As filed with the Securities and Exchange Commission on September 23, 1998
Registration No. 333-________________
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ENDOREX CORP.
(Exact name of issuer as specified in its charter)
Delaware 41-1505029
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
900 North Shore Drive, Lake Bluff, Illinois 60044
(Address of principal executive offices) (Zip Code)
ENDOREX CORP.
AMENDED AND RESTATED
1995 OMNIBUS INCENTIVE PLAN
(Full title of the plan)
DAVID G. FRANCKOWIAK
Vice President, Finance and Administration
ENDOREX CORP.
900 North Shore Drive, Lake Bluff, Illinois 60044
(Name and address of agent for service)
(847) 604-7555
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
=============================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price Fee
Amended and Restated 1995
Omnibus Incentive Plan
Common Stock: 2,000,000 $2.50 $5,000,000.00 $1,475.00
=============================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Amended and Restated 1995
Omnibus Incentive Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
outstanding shares of Common Stock of Endorex Corp.
(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 closing price per
share of Common Stock of Endorex Corp. on September 22, 1998 as reported by
the American Stock Exchange.
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
Endorex Corp.(the "Registrant") hereby incorporates by reference into
this Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997, as filed with the SEC on March 27, 1998, as amended by
Forms 10-KSB/A, filed with the SEC on April 17, 1998, July 30, 1998 and
August 4, 1998.
(b) The Registrant's Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 1998 and June 30, 1998, filed with the SEC
on May 15, 1998 and August 14, 1998, respectively, and any amendments
thereto.
(c) The Registrant's Registration Statement No. 000-16929 on Form 8-A filed
with the SEC on July 8, 1992 pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in which there is
described the terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 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 also is 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 Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Article Thirteenth of the Company's Certificate of Incorporation, as
amended, and Article VII of the Company's By-laws provide that the Company
may indemnify each current and former director, officer, and any employee or
agent of the Company, his or her heirs, executors, and administrators,
against expenses reasonably incurred or any amounts paid by him or her in
connection with any action, suit, or proceeding to which he or she may be
made a party by reason of being or having been a director, officer, employee
or agent of the corporation to the fullest extent permitted by the Delaware
General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
Reference is made to Section 145 of the Delaware General Corporation Law
as such Section pertains to indemnification matters.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
Number Exhibit
====== =======
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-16929 on Form 8-A which
is incorporated herein by reference pursuant to Item 3(c).
5.0 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
No. 5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Amended and Restated 1995 Omnibus Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.5 Form of Addendum to Stock Option Agreement (Involuntary Termination
Following Corporate Transaction/Change in Control).
99.6 Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7 Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8 Form of Automatic Stock Option Agreement.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by
Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this 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
this Registration Statement and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that 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 this Registration Statement;
(2) that for the purpose of determining any liability under the 1933 Act each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof; and (3) to remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of the Registrant's Amended and Restated 1995
Omnibus Incentive 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 into this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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 foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the SEC, 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.
<PAGE>
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 Village of Lake Bluff, State of Illinois,
on this 23rd day of September, 1998.
ENDOREX CORP.
By: /s/ Michael S. Rosen
Michael S. Rosen
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Endorex Corp., a Delaware
corporation, do hereby constitute and appoint Michael S. Rosen and/or David
G. Franckowiak, the lawful attorneys-in-fact and agents with full power and
authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents determine 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 the undersigned hereby ratifies and confirms that
said attorneys and agents 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.
Signature Title Date
President, Chief Executive September 11, 1998
/s/ Michael S. Rosen Officer and Director
Vice President, Finance and September 11, 1998
/s/ David G. Franckowiak Administration(Principal
Financial and Accounting Officer)
/s/ Richard Dunning Director September 11, 1998
/s/ Steve H. Kanzer Director September 11, 1998
/s/ Paul D. Rubin Director September 11, 1998
/s/ H. Laurence Shaw Director September 11, 1998
/s/ Kenneth Tempero Director September 11, 1998
/s/ Steven Thornton Director September 11, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
ENDOREX CORP.
EXHIBIT INDEX
=============
Number Exhibit
====== =======
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-16929 on Form 8-A which
is incorporated herein by reference pursuant to Item 3(c).
5.0 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
No. 5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Amended and Restated 1995 Omnibus Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.5 Form of Addendum to Stock Option Agreement (Involuntary Termination
Following Corporate Transaction/Change in Control).
99.6 Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7 Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8 Form of Automatic Stock Option Agreement.
EXHIBIT 5.0
September 21, 1998
Endorex Corp.
900 North Shore Drive
Lake Bluff, Illinois 60044
Re: Registration Statement for Offering of
2,000,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 2,000,000 shares
of the Common Stock of Endorex Corp. (the "Corporation") issuable under the
Corporation's Amended and Restated 1995 Omnibus Incentive Plan. We advise
you that, in our opinion, when such shares have been issued and sold pursuant
to the applicable provisions of the Amended and Restated 1995 Omnibus
Incentive Plan and in accordance with the Registration Statement, such shares
will be duly authorized, validly issued, fully paid and non-assessable shares
of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Endorex Corp. on Form S-8 of our report dated March 6, 1998, on our
audits of the consolidated financial period from February 1, 1996 through
December 31, 1996 and the period cumulative from inception (February 15, 1985)
to December 31, 1997.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
September 23, 1998
ENDOREX CORPORATION
AMENDED AND RESTATED 1995 OMNIBUS INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This Amended and Restated 1995 Omnibus Incentive Plan is
intended to promote the interests of Endorex Corporation, a Delaware
corporation, by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
(i) the Discretionary Option
Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
(ii) the Salary Investment Option
Grant Program under which eligible employees may elect to
have a portion of their base salary invested each year in
options to purchase shares of Common Stock,
(iii) the Automatic Option Grant
Program under which eligible non-employee Board members
shall automatically receive options at periodic intervals to
purchase shares of Common Stock, and
(iv) the Director Fee Option Grant
Program under which non-employee Board members may
elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.
B. The provisions of Articles One and Six shall apply to
all equity programs under the Plan and shall accordingly govern the interests
of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Board shall have the authority to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders but
may delegate such authority in whole or in part to the Primary Committee.
The Board or the Primary Committee shall have sole and exclusive authority
to exercise all discretionary functions under the Salary Investment Option
Grant Program.
B. Administration of the Discretionary Option Grant
Program with respect to all other persons eligible to participate in that
program may, at the Board's discretion, be vested in the Primary Committee
or a Secondary Committee, or the Board may retain the power to administer
that program with respect to all such persons.
C. Members of the Primary Committee or any
Secondary Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may
also at any time terminate the functions of any Secondary Committee and
reassume all powers and authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and to make such
determinations under, and issue such interpretations of, the provisions of
such program and any outstanding options thereunder as it may deem
necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option Grant
Program under its jurisdiction or any option thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of
each such committee shall accordingly be entitled to full indemnification
and reimbursement as Board members for their service on such committee.
No member of the Primary Committee or the Secondary Committee shall be
liable for any act or omission made in good faith with respect to the Plan or
any option grants under the Plan.
F. Administration of the Automatic Option Grant and
Director Fee Option Grant Programs shall be self-executing in accordance
with the terms of those programs, and no Plan Administrator shall exercise
any discretionary functions with respect to option grants made under those
programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the
Discretionary Option Grant Program are as follows:
(i) Employees,
(ii) non-employee members of the
Board or the board of directors of any Parent or Subsidiary, and
(iii) consultants and other
independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other
highly compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, with respect to the option grants under
the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of
the granted option as either an Incentive Option or a Non-Statutory Option,
the time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for
which the option is to remain outstanding.
