SCHEDULE 14A INFORMATION
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Neose Technologies, Inc.
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<PAGE>
Neose Technologies, Inc.
[NEOSE LOGO]
102 Witmer Road
Horsham, Pennsylvania 19044
To: Our Stockholders
From: Stephen Roth
Subject: Invitation to the Neose Technologies, Inc. 1999 Annual Meeting
Please come to our Annual Meeting on June 15, 1999 to find out more
about your company and the significant progress we are making. You will have the
opportunity to ask questions and make comments. Enclosed with this Proxy
Statement are your voting card and the 1998 Annual Report.
You will notice that we have written our Proxy Statement in plain
English. The Securities and Exchange Commission now encourages companies to use
language that is easier to understand in all communications with stockholders.
We hope you are pleased with this format, and find this Proxy Statement easy to
read.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Stephen Roth
- ---------------------------
Stephen Roth
Chairman and Chief Executive Officer
<PAGE>
Neose Technologies, Inc.
[NEOSE LOGO]
102 Witmer Road
Horsham, Pennsylvania 19044
Notice of Annual Meeting of Stockholders
Date: Tuesday, June 15, 1999
Time: 1:00 p.m.
Place: Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
We will hold our Annual Meeting of Stockholders on June 15, 1999 at
1:00 p.m. at our offices. During the Annual Meeting, we will consider and take
action on the following items:
1. To elect seven directors for a term of one year;
2. To amend our Amended and Restated 1995 Stock Option/Stock Issuance Plan to:
o Increase the number of shares issuable under the stock option plan,
and
o Increase the number of shares issuable each year to non-employee
directors under the Automatic Option Grant Program; and
3. To transact any other business properly brought before the Annual Meeting.
If you are a stockholder as of April 19, 1999, you may vote at the
meeting.
By order of the Board of Directors
/s/ Stephen Roth
- ----------------------
Stephen Roth
Chairman and Chief Executive Officer
<PAGE>
Proxy Statement
This Proxy Statement and the accompanying proxy card are being mailed,
beginning on or about April 30, 1999, to owners of shares of common stock of
Neose Technologies, Inc. in connection with the solicitation of proxies by the
Board of Directors for our 1999 Annual Meeting of Stockholders. This proxy
procedure is necessary to permit all Neose Technologies, Inc. stockholders, many
of whom are unable to attend the Annual Meeting, to vote. The Board of Directors
encourages you to read this document thoroughly and to take this opportunity to
vote on the matters to be decided at the Annual Meeting.
Contents
Questions and Answers........................................................2
Proposal 1 --Election of Directors...........................................5
Our Executive Officers.......................................................8
Report of the Compensation Committee.........................................9
Common Stock Performance Graph..............................................11
Section 16(a) Beneficial Ownership Reporting Compliance.....................11
Stock Ownership of our Directors, Executive Officers,
and 5% Beneficial Owners..................................................12
Employment Agreements.......................................................13
Summary Compensation Table..................................................14
Option Grant Table..........................................................15
Option Exercise Table.......................................................15
Proposal 2 -- Amendment to our Amended and Restated 1995
Stock Option/Stock Issuance Plan..........................................16
Requirements for Advance Notification of Nominations
and Stockholder Proposals.................................................22
Independent Public Accountants..............................................24
Annual Report on Form 10-K..................................................24
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Questions and Answers
Q. What am I voting on?
A. 1. Election of seven directors for a one-year term.
2. Amendments to the Amended and Restated 1995 Stock Option/Stock Issuance
Plan to:
o Increase the number of shares issuable under the stock option plan;
and
o Increase the number of shares issuable each year to directors under
the Automatic Option Grant Program.
3. Any other business that properly comes before the meeting for a vote.
Q. Who is entitled to vote at the Annual Meeting, and how many votes do they
have?
A. Common stockholders of record at the close of business on April 19, 1999
may vote at the Annual Meeting. Each share has one vote. There were
9,908,583 shares of common stock outstanding on April 19, 1999. From June
4, 1999 through June 15, 1999, you may inspect a list of stockholders
eligible to vote. If you would like to inspect the list, please call A.
Brian Davis, our Corporate Secretary, at (215) 441-5890 to arrange a visit,
during regular business hours, to our offices.
Q. How do I vote?
A. You must be present, or represented by proxy, at the Annual Meeting in
order to vote your shares. Since many of our stockholders are unable to
attend the Annual Meeting in person, we send proxy cards to all of our
stockholders to enable them to be represented and vote at the Annual
Meeting.
Q. What is a proxy?
A. A proxy is a person you appoint to vote on your behalf. If you are unable
to attend the Annual Meeting, we are seeking your appointment of proxies so
that your shares of common stock may be voted. You must complete and return
the enclosed proxy card to have your shares voted by proxy.
Q. By completing and returning this proxy card, who am I designating as my
proxy?
A. You will be designating Stephen Roth, our Chairman and Chief Executive
Officer, and Sherrill Neff, our President and Chief Financial Officer, as
your proxies. They may act together or individually on your behalf, and
will have the authority to appoint a substitute to act as proxy.
Q. How will my proxy vote my shares?
A. Your proxy will vote according to the instructions on your proxy card. If
you complete and return your proxy card but do not indicate your vote on
business matters, your proxy will vote "FOR" Proposals 1 and 2. We do not
intend to bring any other matter for a vote at the Annual Meeting, and we
do not know of anyone else who intends to do so. Your proxies are
authorized to vote on your behalf, however, using their best judgment, on
any other business that properly comes before the Annual Meeting.
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Q. How do I vote using my proxy card?
A. If you do not attend the Annual Meeting and vote in person, you must vote
by returning the enclosed proxy card to us. To vote by mail, simply mark,
sign, and date the enclosed proxy card, and return it in the enclosed
postage-paid envelope. If you hold your shares through a broker, bank, or
other nominee, you will receive separate instructions from the nominee
describing how to vote your shares. Alternatively, you may deliver your
proxy card to us in person, by facsimile, or by a courier.
Q. How do I revoke my proxy?
A. You may revoke your proxy at any time before your shares are voted at the
Annual Meeting by:
o Notifying our Corporate Secretary, A. Brian Davis, in writing at 102
Witmer Road, Horsham, PA 19044, that you are revoking your proxy;
o Executing a new proxy card; or
o Attending and voting by ballot at the Annual Meeting.
Q. Is my vote confidential?
A. Yes, only certain employees will have access to your card. All comments
remain confidential, unless you ask that your name be disclosed.
Q. Who will count the votes?
A. An officer of Neose Technologies, Inc. will act as the inspector of
election and will count the votes.
Q. What constitutes a quorum?
A. As of April 19, 1999, there were 9,908,583 shares of common stock issued,
outstanding, and entitled to vote at the Annual Meeting. A majority of the
outstanding shares, either present or represented by proxy, constitutes a
quorum. A quorum is necessary in order to conduct the Annual Meeting. If
you choose to represent your shares by proxy at the Annual Meeting, you
will be considered part of the quorum. If a quorum is not represented at
the Annual Meeting, the stockholders present in person or by proxy may
adjourn the meeting to a date when a quorum is present. If an adjournment
is for more than 30 days or a new record date is fixed for the adjourned
meeting, we will provide notice of the adjourned meeting to each
stockholder of record entitled to vote at the meeting.
Q. How will my vote be counted?
A. For Proposal 1, the election of directors, you may vote separately for, or
withhold your vote separately for, each nominee. Votes that are withheld
will not be included in the vote tally for Proposal 1, and will have no
effect on the results of the vote.
For Proposal 2, the amendments to the Amended and Restated 1995 Stock
Option/Stock Issuance Plan:
o You may abstain, and your abstention will have the same effect as a
vote against Proposal 2; and
o We believe that if you hold your shares through a broker in "street"
name and you do not give instructions to your broker to vote your
shares with respect to Proposal 2, your broker will vote
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your shares. If your broker fails to vote your shares in this
instance, there will be no effect on the vote because broker non-votes
are not considered present at the meeting.
Q. What percentage of our common shares do the directors and officers own?
A. As of March 31, 1999, our directors and executive officers owned
approximately 16% of our common shares. See the discussion under the
heading "Stock Ownership of our Directors, Executive Officers, and 5%
Beneficial Owners" for more details.
Q. Who is soliciting my proxy, how is it being solicited, and who pays the
cost?
A. Neose Technologies, Inc., on behalf of the Board of Directors, through its
directors, officers, and employees, is soliciting proxies primarily by
mail. In addition, proxies may also be solicited in person, by telephone,
or facsimile. Morrow & Co., Inc., a proxy solicitation firm, will be
assisting us for a fee of approximately $4,500, plus out-of-pocket
expenses. We will pay the cost of soliciting proxies. We will also
reimburse stockbrokers and other custodians, nominees, and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and
solicitation material to the owners of common shares.
Q. When are stockholder proposals for the year 2000 Annual Meeting due?
A. Stockholder proposals to be presented at our year 2000 Annual Meeting must
be submitted in writing by January 1, 2000 to A. Brian Davis, Corporate
Secretary, at 102 Witmer Road, Horsham, PA 19044. You should submit any
proposal by a method that permits you to prove the date of delivery to us.
See the discussion under the heading "Requirements for Advance Notification
of Nominations and Stockholder Proposals" for information regarding certain
procedures with respect to stockholder proposals and nominations of
directors.
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Proposal 1 -- Election of Directors
The Board of Directors has seven members. Each member is a nominee for
re-election, and has agreed to serve a one-year term if elected. If any nominee
is unable to stand for election, which circumstance we do not contemplate, the
Board may provide for a lesser number of directors or designate a substitute. In
the latter event, shares represented by proxies may be voted for a substitute
nominee.
If a quorum is present at the Annual Meeting, then a plurality of all
votes cast at the meeting will be sufficient to elect a director. There is no
cumulative voting in the election of directors.
The Board of Directors recommends a vote "FOR" each of the nominees.
Stephen A. Roth, 56, has served on our Board since 1989 and as Chairman
and Chief Executive Officer since August 1994. Dr. Roth co-founded Neose, and
from 1992 until August 1994, he served as Senior Vice President, Research and
Development and Chief Scientific Officer. We engaged Dr. Roth as a consultant
before he became an employee. Dr. Roth was on the faculty of the University of
Pennsylvania from 1980 to 1994 and was Chairman of Biology from 1982 to 1987.
Dr. Roth serves on the Editorial Board of Current Research in Developmental
Biology, The Quarterly Review of Biology, and The Journal of Molecular
Recognition. Dr. Roth received his A.B. in biology from The Johns Hopkins
University and his Ph.D. in developmental biology from the Case Western Reserve
University. He completed his post-doctorate training in carbohydrate chemistry
at The Johns Hopkins University.
P. Sherrill Neff, 47, has served as our President and Chief Financial
Officer, and as a director of Neose since December 1994. From 1993 to December
1994, Mr. Neff was Senior Vice President, Corporate Development at U.S.
Healthcare, Inc., a managed healthcare company. From 1984 to 1993, he worked at
Alex. Brown & Sons Incorporated, an investment banking firm, where he held a
variety of positions, most recently as Managing Director and Co-Head of the
Financial Services Group. Mr. Neff received his B.A. in religion from Wesleyan
University and his J.D. from the University of Michigan Law School. Mr. Neff is
a director of JeffBanks, Inc., a publicly held bank holding company, Resource
America, Inc., a publicly held specialty financial services company, and Prima
Facie, Inc., a privately held technology company. In addition, he is president
and a director of the Pennsylvania Biotechnology Association, an industry trade
organization.
William F. Hamilton, 60, has served on our Board since 1991. Dr.
Hamilton has served on the University of Pennsylvania faculty since 1967 and is
the Landau Professor of Management and Technology and Director of the Jerome
Fisher Program in Management and Technology at The Wharton School and the School
of Engineering and Applied Science at the University of Pennsylvania. He serves
as a director of the following publicly held companies: Centocor, Inc., a
biopharmaceutical company; Digital Lightwave, Inc., a manufacturer of
telecommunications test equipment; Hunt Manufacturing Co., a manufacturer of art
and office supplies; and Marlton Technologies, Inc., a trade show supply
company. Dr. Hamilton received his B.S. and his M.S. in chemical engineering and
his M.B.A. from the University of Pennsylvania, and his Ph.D. in applied
economics from the London School of Economics.
