<PAGE>
Exhibit 99.1
IDEC PHARMACEUTICALS CORPORATION
1988 STOCK OPTION PLAN
(AMENDED AND RESTATED THROUGH MAY 17, 2000)
I. PURPOSES OF THE PLAN
(a) This Stock Option Plan (the "Plan") is intended to
promote the interests of IDEC Pharmaceuticals Corporation, a Delaware
corporation (the "Corporation"), by providing a method whereby key employees
(including officers and directors) of the Corporation (or its parent or
subsidiary corporations) responsible for the management, growth and financial
success of the Corporation (or its parent or subsidiary corporations) may be
offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation and continue to render services to the Corporation (or its parent or
subsidiary corporations).
(b) The following provisions shall be applicable in
determining the parent and subsidiary corporations of the Corporation:
(i) Any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation shall
be considered to be a PARENT corporation of the Corporation, provided
each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(ii) Each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation shall be considered to be a SUBSIDIARY of the Corporation,
provided each such corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(c) All share numbers in this May 17, 2000 restatement
reflect the two-for-one split of the Common Stock which was effected on December
21, 1999.
II. ADMINISTRATION OF THE PLAN
(a) The Corporation's Board of Directors (the "Board")
shall appoint a committee ("Committee") of two (2) or more non-employee Board
members to assume full responsibility for the administration of the Plan.
Members of the Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time.
<PAGE>
(b) The Committee as Plan Administrator shall have full
power and authority (subject to the express provisions of the Plan) to establish
such rules and regulations as it may deem appropriate for the proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or stock issuance thereunder.
III. ELIGIBILITY FOR OPTION GRANTS
(a) The persons eligible to receive option grants under
the Plan shall be limited to key employees (including officers and directors) of
the Corporation (or its parent or subsidiary corporations) who render services
which contribute to the success and growth of the Corporation (or its parent or
subsidiary corporations) or which may reasonably be anticipated to contribute to
the future success and growth of the Corporation (or its parent or subsidiary
corporations).
(b) The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants under the
Plan, the number of shares to be covered by each such grant, whether the granted
option is to be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements, the time or times at which each
such option is to become exercisable, and the maximum term for which the option
is to be outstanding.
IV. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of
the Corporation's authorized but unissued or reacquired Common Stock. The
maximum number of shares which may be issued under the Plan shall not exceed
15,980,000 shares.* The total
-------------
*/ Adjusted to reflect (i) the 1 for 2.5 reverse Common Stock split
effected by the Corporation on August 18, 1991 and a 2 for 1 stock split
effected by the Corporation on December 21, 1999, (ii) the 1,340,000 share
increase authorized by the Board on March 18, 1992 and approved by the
stockholders at the 1992 Annual Meeting, (iii) the 1,400,000 share increase
authorized by the Board on January 13, 1993 and approved by the stockholders at
the 1993 Annual Meeting, (iv) the 1,300,000 share increase authorized by the
Board on February 28, 1994 and approved by the stockholders at the 1994 Annual
Meeting, (v) the 1,000,000 share increase authorized by the Board on January 25,
1995, and approved by the stockholders at the 1995 Annual Meeting, (vi) the
2,400,000 share increase authorized by the Board on January 24, 1996, and
approved by the stockholders at the 1996 Annual Meeting, (vii) the 1,600,000
share increase authorized by the Board on February 24, 1997, and approved by the
stockholders at the 1997 Annual Meeting, (viii) the 1,710,000 share increase
authorized by the Board on February 20, 1998, approved by the stockholders at
the 1998 Annual Meeting, (ix) the 1,600,000 share increase authorized by the
Board on January 13, 1999, approved by the stockholders at the 1999 Annual
Meeting, and (x) the 1,710,000 share increase authorized by the Board on January
12, 2000, approved by the stockholder at the 2000 Annual Meeting. In no event,
however, shall more than 9,865,423 shares of Common Stock be issued under the
Plan after February 29, 2000, subject to adjustment under Section IV(d) in the
event of changes in the Corporation's capital structure.
2
<PAGE>
number of shares issuable under the Plan shall be subject to adjustment from
time to time in accordance with Section IV(d) of the Plan.