D. Only non-employee Board members shall be eligible
to participate in the Automatic Option Grant and Director Fee Option Grant
Programs.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number
of shares of Common Stock initially reserved for issuance over the term of
the Plan shall not exceed 1,500,000 shares. Such authorized share reserve
is comprised of (i) the number of shares which remain available for issuance
under the Plan, as of the date of the Plan Restatement Date as last approved
by the Corporation's stockholders, plus (ii) the additional increase of
1,463,690 shares authorized by the Board on October 21, 1997, subject to
stockholder approval and (iii) the number of shares which remain available
for issuance, as of the Plan Restatement Date, under the Predecessor Plans as
last approved by the Corporation's stockholders, including the shares subject
to the outstanding options to be incorporated into the Plan and the additional
shares which would otherwise be available for future grant.
B. The number of shares of Common Stock available
for issuance under the Plan shall automatically increase on the first trading
day of each fiscal year during the term of the Plan, beginning with the
[1999] fiscal year, by an amount equal to one percent (1%) of the
shares of Common Stock outstanding on the last trading day of the
immediately preceding fiscal year. No Incentive Options may be granted on
the basis of the additional shares of Common Stock resulting from such
annual increases.
C. No one person participating in the Plan may receive
options and separately exercisable stock appreciation rights for more than
750,000 shares of Common Stock per calendar year beginning with the 1997
calendar year.
D. Shares of Common Stock subject to outstanding
options shall be available for subsequent issuance under the Plan to the
extent (i) the options expire or terminate for any reason prior to exercise in
full or (ii) the options are cancelled in accordance with the cancellation-
regrant provisions of Article Two. Unvested shares issued under the Plan
and subsequently repurchased by the Corporation at the original issue price
paid per share pursuant to the Corporation's repurchase rights under the Plan
shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option
under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of
Common Stock issued to the holder of such option.
E. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding
Common Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or
class of securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted options and separately
exercisable stock appreciation rights per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program and (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in
the form approved by the Plan Administrator; provided, however, that each
such document shall comply with the terms specified below. Each
document evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.
A. Exercise Price.
1. The exercise price per share shall not be less
than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date unless otherwise determined by the
Plan Administrator.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of
Section I of Article Six and the documents evidencing the option, be payable
in one or more of the forms specified below:
(i) cash or check made payable to
the Corporation,
(ii) in shares of Common Stock
held for the requisite period necessary to avoid a charge to
the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is
exercised for vested shares, through a special sale and
remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable written instructions to (a) a
Corporation-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
exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:
(i) Any option outstanding at the
time of the Optionee's cessation of Service for any reason shall
remain exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after
the expiration of the option term.
(ii) Any option exercisable in
whole or in part by the Optionee at the time of death may be
exercised subsequently 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.
(iii) During the applicable post-
Service exercise period, the option may not be exercised in
the aggregate for more than the number of vested shares for
which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at
that time exercisable for vested shares.
(iv) Should the Optionee's Service
be terminated for Misconduct, then all outstanding options
held by the Optionee shall terminate immediately and cease
to be outstanding.
2. The Plan Administrator shall have the
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for
which the option is to remain exercisable following the
Optionee's cessation of Service from the period otherwise in
effect for that option to such greater period of time as the
Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be
exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of
Common Stock for which such option is exercisable at the
time of the Optionee's cessation of Service but also with
respect to one or more additional installments in which the
Optionee would have vested under the option had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall
have the discretion to grant options which are exercisable for unvested
shares of Common Stock. Should the Optionee cease Service while holding
such unvested shares, the Corporation shall have the right to repurchase, at
the exercise price paid per share, any or all of those unvested shares. The
terms upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for
the purchased shares) shall be established by the Plan Administrator and set
forth in the document evidencing such repurchase right.
F. Limited Transferability of Options. During the
lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee's death.
However, a Non-Statutory 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 the benefit of one or more such family members.
The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall not be subject to the terms of this
Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not
be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value
of the shares of Common Stock (determined as of the respective date or
dates of grant) for which one or more options granted to any Employee
under the Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options
during any one (1) calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or
more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options
as Incentive Options shall be applied on the basis of the order in which such
options are granted.
D. 10% Stockholder. If any Employee to whom an
Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair
Market Value per share of Common Stock on the option grant date, and the
option term shall not exceed five (5) years measured from the option grant
date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation (or parent thereof) or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
C. Notwithstanding Section III.A. and Section III.B. of
this Article Two, the Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed or replaced (or
those repurchase rights are to be assigned) in the Corporate Transaction.
The Plan Administrator shall also have the discretion to grant options which
do not accelerate whether or not such options are assumed (and to provide
for repurchase rights that do not terminate whether or not such rights are
assigned) in connection with a Corporate Transaction.
D. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation
(or parent thereof).
E. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to
(i) the number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction, (ii) the exercise
price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same
and (iii) the maximum number of securities and/or class of securities for
which any one person may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances under the Plan.
F. The Plan Administrator shall have the discretion,
exercisable at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of any options
which are assumed or replaced in a Corporate Transaction and do not
otherwise accelerate at that time (and the termination of any of the
Corporation's outstanding repurchase rights which do not otherwise
terminate at the time of the Corporate Transaction) in the event the
Optionee's Service should subsequently terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of such Corporate Transaction.
Any options so accelerated shall remain exercisable for fully-vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination.
G. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of
one or more outstanding options (and the automatic termination of one or
more outstanding repurchase rights with the immediate vesting of the shares
of Common Stock subject to those rights) upon the occurrence of a Change
in Control or (ii) condition any such option acceleration (and the termination
of any outstanding repurchase rights) upon the subsequent Involuntary
Termination of the Optionee's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control
shall remain fully exercisable until the expiration or sooner termination of
the option term.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.
I. The grant of options under the Discretionary Option
Grant Program 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.
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 option
holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plans) and to grant in substitution new
options covering the same or different number of shares of Common Stock
but with an exercise price per share based on the Fair Market Value per
share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights
and/or limited stock appreciation rights.
B. The following terms shall govern the grant and
exercise of tandem stock appreciation rights:
(i) One or more Optionees may
be granted the right, exercisable upon such terms as the Plan
Administrator may establish, to elect between the exercise of
the underlying option for shares of Common Stock and the
surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (a) the
Fair Market Value (on the option surrender date) of the
number of shares in which the Optionee is at the time vested
under the surrendered option (or surrendered portion thereof)
over (b) the aggregate exercise price payable for such shares.
(ii) No such option surrender shall
be effective unless it is approved by the Plan Administrator,
either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be
made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in
shares and partly in cash, as the Plan Administrator shall in
its sole discretion deem appropriate.
(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall
retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the
option surrender date and may exercise such rights at any
time prior to the later of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms
of the documents evidencing such option, but in no event
may such rights be exercised more than ten (10) years after
the option grant date.
C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:
(i) One or more Section 16
Insiders may be granted limited stock appreciation rights
with respect to their outstanding options.
(ii) Upon the occurrence of a
Hostile Take-Over, each such individual holding one or more
options with such a limited stock appreciation right shall
have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at
the time exercisable for vested shares of Common Stock. In
return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to
the excess of (a) the Take-Over Price of the shares of
Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (b)
the aggregate exercise price payable for such shares. Such
cash distribution shall be paid within five (5) days following
the option surrender date.