Douglas J. MacMaster, Jr., 68, has served on our Board since May 1993.
Mr. MacMaster served as Senior Vice President of Merck & Co., Inc. from 1988 to
1992, where he was responsible for worldwide chemical and pharmaceutical
manufacturing, the Agvet Division, and the Specialty Chemicals Group. From 1985
to 1988, Mr. MacMaster was President of the Merck Sharp Dohme Division of Merck,
with responsibility for their U.S. human healthcare business. He was an employee
of Merck for 30 years. In addition to serving as a director of Stratton Mutual
Funds, a family of mutual funds, Mr. MacMaster serves as a director of the
following publicly held companies: American Precision Industries, Inc., a heat
transfer
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and precision equipment manufacturing company; Flamel Technologies, S.A., a
polymer chemistry and drug delivery company; Martek Biosciences Corp., a
biological products manufacturing company; Oravax, Inc., a biopharmaceutical
company; and U.S. Bioscience, Inc., a biotechnology company. Mr. MacMaster also
is on the Board of Trustees of Thomas Jefferson University and Martha's Vineyard
Hospital. He received his B.A. from St. Francis Xavier University and his J.D.
from Boston College Law School.
Lindsay A. Rosenwald, 44, has served on our Board since 1989, and
served as our Chairman until August 1994. He is an investment banker, a venture
capitalist, and a fund manager. Dr. Rosenwald has served as Chairman of
Paramount Capital, Inc., an NASD member broker dealer, since 1992; Chairman of
Paramount Capital Investments, LLC, a merchant and investment bank, since 1996;
and Chairman of Paramount Capital Asset Management, Inc., which manages the
investment of several funds specializing in the biotechnology sector, since
1994. He is also a director of the following publicly held biotechnology
companies: BioCryst Pharmaceuticals, Inc.; Interneuron Pharmaceuticals, Inc.;
Sparta Pharmaceuticals, Inc.; and VIMRx Pharmaceuticals, Inc. Dr. Rosenwald is
also the President of the Rosenwald Foundation, a charitable foundation based in
New York that assists outstanding scientists in their continued research and
development in order to further the advancement of biotechnology. Dr. Rosenwald
received his B.S. in finance from Pennsylvania State University and his M.D.
from Temple University School of Medicine.
Lowell E. Sears, 48, has served on our Board since September 1994. He
has been a private investor involved in portfolio management and life sciences
venture capital since April 1994. From 1988 until April 1994, Mr. Sears was
Chief Financial Officer of Amgen Inc., a pharmaceutical company, and from 1992
until 1994, he also served as Senior Vice President responsible for the
Asia-Pacific region. From 1986 until 1988, Mr. Sears was Treasurer and Director
of Planning for Amgen Inc. From 1976 to 1986, he held senior financial and
planning positions at Atlantic Richfield Co. Mr. Sears is a director of the
following publicly held companies: CoCensys, Inc., a neuropharmaceuticals
company, and Techne Corp., a biological products manufacturing company. In
addition, he is a director of the following privately held companies: Dendreon
Corporation, a cell processing company; Encore Pharmaceuticals, Inc., a cancer
therapeutics company; and Integrated Biosystems, Inc., a process equipment
manufacturer. Mr. Sears received his B.A. in economics from Claremont McKenna
College and his M.B.A. from Stanford University.
Jerry A. Weisbach, 65, has served on our Board since May 1993. From
1988 to July 1994, he served as Director of Technology Transfer and Adjunct
Professor at The Rockefeller University. Dr. Weisbach served as Vice President
of Warner-Lambert Company from 1981 to 1987 and President, Pharmaceutical
Research Division from 1979 to 1987, where he was responsible for all
pharmaceutical research and development activities. Prior to joining
Warner-Lambert, Dr. Weisbach worked at SmithKline and French Laboratories from
1960 to 1979, where he was Vice President, Research from 1977 to 1979. Dr.
Weisbach serves as a director of Inkine, a publicly held company. He is also a
director of the following privately held companies: Encore; Exponential
Biotherapies, Inc.; and Synthon Corporation. Dr. Weisbach received his B.S. in
chemistry from Brooklyn College and his M.A. and his Ph.D. in chemistry from
Harvard University.
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What are the committees of our Board of Directors?
The Board of Directors has an Audit Committee and a Compensation
Committee.
o The Audit Committee consists of Dr. Hamilton and Mr. Sears, each
of whom is a non-employee director. The Audit Committee reviews
with our auditors the plan and results of their audit and the
adequacy of our systems of internal accounting controls and
management information systems. In addition, the Audit Committee
reviews the independence of the auditors and their fees for
services rendered Neose.
o The Compensation Committee consists of Dr. Hamilton, Mr.
MacMaster, and Dr. Rosenwald, each of whom is a non-employee
director. The Compensation Committee determines the compensation
of the Chief Executive Officer and the President, and reviews and
takes action on the recommendation of the Chief Executive Officer
as to the appropriate compensation of other officers. The
Compensation Committee is primarily responsible for the
administration of our Amended and Restated 1995 Stock
Option/Stock Issuance Plan, under which option grants and stock
issuances may be made to executive officers.
How are directors nominated?
The Board of Directors has nominated each current director to stand for
re-election. See the discussion under the heading "Requirements for Advance
Notification of Nominations and Stockholder Proposals" for information about
procedures for stockholder nomination of directors.
How many Board and Committee Meetings were held during 1998?
During 1998, the Board of Directors held four meetings, the Audit
Committee held two meetings, and the Compensation Committee held one meeting.
Each director attended at least 75% of the meetings of the Board of Directors,
and all of his appropriate committee meeting(s).
How are directors compensated?
Employee directors receive no compensation beyond their normal salary
for serving as a director. Non-employee directors receive:
o A $14,000 annual retainer, which may be applied, in whole or in
part, toward the acquisition of an option to purchase shares of
our common stock;
o Reimbursement for reasonable travel expenses incurred for their
attendance at meetings of the Board of Directors;
o Consulting fees of $2,000 per day of additional service;
o Upon initial election or appointment to the Board of Directors,
an option to purchase 16,666 shares of common stock exercisable
at the fair market value on the date of grant; and
o Currently, upon re-election to the Board of Directors, an option
to purchase 3,333 shares of common stock exercisable at the fair
market value on the date of grant. The proposed amendment to the
stock option plan would increase this automatic option grant to
10,000 shares. The proposed amendment to the stock option plan to
increase the annual automatic option grant
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to 10,000 shares will not affect any other terms of the option.
Each automatic grant will have a term of ten years, subject to
earlier termination, following the director's cessation of
service on the Board of Directors. Each automatic option will be
immediately exercisable; however, any shares purchased upon
exercise of the option will be subject to repurchase should the
director's service as a non-employee director cease prior to
vesting of the shares. The initial automatic option grant of
16,666 shares will vest in successive equal, annual installments
over the director's initial four-year period of Board service.
Each annual automatic option grant will vest upon the director's
completion of one year of service on the Board of Directors, as
measured from the grant date. Each outstanding option will vest
immediately, however, upon certain changes in the ownership or
control of Neose.
Our Executive Officers
Our executive officers are:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Stephen A. Roth, Ph.D....................................56 Chairman, Chief Executive Officer, and Director
Sherrill Neff............................................47 President, Chief Financial Officer, and Director
Edward J. McGuire, Ph.D..................................61 Vice President, Research and Development
David A. Zopf, M.D.......................................56 Vice President, Drug Development
</TABLE>
Information about executive officers who are not directors
Dr. McGuire has served as our Vice President, Research and Development
since April 1990. He is responsible for leading the oligosaccharide synthesis
team. Dr. McGuire was on the faculty of the University of Pennsylvania from 1985
to April 1990. From 1984 to 1985, Dr. McGuire served as a Senior Researcher at
Genetic Engineering, Inc., a biotechnology company, and from 1972 to 1984 he was
a Research Biochemist at the National Jewish Hospital. Dr. McGuire received his
B.A. in biology from Blackburn College, his Ph.D. in biochemistry/chemistry from
the University of Illinois Medical School, and held National Institutes of
Health post-doctoral fellowships at the University of Michigan and The Johns
Hopkins University.
Dr. Zopf has served as our Vice President, Drug Development since April
1992. From August 1991 to March 1992, we engaged Dr. Zopf as a consultant on the
biomedical applications of complex carbohydrates. From April 1988 to July 1991,
Dr. Zopf served as Vice President and Chief Operating Officer of BioCarb, Inc.,
a biotechnology company and the U.S. subsidiary of BioCarb AB, where he managed
the research and development programs of novel carbohydrate-based diagnostics
and therapeutics. Dr. Zopf worked at the National Institutes of Health from 1971
to 1988, most recently as Chief, Section on Biochemical Pathology at the
National Cancer Institute. Dr. Zopf currently serves on the editorial board of
Archives of Biochemistry and Biophysics. Dr. Zopf received his A.B. in zoology
from Washington University and his M.D. from Washington University School of
Medicine.
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If we incorporate by reference this proxy statement into any subsequent
filing with the Securities and Exchange Commission, the following Report of the
Compensation Committee and the Common Stock Performance Graph on page 11 shall
not be deemed incorporated by reference. The following Report of the
Compensation Committee and the Common Stock Performance Graph on page 11 will be
incorporated by reference into a subsequent filing with the Securities and
Exchange Commission only if we specifically state our intent to incorporate
these sections by reference.
Report of the Compensation Committee
What is our compensation philosophy?
Our philosophy is to provide competitive compensation levels and, where
appropriate, align compensation of senior management with the long-term
interests of our stockholders. We determine the compensation of the senior
management team by evaluating our corporate performance, as well as each
executive officer's own level of performance.
What is the structure of our executive compensation?
The elements of our executive compensation programs are:
o Base salary;
o Annual cash bonuses; and
o Annual long-term stock-based incentives.
We have structured our compensation plan to provide incentives for
senior management performance that promotes continuing improvements in our
corporate performance and stock price over both the short- and long-term.
How do we determine base salaries?
We determine base salaries by each individual's experience and personal
performance, and by comparisons to similar positions within the biotechnology
industry. Base salaries are reviewed annually based on the criteria mentioned
above. The 1998 base salaries for our executive officers were approximately 5.9%
higher than their 1997 base salaries.
How do we determine annual bonuses?
We base the amount of the award to each executive officer on a
combination of our overall performance and the individual's performance. The
Compensation Committee approved bonuses in 1998 to our executive officers
totaling $188,740, which was approximately $39,600, or 17%, lower than bonuses
approved by the Compensation Committee to our executive officers in 1997. The
Compensation Committee considered our corporate performance and each
individual's contributions to our success in determining the bonus amounts.
How is compensation used to ensure senior management is focused on long-term
results?
We use stock options to provide long-term incentives to our executive
officers. The Compensation Committee approves all grants of stock options to
executive officers. These stock option grants are designed to align the
interests of each executive officer with those of our other stockholders. Each
option is
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exercisable over a ten-year period at the market price on the date of grant.
Each option becomes exercisable in installments over a four-year vesting period.
The option will provide a benefit to the executive officer only if he or she
remains employed by Neose during the vesting period, and then only if the market
price of our common stock increases. During 1998, the Compensation Committee
approved grants of options to executive officers to purchase 150,000 shares of
common stock, which were 60,000, or 28%, fewer option shares than were granted
by the Compensation Committee to executive officers during 1997. We based the
number of shares granted to each executive officer on a combination of our
overall performance and the individual's performance, as well as the size of
option grants made to executive officers of comparable biotechnology companies.
How do we determine the compensation of our Chief Executive Officer?