(b) In no event may the aggregate number of shares of
Common Stock for which any one individual participating in the Plan may be
granted stock options and separately exercisable stock appreciation rights
exceed 2,500,000 shares in the aggregate over the remaining term of the Plan,
subject to adjustment from time to time in accordance with Section IV(d) of the
Plan. For purposes of such limitation, no stock options or stock appreciation
rights granted prior to January 1, 1994 shall be taken into account.
(c) Should an option expire or terminate for any
reason prior to exercise in full, the shares subject to the portion of the
option not so exercised shall be available for subsequent option grants under
the Plan. Unvested shares issued under the Plan and subsequently repurchased
by the Corporation, at the option exercise 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. Shares subject to any option cancelled in
accordance with Section VIII of the Plan shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent option
grants under this Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, 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 actually
issued to the option holder.
(d) In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (I) the maximum
number and/or class of securities issuable under the Plan, (II) the maximum
number and/or class of securities for which stock options and separately
exercisable stock appreciation rights may be granted to any one participant in
the aggregate after December 31, 1993 and (III) the number and/or class of
securities and 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.
V. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; PROVIDED, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section VI.
3
<PAGE>
1. OPTION PRICE.
A. The option price per share shall be fixed by the Plan
Administrator, but in no event shall the option price per share be less than one
hundred percent (100%) of the fair market value of a share of Common Stock on
the date of the option grant.
B. The option price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section IX and
the instrument evidencing the grant, be payable in one of the alternative
forms specified below:
(i) full payment in cash or check payable to the
Corporation; or
(ii) full payment in shares of Common Stock held
by the optionee for the requisite period necessary to avoid a charge to
the Corporation's reported earnings and valued at fair market value on
the Exercise Date (as such term is defined below); or
(iii) full payment through a combination of shares
of Common Stock held by the optionee for the requisite period necessary
to avoid a charge to the Corporation's reported earnings and valued at
fair market value on the Exercise Date and cash or check payable to the
Corporation; or
(iv) full payment effected through a
broker-dealer sale and remittance procedure pursuant to which the
optionee shall provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to (A) effect the immediate sale
of a sufficient number of the purchased shares to enable such firm to
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate option price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation
in connection with such purchase and (B) remit those funds to the
Corporation on the settlement date, and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm.
For purposes of this subparagraph B, the Exercise Date shall
be the date on which written notice of the option exercise is received by the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
C. The fair market value per share of Common Stock on
any relevant date under subparagraph A or B (and for all other valuation
purposes under the Plan) shall be determined in accordance with the following
provisions:
4
<PAGE>
(i) If the Common Stock is not at the time
listed or admitted to trading on any national stock exchange but is
traded on The Nasdaq Stock Market, the fair market value shall be the
closing selling price per share of Common Stock on the date in
question, as reported by The Nasdaq Stock Market and published in THE
WALL STREET JOURNAL. If there is no reported closing selling price
for the Common Stock on the date in question, then the closing selling
price on the last preceding date for which such quotation exists shall
be determinative of fair market value.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the fair
market value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions
on such exchange and published in THE WALL STREET JOURNAL. If there is
no reported sale of Common Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price
on the exchange on the last preceding date for which such quotation
exists.
2. TERM AND EXERCISE OF OPTIONS. Each option granted under the
Plan shall be exercisable at such time or times, during such period, and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the instrument evidencing such option; PROVIDED, however, that no such
option shall have a term in excess of ten (10) years from the grant date.
3. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
optionee, Incentive Options shall be exercisable only by the optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the optionee's death. However, non-statutory options
may, in connection with the optionee's estate plan, be assigned in whole or in
part during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
4. EFFECT OF TERMINATION OF SERVICE.
A. Should an optionee cease to remain in Service (as
defined in subparagraph D below) for any reason (including death or permanent
disability as defined in Section 22(e)(3) of the Internal Revenue Code) while
the holder of one or more outstanding options granted to such optionee under the
Plan, then such option or options shall not (except to the extent otherwise
provided pursuant to Section X below) remain exercisable for more than a
5
<PAGE>
thirty-six (36)-month period (or such shorter period determined by the Plan
Administrator and specified in the instrument evidencing the grant) following
the date of such cessation of Service. Under no circumstances, however, shall
any such option be exercisable after the specified expiration date of the option
term. Each such option shall, during such thirty-six (36)-month or shorter
period, be exercisable only to the extent of the number of shares (if any) for
which the option is exercisable on the date of the optionee's cessation of
Service. Upon the expiration of such thirty-six (36)-month or shorter period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be exercisable. However, the option shall, immediately upon the
optionee's cessation of Service for any reason, terminate and cease to be
outstanding for any option shares for which the option is not otherwise at that
time exercisable.