(iii) Neither the approval of the
Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash
distribution.
(iv) The balance of the option (if
any) shall continue in full force and effect in accordance with
the documents evidencing such option.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the
Salary Investment Option Program is to be in effect and to select the
Employees eligible to participate in the Salary Investment Option Grant
Program for those calendar year or years. Each selected Employee who
elects to participate in the Salary Investment Option Grant Program must,
prior to the start of each calendar year of participation, file with the Plan
Administrator (or its designate) an irrevocable authorization directing the
Corporation to reduce his or her base salary for that calendar year by a
designated percentage (in multiples of one percent (1%)). However, the
amount of such salary reduction must be not less than Ten Thousand Dollars
($10,000.00) and must not be more than Seventy-Five Thousand Dollars
($75,000.00). Each individual who files a proper salary reduction
authorization shall automatically be granted an option under this Salary
Investment Option Grant Program on or before the last trading day in
January of the calendar year for which that salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by
one or more documents in the form approved by the Plan Administrator;
provided, however, that each such document shall comply with the terms
specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-
three and one-third percent (33-1/3%) of the Fair Market Value per share of
Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
B. Number of Option Shares. The number of shares
of Common Stock subject to the option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):
X = A ( (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the Optionee's base
salary reduction for the calendar year, and
B is the Fair Market Value per share of
Common Stock on the option grant date.
C. Exercise and Term of Options. The option shall
become exercisable in a series of twelve (12) successive equal monthly
installments upon the Optionee's completion of each calendar month of
Service in the calendar year for which the salary reduction is in effect. Each
option shall have a maximum term of ten (10) years measured from the
option grant date.
D. Effect of Termination of Service. Should the
Optionee cease Service for any reason while holding one or more options
under this Article Three, then each such option shall remain exercisable, for
any or all of the shares for which the option is exercisable at the time
of such cessation of Service, until the earlier of (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of such cessation of Service. Should the
Optionee die while holding one or more options under this Article Three,
then each such option may be exercised, for any or all of the shares for
which the option is exercisable at the time of the Optionee's cessation
of Service (less any shares subsequently purchased by the Optionee prior
to death), 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.
Such right of exercise shall lapse, and the option shall terminate, upon
the earlier of (i) the expiration of the ten (10)-year option term or
(ii) the three (3)-year period measured from the date of the Optionee's
cessation of Service. However, the option shall, immediately
upon the Optionee's cessation of Service for any reason, terminate and cease
to remain outstanding with respect to any and all shares of Common Stock
for which the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the
Optionee remains in Service, each outstanding option held by such Optionee
under this Salary Investment Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable for all of the
shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the three (3)-year
period measured from the date of Optionee's cessation of Service.
B. In the event of a Change in Control while the
Optionee remains in Service, each outstanding option held by such Optionee
under this Salary Investment Option Grant Program shall automatically
accelerate so that each such option shall immediately become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for any or all of such shares as fully-vested
shares of Common Stock. The option shall remain so exercisable until the
earlier of (i) the expiration of the option term or (ii) the expiration of
the three (3)-year period measured from the date of Optionee's cessation of
Service.
C. The grant of options under the Salary Investment
Option Grant Program 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.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the
dates specified below:
1. Each individual serving as a non-employee
Board member on the Plan Restatement Date shall automatically be granted
at that time a Non-Statutory Option to purchase 42,000 shares of Common
Stock, [provided that individual has not previously been in the employ
of the Corporation or any Parent or Subsidiary].
2. Each individual who is first elected or
appointed as a non-employee Board member at any time after the Plan
Restatement Date shall automatically be granted, on the date of such initial
election or appointment, a Non-Statutory Option to purchase 42,000 shares
of Common Stock, [provided that individual has not previously been in
the employ of the Corporation or any Parent or Subsidiary].
3. On the date of the second anniversary of the
initial 42,000-share grant and every two (2) years thereafter, each non-
employee Board member shall automatically be granted a Non-Statutory
Option to purchase 12,000 shares of Common Stock.
B. Exercise Price.
1. The exercise price per share shall be equal to
one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall be payable in one or
more of the alternative forms authorized under the Discretionary Option
Grant Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.
C. Option Term. Each option shall have a term of ten
(10) years measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall
be immediately exercisable for any or all of the option shares. However,
any shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each initial
42,000-share option shall vest, and the Corporation's repurchase right shall
lapse, (i) with respect to 30,000 shares in a series of two (2) successive
equal annual installments upon the Optionee's completion of each year of
Board service over the two (2)-year period measured from the option grant
date and (ii) with respect to 12,000 shares in a series of eight
(8) successive equal quarterly installments on the last day of each
calendar quarter over the two (2)-year period measured from the option
grant date, provided the Optionee has attended the regular Board meeting
held during such quarter. Each 12,000-share option shall vest, and the
Corporation's repurchase right shall lapse, in a series of eight
(8) successive equal quarterly installments on the last day of each
calendar quarter over the two (2)-year period measured from the option
grant date, provided the Optionee has attended the regular Board
meeting held during such quarter.
E. Termination of Board Service. The following
provisions shall govern the exercise of any options outstanding at the time
the Optionee ceases to serve as a Board member:
(i) Any option outstanding at the
time of the Optionee's cessation of Board service for any
reason shall remain exercisable for a twelve (12)-month
period following the date of such cessation of Board service.
(ii) Any option exercisable in
whole or in part by the Optionee at the time of death may be
exercised by the personal representative of the Optionee's
estate or 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.
(iii) During the twelve (12)-month
exercise period, the option may not be exercised in the
aggregate for more than the number of vested shares of
Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iv) Should the Optionee cease to
serve as a Board member by reason of death or Permanent
Disability, then all shares at the time subject to the option
shall immediately vest so that such option may, during the
twelve (12)-month exercise period following such cessation
of Board service, be exercised for all or any portion of those
shares as fully-vested shares of Common Stock.
(v) In no event shall the option
remain exercisable after the expiration of the option term.
Upon the expiration of the twelve (12)-month exercise period
or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's
cessation of Board service for any reason other than death or
Permanent Disability, terminate and cease to be outstanding
to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the
shares of Common Stock at the time subject to each outstanding
option but not otherwise vested shall automatically vest in full so
that each such option shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for all of the
shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested
shares of Common Stock. Immediately following the consummation
of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of those
shares as fully-vested shares of Common Stock. Each such option shall
remain exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding automatic option grants. 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 each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation.
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to
the exercise price payable per share under each outstanding option, provided
the aggregate exercise price payable for such securities shall remain the
same.
E. The grant of options under the Automatic Option
Grant Program 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.
III. REMAINING TERMS
The remaining terms of each option granted under the
Automatic Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or
any portion of the annual retainer fee otherwise payable in cash for his or her
service on the Board to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to the first day of the calendar
year for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a
timely election shall automatically be granted an option under this Director
Fee Option Grant Program on the first trading day in January in the calendar
year for which the annual retainer fee which is the subject of that election
would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the
terms and conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be equal to
thirty-three and one-third percent (33-1/3%) of the Fair Market Value per
share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
B. Number of Option Shares. The number of shares
of Common Stock subject to the option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):
X = A ( (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee
subject to the non-employee Board member's election, and
B is the Fair Market Value per share of
Common Stock on the option grant date.
