As filed with the Commission on October 6, 1997 File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------
CYTOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3078125
- ------------------------------------ ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Two Richmond Square
Providence, Rhode Island 02906
------------------------------------------------------------
(Address of principal executive offices, including zip code)
StemCells, Inc. 1996 Stock Option Plan
1997 CytoTherapeutics, Inc.
StemCells Research Stock Option Plan
(Full title of the plan)
Frederic A. Eustis, III, Esq.
Secretary
CytoTherapeutics, Inc.
Two Richmond Square
Providence, Rhode Island 02906
(410) 272-3310
- --------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Title of Securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered offering price per aggregate offering registration fee
share(1) price (1)
Common Stock, 2,182,620 $4.8459 $10,576,827 $3206.00
par value $0.01 shares
</TABLE>
(1) The maximum aggregate offering price for the shares of the Registrant's
Common Stock, $.01 par value offered hereby is based (i) on the weighted average
exercise price of the 1,782,620 shares issuable upon the exercise of options
previously granted and (ii) for the remaining shares is estimated solely for the
purpose of determining the registration fee pursuant to Rule 457(h) on the basis
of the average of the high and low prices of CytoTherapeutics, Inc. Common
Stock, par value $0.01, reported on NASDAQ/NMS on September 30, 1997.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Registrant hereby incorporates the following documents herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (which incorporates by reference certain information
from the Registrant's Proxy Statement relating to the 1997 Annual
Meeting of Stockholders).
(b) The Registrant's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997.
(c) The Registrant's Current Report on Form 8-K filed on August 18, 1997.
(d) The Registrant's Current Report on Form 8-K filed on October 6, 1997.
(e) The description of the common stock of the Registrant contained in the
Registrant's Registration Statement on Form 8-A (File No. 1-19871),
including all amendments and reports filed for the purpose of updating
such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not required.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
No material interests.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended,
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
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<PAGE>
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (relating to unlawful payment of dividends and
unlawful stock purchase and redemption), or (iv) for any transaction from which
the director derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation, as amended,
provides that the Company's Directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liabilities is not
permitted under the Delaware General Corporation Law as in effect at the time
such liability is determined. The Restated Certificate of Incorporation, as
amended, further provides that the Registrant shall indemnify its directors and
officers to the full extent permitted by the law of the State of Delaware.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
--------
Exhibit
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4 of
the Registrant's Registration Statement on Form S-1, File No.
33-45739).
5.1 Opinion of Ropes & Gray.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ropes & Gray (contained in the opinion filed as Exhibit 5.1
to this registration statement).
24.1 Powers of Attorney (included in Part II of this registration statement
under the caption "Signatures").
99.1. StemCells, Inc. 1996 Stock Option Plan.
99.2 Registrant's 1997 StemCells Research Stock Option Plan the (the
"1997 Plan").
99.3. Form of Performance -- Based Incentive Option Agreement Issued Under
the 1997 Plan.
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<PAGE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement on Form S-8 to be signed on its behalf by the undersigned thereunto
duly authorized, in Providence, Rhode Island, on September 30, 1997.
By
/s/Seth A. Rudnick
--------------------------------------
Seth A. Rudnick
Chairman and Chief Executive Officer
and Director
Each person whose signature appears below constitutes and appoints Seth
A. Rudnick, Frederic A. Eustis and John McBride, and each of them singly, his or
her true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement on Form S-8 to be filed by
CytoTherapeutics, Inc., and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed below by the following
persons in the capacities shown.
Signature Capacity Date
- --------- -------- ----
Chairman, Chief Executive Officer September 30, 1997
/s/ Seth A. Rudnick and Director (principal executive
- ------------------- officer)
Seth A. Rudnick
Chief Financial Officer, Vice September 30, 1997
/s/ John McBride President and Treasurer (principal
- ------------------- financial officer)
John McBride
Controller (principal accounting September 30, 1997
/s/ Suzanne Fleming officer)
- -------------------
Suzanne Fleming
Director September 30, 1997
/s/ Edwin C. Cadman
- -------------------
Edwin C. Cadman
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<PAGE>
Signature Capacity Date
- ---------- -------- ----
/s/ Donald R. Conklin Director September 30, 1997
- ----------------------
Donald R. Conklin
/s/ Patrick Aebischer Director September 30, 1997
- ----------------------
Patrick Aebischer
/s/ Mark J. Levin Director September 30, 1997
- ----------------------
Mark J. Levin
/s/ Richard J. Ramsden Director September 30, 1997
- ----------------------
Richard J. Ramsden
/s/ Peter K. Simon Director September 30, 1997
- ----------------------
Peter K. Simon
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Exhibit 5.1
October 6, 1997
CytoTherapeutics, Inc.
2 Richmond Square
Providence, RI 02906
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-8 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Plan Act of
1933, as amended, for the registration of 2,000,000 shares of common stock
("Common Stock"), $.01 par value (the "Plan Shares"), of CytoTherapeutics, Inc.
(the "Company") issuable upon the exercise of options granted under Company's
1997 StemCells Research Stock Option Plan (the "1997 Plan") and 182,620 shares
of Common Stock (the "Assumed Shares" and together with the Plan Shares, the
"Shares") issuable upon the exercise of options assumed by the Company (the
"Options") that had previously been granted under the StemCells, Inc. 1996 Stock
Option Plan (the "StemCells Plan").
We have acted as counsel for the Company in connection with the 1997
Plan and the assumption of the Options and are familiar with the actions taken
by the Company in connection therewith. For purposes of this opinion we have
examined the Registration Statement, the 1997 Plan, the Options and such other
documents as we deemed appropriate.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized, and the Shares, when issued and sold in accordance with
the terms of the 1997 Plan and the Options, will be validly issued, fully paid
and non-assessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to all references to our firm included in or made a
part of this Registration Statement.
