<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-24424
CIMA LABS INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1569769
- --------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10000 Valley View Road, Eden Prairie, Minnesota 55344-9361
(Address of principal executive offices including zip code)
(612) 947-8700
(Registrant's telephone number, including area code)
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock $.01 par value 9,411,589 shares
--------------------------- --------------------------------
(Class) (Outstanding at November 1, 1996)
<PAGE>
CIMA LABS INC.
TABLE OF CONTENTS
PAGE NUMBER
----------
COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of September 30, 1996
and December 31, 1995 3
Condensed Statements of Operations for the three- and
nine-month periods ended September 30, 1996 and 1995
and the period from December 12, 1986 (inception)
to September 30, 1996 4
Condensed Statements of Cash Flows for the nine-month
periods ended September 30, 1996 and 1995 and the period
from December 12, 1986 (inception) to September 30, 1996 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 11
ITEM 2. CHANGES IN SECURITIES. 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 11
ITEM 5. OTHER INFORMATION. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 12
SIGNATURE 13
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,934,051 $3,558,743
Accounts receivable 439,732 212,971
Inventories -- Note B 349,783 324,610
Prepaid expenses 112,252 287,279
------------- ------------
Total current assets 12,835,818 4,383,603
Property, plant and equipment 13,466,102 13,061,836
Less accumulated depreciation (2,839,166) (2,479,688)
------------- ------------
Other assets: 10,626,936 10,582,148
Lease deposits 290,651 290,650
Patents and trademarks, net of amortization 261,308 262,244
------------- ------------
551,959 552,894
------------- ------------
Total assets $ 24,014,713 $15,518,645
------------- ------------
------------- ------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 143,292 $291,868
Accrued expenses 988,936 695,127
Advance royalties 250,000 250,000
------------- ------------
Total current liabilities 1,382,228 1,236,995
Commitments and contingencies
Stockholders' equity
Convertible Preferred Stock, $.01 par value:
Authorized shares - 5,000,000; issued and
outstanding shares - none
Common Stock, $.01 par value: 94,111 78,201
Authorized shares - 20,000,000; issued and
outstanding shares - [ 9,411,171] - September 30, 1996;
7,821,974 - December 31, 1995
Additional paid-in capital 56,584,670 43,462,921
Deficit accumulated during the development stage (34,046,296) (29,259,472)
------------- ------------
Total stockholders' equity 22,632,485 14,281,650
------------- ------------
Total liabilities and stockholders' equity $ 24,014,713 $15,518,645
------------- ------------
------------- ------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements.
3
<PAGE>
CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period from
September 30, September 30, December 12, 1986
-------------------------- ---------------------- (Inception) to
September 30,
1996 1995 1996 1995 1996
------------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 0 $ 0 $ 0 $ 151,074 $ 13,750,884
Research, development and
licensing revenues 504,425 200,761 1,171,560 447,569 5,046,291
----------- ----------- ----------- ----------- ----------------
Total Revenues 504,425 200,761 1,171,560 598,643 18,797,175
Costs and Expenses:
Cost of goods sold 0 0 0 240,038 17,831,415
Research and product
development 1,228,632 1,119,694 3,903,428 5,348,044 19,023,719
Selling, general and
administrative 782,544 717,058 2,363,303 2,665,027 17,098,337
----------- ----------- ----------- ----------- ----------------
Total costs and expenses 2,011,176 1,836,752 6,266,731 8,253,109 53,953,471
----------- ----------- ----------- ----------- ----------------
Other income (expense):
Interest income, net 200,096 80,160 367,574 378,355 989,440
Other income (expense) (1,876) 3,244 (4,700) 12,207 269,068
----------- ----------- ----------- ----------- ----------------
Total other income 198,220 83,404 362,874 390,562 1,258,508
----------- ----------- ----------- ----------- ----------------
Net loss and deficit accumulated
during the development stage $(1,308,531) $(1,552,587) $(4,732,297) $(7,263,904) $(33,897,788)
----------- ----------- ----------- ----------- ----------------
----------- ----------- ----------- ----------- ----------------
Net loss per share:
Primary $(.14) $(.20) $(.55) $(.96) $ (12.23)
Full diluted $(.14) $(.20) $(.55) $(.96) $ (8.22)
Weighted average number of
shares outstanding:
Primary 9,405,846 7,687,551 8,633,939 7,599,329 2,772,537
Fully diluted 9,405,846 7,687,551 8,633,939 7,599,329 4,124,224
</TABLE>
4
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CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Period from December 12,
---------------------- 1986 (Inception) to
1996 1995 September 30, 1996
------------- ----------- ------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (4,732,297) $ (7,263,904) $(33,897,788)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 442,374 437,097 3,856,598
Preferred Stock issued for accrued interest 0 0 141,448
Gain on sale of property, plant and equipment 0 (396,816) (53,270)
Changes in operating assets and liabilities:
Account receivable (226,761) 233,534 (439,732)
Inventories (25,173) (18,237) (349,783)
Other current assets 175,028 34,979 (112,251)
Accounts payable (148,575) (530,038) 143,288
Accrued expenses 293,809 (250,146) 988,936
Advance royalties 0 0 250,000
------------- ----------- ------------------------
Net cash used in operating activities (4,221,595) (7,753,531) (29,472,554)
Investing activities:
Purchase of and deposits on property, plant and equipment (404,268) (983,163) (14,550,328)
Purchase of short-term investments 0 (6,819,276) (18,547,140)
Proceeds from sale of property, plant and equipment 0 0 471,883
Proceeds from maturities of short-term investments 0 16,500,000 18,547,140
Patents and trademarks (81,959) (49,185) (593,702)
------------- ----------- ------------------------
Net cash provided by (used in) investing activities (486,227) 8,648,376 (14,672,147)
Financing activities:
Proceeds from issuance of stock:
Common Stock 13,083,130 651,238 30,829,882
Preferred Stock 0 0 25,458,690
Borrowing under line of credit 0 0 0
Payment on line of credit 0 0 0
Lease financing of equipment 0 0 2,441,650
Security deposits on leases 0 0 (290,651)
Proceeds from issuance of notes payable and warrants 0 0 1,923,951
Payments on notes payable 0 0 (1,823,700)
Payments on capital leases 0 0 (2,441,650)
Organization costs 0 0 (19,420)
------------- ----------- ------------------------
Net cash provided by financing activities 13,083,130 651,238 56,078,752
------------- ----------- ------------------------
Increases (decreases) in cash equivalents 8,375,308 1,546,083 11,934,051
Cash and cash equivalents at beginning of period 3,558,743 2,912,150 -
------------- ----------- ------------------------
Cash and cash equivalents at end of period 11,934,051 4,458,233 11,934,051
------------- ----------- ------------------------
Supplemental schedule of noncash investing and financing
activities:
Note payable exchanged for issuance $ 1,517,500
Common Stock issued for note receivable 50,000
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month and nine-month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1995.