C. Exercise and Term of Options. The option shall
become exercisable for fifty percent (50%) of the option shares upon the
Optionee's completion of the first six (6) months of Board service in the
calendar year for which his or her election under this Director Fee Option
Grant Program is in effect, and the balance of the option shares shall become
exercisable in a series of six (6) successive equal monthly installments upon
the Optionee's completion of each additional month of Board service during
that calendar year. Each option shall have a maximum term of ten (10)
years measured from the option grant date.
D. Termination of Board Service. Should the
Optionee cease Board service for any reason (other than death or Permanent
Disability) while holding one or more options under this Director Fee
Option Grant Program, then each such option shall remain exercisable, for
any or all of the shares for which the option is exercisable at the time
of such cessation of Board service, until the earlier of (i) the expiration
of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the Optionee under this Director Fee Option
Grant Program at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at
that time exercisable.
E. Death or Permanent Disability. Should the
Optionee's service as a Board member cease by reason of death or
Permanent Disability, then each option held by such Optionee under this
Director Fee Option Grant Program shall immediately become exercisable
for all the shares of Common Stock at the time subject to that option, and the
option may be exercised for any or all of those shares as fully-vested shares
until the earlier of (i) the expiration of the ten (10)-year option term
or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Board service.
Should the Optionee die after cessation of Board service but
while holding one or more options under this Director Fee Option Grant
Program, then each such option may be exercised, for any or all of the shares
for which the option is exercisable at the time of the Optionee's cessation of
Board service (less any shares subsequently purchased by Optionee prior to
death), 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.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
three (3)-year period measured from the date of the Optionee's cessation
of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the
Optionee remains a Board member, each outstanding option held by such
Optionee under this Director Fee Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to
the total number of shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. Each such outstanding option shall be assumed
by the successor corporation (or parent thereof) in the Corporate Transaction
and shall remain exercisable for the fully-vested shares until the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
B. In the event of a Change in Control while the
Optionee remains in Service, each outstanding option held by such Optionee
under this Director Fee Option Grant Program shall automatically accelerate
so that each such option shall immediately become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-
vested shares of Common Stock. The option shall remain so exercisable
until the earlier or (i) the expiration of the ten (10)-year option term
or (ii) the expiration of the three (3)-year period measured from the
date of the Optionee's cessation of Service.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding option grants. 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 each surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to the
Corporation.
D. The grant of options under the Director Fee Option
Grant Program 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.
IV. REMAINING TERMS
The remaining terms of each option granted under this
Director Fee Option Grant Program shall be the same as the terms in effect
for option grants made under the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee to
pay the option exercise price under the Discretionary Option Grant Program
by delivering a full-recourse, interest bearing promissory note payable in
one or more installments. The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established
by the Plan Administrator in its sole discretion. In all events, the maximum
credit available to the Optionee may not exceed the sum of (i) the aggregate
option exercise price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the
Optionee in connection with the option exercise.
B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to
forgiveness by the Corporation in whole or in part upon such terms as the
Plan Administrator may deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or upon the vesting of such
shares under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan (other than the options granted under the
Director Fee Option Grant Program) with the right to use shares of Common
Stock in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the
following formats:
(i) Stock Withholding: The
election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion
of those shares with an aggregate Fair Market Value equal to
the percentage of the Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
(ii) Stock Delivery: The election
to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other
than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value
equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was initially adopted by the Board on April
24, 1995. The Plan was amended on July 15, 1996 to increase the number
of shares of Common Stock available for issuance by 15,000 shares, subject
to stockholder approval. The Plan was subsequently amended and restated
on October 21, 1997, subject to stockholder approval, to effect the following
changes: (i) increase the number of shares by an additional 1,463,690
shares, (ii) provide that the share reserve shall automatically increase on the
first trading day of each fiscal year beginning with the 1998 fiscal year by an
amount equal to one percent (1%) of the shares outstanding on the last
trading day of the preceding fiscal year, (iii) implement a limit on the
number of shares for which any one individual may be granted options or
separately exercisable stock appreciation rights, (iv) implement the Salary
Investment Option Grant, Automatic Option Grant and Director Fee Option
Grant Programs, (v) extend eligibility under the Discretionary Option Grant
Program to all employees of the Corporation (or any Parent or Subsidiary),
non-employee members of the Board or the board of directors of any Parent
or Subsidiary and consultants and other advisors who provide services to the
Corporation (or any parent or Subsidiary), (vi) allow any unvested shares
issued under the Plan and subsequently repurchased by the Company at the
option exercise price paid per share to be reissued under the Plan, (vii)
eliminate the stock issuance and dividend equivalent right features of the
Plan, (viii) incorporate the Corporation's existing 1994 Non-Employee Stock
Option Plan and the Incentive Stock Option Plan so that the Plan will serve
as the successor to those plans and (ix) effect a series of additional changes
to the provisions of the Plan (including the stockholder approval
requirements) in order to allow the Plan Administrator more flexibility and
to take advantage of the recent amendments to Rule 16b-3 of the 1934 Act.
B. The Plan shall serve as the successor to the
Predecessor Plans, and no further option grants or direct stock issuances
shall be made under the Predecessor Plans after the date of stockholder
approval of this restatement. All options outstanding under the Predecessor
Plans on the Plan Restatement Date have been incorporated into the Plan
and shall be treated as outstanding options under the Plan. However, each
outstanding option so incorporated shall continue to be governed solely by
the terms of the documents evidencing such option, and no provision of the
Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition
of shares of Common Stock.
C. The Plan shall terminate upon the earliest of (i) April
23, 2005, (ii) the date on which all shares available for issuance under the
Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon
such Plan termination, all outstanding options and unvested stock issuances
shall continue to have force and effect in accordance with the provisions of
the documents evidencing such options
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power
and authority to amend or modify the Plan in any or all respects. However,
no such amendment or modification shall adversely affect any rights and
obligations with respect to options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan unless the Optionee
consents to such amendment or modification. In addition, amendments to
the Plan shall be subject to approval of the Corporation's stockholders to the
extent required by applicable laws or regulations.
B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program that are in excess of
the number of shares then available for issuance under the Plan, provided
any excess shares actually issued under such program are held in escrow
until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance
under the Plan. If such stockholder approval is not obtained within twelve
(12) months after the date the first such excess grants are made, then (i) any
unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees the exercise paid for any excess shares issued under
the Plan and held in escrow, together with interest (at the applicable Short
Term Federal Rate) for the period the shares were held in escrow, and such
shares shall thereupon be automatically cancelled and cease to be
outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale
of shares of Common Stock under the Plan shall be used for general
corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option or stock appreciation right under the Plan and the issuance of any
shares of Common Stock upon the exercise of any option or stock
appreciation right shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options and stock appreciation rights granted under it and
the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws and all applicable listing requirements of any stock exchange (or the
Nasdaq National Market, if applicable) on which Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such person's
Service at any time for any reason, with or without cause.
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic
option grant program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders, which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the
Board over a period of thirty-six (36) consecutive months or
less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board
membership, to be comprised of individuals who either (I)
have been Board members continuously since the beginning
of such period or (II) have been elected or nominated for
election as Board members during such period by at least a
majority of the Board members described in clause (I) who
were still in office at the time the Board approved such
election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(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
the persons holding 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.
G. Corporation shall mean Endorex Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Endorex Corporation which shall by appropriate
action adopt the Plan.
H. Discretionary Option Grant Program shall mean the
discretionary option grant program in effect under the Plan.