Very truly yours,
/s/ Ropes & Gray
----------------
Ropes & Gray
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the StemCells, Inc. 1996 Stock Plan and the
1997 CytoTherapeutics, Inc. StemCells Research Stock Option Plan of
CytoTherapeutics, Inc. of our report dated February 6, 1997, except for Note 17,
as to which the date is February 13, 1997, with respect to the consolidated
financial statements of CytoTherapeutics, Inc. included in its Annual Report
(Form 10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
----------------------
ERNST & YOUNG LLP
Boston, Massachusetts
October 2, 1997
Exhibit 99.1
STEMCELLS, INC.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
a. "Administrator" means the Board or any of its
Committees as shall be administering the Plan in
accordance with Section 4 hereof.
b. "Applicable Laws" means the requirements relating to
the administration of stock option plans under U.S.
state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed
or quoted and the applicable laws of any foreign
country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan.
c. "Board" means the Board of Directors of the Company.
d. "Code" means the Internal Revenue Code of 1986, as
amended.
e. "Committee" means a committee of Directors appointed
by the Board in accordance with Section 4 hereof.
f. "Common Stock" means the Common Stock of the Company.
g. "Company" means StemCells, Inc., a California
corporation.
h. "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render
consulting or advisory services to such entity.
i. "Director" means a member of the Board of Directors
of the Company.
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j. "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or
Subsidiary of the Company. A Service Provider shall
not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii)
transfers between locations of the Company or between
the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options,
no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of
such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director's fee by the
Company shall be sufficient to constitute
"employment" by the Company.
k. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
l. "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
i. If the Common Stock is listed on any
established stock exchange or a
national market system, including
without limitation the NASDAQ
National Market or The NASDAQ
SmallCap Market of The NASDAQ Stock
Market, its Fair Market Value shall
be the closing sales price for such
stock (or the closing bid, if no
sales were reported) as quoted on
such exchange or system for the last
market trading day prior to the time
of determination, as reported in The
Wall Street Journal or such other
source as the Administrator
deems reliable;
ii. If the Common Stock is regularly
quoted by a recognized securities
dealer but selling prices are not
reported, its Fair Market Value
shall be the mean between the high
bid and low asked prices for the
Common Stock on the last market
trading day prior to the day of
determination; or
iii. In the absence of an established
market for the Common Stock, the
Fair Market Value thereof shall be
determined in good faith by the
Administrator.
m. "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the
meaning of Section 422 of the Code.
2
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n. "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
o. "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations
promulgated thereunder.
p. "Option" means a stock option granted pursuant to the
Plan.
q. "Option Agreement" means a written or electronic
agreement between the Company and an Optionee
evidencing the terms and conditions of an
individual Option grant. The Option Agreement is
subject to the terms and conditions of the Plan.
r. "Option Exchange Program" means a program whereby
outstanding Options are exchanged for Options with a
lower exercise price.
s. "Optioned Stock" means the Common Stock subject to an
Option or a Stock Purchase Right.
t. "Optionee" means the holder of an outstanding Option
or Stock Purchase Right granted under the Plan.
u. "Parent" means a "parent corporation," whether now or
hereafter existing,as defined in Section 424(e) of
the Code.
v. "Plan" means this 1996 Stock Plan.
w. "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of a Stock Purchase
Right under Section 11 below.
x. "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
y. "Service Provider" means an Employee, Director or
consultant.
z. "Share" means a share of the Common Stock, as
adjusted in accordance with Section 12 below.
aa. "Stock Purchase Right" means a right to purchase
Common Stock pursuant to Section 11 below.
3
<PAGE>
bb. "Subsidiary" means a "subsidiary corporation,
" whether now or hereafter existing, as defined in
Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of Shares which may be
subject to option and sold under the Plan is 120,000 Shares. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
a. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee
shall be constituted to comply with Applicable
Laws.
b. Powers of the Administrator. Subject to the
provisions of the Plan and, in the case of a
Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any
relevant authorities, the Administrator shall have
the authority in its discretion.
i. to determine the Fair Market Value;
ii. to select the Service Providers to
whom Options and Stock Purchase
Rights may from time to time be
granted hereunder;
iii. to determine the number of Shares to
be covered by each such award
granted hereunder;
iv. to approve forms of agreement for
use under the Plan;
v. to determine the terms and
conditions, of any Option or Stock
Purchase Right granted hereunder.
Such terms and conditions include,
but are not limited to, the exercise
price, the time or times when
Options or Stock Purchase Rights
may be exercised (which may be based
on performance
4
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criteria), any vesting acceleration
or waiver of forfeiture
restrictions, and any restriction or
limitation regarding any Option or
Stock Purchase Right or the Common
Stock relating thereto, based in
each case on such factors as the
Administrator, in its sole
discretion, shall determine;
vi. to determine whether and under what
circumstances an Option may be
settled in cash under subsection
9(f) instead of Common Stock;
vii. to reduce the exercise price of any
Option to the then current Fair
Market Value if the Fair Market
Value of the Common Stock covered by
such Option has declined since
the date the Option was granted;
viii. to initiate an Option Exchange
Program;
ix. to prescribe, amend and rescind
rules and regulations relating to
the Plan, including rules and
regulations relating to sub-plans
established for the purpose of
qualifying for preferred tax
treatment under foreign tax laws;
x. to allow Optionees to satisfy
withholding tax obligations by
electing to have the Company
withhold from the Shares to be
issued upon exercise of an Option or
Stock Purchase Right that number of
Shares having a Fair Market Value
equal to he amount required to be
withheld. The Fair Market Value of
the Shares to be withheld shall be
determined on the date that the
amount of tax to be withheld is to
be determined. All elections by
Optionees to have Shares withheld
for this purpose shall be made in
such form and under such conditions
as the Administrator may deem
necessary advisable; and
xi. to construe and interpret the terms
of the Plan and awards
granted pursuant to the Plan.
c. Effect of Administrator's Decision. All decisions,
determinations and interpretations of the
Administrator shall be final and binding on all
Optionees.