NOTE B - INVENTORIES
September 30, December 31,
1996 1995
------------- -------------
Raw materials $ 349,783 $ 324,610
Work in process -- --
Finished products -- --
------------- -------------
$ 349,783 $ 324,610
NOTE C - INITIAL PUBLIC OFFERING
The Company completed its initial public offering ("IPO") of its Common Stock in
August 1994. Outstanding shares of Series A, B, C, D and E Preferred Stock were
automatically converted on a one-for-one basis to shares of Common Stock on the
closing date of August 4, 1994.
NOTE D - LOSS PER SHARE
The primary loss per share is based on the weighted average Common shares
outstanding during the period. The fully diluted loss per share assumes the
conversion of the preferred shares to common shares as of the beginning of the
period, or from the date of issuance if later. The loss per share for periods
prior to August 4, 1994, the closing date of the IPO, also gives effect to the
requirements of Staff Accounting Bulletin No. 83 (SAB 83).
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS SECTION AS WELL AS
THOSE DISCUSSED IN THE COMPANY'S PROSPECTUS, DATED MAY 10, 1996, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
GENERAL
CIMA LABS INC. ("CIMA" or the "Company") was founded in 1986 to develop
effervescent drug delivery technologies and focused initially on contract
manufacturing of liquid effervescents. CIMA continues to be a development stage
company. CIMA's business focus has evolved over the last several years with the
development and patenting of OraSolv-Registered Trademark-, an oral dosage form
which incorporate microencapsulated drug ingredients into a tablet that
dissolves quickly in the mouth without chewing or water and which effectively
masks the taste of the medication being delivered. In 1993, following issuance
of the U.S. patent covering OraSolv-Registered Trademark-, the Company began to
emphasize and focus on the development of OraSolv-Registered Trademark- products
and currently focuses primarily on such products.
At September 30, 1996, the Company had accumulated net losses of
approximately $34,046,000. The Company's revenues have been from product sales
using the Company's AutoLution-Registered Trademark- (a liquid effervescent)
technology, license fees paid by corporate partners in consideration of the
transfer of rights under collaboration agreements, and research and development
fees paid by corporate partners to fund the Company's research and development
efforts for products developed under such agreements. To date, such revenues
have been derived primarily from manufacturing agreements with third parties for
liquid effervescent and other products, and to a lesser extent from research and
development fees and licensing arrangements, the latter generated primarily in
the last five years. In 1996, there have not been any revenues from
manufacturing liquid effervescent products. This is a result of the Company's
decision to discontinue manufacturing those products and focus on developing its
OraSolv-Registered Trademark- technology. The last revenues for manufacturing
liquid effervescent products were recognized in 1995. In addition to revenues
from such manufacturing, research and development and licensing, the Company has
funded operations from private sales of equity securities, realizing net
proceeds of approximately $25,963,000. In July 1994 the Company completed an
initial public offering of shares of its Common Stock realizing net proceeds of
approximately $16,379,000, and in May 1996 completed an additional public
offering of its Common Stock realizing net proceeds of approximately
$12,145,000.
The Company expects that losses will continue at least through 1997.
Research and development expenses and general and administrative expenses
are expected to remain relatively stable as the majority of the necessary
personnel for these functions have already been hired. As CIMA prepares for
the commercialization of its OraSolv-Registered Trademark- technology, it is
expected that additional manufacturing personnel will be added, and that
operating expenses will increase prior to a product launch by one of CIMA's
corporate partners.
7
<PAGE>
The Company's ability to generate revenues is dependent upon its ability to
enter into and be successful in collaborative arrangements with pharmaceutical
and other healthcare companies for the development and manufacture of OraSolv-
Registered Trademark- products to be marketed by these corporate partners. The
Company is highly dependent upon the efforts of the corporate partners to
successfully market OraSolv-Registered Trademark- products. Although the
Company believes these partners will have an economic motivation to market these
products vigorously, the amount and timing of resources to be devoted to
marketing are not within the control of the Company. These partners
independently could make material marketing and other commercialization
decisions which could adversely affect the Company's future revenues. Moreover,
certain of the Company's products are seasonal in nature and the Company's
revenues could vary materially from quarter to quarter depending on which of
such products, if any, are then being marketed.