I. Director Fee Option Grant Program shall mean the special
stock option grant in effect for non-employee Board members under Article
Four of the Plan.
J. Employee shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
K. Exercise Date shall mean the date on which the Corporation
shall have received written notice of the option exercise.
L. Fair Market Value per share of Common Stock on any
relevant date shall be determined in accordance with the following
provisions:
(i) If the Common Stock is at the time
traded on the Nasdaq National Market, then the Fair Market
Value shall be the closing selling price per share of Common
Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time
listed on any Stock Exchange, then the Fair Market Value
shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is
no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time
traded on the Nasdaq OTC Market, then the Fair Market
Value shall be the mean of the highest bid and lowest asked
prices per share of Common Stock on the date in question, as
such prices are quoted by the National Association of
Securities Dealers. If both bid and asked prices are not
available for the date in question, then the Fair Market Value
shall be the average of the highest bid and lowest asked prices
for the last preceding date for which such quotations exist.
M. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by the Corporation for reasons other than
Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the
Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and
participation in corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C)
a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
the individual's consent.
P. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting 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 any Optionee or other person in
the Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
R. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. Optionee shall mean any person to whom an option is
granted under the Discretionary Option Grant, Automatic Option Grant or
Director Fee Option Grant Program.
T. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
U. Permanent Disability or Permanently Disabled shall mean
the inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more. However, solely for the purposes of the Director Fee Option
Grant Program, Permanent Disability or Permanently Disabled shall mean
the inability of the non-employee Board member to perform his or her usual
duties as a Board member by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.
V. Plan shall mean the Corporation's Amended and Restated
1995 Omnibus Incentive Plan, as set forth in this document.
W. Plan Administrator shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant Program with
respect to one or more classes of eligible persons, to the extent such
entity is carrying out its administrative functions under that program
with respect to the persons under its jurisdiction.
X. Plan Restatement Date shall mean October 21, 1997, the
date on which the Plan was restated by the Board.
Y. Predecessor Plans shall mean the 1994 Non-Employee Stock
Option Plan and the Incentive Stock Option Plan.
Z. Primary Committee shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer
the Discretionary Option Grant Program with respect to Section 16 Insiders.
AA. Salary Investment Option Grant Program shall mean the
salary investment grant program in effect under the Plan.
BB. Secondary Committee shall mean a committee of two (2) or
more Board members appointed by the Board to administer the Discretionary
Option Grant Program with respect to eligible persons other than Section 16
Insiders.
CC. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
DD. Service shall mean the performance of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant
or independent advisor, except to the extent otherwise specifically provided
in the documents evidencing the option grant or stock issuance.
EE. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.
FF. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
GG. Take-Over Price shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price per
share.
HH. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.
II. 10% Stockholder shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).
ENDOREX CORP.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Endorex Corp. (the "Corporation"):
Optionee:
Grant Date:
Vesting Commencement Date:
Exercise Price: $ per share
Number of Option Shares: shares
Expiration Date:
Type of Option: [ ] Incentive Stock Option
[ ] Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable with
respect to twelve and one-half percent (12.5%) of the Option Shares
upon Optionee's completion of three (3) months of Service measured
from the Vesting Commencement Date and shall become exercisable for
the balance of the Option Shares in fourteen (14) successive equal
quarterly installments upon Optionee's completion of each
additional three (3) months of Service over the next forty-two (42)
month period thereafter. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted subject
to and in accordance with the terms of the Endorex Corp. Amended and Restated
1995 Omnibus Incentive Plan (the "Plan"). Optionee further agrees to be bound
by the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement and any Addenda to such Stock Option Agreement attached hereto
as Exhibit A. A copy of the Plan is available upon request made to the
Corporate Secretary at the Corporation's principal offices.
No Employment or Service Contract. Nothing in this Notice or in
the attached Stock Option Agreement or in the Plan shall confer upon Optionee
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: , 199
ENDOREX CORP.
By:
Title:
OPTIONEE
Address:
ATTACHMENTS
Exhibit A - Stock Option Agreement and Addenda
EXHIBIT A
STOCK OPTION AGREEMENT (See Exhibit 99.3 to this Registration Statement on
Form S-8)
ENDOREX CORP.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), 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 an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from
time to time during the option term specified in Paragraph 2 at the Exercise
Price.
2. Option Term. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5 or 6.
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. However, if this option is
designated a Non-Statutory Option in the Grant Notice, then this option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during Optionee's lifetime to one or more members of the Optionee's immediate
family or to a trust established for the exclusive benefit of one or more such
family members. The assigned portion shall be exercisable only by the person
or persons who acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
4. Dates of Exercise. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant
Notice. As the option becomes exercisable for such installments, those
installments shall accumulate, and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of
the option term under Paragraph 5 or 6.
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 any of the following provisions become applicable:
(i) Should Optionee cease to remain in
Service for any reason (other than death, Permanent Disability or
Misconduct) while this option is outstanding, then the period
during which this option may be exercised shall be limited to the
three (3)-month period commencing with the date of such cessation
of Service, but in no event shall this option be exercisable at any
time after the Expiration Date.
(ii) Should Optionee die while holding
this option, then the personal representative of Optionee's estate
or the person or persons to whom the option is transferred pursuant
to Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such
right shall lapse, and this option shall cease to be 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.
(iii) Should Optionee cease Service by
reason of Permanent Disability, then the period during which this
option may be exercised shall be limited to the twelve (12)-month
period commencing with the date of such cessation of Service. In
no event shall this option be exercisable at any time after the
Expiration Date.
(iv) During the limited period of post-
Service exercisability, this option may not be exercised in the
aggregate for more than the number of Option Shares for which the
option is exercisable at the time of Optionee's cessation of
Service. Upon the expiration of such limited exercise period or
(if earlier) upon the Expiration Date, this option shall terminate
and cease to be outstanding for any such Option Shares for which
the option has not been exercised. However, this option shall,
immediately upon Optionee's cessation of Service for any reason,
terminate and cease to be outstanding with respect to any Option
Shares for which this option is not otherwise at that time
exercisable.
(v) Should Optionee's Service be
terminated for Misconduct, then this option shall terminate
immediately and cease to remain outstanding.
6. Special Acceleration of Option.
(a) In the event of a Corporate Transaction, this option,
to the extent outstanding at that time, but not otherwise fully exercisable,
shall automatically accelerate so that this option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all of
the Option Shares at the time subject to this option and may be exercised for
any or all of those Option Shares as fully-vested shares of Common Stock. No
such acceleration of this option, however, shall occur if and to the extent:
(i)this option is, in connection with the Corporate Transaction, to be assumed
by the successor corporation (or parent thereof) or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on the Option Shares for
which this option is not otherwise at that time exercisable (the excess of the
Fair Market Value of those Option Shares over the aggregate Exercise Price
payable for such shares) and provides for subsequent pay-out in accordance with
the same option exercise/vesting schedule set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply 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 Exercise Price, provided the aggregate Exercise Price shall remain the
same.
(d) This Agreement shall not in any 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.
7. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
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 any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which
the option is exercised.
(ii) Pay the aggregate Exercise Price for
the purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the
Corporation, but only to the extent authorized by the Plan
Administrator in accordance with Paragraph 13;
(C) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date; or
(D) through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable written instructions (I) to a
Corporation-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 Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and
(II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment
of the Exercise Price must accompany the Notice of Exercise
delivered to the Corporation in connection with the option
exercise.
(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.
