<PAGE> 1
As filed with the Securities and Exchange Commission on September 27, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 77-0160744
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
9393 TOWNE CENTRE DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
1992 STOCK OPTION/STOCK ISSUANCE PLAN
1992 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plans)
DAVID E. ROBINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIGAND PHARMACEUTICALS INCORPORATED
9393 TOWNE CENTRE DRIVE, SAN DIEGO, CALIFORNIA 92121
(Name and address of agent for service)
(619) 535-3900
(Telephone number, including area code, of agent for service)
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will thereafter be effected upon option exercises or share issuances effected
under the 1992 Stock Option/Stock Issuance Plan and the 1992 Employee Stock
Purchase Plan.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered per Share Price Fee
---------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 800,000 shares(1) $14.25 (2) $11,400,000 (2) $3,932
(Under 1992 Stock Option/
Stock Issuance Plan)
Common Stock, par value $.001 25,000 shares(1) $14.25 (2) $ 356,250 (2) $ 123
(Under 1992 Employee
Stock Purchase Plan)
</TABLE>
- -----------------------------
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1992 Stock Option/Stock
Issuance Plan and the 1992 Employee Stock Purchase Plan by reason of
any stock dividend, stock split, recapitalization or other similar
transaction effected without the receipt of consideration which
results in an increase in the number of the Company's outstanding
shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) and
457(c) of the Securities Act of 1933, as amended.
<PAGE> 2
INCORPORATION OF DOCUMENTS BY REFERENCE
The contents of the Registration Statement on Form S-8 filed by Ligand
Pharmaceuticals Incorporated (the "Registrant") on May 18, 1995 with the
Securities and Exchange Commission as Registration No. 33-92436 (the "1995
Registration Statement") are incorporated herein by reference into this
Registration Statement.
1992 STOCK OPTION/STOCK ISSUANCE PLAN
The Company registered 1,906,576 additional shares of Common Stock issuable
pursuant to its 1992 Stock Option/Stock Issuance Plan (the "Plan") by means of
the 1995 Registration Statement. This Registration Statement shall register an
additional 800,000 shares of Common Stock issuable pursuant to the Plan, as
authorized by the Company's stockholders at the Company's Annual Stockholders'
Meeting held on May 21, 1996.
1992 EMPLOYEE STOCK PURCHASE PLAN
The Company registered 88,594 additional shares of Common Stock issuable
pursuant to its 1992 Employee Stock Purchase Plan (the "ESPP") by means of the
1995 Registration Statement. This Registration Statement shall register an
additional 25,000 shares of Common Stock issuable pursuant to the ESPP, as
authorized by the Company's stockholders at the Company's Annual Stockholders'
Meeting held on May 21, 1996.
EXHIBITS
Exhibit Number Exhibit
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, independent auditors
24.1 Power of Attorney. Reference is made to the signature page
of this registration statement
99.1 1992 Stock Option/Stock Issuance Plan, as amended
99.2 1992 Employee Stock Purchase Plan, as amended
II-1.
<PAGE> 3
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 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on this 27th day of
September, 1996.
LIGAND PHARMACEUTICALS INCORPORATED
By /s/ David E. Robinson
-------------------------------------
David E. Robinson
President and Chief Executive Officer
II-2.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Ligand Pharmaceuticals
Incorporated, a Delaware corporation, do hereby constitute and appoint David E.
Robinson and William L. Respess, and each of them, the lawful attorneys-in-fact
and agents with full power and authority to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, and either
one of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this registration statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this registration statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
registration statement, and to any and all instruments or documents filed as
part of or in conjunction with this registration statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David E. Robinson President, Chief Executive September 27, 1996
- -------------------------------
David E. Robinson Officer and Director (Principal
Executive Officer)
/s/ Paul V. Maier Vice President and Chief September 27, 1996
- -------------------------------
Paul V. Maier Financial Officer (Principal
Financial and Accounting Officer)
/s/ Henry F. Blissenbach Director September 27, 1996
- -------------------------------
Henry F. Blissenbach
/s/ Alexander D. Cross Director September 27, 1996
- -------------------------------
Alexander D. Cross
/s/ John Groom Director September 27, 1996
- -------------------------------
John Groom
/s/ Irving S. Johnson Director September 27, 1996
- -------------------------------
Irving S. Johnson
/s/ William C. Shepherd Director September 27, 1996
- -------------------------------
William C. Shepherd
</TABLE>
II-3.
<PAGE> 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
LIGAND PHARMACEUTICALS INCORPORATED
<PAGE> 6
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, independent auditors
24.1 Power of Attorney. Reference is made to the
signature page of this registration statement
99.1 1992 Stock Option/Stock Issuance Plan, as amended
99.2 1992 Employee Stock Purchase Plan, as amended
<PAGE> 1
Exhibit 5.1
Opinion and consent of Brobeck, Phleger & Harrison LLP
<PAGE> 2
EXHIBIT 5.1
September 27, 1996
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, California 92121
Re: Ligand Pharmaceuticals Incorporated Registration Statement on
Form S-8 for 800,000 Shares of Common Stock Issuable Under Its
1992 Stock Option/Stock Issuance Plan and 25,000 Shares of
Common Stock Issuable Under Its Employee Stock Purchase Plan
Ladies and Gentlemen:
In connection with your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 800,000 shares of
Common Stock of Ligand Pharmaceuticals Incorporated (the "Company") under the
Company's 1992 Stock Option/Stock Issuance Plan, as amended, and 25,000 shares
of Common Stock under the Company's 1992 Employee Stock Purchase Plan, as
amended, we advise you that, in our opinion, if and when such shares have been
issued and sold (and the consideration therefor received) pursuant to the
provisions of the Company's 1992 Stock Option/Stock Issuance Plan, as amended,
or the Company's 1992 Employee Stock Purchase Plan, as amended, as the case may
be, and in accordance with the Registration Statement, such shares will be
duly-authorized, validly-issued, fully-paid and non-assessable shares of the
Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1
<PAGE> 1
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
<PAGE> 2
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Amendments to the 1992 Ligand Stock Option/Stock Issuance
Plan and the 1992 Ligand Employees' Stock Purchase Plan of our report dated
January 19, 1996, with respect to the consolidated financial statements of
Ligand Pharmaceutical Incorporated included in the Annual Report (Form 10-K) of
Ligand Pharmaceutical Incorporated for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
September 25, 1996
San Diego, California
<PAGE> 1
EXHIBIT 24.1
Power of Attorney.