5. Eligibility.
5
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a. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.
b. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first
time by the Optionee during any calendar year
(under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes
of this Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall
be determined as of the time the Option with
respect to such Shares is granted.
c. Neither the Plan nor any Option or Stock Purchase
Right shall confer upon any Optionee any right with
respect to continuing the Optionee's relationship as
a Service Provider with the Company, nor shall it
interfere in any way with his or her right or the
Company's right to terminate such relationship at any
time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its
adoption by the Board. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
8. Option Exercise Price and Consideration.
a. The per share exercise price for the Shares to be
issued upon exercise of an Option shall be such price
as is determined by the Administrator, but shall be
subject to the following:
i. In the case of an Incentive Stock
Option
(A) granted to an Employee who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes
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of stock of the Company or any Parent or Subsidiary, the exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
ii. In the case of a Nonstatutory Stock
Option
(A) granted to a Service Provider who,
at the time of grant of such Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any other Service
Provider, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
iii. Notwithstanding the foregoing,
Options may be granted with a per
Share exercise price other than as
required above pursuant to a merger
or other corporate transaction.
b. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the
method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant).
Such consideration may consist of (1)cash, (2) check,
(3) promissory note, (4) other Shares which (x) in
the case of Shares acquired upon exercise of an
Option, have been owned by the Optionee for more than
six months on the date of surrender, and (y) have
a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5)
consideration received by the Company under a
cashless exercise program implemented by the
Company in connection with the Plan, or (6) any
combination of the foregoing methods of payment.
In making its determination as to the type of
consideration to accept, the Administrator
shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.
9. Exercise of Option.
a. Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable
according to the terms hereof at such times and under
such conditions as determined by the Administrator
and set forth in the Option Agreement, but in no case
at a rate of less than 20% per year over five (5)
years from the date the Option is granted. Unless the
Administrator provides otherwise, vesting of Options
granted hereunder
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shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
b. Termination of Relationship as a Service Provider.
If an Optionee ceases to be a Service Provider, such
Optionee may exercise his or her Option
within such period of time as is specified in the
Option Agreement (of at least thirty (30) days) to
the extent that the Option is vested on the date of
termination (but in no event later than the
expiration of the term of the Option as set forth in
the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the
Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified
by the Administrator, the Option shall
terminate, and the Shares covered by such Option
shall revert to the Plan.
c. Disability of Optionee. If an Optionee ceases to be
a Service Provider as a result of the Optionee's
Disability, the Optionee may exercise his or her
Option within such period of time as is specified in
the Option Agreement to the extent the Option is
vested on the date of termination (but in no event
later than the expiration of the term of such Option
as set forth in the Option Agreement). In the
absence of a specified time in the Option
Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's
termination. If such disability is not a
"disability" as such term is defined in Section 22(e)
(3) of the Code, in the case of an
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Incentive Stock Option such Incentive Stock Option
shall automatically cease to be treated as an
Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option on the day
three months and one day following such termination.
If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within
the time specified herein, the Option shall
terminate, and the Shares covered by such Option
shall revert to the Plan.
d. Death of Optionee. If an Optionee dies while a
Service Provider, the Option may be exercised within
such period of time as is specified in the
Option Agreement (but in no event later than the
expiration of the term of such Option as set forth in
the Notice of Grant), by the Optionee's estate
or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the
extent that the Option is vested on the date of
death. In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee
is not vested as to his or her entire Option, the
Shares covered by the unvested portion
of the Option shall immediately revert to the Plan.
The Option may be exercised by the executor or
administrator of the Optionee's estate or, if
none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of
descent or distribution. If the Option is not so
exercised within the time specified herein, the
Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
e. Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an
Option previously granted, based on such
terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time
that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
a. Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem
with other awards granted under the Plan and/or cash
awards made outside of the Plan. After the
Administrator determines that it will offer Stock
Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms,
conditions and restrictions
9
<PAGE>
related to the offer, including the number of Shares
that such person shall be entitled to purchase, the
price to be paid, and the time within which such
person must accept such offer. The terms of the offer
shall comply in all respects with Section 260.140.42
of Title 10 of the California Code of Regulations.
The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form
determined by the Administrator.
b. Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock purchase
agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary
termination of the purchaser's service with the
Company for any reason (including death or
disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The
repurchase option shall lapse at such rate
as the Administrator may determine, but in no case at
a rate of less than 20% per year over five years from
the date of purchase.
c. Other Provisions. The Restricted Stock purchase
agreement shall contain such other terms, provisions
and conditions not inconsistent with the Plan
as may be determined by the Administrator in its sole
discretion.
d. Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have rights
equivalent to those of a shareholder and shall be a
shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of
the Company. No adjustment shall be made for a
dividend or other right for which the record date is
prior to the date the Stock Purchase Right is
exercised, except as provided in Section 12 of the
Plan.
12. Adjustment Upon Changes in Capitalization, Merger or Asset
Sale.
a. Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number
of shares of Common Stock covered by each outstanding
Option or Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or
Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or
expiration of an Option or Stock Purchase Right, as
well as the price per share of Common Stock covered
by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares
of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or
reclassification of the Common Stock, or any other
increase or decrease
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<PAGE>
in the number of issued shares of Common Stock
effected without receipt of consideration by the
Company. The conversion of any convertible securities
of the Company shall not be deemed to have been
"effected without receipt of consideration." Such
adjustment shall be made by the Board, whose
determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to
an Option or Stock Purchase Right.
b. Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company,
the Administrator shall notify each Optionee
as soon as practicable prior to the effective date of
such proposed transaction. The Administrator in its
discretion may provide for an Optionee to have the
right to exercise his or her Option until fifteen
(15) days prior to such transaction as to all of the
Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be
exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable
to any Shares purchased upon exercise of an Option
or Stock Purchase Right shall lapse as to all such
Shares, provided the proposed dissolution or
liquidation takes place at the time and in the
manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase
Right will terminate immediately prior to the
consummation of such proposed action.
c. Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the
sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase
Right shall be assumed or an equivalent option or
right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation.