Since the Company's initial public offering in 1994, the Company has put in
place a substantially new management team. This new management team was
responsible for the build out and validation of the Company's Eden Prairie
manufacturing facility.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
The Company's results of operations for the three- and nine-month periods
ended September 30, 1996 reflect increased emphasis on development of OraSolv-
Registered Trademark- products. Product sales declined to zero product sales in
the first nine months of 1996 from $0 and $151,074 in the three- and nine-month
periods ended September 30, 1995 respectively, as the Company ceased to
manufacture liquid effervescent and other products. The Company does not intend
to manufacture liquid effervescent products in the future. Research and
development fees and licensing revenues were $200,761 and $447,569 for the
three- and nine-month periods ended September 30, 1995, respectively, compared
to $504,425 and $1,171,560, respectively, in the comparable periods of 1996.
These increased research and development fees and licensing revenues reflect the
progress of license option and development agreements with multinational
pharmaceutical companies that provide for licensing fees, milestone payments,
royalties and manufacturing fees. Research and development fees and licensing
revenues will tend to fluctuate on a quarter to quarter basis.
Cost of goods sold decreased to zero in the first nine months of 1996
from $0 and $240,038 in the three- and nine-month periods ended September 30,
1995, respectively. Costs of goods sold are not expected to increase until
such time as the Company begins commercial production and sales of
OraSolv-Registered Trademark- products. Research and product development
expenses increased from $1,119,694 in the three months ending September 30,
1995, to $1,228,632 for the same period ending September 30, 1996. This
increase is due to additional expenditures for development work for our
corporate partners. Research and product development decreased from
$5,348,044 to $3,903,428 for the nine month period ending September 30, 1995,
compared to September 30, 1996. The decrease was the result of a product
development/optimization charge in the first half of 1995 of approximately
$1,659,000, of which approximately $591,000 was taken in the second quarter
of 1995, from an independent consultant for improving product taste and
packaging of OraSolv-Registered Trademark- products. Selling, general and
administrative expenses decreased due to downsizing from $2,665,027 in the
nine-month period ended September 30, 1995, to $2,363,303 in the nine-month
period ended September 30, 1996. Selling, general and administrative expenses
increased from $717,058 for the three month period ending September 30, 1995,
to $782,544 for the three month period ending September 30, 1996, due to
expenses related to hiring the Chief Financial Officer, and consumer testing
of OraSolv-Registered Trademark-. Net interest income is dependent upon the
cash position of the Company. Net interest income shows a slight decrease
from $378,355 to $367,504 for the nine month periods ending September 30,
1995, and 1996, respectively, but shows an increase from $80,160 to $200,096
for the three month periods ending September 30, 1995, and 1996,
respectively. Other income (expense) decreased from $3,244 and $12,207 in
the three- and nine-month periods ended September 30, 1995, respectively, to
$(1,876) and $(4,700) in the three-and nine-month periods ended September 30,
1996, respectively.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through private
and public sales of its equity securities and revenues from manufacturing
agreements. Through September 30, 1996, CIMA had received net offering proceeds
from such private and public sales of approximately $54,500,000 and had net
sales from manufacturing agreements of approximately $13,800,000. Among other
things, these funds were used to purchase approximately $14,550,000 of capital
equipment, including approximately $7,500,000 in the last two quarters of 1994
in connection with completing the Company's new Eden Prairie manufacturing
facility. In July 1994 the Company completed an initial public offering of
shares of its Common Stock, realizing net proceeds of approximately $16,400,000,
and in May 1996 the Company completed another public offering of shares of its
Common Stock, realizing net proceeds of approximately $12,145,000. The funds
raised in CIMA's initial public offering have been used to build out the
manufacturing facility, purchase and validate the appropriate production
equipment, complete the research and development facilities and purchase the
necessary equipment for that facility. The Company expects to use the funds
raised in its May 1996 public offering primarily to begin commercial production
in its new manufacturing facility and to fund research and development
(including preclinical and clinical testing) for the application of the OraSolv-
Registered Trademark- technology to pharmaceutical products, and that the
balance of such funds will be used for working capital and other general
corporate purposes.
The Company's long-term capital requirements will depend upon numerous
factors, including the status of the Company's collaborative arrangements, the
progress of the Company's research and development programs and receipt of
revenues from sales of the Company's products. Cash and cash equivalents, were
approximately $11,934,000 at September 30, 1996. The Company believes that its
currently available funds, excluding any license fees that may be received in
the future, will meet its needs at least through the second quarter of 1997.
There can be no assurance that, prior to such time the Company will not need to
raise additional funds through public or private financings, including equity
financing which may be dilutive to stockholders. There can be no assurance that
the Company will be able to raise additional funds if its capital resources are
exhausted, or that funds will be available on terms attractive to the Company.
The Company has not generated taxable income through September 1996. At
December 31, 1995, the net operating losses available to offset future taxable
income were approximately $29,664,000. Because the Company has experienced
ownership changes, pursuant to Internal Revenue Code regulations, future
utilization of the operating loss carryforwards will be limited in any one
fiscal year. The carryforwards expire beginning in 2001. As a result of the
annual limitation, a portion of these carryforwards may expire before ultimately
becoming available to reduce potential federal income tax liabilities.