Reference is made to page II-3 of this Registration Statement
<PAGE> 1
EXHIBIT 99.1
1992 Stock Option/Stock Issuance Plan, as Amended
<PAGE> 2
EXHIBIT 99.1
LIGAND PHARMACEUTICALS INCORPORATED
1992 STOCK OPTION/STOCK ISSUANCE PLAN
AS AMENDED THROUGH APRIL 19, 1996
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1992 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Ligand Pharmaceuticals Incorporated, a
Delaware corporation (the "Corporation"), by providing (i) key employees
(including officers) of the Corporation (or its parent or subsidiary
corporations) who are responsible for the management, growth and financial
success of the Corporation (or its parent or subsidiary corporations) and (ii)
consultants and other independent contractors who provide valuable services to
the Corporation (or its parent or subsidiary corporations) with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation (or its parent or subsidiary corporations).
B. The Plan shall become effective on the first date on which
shares of the Corporation's common stock are registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"). Such date is
hereby designated as the "Effective Date" of this Plan.
C. This Plan shall serve as the successor to the Corporation's
Restricted Stock Purchase Plan (the "Stock Plan") and 1988 Stock Option Plan
(the "Option Plan") (such Plans are hereinafter referred to as the "Predecessor
Plans"), and no further option grants or share issuances shall be made under the
Predecessor Plans from and after the Effective Date. Each outstanding option or
share issuance under the Predecessor Plans immediately prior to the Effective
Date are hereby incorporated into this Plan and shall accordingly be treated as
outstanding options or share issuance under this Plan. However, each such option
or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and, except as
otherwise expressly provided herein, no provision of this Plan shall affect or
otherwise modify the rights or obligations of the holders of such incorporated
options or shares with respect to their acquisition of shares of the
Corporation's common stock or otherwise modify the rights or obligations of the
holders of such options or shares.
<PAGE> 3
D. For purposes of this Plan, 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 of 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.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate components:
the Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three and the Stock Issuance Program
specified in Article Four. Under the Discretionary Option Grant Program,
eligible individuals may be granted options to purchase shares of the
Corporation's common stock at not less than 85% of the Fair Market Value (as
defined below) of such shares on the grant date. Under the Automatic Option
Grant Program and subject to the limitations contained in this Plan,
non-employee members of the Board of Directors will be granted options to
purchase shares of the Corporation's common stock at not less than 100% of the
Fair Market Value of such shares on the grant date. Subject to the limitations
contained in this Plan, the Stock Issuance Program shall allow eligible
individuals to purchase shares of the Corporation's common stock at discounts
from the Fair Market Value of such shares of up to 15%. Such shares may be
issued as fully-vested shares or as shares to vest over time.
B. The provisions of Articles One and Five of the Plan shall
apply to both the Discretionary Option Grant Program and the Stock Issuance
Program and shall accordingly govern the interests of all individuals in the
Plan.
C. With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 ("1934 Act"), transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Committee (as defined below) fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
-2-
<PAGE> 4
III. ADMINISTRATION OF THE PLAN
A. The Board shall appoint a committee ("Committee") of two
(2) or more non-employee Board members to assume full responsibility for the
administration of the Discretionary Option Grant and Stock Issuance Programs
under the Plan. No Board member shall be eligible to serve on the Committee if
such individual has, within the relevant period designated below, received an
option grant or stock issuance under this Plan or any other stock plan of the
Corporation (or any parent or subsidiary corporation), other than option grants
made in accordance with the Automatic Option Grant Program:
(i) for each of the initial members of the
Committee, the period commencing with the Effective Date of the Plan
and ending with the date of his or her appointment to the Committee, or
(ii) for any successor or substitute member, the
twelve (12) month period immediately preceding the date of his or her
appointment to the Committee.
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.
B. The Committee as Plan Administrator shall have full power
and authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or stock issuance.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to receive stock issuances under the
Stock Issuance Program ("Participant") and/or option grants pursuant to the
Discretionary Option Grant Program ("Optionee") are as follows:
(i) officers and other key employees of the
Corporation (or its parent or subsidiary corporations) who render
services which contribute to the management, growth and financial
success of the Corporation (or its parent or subsidiary corporations);
(ii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its
parent or subsidiary corporations).
-3-
<PAGE> 5
B. Only non-employee members of the Board shall be eligible to
participate in the Automatic Option Grant Program. Except for the option grants
to be made pursuant to the provisions of the Automatic Option Grant Program,
non-employee Board members shall not be eligible to receive any additional
option grants or stock issuances under this Plan or any other stock plan of the
Corporation (or its parent or subsidiary corporations).
C. 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 number of shares to be covered by each such grant, whether the granted
option is to be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements ("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 individual for such
shares.
D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with Article Two of the Plan or to effect
stock issuances in accordance with Article Four of the Plan. The Plan
Administrator will have no discretion with respect to the grant of options under
the Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock (hereinafter
referred to as the "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.
Prior to November 24, 1994, the maximum number of
shares of Common Stock issuable over the term of the Plan, subject to adjustment
from time to time in accordance with the provisions of this Section V included
1,045,833 shares of Class A Common Stock and 3,137,499 shares of Class B Common
Stock, or a total of 4,183,332 shares. Such total number of shares was comprised
of (i) the number of shares issued under the Predecessor Plans, (ii) the number
of shares which remained available for issuance under the Plans and the
Predecessor Plans, 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 or share issuance under the Predecessor Plans as last
approved by the stockholders, plus (iii) an additional increase of 675,000
shares. On November 24, 1994, each one share of Class A Common Stock was
automatically converted (the "Conversion") into 1.330 shares of Class B Common
Stock (the "Conversion Ratio").
-4-
<PAGE> 6
The maximum number of shares issuable under the Plan
is 6,428,457 shares of Common Stock. Such total number of shares includes the
total number of shares issued under this and the Predecessor Plans. The issuance
before November 24, 1994 of any shares of Class A Common Stock is considered,
for purposes of determining the remaining number of shares of Common Stock
available under the Plan, as the issuance of 1.33 shares of Common Stock.
B. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plans incorporated into
this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled 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
option grant or share issuance under this Plan. Shares subject to any option or
portion thereof surrendered or cancelled in accordance with Section V of Article
Two and all share issuances under the Plan, whether or not such shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan or surrendered for cancellation under Section I.B.3 of Article
Four, shall reduce on a share-for-share basis the number of shares of the same
class of Common Stock available for subsequent option grant or stock 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, then the number of shares of Common
Stock of the same class available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised, and not by the
net number of shares of Common Stock actually issued to the option holder.