Dr. Roth was our Chief Executive Officer during 1998. His compensation
is determined by establishing a base salary competitive with those paid by other
biotechnology companies and making a significant percentage of his total
compensation package contingent upon corporate and individual performance. The
Compensation Committee set Dr. Roth's base salary at $253,600 for 1998. His 1998
bonus of $63,400 was based on the Compensation Committee's assessment of Dr.
Roth's individual performance and his contribution to our corporate performance.
The Compensation Committee granted Dr. Roth stock options in 1998 to purchase
60,000 shares of common stock. The grant was designed to provide Dr. Roth with a
continuing incentive to remain with Neose and contribute to our corporate
success.
What is the impact of Internal Revenue Code Section 162(m)?
Under Section 162(m) of the Internal Revenue Code, we will not be
allowed a federal income tax deduction for compensation paid to certain
executive officers, to the extent that compensation exceeds $1 million per
executive officer in any one year. Compensation that qualifies as
performance-based compensation is not taken into account for purposes of the
limitation. The definition of performance-based compensation includes
compensation deemed paid in connection with the exercise of certain stock
options. The exercised stock options must have an exercise price equal to the
fair market value of the option shares on the grant date to qualify as
performance-based compensation. Our Amended and Restated 1995 Stock Option/Stock
Issuance Plan is intended to assure that the exercise of such stock options will
qualify as performance-based compensation.
Because it is unlikely that the cash compensation payable to any of our
executive officers will soon approach the $1 million limit, the Compensation
Committee has decided not to take any other action to limit or restructure the
elements of cash compensation payable to our executive officers. The
Compensation Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the $1 million level.
THE COMPENSATION COMMITTEE
Dr. Hamilton
Mr. MacMaster
Dr. Rosenwald
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Common Stock Performance Graph
The following graph assumes $100 was invested on February 16, 1996, the
date of our initial public offering, in our common stock. The graph compares the
cumulative return, which includes the reinvestment of dividends, of this
investment with an equivalent investment on that date in the Nasdaq Stock Market
- - U.S. Index (the "Nasdaq Composite") or the Nasdaq Stock Market Biotech Index
(the "Nasdaq Biotech Index").
[GRAPH]
In the printed version of this document there appears a
line graph with the following plot points depicted:
NTEC Nasdaq Composite Nasdaq Biotech Index
02/16/96 100 100 100
12/31/96 144 118.3660254 93.11414011
12/31/97 122 143.9750284 93.04967152
12/31/98 112.5 201.0351092 134.2512433
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the Securities and Exchange Commission require us to
disclose late filings of reports of stock ownership (and changes in stock
ownership) by our directors, executive officers, and greater-than-ten-percent
stockholders. Our directors, executive officers, and greater-than-ten-percent
stockholders are required by those rules to give us copies of the reports of
stock ownership (and changes in stock ownership) they file with the Securities
and Exchange Commission. Based solely on our review of the copies of the reports
we received, we believe that, during the year ended December 31, 1998, our
directors, executive officers, and greater-than-ten-percent stockholders met all
of their filing requirements.
11
<PAGE>
Stock Ownership of our Directors, Executive Officers,
and 5% Beneficial Owners
The following table shows information, as of March 31, 1999, about the
beneficial ownership (as defined under the regulations of the Securities and
Exchange Commission) of our common stock by:
o Each director (all of whom are nominees for re-election);
o Each executive officer shown in our Summary Compensation Table;
o All directors and executive officers as a group; and
o Each person we know to be the beneficial owner of at least five
percent of our common stock.
Unless we have indicated otherwise, each person named in the table
below has sole voting power and investment power for the shares listed opposite
such person's name.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent of
Beneficially Shares
Name Owned Outstanding
- ---- ----------------- -----------
<S> <C> <C>
Lindsay A. Rosenwald, M.D.(1)(2)
c/o Paramount Capital, Inc.
787 7th Avenue
New York, NY 10019........................................ 713,938 7.2%
The TCW Group, Inc.(3)
865 South Figueroa Street
Los Angeles, CA 90017..................................... 680,345 6.9%
Stephen A. Roth, Ph.D.(1)(4)..................................... 354,642 3.5%
P. Sherrill Neff(1)(5)........................................... 246,137 2.5%
Edward J. McGuire, Ph.D.(1)...................................... 128,261 1.3%
William F. Hamilton, Ph.D.(1).................................... 70,149 *
Douglas J. MacMaster, Jr.(1)..................................... 48,900 *
Lowell E. Sears(1)(6)............................................ 45,644 *
David A. Zopf, M.D.(1)........................................... 45,501 *
Jerry A. Weisbach, Ph.D.(1)...................................... 35,150 *
All current directors and executive officers as a group
(9 persons)(1).............................................. 1,688,322 16.0%
</TABLE>
- ------------
* Less than one percent.
(1) Includes the following shares of common stock issuable under stock options
that are exercisable within 60 days of March 31, 1999: Rosenwald - 5,247
shares; Roth - 143,333 shares; Neff - 235,000 shares; McGuire - 56,750
shares; Hamilton - 48,065 shares; MacMaster - 33,066 shares; Sears - 27,720
shares; Zopf - 45,501 shares; Weisbach - 33,066 shares; and all directors
and executive officers as a group - 627,748 shares.
(2) Includes (i) 75,624 shares of common stock owned by Dr. Rosenwald's wife;
(ii) 30,250 shares of common stock held by Dr. Rosenwald's wife as
custodian for Dr. Rosenwald's children; (iii) 71,600 shares of common stock
held by The Aries Master Fund; (iv) 30,300 shares of common stock held by
The Aries Domestic Fund, L.P.; and (v) 32,000 shares of common stock held
by The Rosenwald Foundation, Inc. Paramount Capital Asset Management, Inc.,
of which Dr. Rosenwald is the sole shareholder, serves as the investment
manager to The
12
<PAGE>
Aries Master Fund and also is the General Partner of The Aries Domestic
Fund. Dr. Rosenwald disclaims beneficial ownership of the shares held by
The Aries Master Fund and The Aries Domestic Fund, except to the extent of
his pecuniary interest in the funds. Dr. Rosenwald may be deemed to have
voting and investment control with respect to the shares held by The Aries
Master Fund and The Aries Domestic Fund. In addition, Dr. Rosenwald
disclaims beneficial ownership of the shares held by The Rosenwald
Foundation. Dr. Rosenwald may be deemed to share voting and investment
power with respect to the shares held by The Rosenwald Foundation.
(3) As reflected in Schedule 13G, dated February 12, 1999, filed with the
Securities and Exchange Commission. According to TCW Group, Inc. ("TCW"),
it is a parent holding company which holds such shares indirectly through
the following subsidiaries: (i) Trust Company of the West, a California
corporation and a bank as defined in Section 3(a)(6) of the Securities
Exchange Act of 1934, (ii) TCW Asset Management Company, a California
corporation and an Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940, and (iii) TCW Funds Management, Inc., a
California corporation and an Investment Adviser registered under Section
203 of the Investment Advisers Act of 1940. According to TCW, it has sole
voting and investment power with respect to such shares; however, Robert
Day, an individual, may be deemed to control TCW and may be deemed to
control the following entities: (i) Oakmont Corporation, a California
corporation and an Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940, and (ii) Cypress International Partners
Limited, a British Virgin Islands corporation and an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940. Mr.
Day's address is 200 Park Avenue, Suite 2200, New York, New York 10166.
(4) Includes 100,000 shares of common stock owned by Dr. Roth's wife and 15,758
shares of common stock owned by Dr. Roth's daughter. Dr. Roth disclaims
beneficial ownership of the shares held by his wife and daughter.
(5) Includes 1,000 shares of common stock owned by Mr. Neff's wife. Mr. Neff
disclaims beneficial ownership of the shares held by his wife.
(6) Includes 17,924 shares of common stock owned by the Sears Family Living
Trust, of which Mr. Sears is trustee.
Employment Agreements
In December 1994, we entered into an employment agreement for an
initial period of three years (with automatic one-year extensions) with P.
Sherrill Neff, our President and Chief Financial Officer. Under this agreement,
which included our standard non-competition and confidentiality agreement:
o Mr. Neff is to receive a minimum base salary of $225,000 per
year, and a performance incentive bonus of up to 50% of base
salary at the discretion of the Compensation Committee;
o The Board of Directors granted Mr. Neff options to purchase
100,000 shares of common stock, of which 20,000 shares vested
immediately with the remainder vesting ratably over four years,
at an exercise price of $5.70 per share; and
o We are required to continue to pay Mr. Neff for the shorter of 12
months after termination or the amount of time remaining in his
employment term if Mr. Neff is:
o Involuntarily terminated without cause (as defined in the
agreement); or
o Terminated voluntarily or involuntarily following certain
changes of control of Neose or a sale of all or
substantially all of our assets in a complete liquidation or
dissolution.
In April 1992, we entered into a one-year employment agreement,
extendable in one-year increments, with David A. Zopf, our Vice President, Drug
Development. The agreement has been extended
13
<PAGE>
through March 31, 2000. The agreement currently provides for an annual base
salary of $173,368 and a bonus of up to 25% of base salary at the discretion of
the Chief Executive Officer. In connection with the original agreement, the
Board of Directors granted Dr. Zopf options, which are now fully vested, to
purchase 26,666 shares of common stock at the fair market value on the date of
grant. The agreement contains certain restrictive covenants, including
provisions relating to non-competition, non-solicitation, and the non-disclosure
of proprietary information during his employment with Neose and for specified
periods thereafter.
Summary Compensation Table
The following table provides information about all compensation earned
in 1998, 1997, and 1996 by our Chief Executive Officer and other three executive
officers.
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Annual Compensation Shares
------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options (#) Compensation(1)
- --------------------------- ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen A. Roth...................... 1998 $253,600 $63,400 60,000 $ 5,482(2)
Chief Executive Officer 1997 241,500 72,450 90,000 5,182(2)
1996 230,000 52,500 90,000 5,172(2)
P. Sherrill Neff..................... 1998 248,000 62,000 60,000 5,482(3)
President and Chief Financial 1997 236,250 70,875 90,000 5,182(3)
Officer 1996 225,000 52,500 90,000 5,235(3)
Edward J. McGuire.................... 1998 150,000 30,000 15,000 4,235(4)
Vice President, Research and 1997 136,080 45,000 15,000 3,890(4)
Development 1996 129,600 40,000 15,000 3,855(4)
David A. Zopf........................ 1998 166,700 33,340 15,000 4,635(5)
Vice President, Drug Development 1997 158,760 40,000 15,000 4,434(5)
1996 151,200 40,000 15,000 4,372(5)
</TABLE>
- ------------
(1) Includes $432, $432, and $552 in 1998, 1997, and 1996, respectively, in
premiums paid by us for group term life insurance.
(2) Includes $5,000, $4,750, and $4,620 of matching contributions in 1998,
1997, and 1996, respectively, to the executive officer's account in our
401(k) plan.
(3) Includes $5,000, $4,750, and $4,683 of matching contributions in 1998,
1997, and 1996, respectively, to the executive officer's account in our
401(k) plan.
(4) Includes $3,803, $3,458, and $3,303 of matching contributions in 1998,
1997, and 1996, respectively, to the executive officer's account in our
401(k) Plan.
(5) Includes $4,203, $4,002, and $3,820 of matching contributions in 1998,
1997, and 1996, respectively to the executive officer's account in our
401(k) Plan.
14
<PAGE>
Option Grant Table
The following table provides information about grants of stock options
made during 1998 to each of the executive officers shown in our Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------- Potential Realizable Value
Number of at Assumed Annual Rates of
Shares Percentage of Stock Price Appreciation for
Underlying Total Options Option Term (3)
Options Granted to Exercise Expiration ----------------------------
Name Granted (1) Employees Price (2) Date 5% 10%
- ---- ----------- --------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Roth.... 60,000 21.9% $13.50 12/02/08 $509,405 $1,290,931
P. Sherrill Neff... 60,000 21.9 13.50 12/02/08 509,405 1,290,931
Edward J. McGuire.. 15,000 5.5 13.50 12/02/08 127,351 322,733
David A. Zopf...... 15,000 5.5 13.50 12/02/08 127,351 322,733
</TABLE>
- -------------------
(1) The exercise price of each option is equal to the fair market value of our
common stock on the date of grant. Each option has a term of ten years from
the date of grant and vests ratably over a four-year period, beginning on
the first anniversary of the date of grant.