B. Any outstanding option held by the optionee and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised, but only to the extent of the number of shares (if any)
for which the option is exercisable on the date of the optionee's cessation of
Service (less any option 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. The right to exercise
the option for those shares shall terminate upon the EARLIER of (i) the third
anniversary of the date of the optionee's cessation of Service or (ii) the
specified expiration date of the option term.
C. Notwithstanding subparagraphs A and B above, the Plan
Administrator shall have complete discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding, to permit
one or more options held by the optionee under the Plan to be exercised, during
the limited period of exercisability provided under Section V.4.A above, not
only with respect to the number of shares for which each such option is
exercisable at the time of the optionee's cessation of Service but also with
respect to one or more subsequent installments for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
D. For purposes of the foregoing provisions of this
Section V.4 (and all other provisions of the Plan), the optionee shall be deemed
to remain in the Service of the Corporation for so long as such individual
renders services on a periodic basis to the Corporation or any parent or
subsidiary corporation in the capacity of an Employee, a non-employee member of
the board of directors or an independent consultant or advisor, unless the
option agreement evidencing the option grant and/or the purchase agreement
evidencing the purchased option shares specifically provides otherwise. The
optionee shall be considered to be an Employee for so long as such individual
remains in the employ of the Corporation or one or more of its parent or
subsidiary corporations, subject to the control and direction of the employer
entity as to the work to be performed and as to the manner and method of
performance.
5. STOCKHOLDER RIGHTS. An optionee shall have none of the rights
of a stockholder with respect to any shares covered by the option until such
individual shall have exercised the option and paid the option price for the
purchased shares.
6
<PAGE>
6. REPURCHASE RIGHTS. Unvested shares of Common Stock may be
issued under the Plan which are subject to repurchase by the Corporation in
accordance with the following provisions:
(a) Upon the optionee's cessation of Service while
holding unvested shares under the Plan, the Corporation shall have the
right to repurchase any or all of those unvested shares at the option
price paid per share. The terms and conditions 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 instrument evidencing such repurchase right.
(b) All of the Corporation's outstanding repurchase
rights shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence
of any Corporate Transaction under Section VII of this Plan, except to
the extent: (i) any such repurchase right is to be assigned to the
successor corporation (or parent thereof) in connection with the
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) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the optionee's cessation
of Service, to cancel the Corporation's outstanding repurchase rights
with respect to any or all unvested shares purchased or purchasable by
the optionee under the Plan and thereby accelerate the vesting of those
shares in whole or in part at any time.
VI. INCENTIVE OPTIONS.
The terms and conditions specified below shall be applicable
to all Incentive Options granted under the Plan. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as "non-statutory" options when issued under the Plan shall NOT be
subject to such terms and conditions.
(a) DOLLAR LIMITATION. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock for
which one or more options granted to any Employee under this Plan (or any other
option plan of the Corporation or its parent or subsidiary corporations) may for
the first time become exercisable as incentive stock options under the Federal
tax laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as incentive
stock options under the Federal tax laws shall be applied on the basis of the
order in which such options are granted. Should the
7
<PAGE>
number of shares of Common Stock for which an Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, the option may nevertheless be exercised for those
excess shares in such calendar year as a non-statutory option.
(b) 10% STOCKHOLDER. If any individual to whom the
Incentive Option is granted is the owner of stock (as determined under Section
424(d) of the Internal Revenue Code) possessing ten percent (10%) or more of the
total combined voting power of all classes of stock of the Corporation or any
one of its parent or subsidiary corporations, then the option price per share
shall not be less than one hundred and ten percent (110%) of the fair market
value per share of Common Stock on the grant date, and the option term shall not
exceed five (5) years, measured from such grant date.