C. In the event any change is made to either class of the
Common Stock issuable under the Plan by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares,
conversion or other change affecting the outstanding Common Stock, or any class
of Common Stock as a class, without the Corporation's receipt of consideration,
then appropriate adjustments shall be made to (i) the number and/or class of
shares issuable under the Plan, (ii) the number and/or class of shares and price
per share in effect under each outstanding option under this Plan (including
outstanding options 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.
D. Common Stock issuable under the Discretionary Option Grant
Program or the Stock Issuance Program may be subject to such restrictions on
transfer, repurchase rights or other restrictions as determined by the Plan
Administrator.
-5-
<PAGE> 7
VI. DETERMINATION OF FAIR MARKET VALUE
The "Fair Market Value" of a share of Common Stock shall be determined
in accordance with the following provisions:
- If shares of Common Stock to be valued are not at
the time listed or admitted to trading on any national stock exchange
but is traded on the NASDAQ National Market System, the Fair Market
Value shall be the closing selling price per share of a share of that
class on the date in question, as such price is reported by the
National Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no reported closing
selling price for the series on the date in question, then the closing
selling price on the last preceding date for which such quotation
exists shall be determinative of Fair Market Value.
- If shares of the class of common stock to be valued
are at the time listed or admitted to trading on any national stock
exchange, then the Fair Market Value of a share of that class shall be
the closing selling price per share on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of a share of the class 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 shares of the series of common stock to be
valued at the time are neither listed nor admitted to trading on any
stock exchange nor traded in the over-the-counter market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate, including one or more independent professional appraisals,
in a manner consistent with the provisions of Section 260.140.50 of the
Rules of the California Corporations Commissioner.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and, at the Plan Administrator's
discretion, may 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
-6-
<PAGE> 8
an Incentive Option shall, in addition, be subject to the applicable provisions
of Section II of this Article Two.
A. Option Price.
(1) The option price per share shall be fixed by the
Plan Administrator. In no event, however, shall the price for any share be less
than eighty-five percent (85%) of the Fair Market Value of that share on the
date of the option grant.
(2) 10% Stockholder. If any individual to whom an
option is granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation or any one of its parent or
subsidiary corporations, then the option price per share shall not be less than
one hundred and ten percent (110%) of the Fair Market Value per share of Common
Stock on the grant date.
(3) The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Article Four,
Section II and the instrument evidencing the grant, shall be payable in one of
the following alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
- full payment in shares of Common Stock
held for at least six (6) months and valued at Fair Market Value on the Exercise
Date;
- full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at Fair Market Value on
the Exercise Date and cash or check; or
- full payment through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a 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 option price payable for the purchased shares plus all applicable
Federal and State income and employment taxes required to be withheld by the
Corporation in connection with such purchase and (II) shall provide written
directives to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this subparagraph (3), the Exercise
Date shall be the date on which written notice of the option exercise is
delivered to the Corporation. Except to the extent the sale and remittance
procedure is utilized in connection with the
-7-
<PAGE> 9
exercise of the option, payment of the option price for the purchased shares
must accompany such notice.
B. Term and Exercise of Options. Each option granted under
this Article Two shall be exercisable at such time or times and during such
period as is determined by the Plan Administrator and set forth in the stock
option agreement evidencing the grant; provided that options granted under this
Plan must become exercisable at a rate of at least 20% per year over no more
than five (5) years from the date such option is granted. No such option,
however, shall have a maximum term in excess of ten (10) years from the grant
date and no option granted to a 10% shareholder shall have a maximum term in
excess of five (5) years from the grant date. 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 otherwise than by will or by the laws of descent and
distribution following the Optionee's death.
C. Termination of Service.
(1) Except to the extent otherwise provided pursuant
to Section VI of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service or
death.
- Should an Optionee's Service terminate for
any reason (including death or permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code) while the holder of one
or more outstanding options under the Plan, then none of those options
shall (except to the extent otherwise provided pursuant to Section VI
of this Article Two) remain exercisable beyond the later of (i) the
limited post-Service period designated by the Plan Administrator at the
time of the option grant and set forth in the option agreement; or (ii)
(A) 30 days from the date of termination if termination was caused by
other than the death or disability (as defined in Section 22(e)(3) of
the Internal Revenue Code) of such Optionee or (B) six (6) months from
the date of termination if termination was caused by death or
disability of Optionee.
- Any option granted to an Optionee under
this Article Two and exercisable in whole or in part on the date of the
Optionee's death may be subsequently 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, provided and only
if such exercise occurs prior to the earlier of (i) the third
anniversary of the date of the Optionee's death or (ii) the specified
expiration date of the option term. Upon the occurrence of the earlier
event, the option shall terminate and cease to be exercisable.
- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.
-8-
<PAGE> 10
- During the limited post-Service period of
exercisability, the option may not be exercised for more than the
number of shares for which the option is exercisable on the date the
Optionee's Service terminates. Upon the expiration of such limited
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be exercisable.
(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 permit one or more options held by the
Optionee under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph (1) above, not only with respect to
the number of shares for which each such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
(3) For purposes of the foregoing provisions of this
Section I.C (and for all other purposes under the Plan):
- The Optionee shall (except to the extent
otherwise specifically provided in the applicable option or issuance
agreement) be deemed to remain in the SERVICE of the Corporation for so
long as such individual renders services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity
of an Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The Optionee shall be considered to be an
EMPLOYEE for so long as he or she remains 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.
D. Stockholder Rights.
An Optionee shall have no stockholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option, paid the option price for the purchased shares and been
issued a stock certificate for such shares.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are
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specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any 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 share of Common Stock on
the grant date.
B. 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 after December 31, 1986 under
this Plan (or any other option plan of the Corporation or its parent or
subsidiary corporations) may for the first time become exercisable as incentive
stock options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options under the Federal tax laws shall be applied
on the basis of the order in which such options are granted.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. For purposes of this Section III, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger.
B. Each outstanding option which is assumed in connection with
a Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common
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Stock as are subject to such option immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the option price
payable per share, provided the aggregate option price payable for such
securities shall remain the same. Appropriate adjustments shall also be made to
the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
C. 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.
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 this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than (i) eighty-five percent (85%) of the Fair Market
Value of such share on the new grant date or (ii) one hundred percent (100%) of
such Fair Market Value in the case of an Incentive Option.