BUSINESS RISKS
The Company is a development stage company and must be evaluated in light
of the uncertainties and complications present for any such company and, in
particular, a company in the pharmaceutical industry. The Company has
accumulated aggregate net losses from inception in December 1986 through
September 30, 1996 of approximately $34,046,000. Losses have resulted
principally from costs incurred in research and development of the Company's
technologies and from general and administrative costs. These costs have
exceeded the Company's revenues, which have been derived primarily from the
manufacturing of AutoLution-Registered Trademark- (a liquid effervescent) and
other non-OraSolv-Registered Trademark- products under agreements with third
parties. The Company no longer manufactures such products and no longer derives
revenues from their manufacture. The Company expects to continue to incur
quarterly losses at least through 1997. Many of the Company's expenditures to
date have been non-recurring costs for plant, equipment and product optimization
and validation. There can be no assurance, however, that the Company will ever
generate substantial revenues or achieve profitability.
The Company may need to raise additional funds to operate prior to the end
of the first half of 1997 and will need to raise such funds prior to the end of
1997, and is subject to the risks inherent in raising such additional funds.
See "-Liquidity and Capital Resources." In addition, the Company is dependent
upon its ability to enter into and perform under collaborative arrangements with
pharmaceutical companies for the development and commercialization of its
products. See "-General."
The success of the Company and of its business strategy is also dependent
in large part on the ability of the Company to attract and retain key management
and operating personnel. Such individuals are in high demand and are often
subject to competing offers. In particular, the Company's success will depend,
in part, on its ability to attract and retain the services of its executive
officers and scientific and technical personnel. The loss of the services of one
or more members of management or key employees
9
<PAGE>
or the inability to hire additional personnel as needed or replace personnel
who have left the Company may have a material adverse affect on the Company.
To date no commercial sales of OraSolv-Registered Trademark- products have
been made, and the Company has not derived any revenues from sales of OraSolv-
Registered Trademark- products. Further, the Company does not expect to derive
any such revenues until at least 1997. The Company has not yet manufactured
OraSolv-Registered Trademark- products in commercial quantities. To achieve
desired levels of production, the Company will be required to increase
substantially its manufacturing capabilities. There can be no assurance that
manufacturing can be scaled-up in a timely manner to allow production in
sufficient quantities to meet the needs of the Company's corporate partners.
The foregoing risks reflect the Company's stage of development and the
nature of the Company's industry and products. Also inherent in the Company's
stage of development is a range of additional risks, including competition,
uncertainties regarding the effects of health care reform on the pharmaceutical
industry, including pressures exerted on the prices charged for pharmaceutical
products, uncertainties regarding protection of patents and proprietary rights,
uncertainties relating to government regulation and risks associated with having
only one manufacturing line at the sole manufacturing facility.
10
<PAGE>
CIMA LABS INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Item Description
----- ------------
10.11 Equity Incentive Plan, as amended and restated.
10.12 1994 Directors' Stock Option Plan, as amended and
restated.
10.29 Offer letter between the Company and Keith P.
Salenger dated August 8, 1996.
11.1 Statement re Computation of Net Loss Per Share
27 Financial Data Schedule
- ------------------------
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended
September 30, 1996.
11
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CIMA LABS INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
CIMA LABS INC.
Date: November 14, 1996 By: /s/ John M. Siebert
----------------- ---------------------------------
John M. Siebert
President and Chief Executive Officer
Date: November 14, 1996 By: /s/ Keith P. Salenger
----------------- ---------------------------------
Keith P. Salenger
Vice President, Finance and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
12
<PAGE>
EXHIBIT INDEX
NO. OF EXHIBIT DESCRIPTION
- -------------- ------------
10.11 Equity Incentive Plan, as amended and restated.
10.12 1994 Directors' Stock Option Plan, as amended and restated.
10.29 Offer letter between the Company and Keith P. Salenger dated
August 8, 1996.
11.1 Statement re Computation of Net Loss Per Share
27 Financial Data Schedule
- -------------------------
13
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CIMA LABS INC.
EQUITY INCENTIVE PLAN
AMENDED AND RESTATED MARCH 25, 1996
FURTHER AMENDED, EFFECTIVE SEPTEMBER 24, 1996
INTRODUCTION.
In 1987, the Board of Directors adopted the CIMA LABS, INC. Stock Option
and Stock Award Plan, which was later amended and restated. On March 25,
1996, the Board of Directors adopted a subsequent amendment and restatement
and retitled this the Equity Incentive Plan.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company
or its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant to
subsection 3(c), be either (i) Options granted pursuant to Section 6 hereof,
including Incentive Stock Options and Nonstatutory Stock Options, (ii) stock
bonuses or rights to purchase restricted stock granted pursuant to Section 7
hereof, or (iii) stock appreciation rights granted pursuant to Section 8
hereof. All Options shall be separately designated Incentive Stock Options
or Nonstatutory Stock Options at the time of grant, and in such form as
issued pursuant to Section 6, and a separate certificate or certificates will
be issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections
424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
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(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means CIMA LABS INC., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted
or terminated. The Board or the chief executive officer of the Company, in
that party's sole discretion, may determine whether Continuous Status as an
Employee, Director or Consultant shall be considered interrupted in the case
of: (i) any leave of absence approved by the Board or chief executive
officer of the Company, including sick leave, military leave, or any other
personal leave; or (ii) transfers between locations of the Company or between
the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as
a Director nor payment of a director's fee by the Company shall be sufficient
to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market, the Fair Market Value of a share of common stock shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
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(2) If the common stock is quoted on the Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a share of common stock shall be the mean between the bid and asked prices
for the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K promulgated pursuant to
the Securities Act of 1933 ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K, and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a "non-employee director" for purposes of Rule
16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(u) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
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(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(w) "PLAN" means this CIMA LABS INC. Equity Incentive Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company when discretion is
being exercised with respect to the Plan.
