<PAGE> 1
As filed with the Securities and Exchange Commission on May 27, 1999
Registration No. 333-___________
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LIGAND PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction 77-0160744
of incorporation or organization) (IRS Employer Identification No.)
10275 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
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1992 STOCK OPTION/STOCK ISSUANCE PLAN
1992 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plans)
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DAVID E. ROBINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIGAND PHARMACEUTICALS INCORPORATED
10275 SCIENCE CENTER DRIVE, SAN DIEGO, CALIFORNIA 92121
(Name and address of agent for service)
(619) 535-3900
(Telephone number, including area code, of agent for service)
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<TABLE>
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
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<S> <C> <C> <C> <C>
1992 Stock Option/
Stock Issuance Plan
Common Stock, par value $0.001 985,000 shares 10.875(2) 10,711,875(2) $2,977.90
1992 Employee Stock
Purchase Plan
Common Stock, par value $0.001 95,000 shares 10.875(2) 1,033,125(2) $ 287.21
Aggregate Amount of Registration Fee $3,265.11
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</TABLE>
(1) This Registration Statement shall also cover any additional shares of
registrant's Common Stock which become issuable under the 1992 Stock
Option/Stock Issuance Plan and the 1992 Employee Stock Purchase Plan, or
which become issuable to the Selling Stockholders, by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without our receipt of consideration and which results in an
increase in the number of our 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, on the basis of the
average of the high and low selling prices per share of registrant's Common
Stock on May 24, 1999, as reported by the Nasdaq National Market.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we have on
file at the SEC's public reference rooms in Washington, DC, New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0300 for further
information about the public reference rooms. Our SEC filings are also available
to the public at the SEC's web site at http://www.sec.gov.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this registration statement, and later information
filed with the SEC will update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until our offering is complete:
(a) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998, filed on March 31, 1999;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, filed on May 15, 1999;
(c) The description of our Common Stock, par value 0.001 per share,
contained in our Form 8-A registration statement, filed on
November 21, 1994;
(d) Our Amended and Restated Certificate of Incorporation, filed on
July 9, 1998, as Exhibit 3.2 to our Form S-4 registration
statement;
(e) Our Bylaws, filed on July 9, 1998, as Exhibit 3.3 to our Form S-4
registration statement;
(f) Our Form of Stock Option Agreement filed on April 16, 1992, as
Exhibit 10.2 to our Form S-1 registration statement;
(g) Our Form of Stock Issuance Agreement filed on April 16, 1992, as
Exhibit 10.3 to our Form S-1 registration statement; and
(h) Our Form of Stock Purchase Agreement filed on April 16, 1992, as
Exhibit 10.13 to our Form S-1 registration statement.
All reports and other documents that we subsequently filed under
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), prior to the filing of a post-effective amendment
which indicates that all securities offered under this registration statement
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this registration statement and
to be a part of this registration statement from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference into this registration statement shall be deemed to be
modified or superseded for purposes of this registration statement to the extent
that a statement contained in this registration statement or in any subsequently
filed document which also is deemed to be incorporated by reference in this
registration statement modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this registration statement.
II-1
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attn: Secretary
(619) 535-3900
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 145 of the Delaware General Corporation Law permits
indemnification of our officers and directors under certain conditions and
subject to certain limitations. Section 145 of the Delaware General Corporation
Law also provides that a corporation has the power to purchase and maintain
insurance on behalf of its officers and directors against any liability asserted
against such person and incurred by him or her in such capacity, or arising out
of his or her status as such, whether or not the corporation would have the
power to indemnify him or her against such liability under the provisions of
Section 145 of the Delaware General Corporation Law.
(b) Article VII, Section 1 of our Bylaws provides that we shall
indemnify our officers, directors, employees and agents to the full extent
permitted by the General Corporation Law of Delaware. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding by reason of the fact that he or she is or was our
director or officer (or was serving at our request as a director or officer of
another corporation) shall be paid by us in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by us as authorized
by the relevant section of the Delaware General Corporation Law.