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 option price payable for
such vested shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall accordingly become
entitled under this Section V may be made in shares of any class 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
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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 effected at any time when the Corporation's
outstanding Common Stock is registered under Section 12(g) of the 1934 Act, each
outstanding option with such a limited stock appreciation right in effect for at
least six (6) months shall automatically be cancelled, to the extent such option
is at the time exercisable for fully-vested shares of Common Stock. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the vested shares of
Common Stock at the time subject to the cancelled option (or cancelled portion
of such option) over (ii) the aggregate exercise price payable for such shares.
The cash distribution payable upon such cancellation shall be made within five
(5) days following the consummation of the Hostile Take-Over. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option cancellation and cash distribution. The
balance of the option (if any) shall continue to remain outstanding and
exercisable in accordance with the terms of the instrument evidencing such
grant.
E. For purposes of Section V.D, the following definitions
shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept and (ii) more than fifty
percent (50%) of the securities so acquired in such tender or exchange
offer are accepted from holders other than Corporation officers and
directors participating in the Plan.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on the date
of cancellation, as determined pursuant to the valuation provisions of
Section I.A.(3) of this Article Two, or (b) the highest reported price
per share paid in effecting such Hostile Take-Over. However, if the
cancelled option is an Incentive Option, the Take-Over Price shall not
exceed the clause (a) price per share.
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F. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grant under the Plan.
VI. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(1) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article
Three on the dates specified below:
(1) Each individual who first becomes a non-
employee Board member on or after May 20, 1993, whether through
election by the Corporation's stockholders or appointment by the Board,
and who has not otherwise been in the prior employ of the Corporation
shall automatically be granted, at the time of such initial election or
appointment, a Non-Statutory Option to purchase 16,237 shares of Common
Stock, each upon the terms and conditions of this Article Three.
(2) On the date of each stockholder meeting
held after the initial grant of options pursuant to this Article Three,
each individual re-elected as a non-employee Board member at such
stockholder meeting shall automatically be granted, at each such
meeting at which he or she is so re-elected, a Non-Statutory Option to
purchase 8,118 shares of Common Stock upon the terms and conditions of
this Article Three. There shall be no limit on the number of
8,118-share option grants any one non-employee Board member may receive
over the period of Board service.
B. Exercise Price. The exercise price per share of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of the Common Stock on
the date of grant under this Automatic Option Grant Program.
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<PAGE> 15
C. Payment.
The exercise price shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) full payment in shares of Common Stock held for
at least six (6) months and valued at Fair Market Value on the Exercise
Date (as such term is defined below);
(iii) full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at Fair Market
Value on the Exercise Date and cash or check; or
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member
(A) shall provide irrevocable written instructions to a 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 option price
payable for the purchased shares plus all applicable Federal and state
income taxes required to be withheld by the Corporation in connection
with such purchase and (B) shall provide written directives to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this paragraph C, the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant shall become
exercisable in full one (1) year after the automatic grant date. The option
shall not become exercisable for any additional option shares after the optionee
has ceased for any reason to be a member of the Board.
F. Non-Transferability. During the lifetime of the optionee,
each automatic option grant shall be exercisable only by the optionee and shall
not be assignable or transferable by the optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following
optionee's death.
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<PAGE> 16
G. Effect of Termination of Board Membership.
(1) Should the optionee cease to serve as a Board
member for any reason (other than death) while holding one or more automatic
option grants under this Article Three, then such optionee shall have a three
(3) month period following the date of such cessation of Board membership in
which to exercise each such option for any or all of the shares of Common Stock
for which the option was exercisable at the time of such cessation of Board
membership. Each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board membership, with respect to
any shares for which the option is not otherwise at that time exercisable.
(2) Should the optionee die while serving as a member
of the Board or within three (3) months after cessation of Board service, then
each outstanding 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 for which the option was exercisable at the time of the optionee's
cessation of Board membership (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.
Any such exercise must occur within thirty-six (36) months after the date of the
optionee's death. However, each such automatic option grant shall immediately
terminate and cease to be outstanding, at the time of the optionee's cessation
of Board membership, with respect to any option shares for which it is not
otherwise at such time exercisable.
(3) In no event shall any automatic grant under this
Article Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with subparagraphs (1) and (2) 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 unexercised shares for which the option was
exercisable at the time of the optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option, paid the exercise price for the purchased shares and been
issued a stock certificate for such shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-statutory
Stock Option Agreement attached as Exhibit A to the Plan.
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<PAGE> 17
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. For purposes of this Section II, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger
B. Each outstanding option which is assumed in connection with
a Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also be
made to the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
C. The grant of options under this Article Three 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.
D. The automatic option grants outstanding under this Article
Three 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.
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<PAGE> 18
III. LIMITED AMENDMENT OF THE AUTOMATIC OPTION GRANT PROVISIONS
The provisions of this Automatic Option Grant Program,
together with the automatic option grants outstanding under this Article Three,
may not be amended more than once every six (6) months, other than to comport
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder.
ARTICLE FOUR
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 Four.
A. CONSIDERATION
(1) Shares of Common Stock drawn from the
Corporation's authorized but unissued shares of Common Stock ("Newly Issued
Shares") shall be issued under the Plan for one or more of the following items
of consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or cash equivalents (such as a personal
check or bank draft) paid the Corporation;
(ii) a promissory note payable to the
Corporation's order in one or more installments, which may be subject
to cancellation in whole or in part upon terms and conditions
established by the Plan Administrator; or
(iii) past services rendered to the Corporation
or any parent or subsidiary corporation.
(2) Newly Issued 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,
but in no event less than eighty-five percent (85%) of such Fair Market Value.
Notwithstanding the foregoing, in the case of 10% shareholders, Newly Issued
Shares must be issued at one hundred percent (100%) of Fair Market Value of such
shares.
(3) Shares of Common Stock reacquired by the
Corporation and held as treasury shares ("Treasury Shares") may be issued under
this Article Four for such consideration (in whatever form) as the Plan
Administrator may deem appropriate.
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Accordingly, such Treasury Shares may, in lieu of any cash consideration, be
issued subject to such vesting requirements tied to the Participant's period of
future Service or the Corporation's attainment of specified performance
objectives as the Plan Administrator may establish at the time of issuance.