(y) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.
(aa) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
(ab) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive stock
pursuant to a Stock Award; whether a person shall be permitted to receive
stock upon exercise of an Independent Stock Appreciation Right; and the
number of shares with respect to which a Stock Award shall be granted to each
such person.
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(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of two (2) or more Outside
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan. Notwithstanding anything
in this Section 3 to the contrary, at any time the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Stock Awards to eligible persons who (1) are not then subject to
Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to avoid the application of Section
162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Two Million (2,000,000) shares of the
Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in
full, the stock not acquired under such Stock Award shall revert to and again
become available for issuance under the Plan. Shares subject to Stock
Appreciation Rights exercised in accordance with Section 8 of the Plan shall
not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
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5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be
granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option or an award to purchase restricted stock if, at the time of grant,
such person owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Incentive Stock Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date
of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than five hundred thousand (500,000)
shares of the Company's common stock in any three (3) calendar year period.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted; the exercise
price of each Nonstatutory Stock Option shall be determined by the Board.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option
or a Nonstatutory Stock Option) may be granted with an exercise price lower
than that set forth in the preceding sentence or determined by the Board if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company)
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with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person. A Nonstatutory Stock Option shall not be
transferable, except by the Optionee upon such terms and conditions as are
set forth in the Option Agreement for such Nonstatutory Stock Option, as the
Board or the Committee shall determine in its discretion. Notwithstanding
the foregoing, the person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period,
and may be exercised with respect to some or all of the shares allotted to
such period and/or any prior period as to which the Option became vested but
was not fully exercised. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may be based
on performance or other criteria) as the Board may deem appropriate. The
provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it at the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionee does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under
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Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the
Option Agreement, or (ii) the tenth (10th) day after the last date on which
such exercise would result in such liability under Section 16(b) of the
Exchange Act. Finally, an Optionee's Option Agreement may also provide that
if the exercise of the Option following the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant (other than upon the
Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the first paragraph of this
subsection 6(f), or (ii) the expiration of a period of three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director
or Consultant during which the exercise of the Option would not be in
violation of such registration requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, at the date
of termination, the Optionee is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise
the Option at the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant
to subsection 6(d), but only within the period ending on the earlier of (i)
the date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of such Option as set forth in the Option Agreement. If, at the
time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(i) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to
include as part of any Option Agreement a provision entitling the Optionee to
a further Option (a "Re-Load Option") in the event the Optionee
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exercises the Option evidenced by the Option agreement, in whole or in part,
by surrendering other shares of Common Stock in accordance with this Plan and
the terms and conditions of the Option Agreement. Any such Re-Load Option
(i) shall be for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of such Option; (ii) shall have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (iii) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is an Incentive Stock Option and which is granted to a 10%
stockholder (as described in subsection 5(b)), shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market Value of
the stock subject to the Re-Load Option on the date of exercise of the
original Option and shall have a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the
time of the grant of the original Option; PROVIDED, HOWEVER, that the
designation of any Re-Load Option as an Incentive Stock Option shall be
subject to the one hundred thousand dollar ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 12(d) of
the Plan and in Section 422(d) of the Code. There shall be no Re-Load Options
on a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and the limits on the
grant of options under subsection 5(c) and shall be subject to such other
terms and conditions as the Board or Committee may determine which are not
inconsistent with the express provisions of the Plan regarding the terms of
Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement. Notwithstanding the foregoing,
the Board or the Committee may determine that eligible participants in the
Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be transferable except by will or the laws of
descent and distribution so long as stock awarded under such agreement
remains subject to the terms of the agreement, except as specifically
provided in the applicable stock bonus or restricted stock purchase agreement.
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(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
restricted stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board or the Committee,
according to a deferred payment or other arrangement with the person to whom
the stock is sold; or (iii) in any other form of legal consideration that may
be acceptable to the Board or the Committee in its discretion.
Notwithstanding the foregoing, the Board or the Committee to which
administration of the Plan has been delegated may award stock pursuant to a
stock bonus agreement in consideration for past services actually rendered to
the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or
all of the shares of stock held by that person which have not vested as of
the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under
the Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. Except as
provided in subsection 5(c), no limitation shall exist on the aggregate
amount of cash payments the Company may make under the Plan in connection
with the exercise of a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in
cash (or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the Option surrender) in an amount up to the
excess of (A) the Fair Market Value (on the date of the Option surrender) of
the number of shares of stock covered by that portion of the surrendered
Option in which the Optionee is vested over (B) the aggregate exercise price
payable for such vested shares.