In the event that the successor corporation refuses
to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and
have the right to exercise the Option or Stock
Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise
be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable
in lieu of assumption or substitution in the event of
a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that
the Option or Stock Purchase Right shall be fully
exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock
Purchase Right shall terminate upon the
expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall
be considered assumed if, following the merger or
sale of assets, the option or right confers the right
to purchase
11
<PAGE>
or receive, for each Share of Optioned Stock subject
to the Option or Stock Purchase Right immediately
prior to the merger or sale of assets, the
consideration (whether stock, cash, or other
securities or property) received in the merger or
sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction
(and if holders were offered a choice of
consideration, the type of consideration chosen by
the holders of a majority of the outstanding Shares);
provided, however, that if such consideration
received in the merger or sale of assets is not
solely common stock of the successor corporation or
its Parent, the Administrator may, with the consent
of the successor corporation, provide for the
consideration to be received upon the exercise of the
Option or Stock Purchase Right, for each Share of
Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair
market value to the per share consideration received
by holders of Common Stock in the merger or sale of
assets.
13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
14. Amendment and Termination of the Plan.
a. Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
b. Shareholder Approval. The Board shall obtain
shareholder approval of any Plan amendment to the
extent necessary and desirable to comply with
Applicable Laws.
c. Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan
shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing
and signed by the Optionee and the Company.
Termination of the Plan shall not affect the
Administrator's ability to exercise the powers
granted to it hereunder with respect to Options
granted under the Plan prior to the date of such
termination.
15. Conditions Upon Issuance of Shares.
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<PAGE>
a. Legal Compliance. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such
Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the
Company with respect to such compliance.
b. Investment Representations. As a condition to the
exercise of an Option, the Administrator may require
the person exercising such Option to represent and
warrant at the time of any such exercise that the
Shares are being purchased only for investment and
without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this
Plan, at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the degree and
manner required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
13
Exhibit 99.2
CYTOTHERAPEUTICS, INC.
1997 CYTOTHERAPEUTICS, INC. STEMCELLS RESEARCH
STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1997 CytoTherapeutics, Inc. StemCells Research
Stock Option Plan (the "Plan") is to advance the interests of CytoTherapeutics,
Inc. (the "Company") by enhancing the ability of the Company and its
subsidiaries to attract and retain directors, employees, consultants or advisers
who are in a position to make significant contributions to the success of the
Company, and in particular the success of the Company's research programs, to
reward them for their contributions and to encourage them to take into account
the long-term interests of the Company.
The Plan provides for the award of options to purchase shares of the
Company's common stock ("Stock"). Options granted pursuant to the Plan may be
incentive stock options as defined in section 422 of the Internal Revenue Code
of 1986 (as from time to time amended, the "Code") (any option that is intended
to qualify as an incentive stock option being referred to herein as an
"incentive option"), or options that are not incentive options, or both. Options
granted pursuant to the Plan shall be presumed to be non-incentive options
unless expressly designated as incentive options.
2. ELIGIBILITY FOR AWARDS
Persons eligible to receive awards under the Plan shall be all
executive officers of the Company and its subsidiaries and other employees,
consultants and advisers who, in the opinion of the Board, are in a position to
make a significant contribution to the success of the Company and its
subsidiaries, and in particular the success of the Company's stemcells research
programs. Directors, including directors who are not employees, of the Company
shall be eligible to receive awards under the Plan to the extent that their
eligibility would not disqualify them as disinterested persons for purposes of
rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Incentive options shall be granted only to "employees" as
defined in the provisions of the Code or regulations thereunder applicable to
incentive stock options. A subsidiary for purposes of the Plan shall be a
corporation in which the Company owns, directly or indirectly, stock possessing
50% or more of the total combined voting power of all classes of stock. Persons
selected for awards under the Plan are referred to herein as "participants."
3. ADMINISTRATION
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<PAGE>
The Plan shall be administered by the Board of Directors (the "Board")
of the Company. The Board shall have authority, not inconsistent with the
express provisions of the Plan, (a) to grant awards consisting of options, to
such participants as the Board may select; (b) to determine the time or times
when awards shall be granted and the number of shares of Stock subject to each
award; (c) to determine which options are, and which options are not, incentive
options; (d) to determine the terms and conditions of each award; (e) to
prescribe the form or forms of any instruments evidencing awards and any other
instruments required under the Plan and to change such forms from time to time;
(f) to adopt, amend and rescind rules and regulations for the administration of
the Plan; and (g) to interpret the Plan and to decide any questions and settle
all controversies and disputes that may arise in connection with the Plan. Such
determinations of the Board shall be conclusive and shall bind all parties.
Subject to Section 8 the Board shall also have the authority, both generally and
in particular instances, to waive compliance by a participant with any
obligation to be performed by the participant under an award--, to waive any
condition or provision of an award, and to amend or cancel any award (and if an
award is canceled, to grant a new award on such terms as the Board shall
specify) except that the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participant's consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Section 5(c) and Section 6(j).
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references in this Plan (as appropriate) to the Board shall be deemed to refer
to the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members. In the event the Board shall delegate the power to select
directors and executive officers to receive awards under the Plan and the
timing, pricing and amount of such awards to a committee or committees, the
make-up of the Committee shall satisfy the requirements of Rule 16b-3 applicable
to the Company and all members of which shall be disinterested persons within
the meaning of the applicable provisions of Rule 16b-3 and, with respect to
executive officers only, "outside directors" within the meaning of Section
162(m) under the Code.
4. EFFECTIVE DATE AND TERM OF PLAN
No awards shall be granted under the Plan after the completion of ten
years from the date on which the Plan was adopted by the Board, but awards
previously granted may extend beyond that date.