B. VESTING PROVISIONS
(1) Shares of Common Stock issued under this Article Four
may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service (as such term is defined in Section I.C.(3)
of Article Two); provided, that such vesting must be at a rate of at least 20%
per year over no more than five years from the date such shares are issued. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Plan, 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, 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 stockholder rights with
respect to any shares of Common Stock issued to him or her under this Article
Four, 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,
reclassification of Common Stock or other similar change in the Corporation's
capital structure or by reason of any Corporate Transaction under Section II of
this Article Four 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 this Article Four,
then
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<PAGE> 20
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those 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 shall cancel the principal balance of any outstanding purchase-money
note of the Participant to the extent attributable to such surrendered shares.
The surrendered shares may, at the Plan Administrator's discretion, be retained
by the Corporation as Treasury Shares or may be retired to authorized but
unissued share status.
(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. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Four 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 issued 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 shares (or other
securities or assets) vests. Alternatively, if the unvested shares are issued
directly to the Participant, the restrictive legend on the certificates for such
shares shall read substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
UNVESTED AND ARE ACCORDINGLY SUBJECT TO (I)
CERTAIN TRANSFER RESTRICTIONS AND TO (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE
TERMS AND CONDITIONS OF SUCH CANCELLATION OR
REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE
AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
INTEREST) DATED , 19 , A COPY OF WHICH IS
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ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under this Article Four.
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 cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Plan to his or her spouse or issue,
including adopted children, or to a trust established for such spouse or issue,
provided the done of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FIVE
MISCELLANEOUS
I. EFFECT OF RECENT TRANSACTIONS ON OUTSTANDING OPTIONS
A. Prior to the Effective Date of the Plan, the Company's
outstanding common stock was reclassified as Series B Common Stock and subjected
to a 3 for 4 reverse stock split. As part of the same transaction, one-third of
a share of newly authorized Series A Common Stock was distributed with respect
to each outstanding share of Series B Common Stock. Under the Company's 1988
Stock Option Plan and each of the options outstanding as of the record date for
such dividend ("Affected Option"), which options are incorporated under this
Plan, appropriate adjustment must be made to the outstanding options to reflect
such reverse stock split and stock dividend. Such appropriate adjustments were
as follows:
1. The aggregate number of shares of Common Stock
available under any Affected Option shall be unchanged by the reverse stock
split and stock dividend, but 75% of such total number shares of Common Stock
available under such options shall be Class B Common Stock and 25% of such total
number shall be Class A Common Stock.
2. The option price per share for each share of stock
available under an Affected Option will remain unchanged, and the aggregate
option price for all shares available under the option will remain unchanged.
3. Any vesting schedule imposed under an Affected
Option will be applied separately to the total Class A and Class B Common Stock
so that on each vesting date the holder will vest in one Class A share for every
three shares of Class B Common Stock vesting on such date.
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4. Option holders may separately exercise all or any
portion of the vested options of either Class of Common Stock.
B. As a result of a Conversion pursuant to the terms of the
Company's Certificate of Incorporation, all outstanding shares of Class A Common
Stock of the Corporation were converted into 1.33 shares of Class B Common Stock
(which became the only outstanding class of Common Stock of the Corporation).
Under this Plan, each outstanding option to purchase shares of Class A Common
Stock must be adjusted to reflect such conversion. Such adjustments are as
follows:
1. Each option to purchase a share of Class A Common
Stock (a "Converted Option") is automatically converted into an option to
purchase 1.33 shares of Common Stock.
2. The aggregate option price per share for each
Converted Option will remain unchanged, but the price per share for each share
of Common Stock under a Converted Option will equal the purchase price payable
for a share of Class A Common Stock divided by 1.33.
3. Any remaining vesting schedule imposed under a
Converted Option will apply to the Common Stock available under such Option.
II. LOANS OR GUARANTEE OF LOANS
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 Article Two Discretionary Option Grant Program or the
purchase of one or more shares issued to such Participant under the Article Four
Stock Issuance Program, including the satisfaction of any Federal and State
income and employment tax obligations arising therefrom by (i) authorizing the
extension of a loan from the Corporation to such Optionee or Participant or (ii)
permitting the Optionee or Participant to pay the option price or purchase price
for the purchased Common Stock in installments over a period of years. The terms
of any loan or installment method of payment (including the interest rate and
terms of repayment) will be upon such terms as the Plan Administrator specifies
in the applicable option or issuance agreement or otherwise deems appropriate
under the circumstances. Loans and installment payments may be granted with or
without security or collateral (other than to individuals who are consultants or
independent contractors, in which event the loan must be adequately secured by
collateral other than the purchased shares). However, 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 and State income and employment tax liability incurred by the Optionee
or Participant in connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject
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to forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may deem appropriate.
III. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise of stock options or stock appreciation rights granted under the
Discretionary Option Grant Program or upon direct issuance under the Stock
Issuance Program 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 upon such
terms and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of SEC Rule 16b-3) provide any or all holders of
outstanding option grants under the Discretionary Option Grant Program with the
election to have the Company withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate Fair Market Value equal to the designated percentage (up to 100% as
specified by the optionee) of the Federal and State income taxes ("Taxes")
incurred in connection with the acquisition of such shares. In lieu of such
direct withholding, one or more option holders may also be granted the right to
deliver shares of Common Stock to the Company in satisfaction of such Taxes. The
withheld or delivered shares shall be valued at the Fair Market Value on the
applicable determination date for such Taxes or such other date required by the
applicable safe-harbor provisions of SEC Rule 16b-3.
IV. AMENDMENT OF THE PLAN AND AWARDS
A. Subject to Article Three, III., 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. No amendment or modification may
adversely affect the rights and obligations of an Optionee 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 Plan 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
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan (except for permissible adjustments under Article
One, Section IV.B.) or (ii) materially modify the eligibility requirements for
participation in the Plan or materially increase the benefits accruing to
Optionees or Participants under the Plan.
B. (i) Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program or the Automatic 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 Option Grant Program, the Automatic Option Grant Program or the
Stock Issuance Program are held
-22-
<PAGE> 24
in escrow until stockholder approval is obtained for a sufficient increase in
the number of shares available for issuance under the Plan. If such stockholder
approval is not obtained within twelve (12) months after the date the first such
excess option grants 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.
V. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Company's Predecessor Plans,
shall become effective as of the Effective Date, and no further option grants
shall be made under the Option Plan nor shall any further shares be issued under
the Stock Plan from and after such Effective Date. If stockholder approval of
this Plan is not obtained within twelve months after the date this Plan is
adopted by the Board, then each option granted under this Plan from and after
the Effective Date shall terminate without ever becoming exercisable for the
option shares and all shares issued hereunder shall be repurchased by the
Corporation at the purchase price paid, together with interest (at the
applicable Short Term Federal Rate). However, in the event such stockholder
approval is not obtained, the Predecessor Plans shall continue in effect in
accordance with the terms and provisions last approved by the Corporation's
stockholders, and all outstanding options and unvested stock issuances under the
Predecessor Plans shall remain in full force and effect in accordance with the
instruments evidencing such options and issuances.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such option
or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
C. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
Non-Statutory Options outstanding under the Option Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be utilized
in connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) the tenth
anniversary of the Effective Date or (ii) the date on which all shares available
for issuance under the Plan shall have been issued or cancelled pursuant to the
exercise,
-23-
<PAGE> 25
surrender or cash-out of the options granted under the Discretionary Option
Grant Program 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 stock issuances outstanding on
such date shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing such grants or issuances.
VI. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Discretionary Option Grant Program, 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.
B. No shares of Common Stock or other assets shall be issued
or delivered under this Plan unless and until there shall have been compliance
with all applicable requirements of Federal and State securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which stock of the same class is then
listed.
VIII. 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.
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 shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, whether by
Corporate
-24-
<PAGE> 26
Transaction or otherwise, and the Participants and Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
X. FINANCIAL REPORTS
The Corporation shall deliver financial and other information
regarding the Corporation, on an annual or more frequent basis, to each
individual holding an outstanding option under the Plan, as required pursuant to
Section 260.140.46 of the Rules of the California Corporations Commissioner.
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<PAGE> 27
EXHIBIT "A"
AUTOMATIC GRANT OPTION PROGRAM
NON-STATUTORY OPTION AGREEMENT
NON-EMPLOYEE DIRECTORS
A-1
<PAGE> 1
EXHIBIT 99.2
1992 Employee Stock Purchase Plan, as Amended
<PAGE> 2
EXHIBIT 99.2
LIGAND PHARMACEUTICALS INCORPORATED
1992 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED THROUGH APRIL 19, 1996
I. PURPOSE
The Ligand Pharmaceuticals Incorporated 1992 Employee Stock
Purchase Plan (the "Plan") is intended to provide eligible employees of the
Company and one or more of its Corporate Affiliates with the opportunity to
acquire a proprietary interest in the Company through the periodic application
of their payroll deductions to the purchase of shares of the Company's common
stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall
have the meanings indicated:
Base Salary means the regular basic earnings paid to a
Participant by one or more Participating Companies plus any pre-tax
contributions made by the Participant to any Code Section 401(k) salary deferral
plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Company or any Corporate Affiliate. There shall be excluded
from the calculation of Base Salary (I) all overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive-type payments and
(II) all contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Company or one or more
Corporate Affiliates under any employee benefit or welfare plan now or hereafter
established.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Company means Ligand Pharmaceuticals Incorporated, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Ligand Pharmaceuticals Incorporated which shall by
appropriate action adopt the Plan.
Common Stock means shares of the Company's Common Stock.
Corporate Affiliate means any company which is a parent or
subsidiary corporation of the Company (as determined in accordance with Code
Section 424),
<PAGE> 3
including any parent or subsidiary corporation which becomes such after the
Effective Date.
Effective Date means the first day of the initial offering
period scheduled to commence upon the later of (i) October 1, 1992 or (ii) the
effective date of the S-8 Registration Statement covering the shares of Common
Stock issuable under the Plan. However, for any Corporate Affiliate which
becomes a Participating Company in the Plan after the first day of the initial
offering period, a subsequent Effective Date shall be designated with respect to
participation by its Eligible Employees.
Eligible Employee means any person who is engaged, on a
regularly- scheduled basis of more than twenty (20) hours per week and more than
five (5) months per calendar year, in the rendition of personal services to the
Company or any other Participating Company for earnings considered wages under
Section 3121(a) of the Code.
Entry Date means the date an Eligible Employee first joins the
offering period in effect under the Plan. The earliest Entry Date under the Plan
shall be the Effective Date.
Participant means any Eligible Employee of a Participating
Company who is actively participating in the Plan.
Participating Company means the Company and such Corporate
Affiliate or Affiliates as may be designated from time to time by the Board.
Quarterly Entry Date means the first business day of January,
the first business day of April, the first business day of July and the first
business day of October during each offering period in effect under the Plan.
The earliest Quarterly Entry Date for an individual who is not otherwise
eligible to join the Plan on the Effective Date shall be January 1, 1993.
Quarterly Period of Participation means each quarterly period
for which the Participant actually participates in an offering period in effect
under the Plan. Except as otherwise designated by the Plan Administrator, each
quarterly period shall begin on the first business day of each calendar quarter
and shall end on the last business day of such quarter.
Quarterly Purchase Date means the last business day of March,
June, September and December each year on which shares of Common Stock are
automatically purchased for Participants under the Plan.
Service means the period during which an individual remains in
the employ of the Company or any Corporate Affiliate, whether or not in Eligible
Employee status, and shall be measured from such individual's most recent date
of hire by the Company or such Corporate Affiliate.
2.
<PAGE> 4
III. ADMINISTRATION
The Plan shall be administered by a committee (the "Plan
Administrator") comprised of two or more non-employee Board members appointed
from time to time by the Board. The Plan Administrator shall have full authority
to administer the Plan, including authority to interpret and construe any
provision of the Plan. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated in accordance with Article X.
B. The initial offering period will begin upon the later of
(i) October 1, 1992 or (ii) the effective date of the S-8 Registration Statement
covering the shares of Common Stock issuable under the Plan and will end on the
last business day in December 1993. Subsequent offering periods (if any) shall
be coincidental with the calendar year and shall accordingly commence on the
first business day in January of the relevant year.
C. Under no circumstances shall any offering period commence
under the Plan, nor shall any shares of Common Stock be issued hereunder, until
such time as (i) the Plan shall have been approved by the Company's stockholders
and (ii) the Company shall have complied with all applicable requirements of the
Securities Act of 1933 (as amended), all applicable listing requirements of any
securities exchange on which shares of the Common Stock are listed and all other
applicable statutory and regulatory requirements.
D. The Participant shall be granted a separate purchase right
for each offering period in which he/she participates. The purchase right shall
be granted on the Entry Date on which such individual first joins the offering
period in effect under the Plan and shall be automatically exercised in
successive installments on each Quarterly Purchase Date within the offering
period.
