<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-12968
LXR BIOTECHNOLOGY INC.
(Exact name of small business issuer as specified in its charter)
Delaware 68-0282856
(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification No.)
1401 Marina Way South, Richmond, California 94804
(Address of principal executive offices)
(510) 412-9100
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days:
Yes X No
------ ------
At July 31, 1996 the number of outstanding shares of the Registrant's Common
Stock, par value $0.0001, was 15,971,366.
Transitional Small Business Disclosure Format (check one): Yes No X .
--- ---
1
<PAGE> 2
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
QUARTERLY REPORT ON FORM 10-QSB
FOR THE SIX MONTHS ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 1996 and 1995
and for the period from April 20, 1992 (date of incorporation)
to June 30, 1996 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 and for the period from
April 20, 1992 (date of incorporation) to June 30, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Plan of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,127,935 $ 68,245
Prepaid expenses 257,704 183,691
Other receivables 257,342 33,355
------------ ------------
Total current assets 4,642,981 285,291
Equipment and leasehold improvements, net 760,801 890,468
Deposits 219,035 217,138
Organization costs, net 10,500 15,000
------------ ------------
Total assets $ 5,633,317 $ 1,407,897
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 150,913 $ 422,255
Accrued expenses 284,839 403,157
Deferred rent obligation 166,176 160,076
Short-term borrowings from related parties -- 600,000
Short-term portion of obligations under capital leases 216,476 223,420
------------ ------------
Total current liabilities 818,404 1,808,908
Obligations under capital leases, excluding short-term
portion 84,495 183,540
------------ ------------
Total liabilities 902,899 1,992,448
------------ ------------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $0.0001 par value; 45,000,000
shares authorized; 16,137,066 and 7,725,403
shares issued and outstanding at June 30,
1996 and December 31, 1995, respectively 1,584 773
Additional paid-in capital 24,027,829 15,396,249
Notes receivable from stockholders (75,500) (79,000)
Deficit accumulated during the development stage (19,208,632) (15,892,720)
Treasury stock, at cost; 179,886 and 128,978 shares at
June 30, 1996 and December 31, 1995, respectively (14,863) (9,853)
------------ ------------
Total stockholders' equity (deficit) 4,730,418 (584,551)
------------ ------------
Commitments and contingencies (notes 2 and 5)
Total liabilities and stockholders' equity (deficit) $ 5,633,317 $ 1,407,897
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE> 4
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 20,1992
THREE MONTHS SIX MONTHS (DATE OF
ENDED ENDED INCORPORATION)
---------------------------- --------------------------- TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Grant Revenue $ 59,702 $ -- $ 70,246 $ -- $ 70,246
Expenses incurred in the development stage:
Research and development 1,122,624 1,138,982 2,332,865 2,144,965 13,722,255
General and administrative 649,715 599,737 1,162,422 1,109,042 5,727,476
------------ ------------ ----------- ------------ ------------
Total expenses incurred in the development
stage 1,772,339 1,738,719 3,495,287 3,254,007 19,449,731
------------ ----------- ------------ ----------- ------------
Loss from operations (1,712,637) (1,738,719) (3,425,041) (3,254,007) (19,379,485)
Interest income, net:
Interest income 69,684 23,920 150,868 58,009 511,850
Interest expense 12,882 20,501 33,139 42,840 329,192
------------ ------------ ----------- ------------
------------
Total interest income, net 56,802 3,419 117,729 15,169 182,658
------------ ----------- ------------ ----------- ------------
Loss before income taxes (1,655,835) (1,735,300) (3,307,312) (3,238,838) (19,196,827)
Income taxes 4,300 200 8,600 400 11,800
------------ ----------- ------------ ----------- ------------
Net loss $ (1,660,135) $(1,735,500) (3,315,912) (3,239,238) $(19,208,627)
============ =========== ============ =========== ============
Net loss per share $ (0.11) $ (0.23) (0.22) (0.43)
============ =========== ============ ===========
Weighted average shares used to compute
net loss per share 15,684,128 7,494,950 15,121,566 7,494,950
============ =========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE> 5
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 20, 1992
(DATE OF
SIX MONTHS ENDED INCORPORATION)
-------------------------- THROUGH
JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities $(3,738,299) $(3,004,944) $(17,897,279)
----------- ----------- ------------
Cash flows from investing activities:
Purchase of investments -- -- (3,910,150)