(c) As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, Article VI, Section (A)2 of our Amended and Restated
Certificate of Incorporation provides that our directors shall not be personally
liable for monetary damages or breach of fiduciary duty as a director, except
for liability for (i) any breach of the director's duty of loyalty to us or our
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or unlawful stock purchases or redemptions under Section 174 of the
Delaware General Corporation Law, or (iv) any transaction from which the
director derived any improper personal benefit.
(d) Pursuant to authorization provided under the Amended and Restated
Certificate of Incorporation, we have entered into indemnification agreements
with each of our present and certain of our former directors. We have also
entered into similar agreements with certain of our executive officers who are
not directors. Generally, the indemnification agreements attempt to provide the
maximum protection permitted by Delaware and California law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification.
(e) We now have in effect directors and officers liability insurance
which insures our directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
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ITEM 8. EXHIBITS
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Exhibit Number Exhibit
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<S> <C>
4.1 Instruments defining the rights of stockholders.
Reference is made to our Form 8-A registration
statement filed on November 21, 1994 (incorporated
into this registration statement by reference), the
Amended and Restated Certificate of Incorporation
(incorporated into this registration statement by
reference to Exhibit 3.2 to our Form S-4
registration statement filed on July 9, 1998) and
the Bylaws (incorporated into this registration
statement by reference to Exhibit 3.3 of our Form
S-4 registration statement, filed on July 9, 1998).
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 page II-4 of
this registration statement.
99.1 1992 Stock Option/Stock Issuance Plan (as amended
May 20, 1999).
99.2 Form of Stock Option Agreement. Reference is made to
Exhibit 10.2 to our Form S-1 registration statement,
filed on April 16, 1992, which is incorporated into
this registration statement by reference.
99.3 Form of Stock Issuance Agreement. Reference is made
to Exhibit 10.3 to our Form S-1 registration
statement, filed on April 16, 1992, which is
incorporated into this registration statement by
reference.
99.4 1992 Employee Stock Purchase Plan (as amended May
20, 1999).
99.5 Form of Stock Purchase Agreement. Reference is made
to Exhibit 10.13 to our Form S-1 registration
statement, filed on April 16, 1992, which is
incorporated into this registration statement by
reference.
</TABLE>
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ITEM 9. UNDERTAKINGS
A. The undersigned registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of our annual report
pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated
by reference into this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the 1934 Act; and, where interim
financial information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to provide such
interim financial information.
D. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers, or controlling persons of the
registrant pursuant to the indemnification provisions summarized in Item 6 above
or otherwise, the registrant has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the 1933 Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 May, 1999.
LIGAND PHARMACEUTICALS INCORPORATED
By: /S/ DAVID E. ROBINSON
_____________________________________
David E. Robinson
President and Chief Executive Officer
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 Paul V. Maier, 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.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/S/ DAVID E. ROBINSON
_____________________________ President, Chief Executive Officer and May 26, 1999
David E. Robinson Director (Principal Executive Officer)
/S/ PAUL V. MAIER
_____________________________ Senior Vice President and Chief May 21, 1999
Paul V. Maier Financial Officer (Principal Financial
and Accounting Officer)
/S/ HENRY F. BLISSENBACH
_____________________________ Director May 26, 1999
Henry F. Blissenbach
/S/ ALEXANDER D. CROSS
_____________________________ Director May 26, 1999
Alexander D. Cross
/S/ MICHAEL A. ROCCA
_____________________________ Director May 18, 1999
Michael A. Rocca
/S/ JOHN GROOM
_____________________________ Director May 20, 1999
John Groom
/S/ IRVING S. JOHNSON, PH.D.
_____________________________ Director May 19, 1999
Irving S. Johnson, Ph.D.