(2) The exercise price may be paid in cash, in shares of Neose common stock
valued at fair market value on the exercise date, or through a cashless
exercise procedure involving a same-day sale of the purchased shares. We
may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the federal
and state income or employment tax liability incurred by the optionee in
connection with such exercise. The optionee may be permitted, subject to
the approval of the Compensation Committee, to apply a portion of the
shares purchased under the option (or to deliver existing shares of common
stock) in satisfaction of such tax liability.
(3) Potential realizable value is based on the assumption that the price per
share of common stock appreciates at the assumed annual rate of stock
appreciation for the option term. The assumed 5% and 10% annual rates of
appreciation (compounded annually) over the term of the option are provided
in accordance with the regulations of the Securities and Exchange
Commission and do not represent our estimate of stock price appreciation.
Option Exercise Table
The following table provides information about the exercise of stock
options during 1998 and the value of stock options unexercised at the end of
1998 for the executive officers shown in our Summary Compensation Table. The
value of unexercised stock options is calculated by multiplying the number of
option shares by the differences between the option exercise price and the
year-end stock price.
<TABLE>
<CAPTION>
Number of Shares
Number of Underlying Unexercised Values of Unexercised
Shares Options In-The-Money Options
Acquired On Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Roth..... 3,234 $44,176 143,333 195,000 $208,077 $68,006
P. Sherrill Neff.... -- -- 235,000 195,000 939,019 68,006
Edward J. McGuire... -- -- 56,750 36,250 499,884 26,016
David A. Zopf....... -- -- 46,615 35,416 401,749 21,794
</TABLE>
15
<PAGE>
Proposal 2 -- Amendment to our Amended and Restated 1995
Stock Option/Stock Issuance Plan
Proposed Amendment
At the Annual Meeting, a proposal will be presented to the stockholders
to approve and adopt the following changes to our Amended and Restated 1995
Stock Option/Stock Issuance Plan:
o Increase the number of shares of common stock issuable under the
stock option plan from 1,775,722 to 2,270,722; and
o Increase the number of shares of common stock underlying options
that are automatically issuable each year under the stock option
plan to each non-employee director, who has at least six months
of Board service, from an automatic option grant for 3,333 shares
to an automatic option grant for 10,000 shares.
In April 1999, the Board adopted the above changes to the stock option
plan, subject to approval by our stockholders. We believe that our ability to
grant options under the stock option plan is a valuable and necessary
compensation tool that aligns the long-term financial interests of employees and
directors with the financial interests of our stockholders. In addition, we
believe that the stock option plan helps us to attract, retain, and motivate
stock option plan participants, and encourages these participants to devote
their best efforts to our business and financial success. An increase in the
number of shares available for issuance under the stock option plan is necessary
to meet the above objectives. The Board of Directors believes that approval of
Proposal 2 is in the best interests of Neose and its stockholders.
The material features of the stock option plan are described below.
Approval of the proposal to amend the Amended and Restated 1995 Stock
Option/Stock Issuance Plan requires the affirmative vote of the holders of a
majority of shares present in person or represented by proxy at the Annual
Meeting.
The Board of Directors recommends a vote "FOR" the proposal to amend
the stock option plan.
Description of the stock option plan
We adopted the stock option plan in 1995, and most recently amended and
restated the stock option plan on June 19, 1997. The stock option plan, which
designates our Compensation Committee as the plan administrator, incorporates
our two predecessor stock option plans, the 1991 Stock Option Plan and the 1992
Stock Option Plan. The stock option plan is divided into four separate
components:
o The Discretionary Option Grant Program, under which employees,
non-employee directors (other than the members of the
Compensation Committee), and consultants may be granted options
to purchase shares of common stock;
o The Stock Issuance Program, under which employees, non-employee
directors (other than the members of the Compensation Committee),
and consultants may be issued shares of common stock either
through the purchase of shares or as a bonus tied to the
performance of services;
o The Automatic Option Grant Program, under which option grants
will automatically be made annually to eligible non-employee
directors to purchase shares of common stock; and
16
<PAGE>
o The Director Fee Option Grant Program, under which non-employee
directors may elect to apply all, or part, of their annual
retainer fees otherwise payable in cash to the acquisition of a
special option grant.
The stock option plan currently authorizes up to 1,775,722 shares of
common stock for issuance. The proposed amendment to the stock option plan would
increase the number of shares authorized for issuance under the stock option
plan to 2,270,722. As of April 16, 1999, options to purchase 1,715,138 shares of
common stock were outstanding under the stock option plan, and options to
purchase 60,584 shares remained available for future grants. Shares of common
stock issued or currently issuable under the stock option plan are covered by
registration statements on Form S-8, which were filed with the Securities and
Exchange Commission on February 15, 1996 and September 10, 1997.
Eligibility
All employees, non-employee directors, and consultants are eligible to
receive grants under the stock option plan. Non-employee directors are eligible
to receive grants pursuant to the Automatic Option Grant Program and the
Director Fee Option Grant Program, and non-employee directors who do not serve
on the Compensation Committee are eligible to participate in the Discretionary
Option Grant Program and the Stock Issuance Program. As of April 16, 1999, there
were approximately 56 employees and 5 non-employee directors eligible to
participate in the stock option plan. No person may be granted, in any given
year, more than 50% of the total number of shares for which stock options, stock
appreciation rights, and direct stock issuances may be granted over the term of
the stock option plan.
Discretionary Option Grant Program
Under the Discretionary Option Grant Program, the Compensation
Committee has complete discretion to determine:
o Which eligible individuals are to receive option grants or stock
appreciation rights;
o The time or times when option grants are to be made;
o The number of shares subject to, and the vesting schedule for,
each option grant;
o The designation of each stock option as either an incentive or a
non-qualified stock option;
o The maximum term for which each option grant is to remain
outstanding, which term, for an incentive stock option, may not
exceed ten years, and for a stock option granted to a person who
owns more than 10% of the voting power of Neose may not exceed
five years; and
o The option exercise price, which for a non-qualified stock option
may not be less than 85% of the fair market value of the stock on
the date of grant. The exercise price of an incentive stock
option must have an exercise price of at least 100% of the fair
market value on the date of grant, provided that the recipient of
the option grant does not own more than 10% of the voting power
of Neose. If the recipient of an incentive stock option owns more
than 10% of the voting power of Neose, the exercise price must be
at least 110% of the fair market value on the date of grant. The
Internal Revenue Code allows an optionee to receive incentive
stock options only to the extent that the aggregate amount of
incentive stock options exercisable for the first time by an
optionee during any calendar year does not exceed $100,000. Any
stock option that is granted to
17
<PAGE>
an optionee who fails to meet the criteria for an incentive stock
option must be granted as a non-qualified stock option.
The fair market value of the common stock is the closing sale price per
share on the grant date as such price is reported on the Nasdaq National Market.
If there is no reported closing sale price on such date, the fair market value
is the closing sale price on the last preceding date for which a quotation
exists. The closing sale price per share of common stock on April 16, 1999 was
$12.00.
The Compensation Committee also has the authority to cancel outstanding
options under the Discretionary Option Grant Program (including options
incorporated from our two predecessor stock option plans) in return for the
grant of new options for the same or different number of option shares, with an
exercise price per share based upon the fair market value of the common stock on
the new grant date.
Stock appreciation rights may be issued under the Discretionary Option
Grant Program. These stock appreciation rights will allow the holders to
surrender their outstanding options for an appreciation distribution from Neose
equal to the fair market value of the vested shares of common stock subject to
the surrendered option less the aggregate exercise price payable for such
shares. The appreciation distribution may be made in cash or in shares of common
stock.
Stock Issuance Program
Under the Stock Issuance Program, the Compensation Committee has
complete discretion to determine:
o Which eligible individuals are to receive stock issuances;
o The time or times when stock issuances are to be made; and
o The number of shares subject to, and the vesting schedule for,
each stock issuance.
The Compensation Committee may issue shares of common stock for cash, a
promissory note, or past services rendered. The consideration must be equal in
value to at least 85% of the fair market value of the common stock issued. The
issued shares may be fully and immediately vested, vest in one or more
installments over a period of service, or vest upon the attainment of certain
performance milestones determined by the Compensation Committee.
Automatic Option Grant Program
Under the Automatic Option Grant Program, each non-employee director,
on the date first elected or appointed to the Board of Directors, will
automatically be granted an option to purchase 16,666 shares of common stock,
provided such individual has not been previously employed by us. In addition,
each non-employee director with at least six months of Board service who
continues to serve as a non-employee director following each annual meeting,
currently, will automatically be granted an option to purchase 3,333 shares of
common stock. The proposed amendment to the stock option plan would increase the
number of shares underlying this annual automatic option grant to 10,000 shares.
All grants under the Automatic Option Grant Program will be made in
strict compliance with the provisions of such programs. Accordingly, the
Compensation Committee does not exercise any administrative discretion with
respect to these automatic options. Each automatic option has a term of ten
years, subject to earlier termination following the director's cessation of
service on the Board. Each
18
<PAGE>
automatic option is immediately exercisable. Any shares purchased upon exercise
of the option, however, are subject to repurchase if the director's service as a
non-employee director ceases prior to vesting of the shares. The initial
automatic option grant to purchase 16,666 shares will vest in successive equal,
annual installments over the director's initial four-year period of Board
service. Each additional automatic option grant vests upon the director's
completion of one year of service on the Board of Directors, as measured from
the grant date. In addition, each outstanding option will vest immediately upon
certain changes in the ownership or control of Neose.
Director Fee Option Grant Program
Under the Director Fee Option Grant Program, each non-employee director
may elect to apply all, or part, of his or her annual retainer fee otherwise
payable in cash to the acquisition of a special option grant under the Director
Fee Option Grant Program. Elections to acquire an option grant in lieu of annual
retainer fees must be filed with us prior to the start of the calendar year of
participation. If an election is filed, the option grant is automatically made
on the first trading day in January, and has an exercise price per share equal
to one-third of the fair market value of the common stock on the grant date. The
number of option shares is determined by dividing the amount of the retainer fee
applied to the program by two-thirds of the fair market value of common stock on
the grant date. As a result, the total spread on the option (the fair market
value of the option shares on the grant date less the aggregate exercise price
payable for those shares) is equal to the portion of the retainer fee subject to
the director's election.
All grants under the Director Fee Option Grant Program will be made in
strict compliance with the provisions of such programs. Accordingly, the
Compensation Committee does not exercise any administrative discretion with
respect to these options. The option becomes exercisable in a series of twelve
successive equal, monthly installments upon the director's completion of each
month of Board service during the calendar year for which the option grant is
made. The option remains exercisable for such shares until the earlier of the
expiration of the ten-year option term or the end of the three-year period
measured from the date of the director's cessation of Board service. In
addition, upon certain changes in the ownership or control of Neose, each
outstanding option will immediately vest in full.
Corporate transactions
If we are a party to certain corporate transactions (as defined in the
stock option plan), including, certain mergers or asset sales, each outstanding
option and unvested stock issuance will, under certain circumstances,
automatically accelerate in full. Options and stock issuances that do not
accelerate at the time of the acquisition will accelerate if the individual's
service is terminated, whether involuntarily or through a resignation for good
reason, within 18 months following the acquisition. The Compensation Committee
may also accelerate options and unvested stock issuances upon a change in
control (as defined in the stock option plan) of Neose or the termination of the
individual's service, whether involuntarily or through a resignation for good
reason, within a specified period following the change in control. Options
currently outstanding under our predecessor stock option plans contain different
acceleration provisions in connection with an acquisition of Neose. Options
outstanding under the 1992 Stock Option Plan may, under certain circumstances,
accelerate upon a change in control. Options outstanding under the 1991 Stock
Option Plan do not contain any acceleration provisions in connection with such a
change in control. The Compensation Committee has the discretion, however, to
extend the acceleration provisions of the stock option plan to outstanding
options under our predecessor stock option plans.