Purchase of equipment and leasehold improvements (126,903) (16,059) (1,395,143)
Proceeds from maturity of investments -- 1,500,000 4,000,000
----------- ----------- ------------
Net cash provided by (used in) investing
activities (126,903) 1,483,941 (1,305,293)
----------- ----------- ------------
Cash flows from financing activities:
Net proceeds from sale of common stock 8,630,967 -- 20,315,555
Proceeds from notes payable to related parties -- -- 4,694,500
Proceeds from line of credit -- -- 375,000
Repayment of notes payable and line of credit (600,000) -- (1,581,111)
Principal payments for obligations under
capital lease (105,989) (91,049) (475,542)
Payments received for notes receivable from
stockholders -- -- 2,147
Repurchase of common stock (1,510) -- (1,510)
Net proceeds from exercise of stock options 1,424 -- 1,468
----------- ----------- ------------
Net cash provided by (used in) financing
activities 7,924,892 (91,049) 23,330,507
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents 4,059,690 (1,612,052)
4,127,935
Cash and cash equivalents at beginning of period 68,245 2,071,664 --
----------- ----------- ------------
Cash and cash equivalents at end of period $ 4,127,935 $ 459,612 $ 4,127,935
=========== =========== ============
Supplemental cash flow information:
Cash paid for income taxes $ 5,500 $ 800 8,100
=========== =========== ============
Cash paid for interest $ 38,114 $ 42,840 $ 324,363
=========== =========== ============
Noncash financing activities:
Common stock issued in exchange for notes
receivable from stockholders $ -- $ -- $ 107,385
=========== =========== ============
Equipment purchased under capital
lease obligation $ -- $ -- $ 855,022
=========== =========== ============
Stock dividend $ -- $ -- $ 5
=========== =========== ============
Common stock issued in exchange for note
payable to David Blech and others $ -- $ -- $ 3,594,500
=========== =========== ============
Repurchase of common stock in exchange for notes
receivable from stockholders $ 3,500 $ -- $ 13,353
=========== =========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the Company's financial
position as of June 30, 1996 and December 31, 1995, and results of operations
for the three and six months ended June 30, 1996 and 1995 and for the period
from April 20, 1992 (date of incorporation) to June 30, 1996, and changes in
cash flows for the six months ended June 30, 1996 and 1995, and for the period
from April 20, 1992 (date of incorporation) to June 30, 1996.
These condensed consolidated statements should be read in conjunction
with the Company's audited consolidated financial statements for the years ended
December 31, 1995 and 1994, which are included as part of the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
The Company's condensed consolidated financial statements include the
accounts and results of operations of Optical Analytic, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain items have been reclassified to conform with current financial
statement presentation.
(2) ACQUISITION OF TECHNOLOGY
In April 1996, the Company agreed to acquire the rights to certain
patented technology for use in heart transplantation in exchange for cash and
restricted stock. In accordance with the agreement, one of the inventors of the
solution will join LXR's Scientific Advisory Board and the other inventor will
be hired by the Company to coordinate the development project.
(3) 1993 STOCK OPTION PLAN
During 1996, the Company had the following activity under the 1993 Stock
Option Plan:
<TABLE>
<CAPTION>
Stock Options Outstanding
---------------------------
Number of Price per
shares share
--------- ---------
<S> <C> <C>
Balance as of December 31, 1995 479,385 $ 0.03 - 5.250
Options granted 132,000 2.00 - 6.188
Options cancelled or expired (37,124) 0.03 - 1.875
Options exercised (9,969) 0.03 - 1.375
-------
Balance as of June 30, 1996 564,292
=======
</TABLE>
6
<PAGE> 7
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(4) CAPITAL STOCK
In May 1996, the Company exercised its option to repurchase 50,908 shares
of unvested common stock for a repurchase price of $5,010.
In May 1996, the Company issued 305,694 shares of common stock upon
exercise of a warrant issued in the Company's Private Placement Offering in
January 1996 ("the Private Placement"). The warrant holder elected a cashless
exercise of this warrant resulting in a reduction of shares issuable under the
warrant of 99,095. As of June 30, 1996, the Company had warrants to purchase
680,058 shares of common stock remaining outstanding.
In June 1996, the Company's shareholders approved the proposal to amend
the Company's Restated Certificate of Incorporation to increase the number of
shares of common stock authorized for issuance from 30,000,000 shares to
45,000,000 shares.