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(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock
to which the Concurrent Right pertains. The appreciation distribution
payable on an exercised Concurrent Right shall be in cash (or, if so
provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Concurrent Right) in an amount equal
to such portion as shall be determined by the Board or the Committee at the
time of the grant of the excess of (A) the aggregate Fair Market Value (on
the date of the exercise of the Concurrent Right) of the vested shares of
stock purchased under the underlying Option which have Concurrent Rights
appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They
shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Independent Right) of a number of shares of
Company stock equal to the number of share equivalents in which the holder is
vested under such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the aggregate Fair
Market Value (on the date of the grant of the Independent Right) of such
number of shares of Company stock. The appreciation distribution payable on
the exercised Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date
of the exercise of the Independent Right.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register
under the Securities Act of 1933, as amended (the "Securities Act") either
the Plan, any Stock Award or any stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.
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10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which
it may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such
person has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without cause the right of the Company's
Board of Directors and/or the Company's shareholders to remove any Director
pursuant to the terms of the Company's By-Laws and the provisions of the
Delaware General Corporation Law, or the right to terminate the relationship
of any Consultant pursuant to the terms of such Consultant's agreement with
the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring
stock under any Stock Award, (1) to give written assurances satisfactory to
the Company as to such person's knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Stock Award for such person's own account and not with any present intention
of selling or otherwise distributing the
12
<PAGE>
stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may,
upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination
of such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the
Stock Award; or (3) delivering to the Company owned and unencumbered shares
of the common stock of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving the receipt
of consideration by the Company), the Plan will be appropriately adjusted in
the type(s) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person during any three (3) calendar year period pursuant to subsection 5(c),
and the outstanding Stock Awards will be appropriately adjusted in the
type(s) and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; (3) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity
or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or
any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated
13
<PAGE>
under the Exchange Act, or comparable successor rule) of securities of the
Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then to the extent
permitted by applicable law: (i) any surviving or acquiring corporation or
an Affiliate of such surviving or acquiring corporation shall assume any
Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards (including a stock award resulting in the acquisition of the same
consideration paid to the stockholders in the transaction described in this
subsection 12(b)) for those outstanding under the Plan, or (ii) such Stock
Awards shall continue in full force and effect. In the event any surviving
or acquiring corporation or its Affiliates refuse to assume or continue such
Stock Awards, or to substitute similar Stock Awards for those outstanding
under the Plan, then, with respect to Stock Awards held by persons then
performing services as Employees, Directors or Consultants, the time during
which such Stock Awards may be exercised shall be accelerated and the Stock
Awards terminated if not exercised after such acceleration and at or prior to
such event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m) of the
Code and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.
14
<PAGE>
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on May 31, 2004, which shall be
within ten (10) years from the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
15
<PAGE>
CIMA LABS INC.
1994 DIRECTORS' STOCK OPTION PLAN
AMENDED EFFECTIVE SEPTEMBER 24, 1996
SECTION 1. PURPOSE.
This plan shall be known as the "CIMA LABS INC. 1994 Directors' Stock
Option Plan" and is hereinafter referred to as the "Plan." The purpose of
the Plan is to promote the interests of CIMA LABS INC., a Delaware
corporation (the "Company"), by enhancing its ability to attract and retain
the services of experienced and knowledgeable independent directors and by
providing additional incentive for these directors to increase their interest
in the Company's long-term success and progress.
SECTION 2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates such
administration to a committee (the "Committee") of two or more non-employee
directors appointed by the Board. For this purpose, "non-employee director"
means a director who either (i) is not a current employee or officer of the
Company or its parent or subsidiary, does not receive compensation (directly
or indirectly) from the Company or its parent or subsidiary for services
rendered as a consultant or in any capacity other than as a director (except
for an amount as to which disclosure would not be required under Item 404(a)
of Regulation S-K promulgated pursuant to the Securities Act of 1933
(Regulation S-K)), does not possess an interest in any other transaction as
to which disclosure would be required under Item 404(a) of Regulation S-K,
and is not engaged in a business relationship as to which disclosure would be
required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered
a non-employee director for purposes of Rule 16b-3. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such resolutions, not inconsistent with the provisions
of the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration
of the Plan.
(b) Grants of stock options under the Plan and the amount and nature of
the awards to be granted shall be automatic as described in Section 6.
However, all questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board or the Committee and such
determination shall be final and binding upon all persons having an interest
in the Plan.
SECTION 3. PARTICIPATION IN THE PLAN.
Each director of the Company shall be eligible to participate in the
Plan unless such director is an employee of the Company or any subsidiary of
the Company.
1
<PAGE>
SECTION 4. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 11 hereof, the stock to be subject
to options under the Plan shall be authorized by unissued shares of the
Company's common stock, par value $.01 per share (the "Common Stock").
Subject to adjustment as provided in Section 11 hereof, the maximum number of
shares with respect to which options may be exercised under this Plan shall
be 350,000 shares. If an option under the Plan expires, or for any reason is
terminated, any shares that have not been purchased upon exercise of the
option prior to the expiration or termination date shall again be available
for options thereafter granted during the term of the Plan.
SECTION 5. NON-QUALIFIED STOCK OPTIONS.
All options granted under the Plan shall be non-qualified stock options
that do not qualify as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve,
which agreements shall comply with and be subject to the following terms and
conditions:
6.1 ONE-TIME OPTION GRANT. An option to purchase 20,000 shares of
Common Stock shall be granted automatically on the later of the closing of
the first public offering of the Common Stock registered under the Securities
Act of 1933, as amended, or the first business day immediately following the
date the eligible director is first elected to the Board of Directors of the
Company.