19
<PAGE>
Amendment and termination of the stock option plan
The Board has complete and exclusive power and authority to amend or
modify the stock option plan in any, or all, respects. No amendment, however,
may adversely affect the rights and obligations of options outstanding at the
time under the stock option plan. In addition, no amendment may adversely affect
the rights of any optionee with respect to common stock issued under the stock
option plan prior to such action, unless the optionee consents to such action.
In addition, the Board may not, without stockholder approval, amend the stock
option plan to:
o Increase the maximum number of shares issuable under the stock
option plan, or the maximum amount of shares for which any one
individual participating in the stock option plan may be granted
stock options, stock appreciation rights, and direct stock
issuances for any given year;
o Materially modify the eligibility requirements for participation;
or
o Otherwise materially increase the benefits accruing to
participants.
The stock option plan will terminate on the earlier of February 28,
2005 or the date on which all shares available for issuance under the stock
option plan have been issued.
Federal income tax consequences of the stock option plan
The following discussion summarizes the principal federal income tax
consequences of the stock option plan based on the Internal Revenue Code and its
regulations, and administrative and judicial interpretations. The summary does
not address any foreign, state, or local tax consequences of participation in
the stock option plan.
Non-Qualified Stock Options
There generally are no federal income tax consequences to an optionee
or to Neose upon the grant of a non-qualified stock option. Upon the exercise of
a non-qualified stock option, an optionee will recognize ordinary compensation
income in an amount equal to the fair market value of the shares at the time of
exercise less the exercise price of the non-qualified stock option. We generally
will be entitled to a corresponding federal income tax deduction. Upon the sale
of shares of common stock that were acquired by the exercise of a non-qualified
stock option, an optionee will recognize a capital gain or loss. The amount of
the capital gain or loss will be equal to the difference between the amount
realized upon the sale of the shares and the optionee's adjusted tax basis in
the shares of common stock. The optionee's adjusted tax basis in the shares of
common stock is equal to the exercise price plus the amount of ordinary income
recognized by the optionee at the time of exercise of the non-qualified stock
option. The tax rate for the capital gain will depend on the length of time the
shares were held by the optionee and other factors.
Incentive Stock Options
A recipient of an incentive stock option will not recognize taxable
income, for purposes of the regular income tax, upon either the grant or
exercise of the incentive stock option. Under the regulations of the Internal
Revenue Code governing the alternative minimum tax, however, the exercise of an
incentive stock option generally increases the recipient's alternative minimum
taxable income in the year in which an incentive stock option is exercised. The
amount of the increase is equal to the fair market value of the shares of common
stock acquired upon exercise less the stock option exercise price. Upon a
qualifying disposition of shares acquired upon exercise of an incentive stock
option, an optionee will recognize long-term capital gain or loss, and we will
not be entitled to a corresponding federal income tax deduction. For these
purposes, a qualifying disposition is defined as a disposition of shares at
least two years after the incentive stock option
20
<PAGE>
was granted and at least one year after exercise of the incentive stock option.
As a general rule, if an optionee disposes of the shares acquired upon exercise
of an incentive stock option before satisfying both holding period requirements,
the gain recognized on such a disposition will be taxed to the optionee as
ordinary income, and we generally will be entitled to a corresponding federal
income tax deduction. The amount of ordinary income is the difference between
the fair market value of the shares on the date of exercise and the option
exercise price. The gain, if any, in excess of the amount recognized as ordinary
income on such a disqualifying disposition will be long-term or short-term
capital gain, depending upon the length of time the optionee held the shares
prior to the disposition.
Stock Appreciation Rights
An optionee will not recognize any income upon the grant of a stock
appreciation right. Upon the exercise of a stock appreciation right, the
optionee will recognize ordinary compensation income in the amount of both the
cash and the fair market value of the shares of common stock received upon such
exercise, and we generally will be entitled to a corresponding federal income
tax deduction. When an optionee sells shares acquired upon the exercise of a
stock appreciation right, the optionee will recognize a capital gain or loss.
The amount of the capital gain or loss will be equal to the difference between
the amount realized on the sale and the amount of ordinary income recognized at
the time of exercise of the stock appreciation right.
Stock Issuances
A recipient generally will recognize taxable income upon the grant of a
stock issuance if:
o The shares are not subject to a substantial risk of forfeiture;
and
o There are no restrictions on the transferability of the shares at
the time of grant.
A recipient of a grant of restricted stock (a stock issuance not
meeting either of the above criteria) normally will not recognize taxable income
upon the grant, and we will not be entitled to a corresponding federal income
tax deduction. When the shares either are transferable or are no longer subject
to a substantial risk of forfeiture, the recipient will recognize ordinary
compensation income, and we generally will be entitled to a corresponding
federal income tax deduction. The amount of the ordinary compensation income
will be equal to the difference between the fair market value of the common
stock at that time and any amount paid for the shares. A recipient may, however,
elect to recognize ordinary compensation income in the year the restricted stock
grant is awarded, and we generally will be entitled to a corresponding federal
income tax deduction. The amount of ordinary compensation income will be equal
to the difference between the fair market value of the common stock at that time
and any amount paid for the shares.
Payment of Withholding Taxes
Our obligation to deliver shares of common stock upon the exercise of
any stock option or upon the issuance of any shares is subject to the
satisfaction of all applicable income and employment tax withholding
requirements. In some circumstances, we permit an optionee to remit directly to
the appropriate taxing authority the amount of the optionee's withholding tax
obligations.
Plan benefits
Option grants to our current directors and executive officers to
purchase the following number of shares of common stock have been made under the
stock option plan (including our two predecessor stock option plans) from
adoption of the 1991 Stock Option Plan through April 16, 1999: Stephen A.
Roth--
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341,567; P. Sherrill Neff--430,000; Edward J. McGuire--95,000; David A.
Zopf--84,998; current executive officers as a group--951,565; current
non-employee directors as a group--168,002; and all other employees and
consultants as a group--1,157,534.
The benefits and amounts that may be received in the future by persons
eligible to participate in the stock option plan are not currently determinable,
except as to those future automatic grants to be awarded to non-employee
directors under the Automatic Option Grant Program.
Requirements for Advance Notification of Nominations
and Stockholder Proposals
Advance Notice Requirements for the year 2000 Annual Meeting
Under Section 11 of Article II of our By-Laws, you may nominate a
person for election as a director or propose business to be considered at the
year 2000 Annual Meeting if you:
o Are a holder of record at the time of giving the notice described
below;
o Are entitled to vote at the Annual Meeting; and
o Deliver a written notice of intent to make a nomination or
proposal to A. Brian Davis, our Corporate Secretary, at our
offices. You must deliver the written notice of intent, which
must contain the relevant information described below, between
December 2, 1999 and January 1, 2000. If the date of the year
2000 Annual Meeting is earlier than March 31, 2000 or later than
June 29, 2000, however, your written notice of intent must be
delivered by:
o No earlier than the close of business on the 90th day before
the year 2000 Annual Meeting; and
o No later than the close of business on the later of the 60th
day before the year 2000 Annual Meeting, or the 10th day
after our first public announcement of the year 2000 Annual
Meeting date.
If the Board of Directors decides to propose, for the year 2000 Annual
Meeting, an increase in the number of directors, the advance notice requirements
will differ from those described above if we fail to make a timely public
announcement of the proposal. Our public announcement must be made as described
below, and must either name all of the nominees for director or specify the new
size of the Board of Directors. To be considered timely, our first public
announcement of such a proposal must be made:
o By 70 days before the year 2000 Annual Meeting, if the date of
the year 2000 Annual Meeting is earlier than March 31, 2000 or
later than June 29, 2000; or
o By April 6, 2000, if the date of the year 2000 Annual Meeting is
between March 31, 2000 and June 29, 2000.
If we fail to meet the applicable deadline for making a timely public
announcement, and you would like to nominate individuals for the new position(s)
created by the increase, you must deliver your written notice of intent by no
later than the close of business on the 10th day after our first public
announcement. Your written notice of intent, which must be delivered to A. Brian
Davis, our Corporate Secretary, may
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nominate individuals only for new position(s) created by the increase, and must
contain the relevant information described below.
Advance Notice Requirements for a Special Meeting of Stockholders
If the Board of Directors calls for a special meeting of stockholders,
you may, under Section 11 of Article II of our By-Laws, nominate a person for
election as a director at the special meeting if:
o The Board of Directors has determined that directors shall be
elected at the special meeting;
o You are a holder of record at the time of giving the notice
described below;
o You are entitled to vote at the special meeting; and
o You deliver a written notice of intent, which must contain the
relevant information described below, to make a nomination to A.
Brian Davis, our Corporate Secretary, at our offices. The written
notice of intent must be delivered by:
o No earlier than the close of business on the 90th day before
the special meeting; and
o No later than the close of business on the later of the 60th
day before the special meeting or the 10th day after our
first public announcement of both the date of the special
meeting and the nominees proposed by the Board of Directors
to be elected at the special meeting.
Requirements for a Written Notice of Intent
Your written notice of intent to make a nomination or proposal must
contain, as relevant:
o As to each person you propose to nominate for election or
re-election as a director, all information relating to each
nominee that either is:
o Required to be disclosed in solicitations of proxies for
election of directors in an election contest; or
o Otherwise required by Regulation 14A under the Securities
Exchange Act of 1934.
Your written notice of intent also must include the nominee's
written consent to be named in the proxy statement as a nominee
and to serve as a director if elected.
o As to any other business you propose to bring before the meeting:
o A brief description of the business;
o The reasons for conducting the business at the meeting; and
o Your material interest in the business, or the material
interest in the business of the beneficial owner, if any, on
whose behalf the proposal is made.
o Your name, address, and the number of each class of our shares
you own beneficially and of record. If you are delivering the
written notice of intent on behalf of a beneficial owner of our
shares, the written notice of intent also must contain the
beneficial owner's name, address, and the number of each class of
our shares held beneficially and of record.
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Requirements for a Public Announcement
For purposes of the procedures described above, our By-Laws define a
public announcement as disclosure in a:
o Press release reported by the Dow Jones News Service, Associated
Press, or comparable news service; or
o Document publicly filed by us with the Securities and Exchange
Commission pursuant to Section 13, 14, or 15(d) of the Securities
Exchange Act of 1934.
Other Requirements
You also must comply with all applicable requirements of the Securities
Exchange Act of 1934 for nominations of directors and proposals of business to
be conducted at stockholder meetings. If you have not complied with the
procedures described above, the chairman of a meeting may refuse to acknowledge
your nomination or proposal. These procedures will not be deemed to affect any
of your rights under Rule 14a-8 under the Securities Exchange Act of 1934 to
request inclusion of proposals in our proxy statements.
Independent Public Accountants
Arthur Andersen LLP has served as our independent public accountants
and auditors since 1994. We have selected Arthur Andersen LLP to serve as our
auditor for 1999. We expect a representative of Arthur Andersen LLP to be
present at the Annual Meeting. The representative will have an opportunity to
make a statement, if he or she desires, and be available to answer questions.
Annual Report on Form 10-K
You may request a copy of our Annual Report on Form 10-K for the year
ended December 31, 1998, by writing to A. Brian Davis, our Corporate Secretary,
at [email protected] or 102 Witmer Road, Horsham, Pennsylvania, 19044.
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NEOSE TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Amended and Restated as of June 15, 1999)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended to
promote the interests of Neose Technologies, Inc., a Delaware corporation (the
"Corporation"), by providing eligible individuals with the opportunity to obtain
an equity interest, or otherwise increase their equity interest, in the
Corporation. This Plan shall serve as the successor equity incentive program to
the Corporation's 1992 Stock Option Plan and 1991 Stock Option Plan.
B. The Discretionary Option Grant and Stock Issuance Programs of the Plan
became effective immediately upon the adoption of the Plan by the Corporation's
Board of Directors. Such date is hereby designated the "Plan Effective Date."