(iv) Make appropriate arrangements with
the Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all Federal, state and local
income and employment tax withholding requirements applicable to
the option exercise.
(b) 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 for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. 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 (or the
Nasdaq National Market, if applicable) on which the Common Stock may be listed
for trading at the time of such exercise and issuance.
(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. The Corporation, however, shall use its best efforts to obtain
all such approvals.
11. Successors and Assigns. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
12. 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 at its principal corporate offices. 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 effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. Financing. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the
terms of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. 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 terms 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.
15. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Illinois without resort to that State's conflict-of-laws rules.
16. Excess Shares. 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 those 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
the Plan.
17. Additional Terms Applicable to an Incentive Option. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify
for favorable tax treatment as an Incentive Option if (and to the
extent) this option is exercised for one or more Option Shares: (A)
more than three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Permanent Disability or
(B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.
(ii) No installment under this option
shall qualify for favorable tax treatment as an Incentive Option 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 would, when added to the
aggregate value (determined as of the respective date or dates of
grant) of the Common Stock or other securities for which this
option or any other Incentive 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) first become
exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory
Option.
(iii) Should the exercisability of this
option be accelerated upon a Corporate Transaction, then this
option shall qualify for favorable tax treatment as an Incentive
Option 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
value (determined as of the respective date or dates of grant) of
the Common Stock or other securities for which this option or one
or more other Incentive 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) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should the applicable One Hundred
Thousand Dollar ($100,000) limitation be exceeded in the calendar
year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-
Statutory Option.
(iv) Should Optionee hold, in addition to
this option, one or more other options to purchase Common Stock
which become exercisable for the first time in the same calendar
year as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are
granted.
18. Leave of Absence. The following provisions shall apply upon
the Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect
under the Grant Notice shall be frozen as of the first day of the
authorized leave, and this option shall not become exercisable for
any additional installments of the Option Shares during the period
Optionee remains on such leave.
(ii) Should Optionee resume active
Employee status within sixty (60) days after the start date of the
authorized leave, Optionee shall, for purposes of the exercise
schedule set forth in the Grant Notice, receive Service credit for
the entire period of such leave. If Optionee does not resume
active Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of such leave.
(iii) If the option is designated as an
Incentive Option in the Grant Notice, then the following additional
provision shall apply:
(A) If the leave of absence continues
for more than ninety (90) days, then this option shall
automatically convert to a Non-Statutory Option under the
Federal tax laws at the end of the three (3)-month period
measured from the ninety-first (91st) day of such leave,
unless the Optionee's reemployment rights are guaranteed by
statute or by written agreement. Following any such
conversion of the option, all subsequent exercises of such
option, whether effected before or after Optionee's return to
active Employee status, shall result in an immediate taxable
event, and the Corporation shall be required to collect from
Optionee the Federal, state and local income and employment
withholding taxes applicable to such exercise.
(iv) In no event shall this option become
exercisable for any additional Option Shares or otherwise remain
outstanding if Optionee does not resume Employee status prior to
the Expiration Date of the option term.
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Endorex Corp. (the "Corporation") that I elect to
purchase shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's Amended and Restated 1995 Omnibus Incentive Plan on
, 199 .
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the
Exercise Price.
, 199
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:
Employee Number:
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(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 the persons
holding 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.
F. Corporation shall mean Endorex Corp., a Delaware corporation.
G. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. Exercise Price shall mean the exercise price per share as specified
in the Grant Notice.
J. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is at the time traded on the Nasdaq
OTC Market, then the Fair Market Value shall be the mean of the
highest bid and lowest asked prices per share of Common Stock on
the date in question, as such prices are quoted by the National
Association of Securities Dealers. If both bid and asked prices
are not available for the date in question, then the Fair Market
Value shall be the average of the highest bid and lowest asked
prices for the last preceding date for which such quotations exist.
L. Grant Date shall mean the date of grant of the option as specified
in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, 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 Optionee
adversely affecting 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 Optionee or any other individual in the Service of the Corporation
(or any Parent or Subsidiary).
P. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
R. Option Shares shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
S. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. Parent shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
U. Permanent Disability shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has
lasted or can be expected to last for a continuous period of twelve (12) months
or more.
V. Plan shall mean the Corporation's Amended and Restated 1995 Omnibus
Incentive Plan.
W. Plan Administrator shall mean either the Board or a committee of
the Board acting in its administrative capacity under the Plan.
X. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. Stock Exchange shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
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 Endorex Corp. (the "Corporation") and
("Optionee") evidencing the stock option (the "Option")
granted on , 19 to Optionee under the terms of the
Corporation's Amended and Restated 1995 Omnibus 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.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(i) Optionee shall have the unconditional
right exercisable at any time during the thirty (30)-day period
immediately following a Hostile Take-Over to surrender the Option
to the Corporation, to the extent the Option is at the time
exercisable for one or more shares of Common Stock. In return for
the surrendered Option, Optionee shall receive a cash distribution
from the Corporation in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock for which the
surrendered option (or surrendered portion) is at the time
exercisable over (B) the aggregate Exercise Price payable for such
shares.
(ii) To exercise this limited stock
appreciation right, Optionee must, during the applicable thirty
(30)-day exercise period, provide the Corporation with written
notice of the option surrender in which there is specified the
number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of
Optionee's copy of the Option Agreement, together with any written
amendments to such Agreement. The cash distribution shall be paid
to Optionee within five (5) business days following such delivery
date. The exercise of the limited stock appreciation right in
accordance with the terms of this Addendum is hereby approved by
the Plan Administrator in advance of such exercise, and further
approval of the Plan Administrator shall be required at the time of
the actual option surrender and cash distribution. Upon receipt of
such cash distribution, the Option shall be cancelled with respect
to the Option Shares for which the Option has been surrendered, and
Optionee shall cease to have any further right to acquire those
Option Shares under the Option Agreement. The Option shall,
however, remain outstanding and exercisable for the balance of the
Option Shares (if any) in accordance with the terms of the Option
Agreement, and the Corporation shall issue a new stock option
agreement (substantially in the same form of the surrendered Option
Agreement) for those remaining Option Shares.
(iii) In no event may this limited stock
appreciation right be exercised when there is not a positive spread
between the Fair Market Value of the Option Shares subject to the
surrendered option and the aggregate Exercise Price payable for
such shares. This limited stock appreciation right shall in all
events terminate upon the expiration or sooner termination of the
Option and may not be assigned or transferred by Optionee, except
to the extent the Option is transferable in accordance with the
provisions of the Option Agreement.
2. For purposes of this Addendum, the following definitions
shall be in effect:
(i) 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 Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
(ii) The Take-Over Price per share shall be
deemed to be equal to the greater of (A) the Fair Market Value per
Option Share on the option surrender date or (B) the highest
reported price per share of Common Stock paid by the tender offeror
in effecting the Hostile Take-Over. However, if the surrendered
Option is designated as an Incentive Option in the Grant Notice,
then the Take-Over Price shall not exceed the clause (A) price per
share.
IN WITNESS WHEREOF, Endorex Corp. 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.
ENDOREX CORP.