Except as modified by the preceding provisions of this Section
VI, all the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
VII. CORPORATE TRANSACTION/CHANGE IN CONTROL
(a) In the event of any of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in
liquidation or dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation
is the surviving entity but in which fifty percent (50%) or more of the
Corporation's outstanding voting stock is transferred to persons
different from those who held the stock immediately prior to such
merger,
each outstanding option under the Plan shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become exercisable for the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. However, an outstanding option under the Plan 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 be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof or (ii) the
acceleration of such option is subject to other applicable limitations imposed
by the Plan Administrator at the time of grant. The determination of
comparability under clause (i) above shall be made by the Plan Administrator and
its determination shall be final, binding and conclusive.
8
<PAGE>
(b) Each outstanding option under the Plan which is
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued, in consummation of such Corporate Transaction, to an
actual holder of the same number of shares of Common Stock as are subject to
such option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, PROVIDED
the aggregate option price payable for such securities shall remain the same. In
addition, the class and number of securities available for issuance under the
Plan on both an aggregate and per participant basis shall be appropriately
adjusted to reflect the effect of the Corporate Transaction upon the
Corporation's capital structure.
(c) In connection with any Change in Control (as defined
below), the Plan Administrator shall have full power and authority, 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 each outstanding
option under the Plan so that each such option shall, immediately prior to the
effective date of the Change in Control, become exercisable for the total number
of shares 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. The Plan
Administrator shall also have full power and authority to condition such option
acceleration, and the termination of any of the Corporation's repurchase rights
with respect to any unvested shares purchased or purchasable under the Plan,
upon the subsequent termination of the optionee's Service within a designated
period following the Change in Control.
A CHANGE IN CONTROL shall be deemed to occur in the event:
(i) twenty-five percent (25%) or more of the
Corporation's outstanding voting stock is acquired pursuant to a tender
or exchange offer (A) which is made directly to the Corporation's
stockholders 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) and (B)
which the Board does not recommend the stockholders to accept; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, 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 such election or nomination was approved by the Board.
9
<PAGE>
(d) Immediately following the consummation of a Corporate
Transaction, all outstanding options under the Plan shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation or its
parent company. Upon a Change in Control, each outstanding option accelerated
pursuant to subsection VII(c) above shall remain fully exercisable until the
expiration or sooner termination of the option term specified in the agreement
evidencing such grant.
(e) The exercisability as incentive stock options under
the Federal tax laws of any options accelerated in connection with a Corporate
Transaction or Change in Control shall remain subject to the dollar limitation
of Section VI(b) of the Plan. To the extent such dollar limitation is exceeded,
the accelerated option shall be exercisable as a non-statutory option under the
Federal tax laws.
(f) The grant of options under this Plan 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.
VIII. STOCK APPRECIATION RIGHTS
(a) Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section VIII, one or more optionees may be granted the
right, exercisable upon such terms and conditions as the Plan Administrator
may establish, to surrender all or part of an unexercised option under the
Plan in exchange for a distribution from the Corporation in an amount equal
to the excess of (i) 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 (ii) the aggregate
option price payable for such vested shares.
(b) No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender
is so approved, then the distribution to which the optionee shall accordingly
become entitled under this Section VIII 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.
10
<PAGE>
(c) 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
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
(d) One or more officers of the Corporation subject to
the short-swing profit restrictions of the Federal securities laws may, in
the Plan Administrator's sole discretion, be granted limited stock
appreciation rights in tandem with their outstanding options under the Plan.
Upon the occurrence of a Hostile Take-Over, each outstanding option with such
a limited stock appreciation right shall automatically be cancelled, to the
extent such option is at the time exercisable for fully-vested shares of
Common Stock (including any shares which may vest in connection with such
Hostile Take-Over). 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 vested shares of Common Stock at the time subject to
the cancelled option (or cancelled portion of such option) over (ii) the
aggregate exercise price payable for such shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following
the consummation of the Hostile Take-Over. The Plan Administrator shall
pre-approve, at the time the limited stock appreciation right is granted, the
subsequent exercise of that right in accordance with the terms of the grant
and the provisions of this Section VIII(d). No additional approval of the
Plan Administrator or the Board shall be required at the time of the actual
option cancellation and cash distribution. The balance of the option (if any)
shall continue to remain outstanding and exercisable in accordance with the
terms and conditions of the instrument evidencing such grant.