6.2 ANNUAL OPTION GRANTS. An option to purchase 7,500 shares of Common
Stock shall be granted automatically on the first business day immediately
following each annual meeting of the Company's stockholders (the "Annual
Option Grant Date") held during the term of the Plan, beginning with the
first annual meeting of stockholders held after the Plan becomes effective
pursuant to Section 12 hereof, to each eligible director in office on such
Annual Option Grant Date.
6.3 OPTIONS NON-TRANSFERABLE. No option granted under the Plan shall
be transferable by the optionee except (i) by will or by the laws of descent
and distribution as provided in Section 6.6 hereof, or (ii) upon such terms
and conditions as are expressly set forth in the agreement documenting the
grant of such option; the option shall be exercisable during the lifetime of
the optionee only by the optionee (or by his or her legal guardian or legal
representative) or such transferee. Notwithstanding the foregoing, the
optionee may, by delivering written notice to the Company in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the optionee, shall thereafter be entitled to exercise the option.
2
<PAGE>
6.4 PERIOD OF OPTIONS. Options shall terminate upon the expiration of
10 years from the date on which they were granted.
6.5 EXERCISE OF OPTIONS.
(a) Options granted under Section 6.1 hereof shall vest and become
exercisable as to 50% of the shares covered by the option on the twelve month
anniversary of the date of grant and as to 100% of such shares on the
twenty-four month anniversary of the date of grant. Options granted under
Section 6.2 hereof shall vest and become exercisable as to 100% of the shares
covered by the option six months subsequent to the date of grant. Options
that are vested and exercisable will be exercisable at any time or from time
to time during the term of the option. An unvested portion of any option
shall only vest so long as the eligible director remains a director on the
date such portion vests.
(b) The exercise of any option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that
the issuance and delivery of Common Stock pursuant to such exercise will not
violate any federal or state securities or other laws. An optionee desiring
to exercise an option may be required by the Company, as a condition of the
effectiveness of any exercise of an option granted hereunder, to agree in
writing that all Common Stock to be acquired pursuant to such exercise shall
be held for his or her own account without a view to any distribution
thereof, that the certificates for such shares shall bear an appropriate
legend to that effect and that such shares will not be transferred or
disposed of except in compliance with applicable federal and state securities
laws.
(c) An optionee electing to exercise an option shall give written
notice to the Company of such election and of the number of shares subject to
such exercise. The full purchase price of such shares shall be tendered with
such notice of exercise. Payment shall be made to the Company in cash
(including check, bank draft or money order) or in such other form of
consideration as the Committee shall approve.
6.6 EFFECT OF DEATH. If the optionee shall die prior to the time the
option is fully exercised, such option may be exercised at any time within
one year after his or her death by the personal representatives or
administrators of the optionee or by any person or persons to whom the option
is transferred by will or the applicable laws of descent and distribution, to
the extent of the full number of shares the optionee was entitled to purchase
under the option on the date of death and subject to the condition that no
option shall be exercisable after the expiration of the term of the option.
SECTION 7. OPTION EXERCISE PRICE.
The option exercise price per share for the shares covered by each
option shall be equal to the "fair market value" of a share of Common Stock
as of the date on which the option is granted, as determined pursuant to
Section 9 hereof.
3
<PAGE>
SECTION 8. TIME FOR GRANTING OPTIONS.
Unless the Plan shall have been discontinued as provided in Section 13
hereof, the Plan shall terminate upon the expiration of 10 years from the
date upon which it takes effect as provided in Section 12 hereof. No option
may be granted after such termination, but termination of the Plan shall not,
without the consent of the optionee, alter or impair any rights or
obligations under any option theretofore granted.
SECTION 9. FAIR MARKET VALUE OF COMMON STOCK.
For the purposes of the Plan, the fair market value of the Common Stock
on a given date shall be the closing price of the Common Stock as reported on
the Nasdaq National Market, if the Common Stock is then being quoted on the
Nasdaq National Market. If on the date as of which the fair market value is
being determined the Common Stock is not publicly traded, the Committee shall
make a good faith attempt to determine such fair market value and, in
connection therewith, shall take such actions and consider such factors as it
deems necessary or advisable.
SECTION 10. LIMITATION OF RIGHTS.
10.1 NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan, shall
constitute, or be evidence of, any agreement or understanding, express or
implied, that the Company will retain a director for any period of time, or
at any particular rate of compensation.
10.2 NO STOCKHOLDER RIGHTS FOR OPTIONS. An optionee shall have no
rights as a stockholder with respect to the shares covered by options under
the date of issuance to such optionee of a stock certificate therefor, and no
adjustment will be made for cash dividends or other rights for which the
record date is prior to the date such certificate is issued.
SECTION 11. ADJUSTMENTS TO COMMON STOCK.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend (of whatever
amount), stock split, or other change in the corporate structure, appropriate
adjustments in the Plan and outstanding options shall be made. In the event
of any such changes, adjustments shall include, where appropriate, changes in
the aggregate number of shares subject to the Plan, the number of shares
subject to outstanding options and the option exercise prices thereof in
order to prevent dilution or enlargement of option rights.
SECTION 12. EFFECTIVE DATE OF THE PLAN.
The Plan shall be approved by the affirmative vote of the holders of a
majority of the outstanding shares present in person or by proxy and voted at
a duly held meeting of
4
<PAGE>
stockholders of the Company and shall thereafter become effective upon the
closing of the first public offering of the Common Stock registered under the
Securities Act of 1933, as amended.