The Automatic Option Grant Program became effective upon the execution and final
pricing of the Underwriting Agreement for the initial public offering of the
Corporation's Common Stock. The execution date of such Underwriting Agreement is
hereby designated as the Automatic Option Program Effective Date. The Director
Fee Option Grant Program became effective on March 16, 1996.
II. DEFINITIONS
A. For the purposes of this Plan, the following definitions shall be in
effect:
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the Corporation
effected through either of the following transactions:
-- the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept, or
-- a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members ceases, by reason
of one or more contested elections for Board membership, to be comprised of
individuals who either (a) have been Board members continuously since the
beginning of such period or (b) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (a) who were still in office at the time such election or
nomination was approved by the Board.
Code: the Internal Revenue Code of 1986, as amended.
Committee: the committee of two (2) or more Board members appointed by the
Board to administer and interpret the Plan. The Committee members shall be
"outside directors" as defined under Code Section 162(m) and related Treasury
Regulations and may be "non-employee" Board members as defined under Rule 16b-3
of the 1934 Act. However, notwithstanding anything in the Plan to the contrary,
the Board must ratify or approve any grants made under the Discretionary Option
Grant Program or Stock Issuance Program to any Board members or officers of the
Corporation. References in the Plan to the Committee shall be deemed to include
the Board, with respect to ratification or approval of
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grants made to Board members and officers of the Corporation. In addition, the
Board may appoint a "Non-Section 16(b) Committee" solely for the purpose of
making grants under the Discretionary Option Grant Program to individuals who
are not covered by Section 16 of the 1934 Act. Such Committee shall have no
powers other than the power to make grants to such individuals. Any reference to
"Committee" herein shall also encompass the Non-Section 16(b) Committee where
appropriate.
Common Stock: shares of the Corporation's common stock.
Corporate Transaction: either of the following shareholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
Employee: an individual who performs services while in the employ of the
Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
Exercise Date: the date on which the Corporation shall have written notice
of the option exercise.
Fair Market Value: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
-- If the Common Stock is at the time traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share
on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no reported closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
-- If the Common Stock is at the time listed or admitted to trading on
any national securities exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock
on such exchange on the date in question, then the Fair Market Value shall
be the closing selling price on the exchange on the last preceding date for
which such quotation exists.
-- If the Common Stock is on the date in question neither listed nor
admitted to trading on any national securities exchange nor traded on the
Nasdaq National Market, then the Fair Market Value of the Common Stock on
such date shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
Hostile Take-Over: a change in ownership of the Corporation effected
through the following transaction:
-- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a
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tender or exchange offer made directly to the Corporation's shareholder's which
the Board does not recommend such shareholders to accept, and
-- the acceptance of more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer from holders other than the officers
and directors of the Corporation subject to the short-swing profit restrictions
of Section 16 of the 1934 Act.
Incentive Option: a stock option which satisfies the requirements of Code
Section 422.
Involuntary Termination: the termination of the Service of any Optionee or
Participant which occurs by reason of:
-- such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or bonus award)
by more than ten percent (10%) in the aggregate or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
Misconduct: the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
individual of confidential information or trade secrets of the Corporation or
its parent or subsidiary corporations, any failure to perform specific lawful
direction of the Corporation's Board or officers of the Corporation, any refusal
or neglect to perform such individual's duties, any conviction of, or entering
of a plea of nolo contendre to, a crime which constitutes a felony or any other
Misconduct by such individual adversely affecting the business or affairs of the
Corporation. The foregoing definition shall not be deemed to be inclusive of all
the acts or omissions which the Corporation or any parent or subsidiary may
consider as grounds for the dismissal or discharge of any Optionee, Participant
or other individual in the Service of the Corporation.
1934 Act: the Securities Exchange Act of 1934, as amended.
Non-Statutory Option: a stock option not intended to meet the requirements
of Code Section 422.
Optionee: a person to whom an option is granted under the Discretionary
Option Grant Program, the Automatic Option Grant Program or the Director Fee
Option Grant Program.
Participant: a person who is issued Common Stock under the Stock Issuance
Program.
Permanent Disability: the inability of an individual to engage in any
substantial gainful activity, by reason of any medically determinable physical
or mental impairment which is expected to result in death or which has lasted or
can be expected to last for a period of not less than twelve (12) months.
Plan Administrator: either the Board or the Committee, to the extent the
Committee is at the time responsible for the administration of the Plan in
accordance with Section IV of Article One.
Predecessor Plans: the Corporation's 1992 Stock Option Plan and 1991 Stock
Option Plan.
Service: the performance of services on a periodic basis for 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, except to the extent otherwise specifically provided in the
applicable stock option or stock issuance agreement.
Section 12(g) Registration Date: the date on which the initial registration
of the Common Stock under Section 12(g) of the 1934 Act became effective.
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Take-Over Price: the greater of (a) the Fair Market Value per share of
Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the canceled option is an
Incentive Option, then the Take-Over Price shall not exceed the clause (a) price
per share.
10% Shareholder: the owner of stock (as determined under Code Section
424(d)) possessing ten (10%) percent or more of the total combined voting power
of all classes of stock of the Corporation or any parent or subsidiary
corporation.
B. The following provisions shall be applicable in determining the parent
and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation shall be considered to be a parent
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 or stock in one of the other corporations in such chain.
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.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Stock Issuance
Program specified in Article Three, the Automatic Option Grant Program specified
in Article Four and the Director Fee Option Grant Program specified in Article
Five. Under the Discretionary Option Grant Program, eligible individuals may at
the discretion of the Plan Administrator be granted options to purchase shares
of Common Stock in accordance with the provisions of Article Two at a price not
less than eighty-five percent (85%) of the Fair Market Value of such shares on
the grant date. Under the Stock Issuance Program, eligible individuals may be
issued shares of Common Stock directly, either through the immediate purchase of
the shares (at Fair Market Value or at discounts of up to 15%) or as a bonus
tied to the individual's performance of services or the Corporation's attainment
of prescribed milestones. Under the Automatic Option Grant Program, each
individual serving as a non-employee Board member on the Automatic Option Grant
Program Effective Date and each individual who first joins the Board as a
non-employee director at any time after such Effective Date shall at periodic
intervals receive option grants to purchase shares of Common Stock in accordance
with the provisions of Article Four, with the first such grants to be made on
such Effective Date. Under the Director Fee Option Grant Program, each
non-employee Board member may elect to apply all or a portion of his or her
annual retainer fee otherwise payable in cash to a special below market option
grant.
B. Unless the context clearly indicates otherwise, the provisions of
Articles One and Six shall apply to all equity programs under the Plan and shall
accordingly govern the interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs shall be
administered solely and exclusively by the Committee, subject to such conditions
and limitations as the Board may decide, to the extent permissible under
applicable securities and tax laws requirements.
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B. 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.
C. The Plan Administrator shall have full power and authority (subject to
the express provisions of the Plan) to establish rules and regulations for the
proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding option grants or stock
issuances thereunder 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 Discretionary Option Grant or Stock Issuance Program or any
outstanding option grant or share issuance thereunder.
D. Administration of the Automatic Option Grant and Director Fee Option
Grant Programs shall be self-executing in accordance with the express terms and
conditions of those programs, and the Plan Administrator shall exercise no
discretionary functions with respect to option grants made pursuant to those
programs.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two and the Stock Issuance Program under Article Three
shall be limited to the following
(i) officers and other employees of the Corporation (or any parent or
subsidiary corporation);
(ii) non-employee members of the Board or the non-employee members of
the board of directors of any parent or subsidiary corporation; and
(iii) consultants who provide valuable services to the Corporation (or
any parent or subsidiary corporation); provided such services are not in
connection with the offer or sale of securities in a capital-raising
transaction.
B. The Plan Administrator shall have full authority to determine, (i) with
respect to the option grants made under the Discretionary Option Grant Program,
which eligible individuals are to receive option grants, the time or times when
such grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding, and (ii) with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule (if any) to be applicable to the issued shares, and the consideration
to be paid by the Participant for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
2,270,722* shares, subject to adjustment from time to time in accordance with
the provisions of this Section VI. Such authorized share reserve is comprised of
(i) the number of shares which remained for issuance, as of the Plan Effective
Date, under the Predecessor Plans as last approved by the Corporation's
shareholders, including the shares subject to the outstanding options
incorporated into this Plan and any other shares which would have been available
for future option grant under the Predecessor Plans as last approved by the
shareholders, plus (ii) an additional increase of 333,333* shares authorized by
the Board on the Plan Effective Date, (iii) an additional increase of 600,000*
shares authorized by the Board on December 6, 1995, (iv) an additional increase
of 500,000 shares authorized by the Board on March 19, 1997, and (v) an
additional increase of 495,000 shares authorized by the Board on April 16, 1999.
- --------------
* Reflects the 1-for-3 stock split that was effected immediately prior to the
consummation of the initial public offering of the Common Stock.
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As one or more outstanding options under the Plan are exercised, the number of
shares issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. In no event shall the aggregate number of shares of Common Stock for
which any one individual participating in the Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances for
any given year exceed fifty percent (50%) of the total number of shares for
which stock options, separately exercisable stock appreciation rights and direct
stock issuances may be granted over the term of the Plan.
C. Should one or more outstanding options under this Plan (including
options incorporated from the Predecessor Plans) expire or terminate for any
reason prior to exercise in full (including any option canceled in accordance
with the cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan. Shares subject to any
stock appreciation rights exercised under the Plan and all share issuances under
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the share issuance,
and not by the net number of shares of Common Stock actually issued to the
holder of such option or share issuance.
D. Should any change be made to the Common Stock issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without 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 amount and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for any given year under the Plan, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made per
eligible non-employee Board member under the Automatic Option Grant Program,
(iv) the number and/or class of securities and price per share in effect under
each option outstanding under the Discretionary Option Grant, Automatic Option
Grant or Director Fee Option Grant Program and (v) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plans. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted 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 II of this Article Two.
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A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator in
accordance with the following provisions:
(i) The exercise price per share of Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of such Common Stock on the grant date.
(ii) The exercise price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than eighty-five percent
(85%) of the Fair Market Value of such Common Stock on the grant date.
(iii) If any individual to whom an Incentive Option is granted is a
10% Shareholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Six, be
payable in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) in shares of Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through
a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable written instructions (a) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such purchase and (b) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale transaction.
3. Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Term and Exercise of Options. Each option granted under this Plan shall
be exercisable at such time or times and during such period as is determined by
the Plan Administrator and set forth in the instrument evidencing the grant. No
such option, however, shall have a maximum term in excess of ten (10) years
measured from the grant date.
1. During the lifetime of the Optionee, the option, together with any
related stock appreciation right, shall be exercisable only by the Optionee and
shall not be assignable or transferable by the Optionee, except for a transfer
of the option by will or by the laws of descent and distribution following the
Optionee's death or, with respect to options other than Incentive Options, if
permitted in any specific case by the Plan Administrator, pursuant to a domestic
relations order (as defined under the Code or Treasury Regulations).
2. Notwithstanding the foregoing, the Plan Administrator may provide that
an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.
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C. Termination of Service.
1. Except to the extent otherwise provided pursuant to subsection C.2
below, the following provisions shall govern the exercise period applicable to
any options held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service for any reason
other than death, Permanent Disability or Misconduct, then the period
during which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the
date of such cessation of Service.
(ii) Should the Optionee's Service terminate by reason of Permanent
Disability, then the period during which each outstanding option held by
the Optionee is to remain exercisable shall be limited to the twelve
(12)-month period following the date of such cessation of Service.
(iii) Should the Optionee die while holding one or more outstanding
options, then the period during which each such option is to remain
exercisable shall be limited to the twelve (12)-month period following the
date of the Optionee's death. During such limited period, the option may be
exercised by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
(iv) Should the Optionee's Service be terminated for Misconduct, then
all outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
(v) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
(vi) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period
or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be exercisable for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be outstanding
with respect to any option shares for which the option is not at that time
exercisable or in which the Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding,
- to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period in effect under subsection C.1 of this Section I of Article
Two to such greater period of time as the Plan Administrator shall deem
appropriate; provided that in no event shall such option be exercisable
after the specified expiration date of the option term; and/or
- to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise
period applicable under this paragraph C, not only with respect to the
number of vested shares of Common Stock 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.