(e) For purposes of Section VIII(d), the following
definitions shall be in effect:
A HOSTILE TAKE-OVER shall be deemed to occur in the
event any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of
securities possessing more than twenty-five percent (25%) 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.
The TAKE-OVER PRICE per share shall be deemed to be
equal to the GREATER of (a) the fair market value per share on the date
of cancellation, as determined pursuant to the valuation provisions of
Section V.1.C, or (b) the highest reported price per share paid by the
acquiring entity in effecting such Hostile Take-Over. However, to the
extent the cancelled option is an Incentive Option, the Take-Over Price
shall not exceed the clause (a) price per share.
11
<PAGE>
(f) The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section IX shall not be available for subsequent option grant under the Plan.
IX. LOANS OR INSTALLMENT PAYMENTS
The Plan Administrator may, in its discretion, assist any
optionee (including any officer or director of the Corporation) in the exercise
of one or more options granted to such individual under the Plan, including the
satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or (ii) permitting the optionee to pay the option
price for the purchased Common Stock in installments over a period of years. The
terms of any such loan or installment method of payment (including the interest
rate and terms of repayment) will be upon such terms as the Plan Administrator
specifies in the applicable option agreement or otherwise deems appropriate
under the circumstances. Loans or installment payments may be granted with or
without security or collateral (other than to individuals who are independent
consultants or advisors, in which event the loan must be adequately secured by
collateral other than the purchased shares). However, the maximum credit
available to the optionee may not exceed the option price of the acquired shares
(less the par value of those shares) plus any Federal and State income and
employment withholding taxes to which the optionee may become subject in
connection with the exercise of the option.
X. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority, to
extend the period of time for which the option is to remain exercisable
following the optionee's cessation of Service from the thirty-six (36) month or
shorter period set forth in the option agreement to such greater period of time
as the Plan Administrator shall deem appropriate. In no event, however, shall
such option be exercisable after the specified expiration date of the option
term.
XI. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever;
PROVIDED, however, that no such amendment or modification shall, without the
consent of the holders, adversely affect rights and obligations with respect to
options at the time outstanding under the Plan. In addition, certain amendments
may require stockholder approval pursuant to applicable laws or regulations.
XII. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan was initially adopted by the Board on July
19, 1988 and approved by the Corporation's stockholders on March 29, 1989. The
Plan was subsequently amended by the Board on July 18, 1990, and such amendment
was approved by the Corporation's stockholders in October, 1990. In January
1991, the Plan was again amended to increase by 960,000 shares the number of
shares of Common Stock issuable under the Plan, and
12
<PAGE>
such share increase was approved by the Corporation's stockholders on March 20,
1991. The Board further amended the Plan on May 22, 1991, with such amendments
to become effective as of the date the Corporation's Common Stock first became
traded on The Nasdaq Stock Market, in order to revise certain provisions
previously required when the Plan was subject to the permit requirements of the
California Corporations Department. On March 18, 1992, the Plan was amended and
restated in its entirety, including an increase of 1,340,000 shares to the
number of shares of Common Stock issuable thereunder. The 1992 restatement,
including the 1,340,000-share increase, was approved by the stockholders at the
1992 Annual Meeting. On January 13, 1993, the Board amended the Plan to increase
by an additional 1,400,000 shares the number of shares of Common Stock issuable
under the Plan, and such share increase was approved by the stockholders at the
1993 Annual Meeting. On February 28, 1994, the Board amended the Plan to
increase by an additional 1,300,000 shares the number of shares of Common Stock
issuable under the Plan, and such increase was approved by the stockholders at
the 1994 Annual Meeting. On January 25, 1995, the Board amended the Plan to
increase by an additional 1,000,000 shares the number of shares of Common Stock
issuable under the Plan, and such increase was approved by the stockholders at
the 1995 Annual Meeting. On January 24, 1996, the Board adopted an amendment
which increased the number of shares of Common Stock issuable under the Plan by
an additional 1,400,000 shares, and such increase was approved by the
stockholders at the 1996 Annual Meeting.