By:
Title:
OPTIONEE
EFFECTIVE DATE: , 199
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between Endorex Corp. (the "Corporation") and
("Optionee") evidencing the stock option (the "Option")
granted on , 199 to Optionee under the terms of the
Corporation's Amended and Restated 1995 Omnibus Incentive 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/CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed by the successor entity (or its parent company), the
Option shall not accelerate upon the occurrence of that Corporate Transaction,
and the Option shall accordingly continue, over Optionee's period of Service
after the Corporate Transaction, to become exercisable for the Option Shares in
one or more installments in accordance with the provisions of the Option
Agreement. However, immediately upon an Involuntary Termination of Optionee's
Service within eighteen (18) months following such Corporate Transaction, the
Option (or any replacement grant), to the extent outstanding at the time but
not otherwise fully exercisable, shall automatically accelerate so that the
Option shall become immediately exercisable for all the Option Shares at the
time subject to the Option and may be exercised for any or all of those Option
Shares as fully vested shares.
2. The Option shall not accelerate upon the occurrence of a
Change in Control, and the Option shall, over Optionee's period of Service
following such Change in Control, continue to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following the Change in Control,
the Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall become
immediately exercisable for all the Option Shares at the time subject to the
Option and may be exercised for any or all of those Option Shares as fully
vested shares.
3. The Option as accelerated under Paragraphs 1 or 2 shall
remain so exercisable until the earlier of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the Optionee's
Involuntary Termination.
4. For purposes of this Addendum the following definitions shall
be in effect:
(i) An Involuntary Termination shall mean the
termination of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal or
discharge by the Corporation for reasons other than
Misconduct, or
(B) Optionee's voluntary resignation following
(I) a change in Optionee's position with the Corporation (or
Parent or Subsidiary employing Optionee) which materially
reduces Optionee's level of responsibility, (II) a reduction
in Optionee's level of compensation (including base salary,
fringe benefits and participation in any corporate-
performance based bonus or incentive programs) by more than
fifteen percent (15%) or (III) a relocation of 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 Optionee's consent.
(ii) A Change in Control shall be deemed to occur in
the event of a change in ownership or control of the Corporation
effected through either of the following transactions:
(A) the acquisition, directly or indirectly,
by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls,
or is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept, or
(B) a change in the composition of the Board
over a period of thirty-six (36) consecutive months or less
such that a majority of the Board members ceases, by reason
of one or more contested elections for Board membership, to
be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or
(ii) have been elected or nominated for election as Board
members during such period by at least a majority of the
Board members described in clause (i) who were still in
office at the time such election or nomination was approved
by the Board.
5. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within twelve (12) months after
the Corporate Transaction or Change in Control and shall supersede any
provisions to the contrary in Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, Endorex Corp. 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.
ENDOREX CORP.
By:
Title:
EFFECTIVE DATE: , 199
INITIAL GRANT
ENDOREX CORP.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Endorex Corp. (the "Corporation"):
Optionee:
Grant Date:
Exercise Price:
Number of Option Shares:
Expiration Date:
Type of Option:
Date Exercisable:
Vesting Schedule: The Option Shares shall initially be unvested
and subject to repurchase by the Corporation at the Exercise Price
paid per share. Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall accordingly lapse with
respect to, (i) 30,000 Option Shares in a series of two (2)
successive annual installments upon Optionee's completion of each
year of service as a member of the Corporation's Board of Directors
(the "Board") over the two (2)-year period measured from the Grant
Date and (ii) the remaining 12,000 Option Shares in a series of
eight (8) successive equal quarterly installments on the last day
of each calendar quarter over the two (2)-year period measured from
the option grant date, provided Optionee has attended the regular
Board meeting held during such quarter as a Board member. In no
event shall any additional Option Shares vest after Optionee's
cessation of Board service.
Optionee understands and agrees that the Option is granted subject
to and in accordance with the terms of the automatic option grant program under
the Endorex Corp. Amended and Restated 1995 Omnibus Incentive Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A. A copy of the Plan is available upon request
made to the Corporate Secretary at the Corporation's principal offices.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND
SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID
PER SHARE, UPON OPTIONEE'S TERMINATION OF SERVICE AS A MEMBER OF THE BOARD
PRIOR TO VESTING IN THOSE SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No Impairment of Rights. Nothing in this Notice or in the attached
Automatic Stock Option Agreement or the Plan shall interfere with or otherwise
restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
DATED:
ENDOREX CORP.
By:
Title:
OPTIONEE
Address:
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement (See Exhibit 99.8 to this
Registration Statement on
Form S-8)
ANNUAL GRANT
ENDOREX CORP.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Endorex Corp. (the "Corporation"):
Optionee:
Grant Date:
Exercise Price: $ per share
Number of Option Shares: shares
Expiration Date:
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be unvested
and subject to repurchase by the Corporation at the Exercise Price
paid per share. Optionee shall acquire a vested interest in, and
the Corporation's repurchase right shall accordingly lapse with
respect to, the Option Shares in a series of eight (8) successive
equal quarterly installments on the last day of each calendar
quarter during the two (2)-year period measured from the Grant
Date, provided Optionee has attended the regular meeting of the
Board of Directors (the "Board") held during such quarter as a
Board member. In no event shall any additional Option Shares vest
after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted subject
to and in accordance with the terms of the automatic option grant program under
the Endorex Corp. Amended and Restated 1995 Omnibus Incentive Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A. A copy of the Plan is available upon request
made to the Corporate Secretary at the Corporation's principal offices.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND SHALL BE
SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE,
UPON OPTIONEE'S TERMINATION OF SERVICE AS A MEMBER OF THE BOARD PRIOR TO
VESTING IN THOSE SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT
SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No Impairment of Rights. Nothing in this Notice or in the attached
Automatic Stock Option Agreement or the Plan shall interfere with or otherwise
restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
DATED: , 199
ENDOREX CORP.
By:
Title:
OPTIONEE
Address:
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT (See Exhibit 99.8 to this Registration
Statement on Form S-8)
ENDOREX CORP.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. Endorex Corp. has implemented an automatic option grant program
under the Corporation's Amended and Restated 1995 Omnibus Incentive Plan
pursuant to which eligible non-employee members of the Board will automatically
receive special option grants at designated intervals over their period of
Board service in order to provide such individuals with a meaningful incentive
to continue to serve as a member of the Board.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes
of, the Plan in connection with the automatic grant of a stock option to
purchase shares of the Corporation's Common Stock under 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 Code.
D. All capitalized terms in this Agreement, to the extent not
otherwise defined in the Agreement, shall have the meaning assigned to them in
the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, a Non-Statutory Option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2
at the Exercise Price.
2. Option Term. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5, 6 or 7.
3. Limited Transferability. This option may, in connection with
the Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a
trust established for the exclusive benefit of one or more such family members.
The assigned portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the option pursuant to such assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for this option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Corporation may deem appropriate.
Should the Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee's will or the laws of descent and
distribution.
4. Exercisability/Vesting.
(a) This option shall be immediately exercisable for any or
all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule set forth in the Grant Notice, and shall
remain so exercisable until the Expiration Date or the sooner termination of
the option term under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting Schedule
set forth in the Grant Notice, vest in the Option Shares in a series of
installments over his or her period of Board service. Vesting in the Option
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7.
In no event, however, shall any additional Option Shares vest following
Optionee's cessation of service as a Board member.
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
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(i) Should Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability) while holding
this option, then the period during which this option may be exercised
shall be limited to the twelve (12)-month period commencing with the date
of such cessation of Board service, but in no event shall this option be
exercisable at any time after the Expiration Date. During such limited
period of exercisability, this option may not be exercised in the
aggregate for more than the number of Option Shares (if any) in which
Optionee is vested on the date of his or her cessation of Board service.