/S/ CARL C. PECK
_____________________________ Director May 21, 1999
Carl C. Peck
</TABLE>
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<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
LIGAND PHARMACEUTICALS INCORPORATED
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
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<S> <C>
4.1 Instruments defining the rights of stockholders. Reference
is made to our Form 8-A registration statement filed on
November 21, 1994 (incorporated into this registration
statement by reference), the Amended and Restated
Certificate of Incorporation (incorporated into this
registration statement by reference to Exhibit 3.2 to our
Form S-4 registration statement filed on July 9, 1998) and
the Bylaws (incorporated into this registration statement by
reference to Exhibit 3.3 of our Form S-4 registration
statement, filed on July 9, 1998).
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 page II-4 of this
registration statement.
99.1 1992 Stock Option/Stock Issuance Plan (as amended May 20,
1999).
99.2 Form of Stock Option Agreement. Reference is made to Exhibit
10.2 to our Form S-1 registration statement, filed on April
16, 1992, which is incorporated into this registration
statement by reference.
99.3 Form of Stock Issuance Agreement. Reference is made to
Exhibit 10.3 to our Form S-1 registration statement, filed
on April 16, 1992, which is incorporated into this
registration statement by reference.
99.4 1992 Employee Stock Purchase Plan (as amended May 20, 1999).
99.5 Form of Stock Purchase Agreement. Reference is made to
Exhibit 10.13 to our Form S-1 registration statement, filed
on April 16, 1992, which is incorporated into this
registration statement by reference.
</TABLE>
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EXHIBIT 5.1
[Brobeck, Phleger & Harrison LLP Letterhead]
May 27, 1999
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Re: Ligand Pharmaceuticals Incorporated Registration Statement on
Form S-8 for (i) 985,000 Shares of Common Stock Issuable Under
The 1992 Stock Option/Stock Issuance Plan, as amended, and (ii)
95,000 Shares of Common Stock Issuable Under The Employee Stock
Purchase Plan, as amended.
Ladies and Gentlemen:
We have acted as counsel to Ligand Pharmaceuticals Incorporated (the
"Company") in connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) an additional
985,000 shares of the Company's common stock (the "Common Stock") for issuance
under the Company's 1992 Stock Option/Stock Issuance Plan, as amended (the
"Stock Plan"), and (ii) an additional 95,000 shares of Common Stock under the
Company's Employee Stock Purchase Plan, as amended (the "Employee Plan"). All of
such shares of Common Stock are collectively referred to herein as the "Shares."
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Stock Plan and the Employee Plan. Based on such review, we are
of the opinion that if, as and when the additional 1,080,000 Shares reserved in
the aggregate under the Stock Plan and the Employee Plan have been issued and
sold (and the consideration therefor received) pursuant to (a) the provisions of
option agreements duly authorized under the Stock Plan and in accordance with
the Registration Statement, or (b) duly authorized direct stock issuances in
accordance with the Stock Plan and the Employee Plan and in accordance with the
Registration Statement, those Shares will be legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-K.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Stock Plan, the Employee Plan or the Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
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 1992 Stock Option/Stock Issuance Plan and the 1992
Employee Stock Purchase Plan of Ligand Pharmaceuticals Incorporated of our
report dated February 5, 1999, with respect to the consolidated financial
statements of Ligand Pharmaceuticals Incorporated included in its Annual Report
(Form 10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
May 25, 1999
<PAGE> 1
EXHIBIT 99.1
LIGAND PHARMACEUTICALS INCORPORATED
1992 STOCK OPTION/STOCK ISSUANCE PLAN
AS AMENDED THROUGH MAY 20, 1999
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), (ii)
non-employee members of the Board of Directors and (iii) 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 became effective on November 17, 1992, the date on
which the shares of the Corporation's common stock were first 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 were incorporated into this Plan and are to be treated as outstanding
options or stock issuances 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.
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 four separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three, the Stock Issuance Program
specified in Article Four, and the Director Fee Option Grant Program specified
in Article Five. Under the Discretionary Option Grant Program, eligible
individuals may 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
<PAGE> 2
the grant date. Under the Automatic Option Grant Program, eligible non-employee
members of the Board of Directors will be granted options to purchase shares of
the Corporation's common stock at 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. Under the Director Fee Option Grant Program,
non-employee Board members may elect to apply all or a portion of the fee
otherwise payable in cash to him or her each year to the acquisition of a
special option grant.