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<PAGE>
5. SHARES SUBJECT TO THE PLAN
a. Number of Shares. Subject to adjustment as provided
in Section 5(c), the aggregate number of shares of
Stock that may be delivered upon the exercise of
awards granted under the Plan shall be 2,000,000
common shares. If any award granted under the Plan
terminates without having been exercised in full, or
upon exercise is satisfied other than by delivery
of Stock, the number of shares of Stock as to which
such award was not exercised shall be available for
future grants within the limits set forth in
this Section 5(a).
The maximum number of shares for which options may be granted to any
individual over the life of the Plan shall be 1,000,000. The per-individual
limitations described in this paragraph shall be construed and applied
consistent with the rules and regulations under Section 162(m) of the Code.
b. Shares to be Delivered. Shares delivered under the
Plan shall be authorized but unissued Stock or, if
the Board so decides in its sole discretion,
previously issued Stock acquired by the Company and
held in its treasury. No fractional shares of Stock
shall be delivered under the Plan.
c. Changes in Stock. In the event of a stock dividend,
stock split or combination of shares,
recapitalization or other change in the Company's
capital stock, the number and kind of shares of Stock
subject to awards then outstanding or subsequently
granted under the Plan, the exercise price of
such awards, the maximum number of shares of Stock
that may be delivered under the Plan, and other
relevant provisions shall be appropriately adjusted
by the Board, whose determination shall be binding
on all persons.
The Board may also adjust the number of shares subject to outstanding
awards and the exercise price and the terms of outstanding awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, consolidations or mergers (except those described in
Section 6(j)), acquisitions or dispositions of stock or property or any other
event if it is determined by the Board that such adjustment is appropriate to
avoid distortion in the operation of the Plan, provided that no such adjustment
shall be made in the case of an incentive option, without the consent of the
participant, if it would constitute a modification, extension or renewal of the
option within the meaning of section 424(h) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS
3
<PAGE>
a. Exercise Price of Options. The exercise price of
each option shall be determined by the Board but in
the case of an incentive option shall not be
less than 100% (110%, in the case of an incentive
option granted to a ten percent shareholder) of the
fair market value of the Stock at the time the
option is granted; nor shall the exercise price be
less, in the case of an original issue of authorized
stock, than par value. For this purpose, "fair
market value" in the case of incentive options shall
have the same meaning as it does in the provisions of
the Code and the regulations thereunder applicable to
incentive options; and "ten-percent shareholder"
shall mean any participant who at the time of grant
owns directly, or by reason of the attribution rules
set forth in section 424(d) of the Code, is deemed to
own stock possessing more than 10% of the total
combined voting power of all classes of stock of the
Company or of any of its parent or subsidiary
corporations.
b. Duration of Options. Options shall be exercisable
during such period or periods as the Board may
specify. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the
date that is ten years (five years, in the case of an
incentive option granted to a "ten-percent
shareholder" as defined in (a) above) from the date
the option was granted or such earlier date as the
Board may specify at the time the option is granted.
c. Exercise of Options.
i. Options shall become exercisable at such
time or times and upon such conditions as
the Board shall specify. In the case of an
option not immediately exercisable in full,
the Board may at any time accelerate the
time at which all or any part of the option
may be exercised.
ii. Options may be exercised only in writing.
Written notice of exercise must be signed by
the proper person and furnished to the
Company, together with (i) such documents as
the Board may require and (ii) in the case
of options, payment in full as specified
below in Section 6(d) for the number of
shares for which the option is exercised.
iii. The delivery of Stock upon the exercise of
an option shall be subject to compliance
with (i) applicable federal and state laws
and regulations, (ii) if the outstanding
Stock is at the time listed on any stock
exchange, the listing requirements of such
exchange, and (iii)
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<PAGE>
Company counsel's approval of all other
legal matters in connection with the
issuance and delivery of such Stock.
iv. In the case of an option that is not an
incentive option, the Board shall have the
right to require that the participant
exercising the option remit to the Company
an amount sufficient to satisfy any federal,
state, or local withholding tax requirements
(or make other arrangements satisfactory to
the Company with regard to such taxes) prior
to the delivery of any Stock pursuant to the
exercise of the option. If permitted by the
Board, either at the time of the grant
of the option or the time of exercise, the
participant may elect, at such time and in
such manner as the Board may prescribe, to
satisfy such withholding obligation by (i)
delivering to the Company Stock (which in
the case of Stock acquired from the Company
shall have been owned by the participant for
at least six months prior to the
delivery date) having a fair market value
equal to such withholding obligation, or
(ii) requesting that the Company withhold
from the shares of Stock to be delivered
upon the exercise a number of shares of
Stock having a fair market value equal to
such withholding obligation.
In the case of an incentive option, if at the time the option
is exercised the Board determines that under applicable law
and regulations the Company could be liable for the
withholding of any federal or state tax with respect to a
disposition of the Stock received upon exercise, the Board may
require as a condition of exercise that the participant
exercising the option agree (i) to inform the Company promptly
of any disposition (within the meaning of section 424(c) of
the Code and the regulations thereunder) of Stock received
upon exercise, and (ii) to give such security as the Board
deems adequate to meet the potential liability of the Company
for the withholding of tax, and to augment such security from
time to time in any amount reasonably deemed necessary by the
Board to preserve the adequacy of such security.
v. If an option is exercised by the executor or
administrator of a deceased participant, or
by the person or persons to whom the option
has been transferred by the participant's
will or the applicable laws of descent and
distribution, the Company shall be under no
obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as
to the authority of the person or persons
exercising the option.