Upon the earlier of (i) the expiration of such twelve (12)-month period
or (ii) the specified Expiration Date, the option shall terminate and
cease to be exercisable with respect to any vested Option Shares for
which the option has not been exercised.
(ii) Should Optionee die during the twelve (12)-month
period following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution shall have the right to exercise
this option for any or all of the Option Shares in which Optionee is
vested at the time of Optionee's cessation of Board service (less any
Option Shares purchased by Optionee after such cessation of Board service
but prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to be exercisable for those vested Option
Shares, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's cessation of Board service or
(ii) the specified Expiration Date of the option term.
(iii) Should Optionee cease service as a Board member
by reason of death or Permanent Disability, then all Option Shares at the
time subject to this option but not otherwise vested shall immediately
vest in full so that this option may be exercised for any or all of the
Option Shares as fully-vested shares of Common Stock at any time prior to
the earlier of (i) the expiration of the twelve (12)-month period
measured from the date of Optionee's cessation of Board service or (ii)
the specified Expiration Date.
(iv) Upon Optionee's cessation of Board service for
any reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and
all Option Shares in which Optionee is not otherwise at that time vested
in accordance with the normal Vesting Schedule set forth in the Grant
Notice or the special vesting acceleration provisions of Paragraph 6 or 7
below.
6. Corporate Transaction.
(a) In the event of a Corporate Transaction, all Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the
specified effective date for the Corporate Transaction, 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 such shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, this option shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent
company.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply 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 Exercise Price, provided the aggregate Exercise Price shall remain the
same.
7. Change in Control/Hostile Take-Over.
(a) All Option Shares subject to this option at the time of
a Change in Control but not otherwise vested shall automatically vest so that
this option shall, immediately prior to the effective date of such 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 such
shares as fully-vested shares of Common Stock. This option shall remain
exercisable for such fully-vested Option Shares until the earliest to occur of
(i) the specified Expiration Date, (ii) the sooner termination of this option
(ii) in accordance with Paragraph 5 or 6 or (iii) the surrender of this option
(iii) under Paragraph 7(b).
(b) Optionee shall have an unconditional right (exercisable
during the thirty (30)-day period immediately following the consummation of a
Hostile Take-Over) to surrender this option to the Corporation in exchange for
a cash distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the Option Shares at the time subject to the
(ii) surrendered option (whether or not those Option Shares are otherwise at
(iii) the time vested) over (ii) the aggregate Exercise Price payable for such
(iv) shares. This Paragraph 7(b) limited stock appreciation right shall in
(v) all events terminate upon the expiration or sooner termination of the
(vi) option term and may not be assigned or transferred by Optionee.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the option is being surrendered. Such notice must be accompanied by the return
of Optionee's copy of this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five
(5) business days following such delivery date. Upon receipt of such cash
distribution, this option shall be cancelled with respect to the shares subject
to the surrendered option (or the surrendered portion), and Optionee shall
cease to have any further right to acquire those Option Shares under this
Agreement. The option shall, however, remain outstanding for the balance of
the Option Shares (if any) in accordance with the terms and provisions of this
Agreement, and the Corporation shall accordingly issue a new stock option
agreement (substantially in the same form as this Agreement) for those
remaining Option Shares.
8. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder; provided, however, that the aggregate
Exercise Price shall remain the same.
9. Stockholder Rights. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
10. Manner of Exercising Option.
(a) In order to exercise this option for all or any part of
the Option Shares for which the option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) To the extent the option is
exercised for vested Option Shares, execute and deliver to the
Secretary of the Corporation a Notice of Exercise for the number of
vested Option Shares to be purchased under the exercised option; to
the extent that the option is exercised for one or more unvested
Option Shares, execute and deliver to the Secretary of the
Corporation a Purchase Agreement for those unvested Option Shares.
(ii) Pay the aggregate Exercise Price for
the purchased shares shall be paid in one or more of the following
forms:
(A) cash or check made payable to the
Corporation;
(B) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date; or
(C) to the extent the option is
exercised for vested Option Shares, through a special sale
and remittance procedure pursuant to which Optionee shall
provide irrevocable written instructions (I) to a
Corporation-designated brokerage firm to effect the immediate
sale of the vested shares purchased under the option and
remit to the Corporation, out of the sale proceeds available
on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for those shares plus all
applicable Federal, state and local income taxes required to
be withheld by the Corporation by reason of such exercise and
(II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent the sale and remittance
procedure specified above is utilized in connection with the
exercise of the option for vested Option Shares, payment of
the Exercise Price for the purchased shares must accompany
the Exercise Notice or Purchase Agreement delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) has the right to exercise this
option.
(iv) Make appropriate arrangements with
the Corporation for the satisfaction of all Federal, state and
local income tax withholding requirements applicable to the option
exercise.
(b) 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
purchased Option Shares. To the extent any such Option Shares are unvested,
the certificates for those Option Shares shall be endorsed with an appropriate
legend evidencing the Corporation's repurchase rights and may be held in escrow
with the Corporation until such shares vest.
(c) In no event may this option be exercised for fractional
shares.
11. No Impairment of Rights. 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. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board 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 (or the
Nasdaq National Market, if applicable) on which the Common Stock may be listed
for trading at the time of such exercise and issuance.
(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 applicable approvals.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
14. Construction/Governing Law. This Agreement and the option
evidenced hereby are made and granted pursuant to the automatic option grant
program in effect under the Plan and are in all respects limited by and subject
to the express terms and provisions of that program. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of Illinois without resort to that State's conflict-of-laws rules.
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 at its principal corporate offices. 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 effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Endorex Corp. (the "Corporation") that I elect to
purchase shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me pursuant
to the automatic option grant program under the Corporation's Amended and
Restated 1995 Omnibus Incentive Plan on , 199 .
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the
Exercise 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. Alternatively, I may utilize the special broker/dealer sale and
remittance procedure specified in my agreement to effect payment of the
Exercise Price for any Purchased Shares in which I am vested at the time of
exercise.
, 199
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:
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders
to accept, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning
of such period or (B) have been elected or nominated for election
as Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(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 the persons
holding 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.
G. Corporation shall mean Endorex Corp., a Delaware corporation.
H. Exercise Date shall mean the date on which the option shall have
been exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price payable per share as
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option term
expires as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is at the time traded on the
Nasdaq OTC Market, then the Fair Market Value shall be the mean of
the highest bid and lowest asked prices per share of Common Stock
on the date in question, as such prices are quoted by the National
Association of Securities Dealers. If both bid and asked prices
are not available for the date in question, then the Fair Market
Value shall be the average of the highest bid and lowest asked
prices for the last preceding date for which such quotations exist.
L. Grant Date shall mean the date of grant of the option as specified
in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Automatic Stock
Option accompanying this Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
N. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
O. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
P. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
R. Option Shares shall mean the number of shares of Common Stock
subject to the option.
S. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. Permanent Disability shall mean the inability of Optionee to
perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
U. Plan shall mean Corporation's Amended and Restated 1995 Omnibus
Incentive Plan.
V. Purchase Agreement shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which must be executed at the
time the option is exercised for unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and
(ii) preclude the sale, transfer or other disposition of any of the Option
Shares purchased under such agreement while those Option Shares remain subject
to the repurchase right.
W. Stock Exchange shall mean the American Stock Exchange or the New
York Stock Exchange.
X. Take-Over Price shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
Y. Vesting Schedule shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee will vest in the Option Shares in one
or more installments over his or her period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