B. The provisions of Articles One and Six 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.
III. ADMINISTRATION OF THE PLAN
A. Plan Administrator. The Board shall appoint a committee of two
(2) or more non-employee Board members (the "Primary Committee") to have sole
and exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs to administer the Plan with respect to officers and directors
subject to Section 16 of the 1934 Act ("Section 16 Insiders").
B. Committees. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, in the Board's discretion, be vested in the
Primary Committee or a committee of two (2) or more Board members appointed by
the Board (the "Secondary Committee"), or the Board may retain the power to
administer those programs with respect to all such persons.
C. Members of Committees. Members of the Primary Committee or any
Secondary Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may also at any
time terminate the functions of any Secondary Committee and assume all powers
and authority previously delegated to such committee.
D. Service as Committee Members. Service on the Primary Committee
or the Secondary Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Primary Committee or the Secondary Committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option grants or stock issuances under the Plan.
E. Authority. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, 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
Discretionary Option Grant Program and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, such programs and any
outstanding option grants or stock issuances as it may deem necessary or
advisable. Decisions of each Plan Administrator shall be final and binding on
all parties who have an interest in the Discretionary Option Grant Program and
Stock Issuance Program or any outstanding option or stock issuance thereunder.
F. Restriction on Discretion. The administration of the Automatic
Option Grant Program under Article Three and the Director Fee Option Grant
Program under Article Five shall be self executing in accordance with the terms
and provisions of those programs, and no Plan Administrator shall exercise any
discretionary functions with respect to such programs.
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<PAGE> 3
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) non-employee members of the Board of Directors; and
(iii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Only non-employee members of the Board shall be eligible to
participate in the Automatic Option Grant Program and the Director Fee Option
Grant Program.
C. Each Plan Administrator shall have full authority to
determine, (i) with respect to the option grants made under the Discretionary
Option Grant Program, which eligible individuals are to receive option grants,
the time or times when such grants are to be made, the number of shares to be
covered by each such grant, whether the granted option is to be an incentive
stock option ("Incentive Option") which satisfies the requirements of Section
422 of the Internal Revenue Code or a non-statutory option not intended to meet
such requirements, the time or times at which each 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 and the Director Fee 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. The maximum number of shares
issuable under the Plan is 9,073,457 shares of Common Stock. Such share reserve
includes an increase of 985,000 shares authorized by the Board on March 31,
1999, subject to stockholder approval at the 1999 Annual Meeting.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,000,000 shares of Common Stock in the aggregate over the term of the
Plan.
C. 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. Unvested shares issued under the
Plan and subsequently cancelled or repurchased by the Corporation, at the
original exercise or issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, shares subject to any option or portion
thereof surrendered or cancelled in accordance with Section V of Article Two
shall reduce on a share-for-share basis the number of
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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.
D. In the event any change is made to 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 securities for which any one person may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances over the term of the Plan, and (iii) 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.
E. 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.
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, 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 on the Nasdaq National Market. 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.
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 an Incentive Option
shall, in addition, be subject to the applicable provisions of Section II of
this Article Two.
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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) The option price shall become immediately due upon
exercise of the option and, subject to the provisions of Article Six, 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 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 (2), 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.
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. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date.
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 limited post-Service period
designated by the Plan Administrator at the time of the option grant and
set forth in the option agreement.
-- 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
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<PAGE> 6
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.
-- During the limited post-Service period of
exercisability, the option may not be exercised in the aggregate 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
post-Service 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, and
-- 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 subparagraph (1) above 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.
(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.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime to one or more
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<PAGE> 7
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior to
such assignment and shall be set forth in such documents issued to the assignee
as the Plan Administrator may deem appropriate.
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
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 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.