On February 24, 1997, the Board adopted a series of amendments
to the Plan (the "1997 Amendments") which (i) increased the number of shares of
Common Stock reserved for issuance over the term of the Plan by an additional
1,600,000 shares, (ii) rendered non-employee Board members serving as Plan
Administrator eligible to receive option grants under the Plan, (iii) allowed
unvested shares issued under the Plan and subsequently repurchased by the
Corporation at the option exercise price paid per share to be reissued under the
Plan, (iv) removed certain restrictions on the eligibility of non-employee Board
members to serve as Plan Administrator, (v) extended the term of the Option Plan
from July 19, 1998 to December 31, 2002 and (vi) effected a series of additional
changes to the provisions of the Plan (including the stockholder approval
requirements, the transferability of non-statutory stock options and the
elimination of the six (6)-month holding period requirement as a condition to
the exercise of stock appreciation rights) in order to take advantage of the
recent amendments to Rule 16b-3 of the 1934 Act which exempts certain officer
and director transactions under the Plan from the short-swing liability
provisions of the federal securities laws. The 1997 Amendments were approved by
the Corporation's stockholders at the 1997 Annual Meeting.
On February 20, 1998, the Board authorized an increase of
1,710,000 shares of Common Stock to the share reserve under the Plan, and the
stockholders approved such increase at the 1998 Annual Meeting.
On January 13, 1999, the Board authorized an increase of
1,600,000 shares of Common Stock to the share reserve under the Plan, and the
stockholders approved such increase at the 1999 Annual Meeting (the "1999
Amendment").
13
<PAGE>
On January 12, 2000, the Board adopted a series of amendments
to the Plan (the "2000 Amendments") which (i) increased the number of shares of
Common Stock reserved for issuance over the term of the Plan by an additional
1,710,000 shares; (ii) extend the term of the Option Plan from December 31, 2002
to December 31, 2005; (iii) required the option price per share of Common Stock
subject to each option granted under the Option Plan to be not less than 100% of
the fair market value per share of Common Stock on the date of grant; (iv)
removed the non-employee Board members and all independent consultants from the
class of persons eligible to receive option grants under the Plan; and (v)
required the Plan Administrator to be a committee comprised only of non-employee
Board members. The 2000 Amendments were approved by the Corporation's
stockholders at the 2000 Annual Meeting.
On May 17, 2000, the Board further amended the Plan to
eliminate the Plan Administrator's authority to effect the cancellation and
regrant of options under the Plan.
(b) The provisions of the 1992 restatement and of each
subsequent amendment to the Plan shall apply only to stock options and stock
appreciation rights granted under the Plan from and after the applicable
effective date of such restatement or amendment. All stock options and stock
appreciation rights issued and outstanding under the Plan immediately prior to
each such effective date shall continue to be governed by the terms and
conditions of the Plan (and the respective agreements evidencing each such
option or stock appreciation right) as in effect on the date each such option or
stock appreciation right was previously granted, and nothing in the 1992
restatement or in any subsequent amendment shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such prior options
or stock appreciation rights with respect to their acquisition of shares of
Common Stock under such options or their exercise of such stock appreciation
rights. However, the Plan Administrator may, in its discretion, modify stock
option or stock appreciation right issued and outstanding immediately prior to
the effective date of the 1992 restatement or any subsequent amendment to
include one or more provisions to the Plan added by such restatement or
amendment.
(c) Unless sooner terminated in accordance with Section
VII, the Plan shall terminate upon the EARLIER of (i) December 31, 2005 or (ii)
the date on which all shares available for issuance under the Plan shall have
been issued or cancelled pursuant to the exercise, surrender of cash-out of the
stock options and stock appreciation rights granted hereunder. If the date of
termination is determined under clause (i) above, then each stock option or
stock appreciation right outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grant.
(d) Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Plan are held in escrow until stockholder approval is obtained for a sufficient
increase in the number of shares available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess option grants are made, then (I) any unexercised excess
options shall terminate and cease to be exercisable and (II) the Corporation
shall promptly refund the purchase price paid for any excess shares actually
issued under the Plan and held in escrow, together with
14
<PAGE>
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow.
XIII. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
XIV. REGULATORY APPROVALS
The implementation of the Plan, the granting of any stock
option or stock appreciation right hereunder, and the issuance of stock upon the
exercise of any such option or stock appreciation right shall be subject to the
procurement by the Corporation of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the stock issued pursuant to it.
15