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D. Shareholder Rights. An Optionee shall have no shareholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
E. Unvested Shares. The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under the Plan. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms 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 agreement evidencing
such repurchase right. All outstanding repurchase rights under the Plan shall
terminate automatically upon the occurrence of any Corporate Transaction, except
to the extent the repurchase rights are expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
II. INCENTIVE OPTIONS
Incentive Options may only be granted to individuals who are Employees, and
the terms and conditions specified below shall be applicable to all Incentive
Options granted under the Plan. Except as modified by the provisions of this
Section II, all the provisions of Articles One, Two and Six of the Plan shall be
applicable to all Incentive Options granted hereunder. Any Options specifically
designated as Non-Statutory shall not be subject to the terms and conditions of
this Section II.
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 (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then that option
may nevertheless be exercised in that calendar year for the excess number of
shares as a Non-Statutory Option under the Federal tax laws.
B. 10% Shareholder. If any individual to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which is at the
time outstanding under this Article Two shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
such Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares as fully-vested shares. However,
an outstanding option under this Article Two shall not so accelerate if and to
the extent: (i) such option is, in connection with such Corporate Transaction,
either to be assumed by the successor corporation or parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, (ii) such option is to be replaced with
a cash incentive program of the successor corporation which preserves the option
spread existing at the time of such Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option, (iii) such option is to be replaced by another incentive program
which the Plan Administrator determines is reasonably equivalent in value to the
program contemplated by either clause (i) or (ii) above, or (iv) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. However, upon an Optionee's
cessation of Service by reason of an Involuntary Termination (other than for
Misconduct) within eighteen (18) months after a Corporate Transaction in which
his or her outstanding options are assumed or replaced pursuant to clause (i),
(ii) or (iii) above, each such option under clause (i) shall automatically
accelerate and become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
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for all or any portion of such shares as fully-vested shares, the cash incentive
program under clause (ii) shall become fully vested and the benefits under a
clause (iii) replacement program shall become fully vested. The option as so
accelerated shall remain exercisable until the earlier of (i) the expiration of
the option term or (ii) the expiration of a ninety (90)-day period measured from
the date of such Involuntary Termination. The determination of option
comparability under clause (i) or program comparability under clause (iii) above
shall be made by the Plan Administrator, and its determination shall be final,
binding and conclusive.
B. Immediately following the consummation of a Corporate Transaction, all
outstanding options under this Article Two shall terminate and cease to remain
outstanding, except to the extent assumed by the successor corporation or its
parent company.
C. Each outstanding option under this Article Two that is assumed in
connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issued to the option holder in
consummation of such Corporate Transaction had such person exercised the option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share, provided the aggregate
exercise 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 participant basis following the consummation of such Corporate
Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretionary 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 one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control. The Plan Administrator shall also
have full power and authority to condition any such option acceleration (and the
termination of any outstanding repurchase rights) upon the Optionee's cessation
of Service by reason of an Involuntary Termination (other than for Misconduct)
within a specified period following such Change in Control.
E. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term or the surrender of such option in accordance with Section V of this
Article Two.
F. The grant of options under this Article Two shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
G. The portion of any Incentive Option accelerated under this Section III
in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Federal tax laws only to the
extent the dollar limitation of Section II of this Article Two is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a non-statutory option under the Federal tax
laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected Optionees, the cancellation
of any, or all outstanding options under this Article Two (including outstanding
options under the Predecessor Plans incorporated into this Plan) and to grant in
substitution new options under the Plan covering the same or different numbers
of shares of Common Stock but with an exercise price per share not less than (i)
one hundred percent (100%) of the Fair Market Value on the new grant date in the
case of a grant of an Incentive Option, (ii) one hundred ten percent (110%) of
such Fair Market Value in the case of an Incentive Option grant to a 10%
Shareholder or (iii) eighty-five percent (85%) of such Fair Market Value in the
case of all other grants.
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V. 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 V, 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 this Article Two 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 exercise 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 V 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.
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 this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when the Corporation's outstanding
Common Stock is registered under Section 12(g) of the 1934 Act, each such
officer holding one or more options with such a limited stock appreciation right
in effect for at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the option is at
the time exercisable for fully vested shares of Common Stock. The officer 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 each surrendered option (or surrendered portion of
such option) over (ii) the aggregate exercise price payable for such vested
shares. Such cash distribution shall be made within five (5) days following the
option surrender date. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Any unsurrendered portion of the option shall continue to
remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for an
appreciation distribution pursuant to this Section V shall not be available for
subsequent issuance under the Plan.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Three.
A. Consideration.
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1. Shares of Common Stock may be issued under the Stock Issuance Program
for one or more of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable to the Corporation's
order;
(ii) a promissory note payable to the Corporation's order in one or
more installments; or
(iii) past services rendered to the Corporation or any parent or
subsidiary corporation.
2. The shares may, in the absolute discretion of the Plan Administrator, be
issued for consideration with a value less than one hundred percent (100%) of
the Fair Market Value of such shares at the time of issuance, but in no event
less than eighty-five percent (85%) of such Fair Market Value.
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance Program may, in
the absolute discretion of the Plan Administrator, be fully and immediately
vested upon issuance (as a bonus for past services) or may vest in one or more
installments over the Participant's period of Service or the Corporation's
attainment of performance milestones. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
(i) the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse between
installments, and
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the
Issuance Agreement executed by the Corporation and the Participant at the
time such unvested shares are issued.
2. The Participant shall have full shareholder rights with respect to any
shares of Common Stock issued to him or her under the Plan, whether or not his
or her interest in those shares is vested. Accordingly, the Participant shall
have the right to vote such shares and to receive any regular cash dividends
paid on such shares. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration or by reason of any Corporate Transaction, shall be issued subject
to (i) the same vesting requirements applicable to his or her unvested shares
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock under the Stock Issuance Program, then the
Corporation shall have the right to require the Participant to surrender those
shares immediately to the Corporation for cancellation, and the Participant
shall cease to have any further shareholder rights with respect to the
surrendered shares. To the extent the surrendered shares were previously issued
to the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money promissory note), the Corporation shall repay
to the Participant the cash consideration paid for the surrendered shares and
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shall cancel the unpaid principal balance of any outstanding purchase-money note
of the Participant attributable to such surrendered shares.
4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the extent the Corporation's outstanding repurchase
rights are expressly assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction. However, any assigned repurchase
rights covering the unvested shares held by a Participant under this Article
Three shall immediately terminate should there occur an Involuntary Termination
of that Participant's Service (other than for Misconduct) within eighteen (18)
months after such Corporate Transaction.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under this Article Three or
at any time while those shares remain outstanding, to provide for the automatic
termination of the Corporation's repurchase rights with respect to those shares
should there occur a Change in Control. The Plan Administrator shall also have
full power and authority to condition the termination of those repurchase rights
upon the Participant's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within a specified period following such
Change in Control.
III. SHARE ESCROW/TRANSFER RESTRICTIONS
A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
distributed with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such (or the distributed securities or assets) vests.
B. The Participant shall have no right to transfer any unvested shares of
Common Stock issued to him or her under the Stock Issuance Program. For purposes
of this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift or other disposition of such shares,
whether voluntary or involuntary. Upon any such attempted transfer, the unvested
shares shall immediately be canceled in accordance with substantially the same
procedure in effect under Section I.B.3 of this Article Three, and neither the
Participant nor the proposed transferee shall have any rights with respect to
such canceled shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Stock Issuance Program to his or her
spouse or issue, including adopted children, or to a trust established for such
spouse or issue, provided the transferee of such shares delivers to the
Corporation a written agreement to be bound by all the provisions of the Stock
Issuance Program and the Issuance Agreement applicable to the gifted shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant to the
provisions of this Article Four program shall be limited to (i) those
individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date, (ii) those individuals who are first
elected or appointed as non-employee Board members on or after such Effective
Date, whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who are re-elected to serve as
non-employee Board members at one or more Annual Shareholders Meetings held
after the Section 12(g) Registration Date. In no event, however, shall a
non-employee Board member be eligible to receive an automatic option grant
pursuant to clause (i) or (ii) above if such individual has at any time been in
the prior employ of the Corporation (or any parent or subsidiary corporation),
but such individual shall be eligible to receive one or more automatic option
grants pursuant to clause (iii). Each non-employee Board member eligible to
receive one or more automatic option grants pursuant to the foregoing criteria
shall be designated an "Eligible Director" for purposes of the Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION
A. Grant Dates. Option grants shall be made under this Article Four on the
dates specified below:
1. Initial Grant. Each Eligible Director who is first elected or
appointed as a non-employee Board member after the Automatic Option Grant
Program Effective Date shall automatically be granted, on the date of such
initial election or appointment (as the case may be), a Non-Statutory
Option to purchase 16,666 shares of Common Stock upon terms and conditions
of this Article Four.
2. Annual Grant. On the date of each Annual Shareholders Meeting,
beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who will continue to serve as an
Eligible Director shall automatically be granted, whether or not such
individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 10,000 shares of
Common Stock upon the terms and conditions of this Article Four, provided
he or she has served as a non-employee Board member for at least six (6)
months prior to the date of such Annual Meeting.
3. No Limitation. There shall be no limit on the number of shares for
which any one Eligible Director may be granted stock options under this
Article Four over his or her period of Board service.
B. Exercise Price. The exercise price per share of Common Stock subject to
each automatic option grant made under this Article Four shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock, on
the automatic grant date.
C. Payment. The exercise price shall be payable in one of the alternative
forms specified below. To the extent the option is exercised for any unvested
shares, the Optionee must execute and deliver to the Corporation a stock
purchase agreement for those unvested shares which provides the Corporation with
the right to repurchase, at the exercise price paid per share, any unvested
shares held by the Optionee at the time of cessation of Board service and which
precludes the sale, transfer or other disposition of the purchased shares at any
time while those shares remain subject to the Corporation's repurchase right.
(i) full payment in cash or check drawn to the Corporation's order;
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date;
(iii) full payment in a combination of shares of Common Stock held for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date and cash or check drawn to the Corporation's order; or
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(iv) to the extent the option is exercised for vested shares, full
payment through a sale and remittance procedure pursuant to which the
Optionee shall provide irrevocable written instructions to (a) a
Corporation designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure specified above is
used for the exercise of the option for vested shares, payment of the exercise
price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Four shall have a
maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares in accordance with the applicable schedule
below:
Initial Grant. Each initial 16,666-share automatic grant shall vest,
and the Corporation's repurchase right shall lapse, in a series of four
successive and equal annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to
vest upon Optionee's completion of one (1) year of Board service measured
from the automatic grant date.
Annual Grant. Each additional 10,000-share automatic grant shall vest,
and the Corporation's repurchase right shall lapse, upon the Optionee's
completion of one (1) year of Board service measured from the automatic
grant date.
Vesting of the option shares shall be subject to acceleration, as provided
in Section II.G.3 and Section III of this Article Four. In no event shall any
additional option shares vest after the Optionee's cessation of Board service,
except as otherwise provided in Section II.G.3 of this Article Four.
F. Non-Transferability.
1. During the lifetime of the Optionee, each automatic option grant,
together with the limited stock appreciation right pertaining to that option,
shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee, except for a transfer of the option by will or by
the laws of descent and distribution following Optionee's death or, with respect
to options other than Incentive Options, if permitted in any specific case by
the Plan Administrator, pursuant to a domestic relations order (as defined under
the Code or Treasury Regulations).
2. Notwithstanding the foregoing, the Plan Administrator may provide that
an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.