SECTION 13. AMENDMENT OF THE PLAN.
The Board may suspend or discontinue the Plan or revise or amend it in
any respect whatsoever; provided, however that without approval of the
stockholders of the Company, no revision or amendment shall be made that (a)
absent such stockholder approval, would cause Rule 16b-3, as promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, or any successor rule or regulation thereto, to become
unavailable with respect to the Plan, or (b) requires the approval of the
Company's stockholders under any rules or regulations of the National
Association of Securities Dealers, Inc. that are applicable to the Company.
The Board shall not impair any option theretofore granted under the Plan
without the consent of the holder of the option.
SECTION 14. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware and construed
accordingly.
5
<PAGE>
[CIMA Labs Inc. Letterhead]
August 6, 1996
Keith P. Salenger
112 Ridge View Lane
Doylestown, PA 18901
Dear Keith:
It is a pleasure to offer you the position of Chief Financial Officer and Vice
President at CIMA Labs. You will report directly to me. The details of your
offer is as follows:
1. Base Salary: $5,384.62 per pay period (bi-weekly) which is the
equivalent of $140,000 annually.
2. Executive Bonus: Eligible to receive up to 40% of your salary as
additional compensation based on the company performance meeting
objectives and your performance meeting objectives.
3. Executive Severance: If within your first year of employment you are
terminated without cause by the company, you will receive six months
salary.
4. Stock Options: 40,000 shares of stock at an option price of $X.XXX per
share subject to standard employee stock option requirements. The
option price will be determined on the date the Stock Option Committee
approves the action already agreed by the Board of Directors.
5. Vacation: You will receive 4 weeks of vacation on an annual basis.
6. Moving Expenses: Relocation to the Minneapolis/St. Paul area according to
the enclosed CIMA Moving Policy. In addition, you will receive a one
time moving bonus of $25,000.00. As an exception to the Moving Policy,
we will reimburse you for temporary living expenses for three months
and will reimburse you for flights home every other weekend. You will
also be reimbursed for two house-hunting trips.
This offer is contingent upon passing a physical we choose or agree to and
upon completion of a drug testing. CIMA is a drug free environment.
Enclosed is a copy of the Summary of Company Provided Benefits and Medical
and Dental Employee Benefit Costs. I am also providing you with a pack of
information outlining the Medica Medical Insurance and the Guardian
Dental/Life/AD&D/LTD Insurance.
<PAGE>
-2-
Also enclosed is a copy of the CIMA Labs Inc. Employment Agreement for your
signature.
Keith, we are very excited to have you join CIMA Labs. We believe we have
some difficult challenges in front of us which you can help. I look forward
to hearing your acceptance within the next week. Please sign and date in the
space provided and fax back to me at 612-947-8770.
Sincerely,
/s/ John M. Siebert
John M. Siebert, Ph.D.
JMS:mmr
Enclosures
cc: Michele Roepke
SIGNED ACCEPTANCE:
/s/ Keith P. Salenger August 8, 1996
- -----------------------------------------------------------
Keith P. Salenger Date
<PAGE>
Exhibit 11.1 - Statement Re: Computation of Net Loss Per Share
<TABLE>
<CAPTION>
Period from
Three Months Ended Nine Months Ended December 12,
September 30, September 30, 1986
( Inception)
-------------------------- ------------------------- to September 30,
1996 1995 1996 1995 1996
----------- ------------ ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
Primary:
Average shares outstanding 9,405,846 7,687,551 8,633,939 7,599,329 2,327,092
Net effect of dilutive stock
options -- based on the treasury
stock method using average 445,445
market price (See Note A Below)
---------------
Totals 2,772,537
Net loss $(1,308,531) $(1,552,587) $(4,732,297) $(7,263,904) $(33,897,788)
Per share amount $(.14) $(.20) $(.55) $(.96) $ (12.23)
---------------
---------------
Fully diluted:
Average shares outstanding 9,405,846 7,687,551 8,633,939 7,599,329 3,678,779
Net effect of dilutive stock
options -- based on the treasury
stock method using average
market price or the ending market
price if higher (See Note A Below) 445,445
---------------
Totals 9,405,846 7,687,551 8,633,939 7,599,329 4,124,224
---------------
---------------
Net loss $(1,308,531) $(1,552,587) $(4,732,297) $(7,263,904) $(33,897,788)
---------------
---------------
Per share amount $(.14) $(.20) $(.55) $(.96) $ (8.22)
---------------
---------------
</TABLE>
NOTE A: Represents shares required by the provisions of Staff Accounting
Bulletin No. 83 for "cheap stock" issued prior to the Company's initial public
offering in August 1994.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF
CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,934,051
<SECURITIES> 0
<RECEIVABLES> 439,732
<ALLOWANCES> 0
<INVENTORY> 349,783
<CURRENT-ASSETS> 12,835,818
<PP&E> 13,466,102
<DEPRECIATION> (2,839,166)
<TOTAL-ASSETS> 24,014,713
<CURRENT-LIABILITIES> 1,382,228
<BONDS> 0
0
0
<COMMON> 94,111
<OTHER-SE> 22,538,373
<TOTAL-LIABILITY-AND-EQUITY> 24,014,713
<SALES> 0
<TOTAL-REVENUES> 1,171,560
<CGS> 0
<TOTAL-COSTS> 6,266,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362,874
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,732,297)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
</TABLE>