5
<PAGE>
d. Payment for and Delivery of Stock. Stock purchased
upon exercise of an option under the Plan shall be
paid for as follows:
(1) in cash or by personal check, certified
check, bank draft or money order payable to
the order of the Company; or
(2) if so permitted by the Board (which, in the
case of an incentive option, shall specify
the method of payment at the time of grant),
(A) through the delivery of shares of Stock
(which, in the case of Stock acquired from
the Company, shall have been held for at
least six months prior to delivery) having a
fair market value on the last business day
preceding the date of exercise equal to the
purchase price or (B) by delivery of a
promissory note of the participant to the
Company, such note to be payable on such
terms as are specified by the Board or (C)
by delivery of an unconditional and
irrevocable undertaking by a broker to
deliver promptly to the Company sufficient
funds to pay the exercise price or (D) by
any combination of the permissible forms of
payment; provided, that if the Stock
delivered upon exercise of the option is an
original issue of authorized Stock, at least
so much of the exercise price as represents
the par value of such Stock shall be paid
other than by a personal check or promissory
note of the person exercising the option.
e. [Intentionally Omitted]
f. Rights as Shareholder. A participant shall not have
the rights of a shareholder with regard to awards
under the Plan except as to Stock actually received
by the participant under the Plan.
g. Nontransferability of Awards. Except as the Board
may otherwise determine, no award may be transferred
other than by will or by the laws of descent and
distribution, and during a participant's lifetime an
award may be exercised only by the participant.
h. Death. If a participant dies, each option held by
the participant immediately prior to death may be
exercised, to the extent it was exercisable
immediately prior to death, by the participant's
executor or administrator or by the person or persons
to whom the option is transferred by will or the
applicable laws of descent and distribution, at any
time within the one-year period (or such longer or
shorter period as the Board may determine) beginning
with the date of the participant's death but in no
event beyond the Final Exercise Date. All options
held by a participant
6
<PAGE>
immediately prior to death that are not then
exercisable shall terminate on the date of death.
i. Termination of Service Other Than By Death. Except
as otherwise determined by the Board, if an
employee's employment with the Company and its
subsidiaries terminates for any reason other than by
death, all options held by the employee that are not
then exercisable shall terminate. Options that are
exercisable on the date employment terminates shall
continue to be exercisable for a period of three
months (or such longer period as the Board may
determine, but in no event beyond the Final Exercise
Date) unless the employee was discharged for cause
that in the opinion of the Board casts such discredit
on the employee as to justify termination of the
employee's options. After completion of the post-
termination exercise period, such options shall
terminate to the extent not previously exercised,
expired or terminated. For purposes of this Section
6(i), employment shall not be considered terminated
(i) in the case of sick leave or other bona fide
leave of absence approved for purposes of the Plan
by the Board, so long as the employee's right to
reemployment is guaranteed either by statute or by
contract, or (ii) in the case of a transfer
of employment between the Company and a subsidiary
or between subsidiaries, or to the employment of a
corporation (or a parent or subsidiary corporation of
such corporation) issuing or assuming an option
or SAR in a transaction to which section 424(a) of
the Code applies.
In the case of a participant who is not an employee, provisions
relating to the exercisability of options following termination of service shall
be specified in the award. If not so specified, all options held by such
participant that are not then exercisable shall terminate upon termination of
service. Unless otherwise provided for in the award, options that are
exercisable on the date the participant's service as a director, consultant or
adviser terminates shall continue to be exercisable for a period of three months
(or such longer period as the Board may determine, but in no event beyond the
Final Exercise Date). After completion of the post-termination exercise period,
such options shall terminate to the extent not previously exercised, expired or
terminated.
j. Mergers, etc. Except as otherwise determined by the
Board and specified in the award, in the event of a
consolidation or merger in which the Company is not
the surviving corporation or which results in the
acquisition of substantially all the Company's
outstanding Stock by a single person or entity or by
a group of persons and/or entities acting in concert,
or in the event of the sale or transfer of
substantially all the Company's assets, all
outstanding awards shall thereupon terminate,
provided that at least 20 days prior to the effective
date of any such merger, consolidation or sale of
assets, the Board shall either (i) make all
outstanding awards exercisable immediately prior to
consummation of such merger,
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consolidation or sale of assets or (ii) if there is a
surviving or acquiring corporation, arrange, subject
to consummation of the merger, consolidation or sale
of assets, to have that corporation or an affiliate
of that corporation grant to participants replacement
awards, which awards in the case of incentive options
shall satisfy, in the determination of the Board, the
requirements of section 424(a) of the Code.
The Board may grant awards under the Plan in substitution for awards
held by directors, employees, consultants or advisers of another corporation who
concurrently become directors, employees, consultants or advisers of the Company
or a subsidiary of the Company as the result of a merger or consolidation of
that corporation with the Company or a subsidiary of the Company, or as the
result of the acquisition by the Company or a subsidiary of the Company of
property or stock of that corporation. The Company may direct that substitute
awards be granted on such terms and conditions as the Board considers
appropriate in the circumstances.
7. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of awards shall confer
upon any participant any right to continue as an employee or director of, or
consultant or adviser to, the Company or any parent or subsidiary or affect in
any way the right of the Company or parent or subsidiary to terminate them at
any time. Except as specifically provided by the Board in any particular case,
the loss of existing or potential profit in awards granted under this Plan shall
not constitute an element of damages in the event of termination of the
relationship of a participant even if the termination is in violation of an
obligation of the Company to the participant by contract or otherwise.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND
TERMINATION
Neither adoption of the Plan nor the grant of awards to a participant
shall affect the Company's right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued.
The Board may at any time discontinue granting awards under the Plan.
With the consent of the participant, the Board may at any time cancel an
existing award in whole or in part and grant another award for such number of
shares as the Board specifies. The Board may at any time or times amend the Plan
or any outstanding award for the purpose of satisfying the requirements of
section 422 of the Code or of any changes in applicable laws or regulations or
for any other purpose that may at the time be permitted by law, or may at any
time terminate the Plan as to further grants of awards, but no such amendment
shall adversely affect the rights of any participant (without the participant's
consent) under any award previously granted.
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Exhibit 99.3
Optionee: _________________ Shares Subject to Option: ___________
Dated: _________________
CYTOTHERAPEUTICS, INC.