C. 10% Stockholder. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
the Common Stock on the option grant date, and the option term shall not exceed
five (5) years measured from the option grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Six of the Plan shall apply to all Incentive
Options granted hereunder.
III. CORPORATE TRANSACTIONS
A. For purposes of this Section III, a "Corporate Transaction"
shall mean any one 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 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.
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<PAGE> 8
Appropriate adjustments shall also be made to the class and number of securities
available for issuance under the Plan on both an aggregate and per participant
basis 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.4
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 under the Discretionary Option Grant Program 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 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 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. The Plan Administrator shall pre-approve,
at the time the limited right is granted, the subsequent exercise of that right
in accordance with the terms of the grant and the provisions of this Section
V.D. No additional approval of the Plan Administrator or the Board shall be
required at the time of the actual option cancellation and cash distribution.
The balance of the option (if any) shall continue to remain outstanding and
exercisable in accordance with the terms of the instrument evidencing such
grant.
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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 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.
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 VI of Article One, 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.
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.
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 the date of the 1998 Annual Meeting, whether through election
by the Corporation's stockholders or appointment by the Board, shall
automatically be granted, at the time of such initial election or appointment, a
Non-Statutory Option to purchase 20,000 shares of Common Stock upon the terms
and conditions of this Article Three, provided SUCH INDIVIDUAL HAS NOT OTHERWISE
BEEN IN THE PRIOR EMPLOY OF THE CORPORATION.
(2) On the date of each Annual Stockholders Meeting, beginning
with the 1998 Annual Meeting, each individual re-elected as a non-employee Board
member at such Annual Meeting shall automatically be granted a Non-Statutory
Option to purchase 10,000 shares of Common Stock upon the terms and conditions
of this Article Three. There shall be no limit on the number of 10,000-share
option grants any one non-employee Board member may receive over the period of
Board service, and non-employee Board members previously in the Corporation's
employ shall be entitled to one or more such annual option grants over his or
her 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.
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
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(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member (A)
shall provide irrevocable 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. 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 service 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 service. Each such option
shall immediately terminate and cease to be outstanding, at the time of such
cessation of Board service, with respect to any shares for which the option is
not otherwise at that time exercisable.
(2) Should the optionee die while serving as a Board member 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 service (less any option shares subsequently purchased by the optionee
prior to death), by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution. 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 service, 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.
G. 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.
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II. CORPORATE TRANSACTION
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. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. 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.
D. 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.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCE
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:
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(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.
(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. 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). The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Plan, namely:
(ii) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(iii) the number of installments in which the shares are
to vest,
(iv) the interval or intervals (if any) which are to lapse
between installments, and
(v) 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 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 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
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<PAGE> 13
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 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 donee 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
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may, commencing with the 1999 calendar
year, elect to apply all or any portion of the fee otherwise payable to him or
her in cash each year for his or her Board service to the acquisition of a
special option grant under this Director Fee Option Grant Program. Such election
must be filed with the Corporation's Chief Financial Officer prior to last day
of December in the calendar year immediately preceding the calendar year for
which the fee subject of that election is otherwise payable. Each non-employee
Board member who files such a timely election shall automatically be granted an
option under this Director Fee Option Grant
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<PAGE> 14
Program on the first trading day in January in the calendar year for which the
fee subject of that election would otherwise be payable. Until the Corporation
establishes an annual retainer fee for the non-employee Board members, the
dollar amount of the fee subject to the Board member's election each year shall
be equal to the number of regularly-scheduled Board meetings for that year
multiplied by the per Board meeting fee in effect for such year.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. EXERCISE PRICE.
(1) The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
(2) The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Board service in the
calendar year for which the annual retainer fee which is the subject of his or
her election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the optionee cease
Board service for any reason (other than death or permanent disability as
defined in Section 22(e)(3) of the Internal Revenue Code) while holding one or
more options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the optionee under this Article Five at the time of
his or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
E. DEATH OR PERMANENT DISABILITY. Should the Optionee's service
as a Board member cease by reason of death or permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code, then each option held by such
optionee under this Article Five shall immediately become exercisable for all
the shares of Common Stock at the time subject to that option, and the option
may, during the three (3)-year period following such cessation of Board service,
be exercised for any or all of those shares as fully-vested shares.