E. The acquisition of Common Stock through participation in
the Plan for any offering period shall neither limit nor require the acquisition
of Common Stock by the Participant in any subsequent offering period.
3.
<PAGE> 5
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee of a Participating Company shall be
eligible to participate in the Plan in accordance with the following provisions:
- An Eligible Employee with at least five (5) months of
Service on the start date of the offering period may enter that
offering period on such start date, provided such individual enrolls in
the offering period on or before such date in accordance with Section
V.B below. That start date shall then become such individual's Entry
Date for the offering period, and on that date such individual shall be
granted his/her purchase right for the offering period. Should such
Eligible Employee not enter the offering period on the start date, then
he/she may not subsequently join that particular offering period on any
later date.
- An individual who is not an Eligible Employee with at least
five (5) months of Service on the start date of the offering period may
subsequently enter that offering period on the first Quarterly Entry
Date on which he/she is an Eligible Employee with at least five (5)
months of Service, provided he/she enrolls in the offering period on or
before such date in accordance with Section V.B below. That Quarterly
Entry Date shall then become such individual's Entry Date for the
offering period, and on that date such individual shall be granted
his/her purchase right for the offering period. Should such Eligible
Employee not enter the offering period on the first Quarterly Entry
Date on which he/she is first eligible to join the offering period,
then he/she may not subsequently join that particular offering period
on any later date.
B. To participate for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including the purchase agreement and payroll deduction
authorization) and file such forms with the Plan Administrator on or before
his/her scheduled Entry Date.
C. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during each
Quarterly Period of Participation within the offering period, up to a maximum of
ten percent (10%). The deduction rate so authorized shall continue in effect for
the remainder of the offering period, except to the extent such rate is changed
in accordance with the following guidelines:
- The Participant may, at any time during the Quarterly Period
of Participation, reduce his/her rate of payroll deduction. Such
reduction shall become effective as soon as possible after filing of
the requisite reduction form with the Plan Administrator (or its
designate), but
4.
<PAGE> 6
the Participant may not effect more than one such reduction during the same
Quarterly Period of Participation.
- The Participant may, prior to the commencement of any new
Quarterly Period of Participation within the offering period, increase
or decrease the rate of his/her payroll deduction by filing the
appropriate form with the Plan Administrator (or its designate). The
new rate (which may not exceed the ten percent (10%) maximum) shall
become effective as of the first date of the first Quarterly Period of
Participation following the filing of such form.
Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Section VII below.
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable by Participants under the Plan
shall, solely in the discretion of the Plan Administrator, be made available
from either authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Company, including shares of Common Stock
purchased on the open market. The total number of shares which may be issued
under the Plan shall not exceed 166,500 shares of Common Stock (provided that,
for this purpose, each issuance of Class A Common Stock occurring prior to
November 24, 1994 shall be treated as if it were an issuance of 1.33 shares of
Common Stock). The number of shares of Common Stock issuable under the Plan
shall be adjusted from time to time in accordance with Section VI.B hereof.
B. In the event any change is made to the Company's
outstanding Common Stock by reason of any stock dividend, stock split,
combination of shares or other change affecting such outstanding Common Stock as
a class without receipt of consideration, then appropriate adjustments shall be
made by the Plan Administrator to (i) the class and maximum number of shares
issuable over the term of the Plan, (ii) the class and maximum number of shares
purchasable per Participant during any one offering period and (iii) the class
and number of shares and the price per share in effect under each purchase right
at the time outstanding under the Plan. Such adjustments shall be designed to
preclude the dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
An Employee who participates in the Plan for a particular
offering period shall have the right to purchase shares of Common Stock, in a
series of successive quarterly installments during such offering period, upon
the terms and conditions set
5.
<PAGE> 7
forth below and shall execute a purchase agreement embodying such terms and
conditions and such other provisions (not inconsistent with the Plan) as the
Plan Administrator may deem advisable.
Purchase Price. Common Stock shall be issuable at the end of
each Quarterly Period of Participation at a purchase price equal to eighty-five
percent (85%) of the lower of (i) the fair market value per share on the
Participant's Entry Date into the offering period or (ii) the fair market value
per share on the Quarterly Purchase Date on which such Quarterly Period of
Participation ends. However, for each Participant whose Entry Date is other than
the start date of the offering period in effect under the Plan, the clause (i)
amount shall in no event be less than the fair market value of the Common Stock
on the start date of such offering period.
Valuation. For purposes of determining the fair market value
per share of Common Stock on any relevant date, the following procedures shall
be in effect:
- If such fair market value is to be determined on any date on or after
the date the Common Stock is first registered under Section 12(g) of
the Securities Exchange Act of 1934, then the fair market value shall
be the closing selling price on that date, as officially quoted on the
NASDAQ National Market System. If there is no quoted selling price for
such date, then the closing selling price on the next preceding day for
which there does exist such a quotation shall be determinative of fair
market value.
- If such fair market value is to be determined on any date prior to
the time of such Section 12(g) registration of the Common Stock, 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 deems appropriate.
Number of Purchasable Shares. The number of shares purchasable
per Participant for each Quarterly Period of Participation shall be the number
of whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during such Quarterly Period of Participation by the
purchase price in effect for the Quarterly Purchase Date on which such Quarterly
Period of Participation ends. However, no Participant may, during any one
offering period, purchase more than 1,330 shares of Common Stock, subject to
periodic adjustment under Section VI.B.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or any of its Corporate Affiliates.
6.
<PAGE> 8
Payment. Payment for the Common Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll deductions.
Such deductions shall begin on the first pay day coincident with or immediately
following the Participant's Entry Date into the offering period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of the offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from a Participant may be
commingled with the general assets of the Company and may be used for general
corporate purposes.
Termination of Purchase Right. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last
five (5) business days of the Quarterly Period of Participation,
terminate his/her outstanding purchase right under the Plan by filing
the prescribed notification form with the Plan Administrator (or its
designate). No further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right, and any
payroll deductions collected for the Quarterly Period of Participation
in which such termination occurs shall, at the Participant's election,
be immediately refunded or held for the purchase of shares on the next
Quarterly Purchase Date. If no such election is made, then such funds
shall be refunded as soon as possible after the close of such Quarterly
Period of Participation.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which such terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely filing
of a new purchase agreement and payroll deduction authorization) during
the applicable enrollment period for the new offering.
(iii) If the Participant ceases to remain an Eligible
Employee while his/her purchase right remains outstanding, then such
individual (or the personal representative of the estate of a deceased
Participant) shall have the following election, exercisable up until
the end of the Quarterly Period of Participation in which the
Participant ceases Eligible Employee status:
- to withdraw all of the Participant's payroll
deductions for such Quarterly Period of Participation, or
7.