PERFORMANCE-BASED INCENTIVE OPTION AGREEMENT
This Agreement is made as of the date set forth above by and between
CytoTherapeutics, Inc., a Delaware corporation (the "Company" or "CTI"), and the
Optionee specified above (the "Optionee").
WHEREAS, Optionee has entered into a Consulting or Employment Agreement
with the Company which provides for the grant of the options evidenced hereby
(the "Consulting/Employment Agreement"); and
WHEREAS, Optionee is in a position to make a significant contribution
to the long-term success of the Company, and in particular the Company's
stemcell research program.
NOW, THEREFORE, the Company and Optionee agree as follows:
1. Grant of Option. This agreement evidences the grant by the Company
to Optionee pursuant to the Company's 1997 StemCells Research Stock Option Plan
(the "Plan") of an option to purchase, in whole or in part, on the terms
provided herein, the number of shares specified above of the Company's Common
Stock, $.01 par value (the "Common Stock"), at a per share price equal to the
last sales price for the Common Stock on the NASDAQ National Market System on
the last trading day prior to the date of this Agreement (the "Option"). This
Option is not intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended. This
Option shall terminate on the tenth anniversary of the date of this Agreement
(the "Final Exercise Date"), and is subject to earlier termination as provided
in Sections 6 and 7 below.
2. Exercisability of Option. Subject to the terms and conditions
hereof, this Option shall vest and become exercisable as follows:
% of Shares
Milestone Vesting
- --------- --------
On the date of this Agreement 6.25%
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First Corporate Partnership (as defined below)
(before September 1, 1998)
If greater than $5,000,000 and less than or equal to $10,000,000 6.25%
If greater than $10,000,000 and less than or equal to $15,000,000 8.75%
If greater than $15,000,000 11.25%
Second Corporate Partnership (before September 1, 1999)
If greater than $5,000,000 and less than or equal to $10,000,000 6.25%
If greater than $10,000,000 and less than or equal to $15,000,000 8.75%
If greater than $15,000,000 11.25%
First Corporate Partnership resulting from discovery of
a new stem cell (before June 30, 2000)
If greater than $5,000,000 and less than or equal to $10,000,000 6.25%
If greater than $10,000,000 and less than or equal to $15,000,000 8.75%
If greater than $15,000,000 11.25%
Second Corporate Partnership resulting from discovery of
a new stem cell (before June 30, 2000)
If greater than $5,000,000 and less than or equal to $10,000,000 6.25%
If greater than $10,000,000 and less than or equal to $15,000,000 8.75%
If greater than $15,000,000 11.25%
Commencement of first clinical trial of a CTI 12.50%
stem cell product (before June 30, 2000)
Filing of first United States regulatory filing for 12.50%
marketing 12.50% approval of a CTI stem cell product
(before June 30, 2003)
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Filing of first European Union or Japanese regulatory 12.50%
filing for market approval with respect to a
CTI stem cell product (before June 30, 2004)
First United States commercial approval of a 25.00%
CTI stem cell product (before June 30, 2005)
First European Union or Japanese commercial 25.00%
approval of a CTI stem cell product (before June 30, 2005)
For purposes of the foregoing, "Corporate Partnership" means any joint venture,
licensing agreement, collaboration agreement, or research and development
agreement to which the Company is a party and which is material to the long-term
success of the Company. A "Corporate Partnership resulting from the discovery of
a new stem cell" shall mean a Corporate Partnership which is formed to
commercially develop technology resulting from research conducted pursuant to
the Research Plan (as such term is defined in a letter agreement between the
Company and Messrs. Weissman, Gage and Anderson, dated as of September __, 1997)
which the corporate partner and CTI reasonably believe has resulted in the
discovery of a previously undiscovered stem cell. The dollar amounts set forth
above with respect to Corporate Partnerships refer to the receipt by the Company
of the aggregate amount of the following payments received in connection with
any such Corporate Partnership:
(i) any non-refundable up-front license fees;
(ii) the present value of all non-refundable,
non-contingent license fees payable at a later date;
(iii) the amount by which the purchase price paid for any
non-refundable, non-contingent equity investment in
the Company made in connection with such Corporate
Partnership exceeds the fair market value of such
equity investment as reasonably determined by the
Board of Directors of the Company; and
(iv) 50% of all non-contingent payments for sponsored research
under any sponsored research agreement, provided, however,
that in the case of the $5 million target in each of the first
two corporate partnership milestones, 100% of such payments
shall count toward satisfaction of such target.
The Company shall not structure any Corporate Partnership in a bad faith effort
to avoid giving rise to the vesting of options hereunder.
3. Exercise of Option. Each election to exercise this Option
shall be in writing, signed by Optionee or by his duly appointed guardian or
representative, his executor or
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administrator or the person or persons to whom this Option is transferred by
will or the applicable laws of descent and distribution (collectively, the
"Legal Representative"), and received by the Company at its principal office in
Providence, Rhode Island, accompanied by payment in full as provided in Section
4 below. In the event this Option is exercised by such Legal Representative, the
Company shall be under no obligation to deliver stock hereunder unless and until
the Company is reasonably satisfied that the person or persons exercising this
Option is or are the duly appointed guardian(s) or representative(s) of
Optionee, the duly appointed executor(s) or administrator(s) of the deceased
Optionee or the person or persons to whom this Option has been transferred by
will or the applicable laws of descent and distribution.