Should the optionee die while holding one or more options under this
Article Five, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the optionee's
cessation of Board service (less any shares subsequently purchased by optionee
prior to death), by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
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<PAGE> 15
optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the optionee's cessation of Board
service.
III. CORPORATE TRANSACTION
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 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. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. 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.
D. The grant of options under this Article Five shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
I. EFFECT OF 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
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<PAGE> 16
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.
(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
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 to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Plan Administrator may deem appropriate.
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<PAGE> 17
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 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.
IV. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. 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 or modification. In addition, certain
amendments may require stockholder approval if so determined by the Board or
pursuant to applicable laws or regulations.
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 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.
C. On March 31, 1999, the Board amended and restated the Plan to
effect an increase in the maximum number of shares of Common Stock authorized
for issuance over the term of the Plan from 8,088,457 shares to 9,073,457 shares
(the "1999 Restatement"). The 1999 Restatement is subject to stockholder
approval at the 1999 Annual Meeting. Until such stockholder approval is
obtained, any options granted on the basis of the amendments effected by the
1998 Restatement (including the 985,000-share increase) shall not become
exercisable in whole or in part, and those options shall terminate without ever
becoming exercisable for the option shares. All option grants and direct stock
issuances made prior to the 1999 Restatement shall remain outstanding in
accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the 1999 Restatement shall
be deemed to modify or in any way affect those outstanding options or issuances.
The Plan Administrator may make option grants and direct stock issuances under
the Plan at any time before the date fixed herein for the termination of the
Plan.
V. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Company's Predecessor Plans,
became effective as of the Effective ate, 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.
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<PAGE> 18
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. 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) November 16,
2002, or (ii) the date on which all shares available for issuance under the Plan
shall have been issued or cancelled pursuant to the exercise, surrender 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
The provisions of the Plan shall inure to the benefit of, and be binding
upon, the Corporation and its successors or assigns, whether by Corporate
Transaction or otherwise, and the Participants and Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
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<PAGE> 19
EXHIBIT "A"
AUTOMATIC GRANT OPTION PROGRAM
NON-STATUTORY OPTION AGREEMENT
NON-EMPLOYEE DIRECTORS
<PAGE> 1
EXHIBIT 99.4
LIGAND PHARMACEUTICALS INCORPORATED
1992 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED THROUGH MAY 20, 1999
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 before deduction for 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 (1) 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),
including any parent or subsidiary corporation which becomes such after the
Effective Date.
Effective Date meaning November 17, 1992, the start date of the initial
offering period under the Plan. However, for any Corporate Affiliate which
becomes a Participating Company in the Plan after such start date, 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.
<PAGE> 2
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.
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 began on November 17, 1992, and
ended on the last business day in December 1993. Subsequent offering periods
shall be coincidental with the calendar year and shall accordingly commence on
the first business day in January each year.
C. 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.
D. 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.
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.
2.
<PAGE> 3
-- 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 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 355,000 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).
Such share reserve includes the 95,000-share increase approved by the
Board on March 31, 1999, subject to stockholder approval at the 1999 Annual
Meeting. 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.
3.
<PAGE> 4
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 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 fair market value shall be the closing
selling price on that date, as officially quoted on the Nasdaq National Market.
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.
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.
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.
4.
<PAGE> 5
(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
-- 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 pro-rated 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.
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
5.
<PAGE> 6
(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 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 admire (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.
6.
<PAGE> 7
XI. 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.
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) 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.
C. On March 31, 1999, the Board amended the Plan to increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Plan from 260,000 shares to 355,000 shares. This amendment to the Plan is
subject to stockholder approval at the 1999 Annual Meeting.
XI. GENERAL PROVISIONS
A. 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.
B. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
C. 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.
