may be exercised for all or any portion of such shares.
C. The portion of this option accelerated in connection with any
Corporate Transaction or Change in Control shall remain exercisable as an
incentive stock option under the Federal tax laws (if this option is designated
as such in the Grant Notice) only to the extent the applicable dollar limitation
of Paragraph 17 is not exceeded in the calendar year of such Corporate
Transaction or Change in Control.
5.
<PAGE> 6
D. This option, to the extent not previously exercised, shall
terminate upon the consummation of the Corporate Transaction and cease to be
outstanding, unless it is expressly assumed by the successor corporation or
parent thereof. Following a Change in Control, this option shall remain fully
exercisable until the expiration or sooner termination of the option term.
E. 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. 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:
(i) Execute and deliver to the Secretary of the Corporation a
written notice of exercise in 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:
(1) Cash or check made payable to the Corporation's order;
(2) 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
(3) Through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written
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
(4) Payment may also be made in any other form which the Plan
Administrator may, in its discretion, approve at the time of exercise.
6.
<PAGE> 7
(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 written notice of the exercise of the option is delivered to the
Corporation. Except to the extent the sale and remittance procedure of clause 3
above is utilized for the exercise of the 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 American Stock Exchange. If there is no such
reported price on the American Stock Exchange, 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.
C. As soon as practical after receipt of the Exercise Notice, the
Corporation shall mail or deliver to Optionee or to the other person or persons
exercising this option a certificate or certificates representing the purchased
Option Shares.
D. In no event may this option be exercised for any fractional
shares.
9. 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.
10. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon Optionee any right to continue in the service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) for any period of time or interfere with or
otherwise restrict in any way the rights of the Corporation (or any parent or
subsidiary corporation of the Corporation employing or retaining Optionee) or
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason whatsoever, with or without cause.
11. 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.
7.
<PAGE> 8
12. 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.
13. 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 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.
14. 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.
15. CONSTRUCTION. 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. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. 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.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is an incentive stock option as specified in the Grant
Notice, the following terms and conditions shall also apply to the grant:
8.
<PAGE> 9
A. This option shall cease to qualify for favorable tax treatment
as an incentive stock option under the federal tax laws if (and to the extent)
this option is exercised for one or more Option Shares: (i) more than three (3)
months after the date Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date Optionee ceases to be an Employee by reason of
permanent disability.
B. No installment under this option (whether annual or monthly)
shall qualify for favorable tax treatment as an incentive stock option under the
federal tax laws if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder will, when added to the aggregate fair
market value (determined as of the respective date or dates of grant) of the
Common Stock for which this option or one or more other incentive stock options
granted to Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any Parent or Subsidiary corporations) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
C. Should the exercisability of this option be accelerated upon a
Corporate Transaction or Change in Control in accordance with Paragraph 7, then
this option shall qualify for favorable tax treatment as an incentive stock
option under the federal tax laws only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock for
which this option or one or more other incentive stock options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any parent or subsidiary corporations) first become
exercisable during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate.
18. WITHHOLDING TAXES. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of any federal, state or local income tax
withholding requirements and federal social security employee tax requirements
applicable to the exercise of this option.
9.
<PAGE> 10
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: ____________________________________
<PAGE> 1
EXHIBIT 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated ____________
(the "Option Agreement") by and between InSite Vision Incorporated (the
"Corporation") and ___________ ("Optionee") evidencing the stock option (the
"Option") granted on such date to Optionee under the terms of the Corporation's
1994 Stock Option Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. Should there occur an Involuntary Termination of Optionee's
Service within twelve (12) months following a Corporate Transaction in which the
option is 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, then this Option, to the extent such
Option is at the time outstanding but not otherwise fully exercisable, shall
automatically accelerate so that this Option shall immediately become
exercisable for all the Option Shares at the time subject to the Option and may
be exercised for any or all of those shares as fully vested shares. This Option
as so accelerated shall remain exercisable until the earlier of (i) the
Expiration Date or (ii) the sooner termination of the Option under Paragraph 5
of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall
be in effect:
CORPORATE TRANSACTION shall mean any of the following
stockholder-approved transactions:
- 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
- the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
INVOLUNTARY TERMINATION shall mean the termination of the
Optionee's Service which occurs by reason of:
<PAGE> 2
(i) the Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) the Optionee's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and target
bonus under any incentive performance plan) by more than fifteen percent
(15%) or (C) a relocation of the Optionee's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the Optionee's
consent.
MISCONDUCT shall mean the Optionee's commission of any act of
fraud, embezzlement or dishonesty, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by the Optionee which
adversely affects the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
the Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).
IN WITNESS WHEREOF, InSite Vision Incorporated has caused this
Addendum to be executed by its duly-authorized officer, and Optionee has
executed this Addendum, all as of the Effective Date specified below.
INSITE VISION INCORPORATED
By:_________________________________
Title:______________________________
____________________________________
OPTIONEE
EFFECTIVE DATE: _______________, 199__
2.
<PAGE> 1
EXHIBIT 99.8
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
<PAGE> 2
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. Should Optionee die while holding this option, then this
option may be exercised by the personal representative of the 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.
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 holding this option, 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.
2.
<PAGE> 3
"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.
(iv) Should Optionee die while serving as a Board member or
during the three (3)-month period following Optionee's cessation of
Board service and hold this option at the time of his or her death, 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,
3.
<PAGE> 4
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.
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
4.
<PAGE> 5
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 the
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 December 15, 1997 restatement of the Plan at the
1998 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 American Stock Exchange. 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 American Stock Exchange.
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.
6.
<PAGE> 7
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 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.
7.
<PAGE> 8
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
Ten Thousand (10,000) 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: ____________________________________