4. Payment for Stock. Shares of Common Stock shall be issued only upon
receipt by the Company of full payment of the purchase price for the shares as
to which this Option is exercised. The purchase price is payable by Optionee to
the Company either (i) in cash or by certified check or cashier's check payable
to the order of the Company; or (ii) through the delivery of shares of Common
Stock (duly owned by Optionee and as to which Optionee has good title free and
clear of any liens and encumbrances) which have been outstanding for at least
six months and which have a fair market value (as determined by the Board of
Directors of the Company) on the last business day prior to the date of exercise
of this Option equal to the purchase price; or (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price; or (iv) by any combination
of the forgoing permissible forms of payment. The Company will not be obligated
to deliver any shares unless and until, in the opinion of the Company's counsel,
all applicable federal and state laws and regulations have been complied with,
nor, in the event the outstanding Common Stock is at the time listed upon any
stock exchange, unless and until the shares to be delivered have been listed or
authorized to be listed upon official notice that legal matters in connection
with the issuance and delivery of such shares have been approved by the
Company's counsel. The Company will use its best efforts to effect any such
compliance or listing, and Optionee agrees to take any action reasonably
requested by the Company in connection therewith. Subject to any applicable
limitations under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, the Company will promptly file a Registration Statement
on Form S-8 (or any successor form), with respect to the shares of Common Stock
issuable upon exercise of this Option, and the Company will use all reasonable
efforts to maintain the effectiveness of such registration statement for so long
as this Option shall remain outstanding. The Company may require that Optionee
agree that he will notify the Company when he makes any disposition of the
shares issued upon exercise of this Option whether by sale, gift or otherwise.
Optionee will have the rights of a shareholder only as to shares actually
acquired by him upon exercise of this Option.
5. Non-transferability of Option. This Option may not be
transferred by Optionee otherwise than by will or by the laws of descent and
distribution. During Optionee's lifetime this Option may be exercised only by
Optionee or Optionee's duly appointed guardian or representative.
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<PAGE>
6. Termination of Service. In the event Optionee ceases to be a
consultant to or employee of the Company because the Company terminates his
service for Cause (as defined in the Consulting/Employment Agreement) or
Optionee terminates his service without Good Reason (as defined in the
Consulting/Employment Agreement), this Option shall immediately terminate except
that Optionee may thereafter exercise this Option, to the extent he was entitled
to exercise it on the date when his service terminated, for a period of 90 days
after the date of such termination. In no event, however, may this Option be
exercised after the Final Exercise Date.
7. Death or Disability. In the event Optionee dies or Optionee's
service with the Company terminates by reason of disability (meaning the
inability of Optionee, because of physical or mental illness or injury, to
perform substantially all of his duties and responsibilities to the Company),
this Option shall continue to be eligible for vesting as set forth in Section 2
of this Agreement for a period of two years after Optionee's death or the
termination of his service because of disability. In addition, this Option may
be exercised, as to all or any of (a) the shares that Optionee was entitled to
purchase immediately prior to his death or the termination of his service
because of disability and (b) the shares that vest in accordance with the
preceding sentence, by Optionee or his Legal Representative, at any time or
times within three years after his death or such termination of service. Except
as so exercised this Option will expire at the end of such period. In no event,
however, may this Option be exercised after the Final Exercise Date.
8. Administration. This Option will be administered by the Board of
Directors of the Company, which will have the authority to interpret this
agreement and to decide all questions and settle all controversies and disputes
which may arise in connection herewith. All decisions, determinations and
interpretations of the Board of Directors will be binding on all parties
concerned. A majority of the members of the Board of Directors will constitute a
quorum, and all determinations of the Board of Directors will be made by a
majority of its members. Any determination of the Board of Directors under this
agreement may be made without notice or meeting of the Board of Directors by a
written instrument signed by a majority of the members of the Board of
Directors. In the event of any conflict between the terms of this Option and the
terms of the Plan the terms of this Option will control.
9. Stock to be Delivered. Stock to be delivered upon exercise of this
Option may constitute an original issue of authorized but unissued stock or may
consist of previously issued stock acquired by the Company as determined from
time to time by the Board of Directors. The Board of Directors and the proper
officers of the Company will take any appropriate action required for such
delivery.
10. Changes in Stock. In the event of a stock dividend, stock
split or combination of shares, recapitalization or other change in the
Company's capital structure, the Board of Directors of the Company (whose
determination will be binding on Optionee) will make
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<PAGE>
appropriate adjustments to the number and kind of shares of stock or other
securities subject to this Option, the exercise price and other relevant
provisions. Except as provided in the following paragraph, in the event of a
Change in Control (as defined below), this Option will expire and cease to be
exercisable, provided that at least twenty days prior to the effective date of
any such Change in Control, the Board of Directors shall either (a) make this
Option immediately exercisable in full, or (b) arrange to have the acquiror or
an affiliate thereof grant a replacement option or other replacement award
containing terms that the Board of Directors reasonably determines to be
equitable under the circumstances. "Change in Control" means any consolidation
or merger in which the Company is not the surviving corporation, a transaction
or series of related transactions that result in the acquisition of all or
substantially all of the Company's outstanding Common Stock by a single person
or entity or by a group of persons or entities acting in concert, or the sale or
transfer of all or substantially all of the Company's assets.
11. Acceleration of Options on Change in Control. Any Change in Control
will result in the accelerated vesting of the lesser of (i) 50% of the shares
originally issuable pursuant to this Option or (ii) all of the shares which
would become vested on the achievement of all milestones which are not
time-barred at the time of Change in Control.
In addition, the Shares subject to this Option shall be accelerated under the
circumstances and to the extent described in Section 1 (f) of the Agreement (the
"Research Agreement") dated September 26, 1997 among the Company, Irving
Weissman and Fred H. Gage.
12. Amendments. The Board of Directors of the Company may at any time
or times amend this Option for the purpose of satisfying the requirements of any
changes in applicable laws or regulations or for any other purpose which may at
the time be permitted by law, provided that no such amendment will adversely
affect the rights of Optionee without his consent.
13. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (not including
the conflict of laws principles thereof).
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[Incentive Option Agreement]
IN WITNESS WHEREOF, the Company has caused this agreement to be
executed by its duly authorized officer. This Option is granted at the Company's
office, on the date stated above.
CYTOTHERAPEUTICS, INC.
By:___________________________
President
Accepted and Agreed:
- -----------------------------
Optionee
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