G. Effect of Termination of Board Service.
1. Should the Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding one or more automatic
option grants under this Article Four, then such individual shall have a six
(6)-month period following the date of such cessation of Board service in which
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<PAGE>
to exercise each such option for any or all of the shares of Common Stock in
which the Optionee is vested at the time of such cessation of Board service.
However, each such option shall immediately terminate and cease to be
outstanding at the time of such cessation of Board service, with respect to any
shares in which the Optionee is not otherwise at that time vested under that
option.
2. Should the Optionee die within six (6) months after cessation of Board
service, then any automatic option grant held by the Optionee at the time of
death may subsequently be exercised. for any or all of the shares of Common
Stock in which the Optionee is vested at the time of his or her cessation of
Board 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 such option shall lapse upon the expiration of a twelve (12)-
month period measured from the date of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled while serving as
a Board member, then the shares of Common Stock at the time subject to each
automatic option grant held by such Optionee under this Article Four which are
vested may be purchased by the Optionee (or the representative of the Optionee's
estate or the person or persons to whom the option is transferred upon the
Optionee's death) pursuant to the option for a twelve (12)- month period
following the date of the Optionee's cessation of Board service.
4. In no event shall any automatic grant under this Article Four remain
exercisable after the expiration date of the ten (10)-year option term. Upon the
expiration of the applicable post-service exercise period under subparagraphs 1
through 3 above or (if earlier) upon the expiration of the ten (10)-year option
term, the automatic grant shall terminate and cease to be outstanding for any
option shares in which the Optionee was vested at the time of his or her
cessation of Board service but for which such option was not subsequently
exercised.
H. Shareholder Rights. The holder of an automatic option grant under this
Article Four shall have none of the rights of a shareholder with respect to any
shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form of Automatic Stock Option
Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding option under this Article Four but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for all or any portion of
those shares as fully-vested shares. Immediately following the consummation of
the Corporate Transaction, all automatic option grants under this Article Four
shall terminate and cease to be outstanding, except to the extent one or more of
those grants are assumed by the acquiring entity or its parent corporation.
B. In connection with any Change in Control of the Corporation, the shares
of Common Stock at the time subject to each outstanding option under this
Article Four but not otherwise vested shall automatically vest in full so that
each such option shall, immediately prior to the specified effective date for
the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares. Each such option shall remain so
exercisable for all the option shares following the Change in Control, until the
expiration or sooner termination of the option term.
C. Should a Hostile Take-Over occur at any time following the Section 12(g)
Registration Date, then the Optionee shall have a thirty (30)-day period in
which to surrender to the Corporation each option held by him or her under this
Article Four for a period of at least six (6) months. The optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not those shares are
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otherwise at the time fully vested) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. The
shares of Common Stock subject to each option surrendered in connection with the
Hostile Take-Over shall not be available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Four 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.
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any portion of the
annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant under this Director Fee
Option Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to first day of July in the calendar year immediately
preceding the calendar year for which the annual retainer fee which is the
subject of that election is otherwise payable. Each non-employee Board member
who files such a timely election shall automatically be granted an option under
this Director Fee Option Grant Program on the first trading day in January in
the calendar year for which the annual retainer fee which is the subject of that
election would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedures specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares: The number of shares of Common Stock subject to
the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
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completion of each calendar month of Board service in the calendar year for
which the annual retainer fee which is the subject of his or her election under
this Article Five would otherwise be payable. Each option shall have a maximum
term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the Optionee under this Article Five at the time of
his or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
E. Death or Permanent Disability. Should the Optionee's service as a Board
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Article Five shall immediately become exercisable
for all the shares of Common Stock at the time subject to that option, and the
option may, during the three (3)-year period following such cessation of Board
service, be exercised for any or all of those shares as fully-vested shares.
Should the Optionee die while holding one or more options under this
Article Five, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall remain so exercisable until the earlier or (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.
C. The grant of options under the Director Fee Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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<PAGE>
ARTICLE SIX
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant and Automatic Option Grant Programs or the
purchase of one or more shares issued to such Participant under the Stock
Issuance Program, including the satisfaction of any Federal, state and local
income and employment tax obligations arising therefrom, by:
(i) authorizing the extension of a loan from the Corporation to such
Optionee or Participant, or
(ii) permitting the Optionee or Participant to pay the exercise price
or purchase price for the purchased Common Stock in installments over a
period of years.
B. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate at the time such exercise price or purchase price
becomes due and payable. Loans or installment payments may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee or Participant may not exceed the option or purchase price of the
acquired shares (less the par value of such shares) plus any Federal, state and
local income and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.
C. The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this Section I shall be subject to forgiveness
by the Corporation in whole or in part upon such terms and conditions as the
Plan Administrator may in its discretion deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment. In addition, the Board may
not, without the approval of the Corporation's shareholders, amend the Plan to
(i) increase the maximum number of shares issuable under the Plan or the maximum
amount of shares for which any one individual participating in the Plan may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances for any given year under the Plan, except for permissible
adjustments under Article One, (ii) materially modify the eligibility
requirements for Plan participation, or (iii) otherwise materially increase the
benefits accruing to Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and (ii) shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under the Discretionary Option Grant or the Stock
Issuance Programs are held in escrow until shareholder approval is obtained for
a sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances 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 interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
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<PAGE>
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of any stock options granted under Article Two or upon the issuance of
any shares under Article Three shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion and in accordance with the
provisions of this Section III of Article Six and such supplemental rules as the
Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission),
provide any or all holders of Non-Statutory Options or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Federal, state and local income and employment tax liabilities incurred
by such holders in connection with the exercise of their options or the vesting
of their shares (the "Taxes"). Such right may be provided to any such holder in
either or both of the following formats:
-- The holder of the Non-Statutory Option or unvested shares may be
provided with the election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the
applicable Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
-- The Plan Administrator may, in its discretion, provide the holder
of the Non-Statutory Option or the unvested shares with the election to
deliver to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common Stock previously
acquired by such individual (other than in connection with the option
exercise or share vesting triggering the Taxes) with an aggregate Fair
Market Value equal to the percentage of the Taxes incurred in connection
with such option exercise or share vesting (not to exceed one hundred
percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Discretionary Option Grant and Stock Issuance Programs of this Plan
became effective immediately upon adoption of the Plan by the Board on March 23,
1995 (the "Plan Effective Date"). The Plan was approved by the Corporation's
shareholders on April 12, 1995. On December 9, 1995, the Board approved an
increase of 600,000 shares (which number reflects the 1-for-3 reverse stock
split that was effected immediately prior to the consummation of the initial
public offering of the Common Stock) in the aggregate number of shares issuable
under the Plan; such increase was approved by the Corporation's shareholders on
December 19, 1995. The Automatic Option Grant Program of this Plan became
effective on the Automatic Option Grant Program Effective Date. The Plan was
amended by the Board on March 16, 1996 to implement the Director Fee Option
Grant Program, which amendment was approved by the Corporation's shareholders at
the 1996 Annual Stockholders Meeting. On March 19, 1997, the Board approved an
increase of 500,000 shares in the aggregate number of shares issuable under the
Plan, and on April 23, 1997, the Board approved a change in the aggregate number
of shares of Common Stock for which any one individual participating in the Plan
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances, from a limitation of 250,000 shares over the term of
the Plan, to an annual limitation not in excess of 50% of the total number of
shares for which stock options, separately exercisable stock appreciation rights
and direct stock issuances may be granted over the term of the Plan. Both of
such amendments became effective on April 23, 1997, and were approved by the
Corporation's shareholders at the 1997 Annual Stockholders Meeting. On April 16,
1999, the Board approved an increase of 495,000 shares in the aggregate number
of shares issuable under the Plan and an increase in the number of shares
issuable to Eligible Directors under the annual grant provisions of the
Automatic Option Grant Program from 3,333 to 10,000 shares, subject to
shareholder approval at the 1999 Annual Stockholders Meeting.
B. Each stock option grant outstanding under the Predecessor Plans
immediately prior to the Plan Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such option
shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
20
<PAGE>
options with respect to their acquisition of shares of Common Stock thereunder.
However, the Plan Administrator shall have complete discretion to extend, under
such circumstances as it may deem appropriate, one or more provisions of this
Plan to any or all of the stock options which are incorporated into this Plan
from the Predecessor Plans but which do not otherwise contain such provisions.
C. No further option grants or stock issuances shall be made under the
Predecessor Plans from and after the Plan Effective Date.
D. The Plan shall terminate upon the earlier of (i) February 28, 2005 or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or stock appreciation
rights granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
option grants or share issuances.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the Plan,
the issuance of any shares under the Stock Issuance Program, and the issuance of
Common Stock upon the exercise or surrender of the option grants made hereunder
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it, and the Common Stock issued pursuant to it.
VIII. CHANGE OF CONTROL/CORPORATE TRANSACTION
Notwithstanding any other provision of the Plan to the contrary, in the
event of a Corporate Transaction or a Change in Control, the Plan Administrator
shall not have the right to take any actions described in the Plan, nor shall
any provisions of the Plan be operative, if such actions or provisions would
make the Corporate Transaction or Change in Control ineligible for pooling of
interests accounting treatment or would make the Corporate Transaction or Change
in Control ineligible for desired tax treatment if, in the absence of such
actions or provisions, the Corporate Transaction or Change in Control would
qualify for such treatment and the Corporation intends to use such treatment
with respect to the Corporate Transaction or Change in Control.
IX. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan may not
be assigned, encumbered or otherwise transferred by any Optionee or Participant.
B. The provisions of the Plan relating to the exercise of options and the
vesting of shares shall be governed by the laws of the Commonwealth of
Pennsylvania as such laws are applied to contracts entered into and performed in
such Commonwealth.
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C. The provisions of the Plan shall inure to the benefit of, and be binding
upon, the Corporation and its successors or assigns, whether by Corporate
Transaction or otherwise, and the Participants and Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
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<PAGE>
8888
Neose Technologies, Inc.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 15, 1999
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned stockholder of Neose Technologies, Inc. hereby appoints
Stephen A. Roth, Chairman and Chief Executive Officer, and P. Sherrill Neff,
President and Chief Financial Officer, and each of them, with full power of
substitution, proxies to vote the shares of stock that the undersigned could
vote if personally present at the Annual Meeting of Stockholders of Neose
Technologies, Inc. to be held at the Company's headquarters at 102 Witmer Road,
Horsham, PA 19044, on June 15, 1999, at 1:00 P.M. (Eastern Daylight Time), or
any adjournment thereof.
(Continued and to be signed on Reverse Side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
NEOSE TECHNOLOGIES, INC.
June 15, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A |X| Please marke your
votes as in this
example.
1. ELECTION FOR all nominees WITHHOLD
OF at right(except as AUTHORITY
DIRECTORS marked to the to vote for all
contrary below) nominees at right
|_| |_|
INSTRUCTION: To withhold authority to vote for
an individual nominee, strike a line through
that nominee's name in the list at right.
NOMINEES: Stephen A. Roth
P. Sherrill Neff
William F. Hamilton
Douglas J. MacMaster, Jr.
Lindsay A. Rosenwald
Lowell E. Sears
Jerry A. Weisbach
FOR AGAINST ABSTAIN
|_| |_| |_|
2. PROPOSAL TO APPROVE AND ADOPT THE
NEOSE TECHNOLOGIES, INC. AMENDED AND
RESTATED 1995 STOCK OPTION/STOCK
ISSUANCE PLAN (the "Amended Plan") to
increase the nunber of shares authorized for issuance under the Amended Plan,
and issuable annually to non-employee directors under the Automatic Option
Grant Program of the Amended Plan.
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND THE RELATED PROXY STATEMENT.
Signature______________________________________________ Dated:______________
_______________________________________________________ Dated:______________
SIGNATURE: IF HELD JOINTLY
Note: Please date and sign exactly as your name appears on the envelope in which
this material was mailed. If shares are held jointly, each stockholder
should sign. Executors, administrators, trustees, etc. should use full
title, and if more than one, all should sign. If the stockholder is a
corporation, please sign full corporate name by an authorized officer. If
the stockholder is a partnership, please sign full partnership name by an
authorized person.