<PAGE> 9
- to have such funds held for the purchase of shares on
the Quarterly Purchase Date immediately following such cessation of
Eligible Employee status.
If no such election is made, then such funds shall be
refunded as soon as possible after the close of such Quarterly Period
of Participation. In no event, however, may any payroll deductions be
made on the Participant's behalf following his/her cessation of
Eligible Employee status.
Stock Purchase. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded in accordance with the Termination of
Purchase Right provisions above) on each Quarterly Purchase Date. The purchase
shall be effected by applying each Participant's payroll deductions for the
Quarterly Period of Participation ending on such Quarterly Purchase Date
(together with any carryover deductions from the preceding Quarterly Period of
Participation) to the purchase of whole shares of Common Stock (subject to the
limitation on the maximum number of purchasable shares set forth above) at the
purchase price in effect for such Quarterly Period of Participation. Any payroll
deductions not applied to such purchase because they are not sufficient to
purchase a whole share shall be held for the purchase of Common Stock in the
next Quarterly Period of Participation. However, any payroll deductions not
applied to the purchase of Common Stock by reason of the limitation on the
maximum number of shares purchasable by the Participant for that offering period
shall be promptly refunded to the Participant.
Proration of Purchase Rights. Should the total number of
shares of Common Stock which are to be purchased pursuant to outstanding
purchase rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock prorated to such
individual, shall be refunded to such Participant.
Rights as Stockholder. A Participant shall have no stockholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after each Quarterly Purchase Date, a stock certificate for the
number of shares purchased on the Participant's behalf. Such certificate may,
upon the Participant's request, be issued in the names of the Participant and
his/her spouse as community property or as joint tenants with right of
survivorship.
8.
<PAGE> 10
Assignability. No purchase right granted under the Plan shall
be assignable or transferable by the Participant other than by will or by the
laws of descent and distribution following the Participant's death, and during
the Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its stockholders
enter into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which the Company
will not be the surviving corporation (other than a reorganization effected
primarily to change the State in which the Company is incorporated), or
(ii) a reverse merger in which the Company is the surviving
corporation but in which more than 50% of the Company's outstanding voting stock
is transferred to holders different from those who held the stock immediately
prior to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such sale,
merger, reorganization or reverse merger by applying the payroll deductions of
each Participant for the Quarterly Period of Participation in which such
transaction occurs to the purchase of whole shares of Common Stock at
eighty-five percent (85%) of the lower of (i) the fair market value of the
Common Stock on the Participant's Entry Date into the offering period in which
such transaction occurs or (ii) the fair market value of the Common Stock
immediately prior to the consummation of such transaction. However, the
applicable share limitations of Articles VII and VIII shall continue to apply to
any such purchase, and the clause (i) amount above shall not, for any
Participant whose Entry Date for the offering period is other than the start
date of such offering period, be less than the fair market value of the Common
Stock on such start date.
The Company shall use its best efforts to provide at least ten
(10)-days advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (I) rights to purchase
Common Stock accrued under any other purchase right outstanding under this Plan
and (II) similar rights accrued under other employee stock purchase plans
(within the meaning of Section 423 of the
9.
<PAGE> 11
Code) of the Company or its Corporate Affiliates, would otherwise permit such
Participant to purchase more than $25,000 worth of stock of the Company or any
Corporate Affiliate (determined on the basis of the fair market value of such
stock on the date or dates such rights are granted to the Participant) for each
calendar year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the
right to acquire Common Stock pursuant to each purchase right outstanding under
the Plan shall accrue as follows:
(i) The right to acquire Common Stock under each such
purchase right shall accrue in a series of successive quarterly
installments as and when the purchase right first becomes exercisable
for each quarterly installment on the last business day of each
Quarterly Period of Participation for which the right remains
outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
$25,000 worth of Common Stock (determined on the basis of the fair
market value on the date or dates of grant) pursuant to one or more
purchase rights held by the Participant during such calendar year.
(iii) If by reason of such accrual limitations, any
purchase right of a Participant does not accrue for a particular
Quarterly Period of Participation, then the payroll deductions which
the Participant made during that Quarterly Period of Participation with
respect to such purchase right shall be promptly refunded.
C. In the event there is any conflict between the provisions
of this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase
plan under Code Section 423. Accordingly, the Participant will not recognize any
taxable income at the time one or more shares of Common Stock are purchased on
his/her behalf on any Quarterly Purchase Date under the Plan.
10.
<PAGE> 12
X. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Quarterly Period of Participation. However, the Board
may not, without the approval of the Company's stockholders:
(i) materially increase the number of shares issuable under
the Plan or the maximum number of shares which may be purchased per
Participant during any one offering period under the Plan, except that
the Plan Administrator shall have the authority, exercisable without
such stockholder approval, to effect adjustments to the extent
necessary to reflect changes in the Company's capital structure
pursuant to Section VI.B;
(ii) alter the purchase price formula so as to reduce the
purchase price payable for the shares issuable under the Plan; or
(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility to participate in the Plan.
B. The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Quarterly Period of
Participation. Should the Company elect to exercise such right, then the Plan
shall terminate in its entirety. No further purchase rights shall thereafter be
granted or exercised, and no further payroll deductions shall thereafter be
collected, under the Plan.
XI. GENERAL PROVISIONS
A. The Plan shall become effective on the designated Effective
Date, provided that no offering period shall commence, and no shares of Common
Stock shall be issued hereunder, until (i) the Plan shall have been approved by
the stockholders and (ii) the Company shall have complied with all applicable
requirements of the Securities Act of 1933 (as amended), all applicable listing
requirements of any securities exchange on which shares of the Common Stock are
listed and all other applicable requirements established by law or regulation.
In the event such stockholder approval is not obtained, or such Company
compliance is not effected, within twelve (12) months after the date on which
the Plan is adopted by the Board, the Plan shall terminate and have no further
force or effect.
B. The Plan shall terminate upon the earlier of (i) December
31, 2002 or (ii) the date on which all shares available for issuance under the
Plan shall have been sold pursuant to purchase rights exercised under the Plan.
11.
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C. All costs and expenses incurred in the administration of
the Plan shall be paid by the Company.
D. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any of its Corporate
Affiliates for any period of specific duration, and such person's employment may
be terminated at any time, with or without cause.
12.