(5) LITIGATION
The Company and/or certain of its past and present directors and officers
are named as defendants in three lawsuits, Katz vs. Blech, 95 Civ. 7215
(S.D.N.Y.) ("Katz"), In re Blech Securities Litigation, 94 Civ. 7696 (S.D.N.Y.)
("Blech"), and Degulis vs. LXR Biotechnology Inc., et al., 95 Civ. 4204
(S.D.N.Y) ("Degulis"), all pending in the Southern District of New York. All
three cases are brought on behalf of classes of persons purchasing common shares
of the Company prior to September 21, 1994, and assert claims arising out of the
Company's IPO and subsequent trading of those shares.
The suits allege violations of Sections 11 and 12 of the Securities Act
of 1933 and Sections 10(b) and 20 of the Securities Exchange Act of 1934,
including misrepresentations and omissions in connection with the IPO and
manipulation of share prices. The suits also allege common law claims for fraud
and deceit and seek punitive damages. The complaints allege that defendants,
including the Company and the defendant directors and officers, failed to
disclose in securities filings connected with the IPO the leveraged financial
condition of the Company's underwriter, D. Blech & Co., and its principal, David
Blech. The suits further allege that defendants failed to disclose that D. Blech
& Co. would act as principal market maker for the Company's shares following the
IPO, and that D. Blech & Co.'s extended financial commitments would affect its
ability to maintain a market for the Company's shares. The suits also allege
that defendants assisted or acquiesced in a post-offering scheme to manipulate
the market for the Company's shares and artificially inflate share prices.
Under the Company's bylaws, individual agreements, and state law, the
Company's current and former directors and officers may have certain rights to
indemnification and defense costs in the event they are named in litigation.
Four individual defendants in Katz and/or Degulis have submitted claims for
indemnity and advancement of defense costs, and the Company has agreed to
advance defense costs and indemnify those individuals to the extent permitted by
law. A demand by Mark Germain, the former chairman of the Company and a Managing
Director of D. Blech & Co., remains under consideration by the Company. A demand
by the independent underwriter for contractual indemnity has been denied; such
denial is subject to contest by the underwriter. The Company and the underwriter
entered into a tolling agreement whereby the Company agreed that the running of
any statute of limitations applicable to claims of the underwriter against the
Company would be tolled until the earlier of June 30, 1997 and the termination
of the tolling agreement.
7
<PAGE> 8
LXR BIOTECHNOLOGY INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(5) LITIGATION (CONTINUED)
The Company's primary level directors and officers liability insurance
carrier has tentatively agreed to provide coverage for reasonable attorneys fees
in the defense of the four current and former directors and/or officers
referenced above, but the carrier has refused to provide indemnity or defense
costs for the Company. The Company and the carrier have entered into an
allocation agreement whereby 83% of the defense costs related to the Katz and
Degulis actions will be borne by the carrier, with the remaining 17% to be borne
by the Company. The carrier is not obligated to make any payments until a
$250,000 deductible (applicable to all covered claims, in the aggregate) under
the policy is exhausted. The extent to which costs of defending the litigation
will ultimately be covered by insurance is not yet known. The extent to which
insurance would cover any settlement or judgment has not been determined and may
not be determined until the litigation is completed.
On June 6, 1996, the court decided motions to dismiss previously filed by
the Company and other parties in all three cases. The motions to dismiss Degulis
and Katz were denied. The motion to dismiss In re Blech was granted as to the
Company. On July 26, 1996, plaintiffs filed an amended complaint in In re Blech
which does not name the Company as a defendant; of the remaining defendants in
In re Blech only Mark Germain has made a demand for indemnity against the
Company.
The Company denies any wrongdoing and is defending the above cases
vigorously. While it is possible that the litigation may have a material adverse
effect on the Company, the early stage of the litigation, uncertainty as to
whether any material judgment or settlement will result, and the possibility
that some portion of any settlement or judgment may be covered by insurance,
make it impossible to predict at this time whether the litigation will have a
material adverse financial impact on the Company. An adverse judgment or
settlement could have a material adverse effect on the Company.
(6) SUBSEQUENT EVENT
In July 1996, a warrant holder from the Company's Private Placement
exercised his option to purchase 14,186 shares of the Company's common stock at
a purchase price of $19,506.
8
<PAGE> 9
ITEM 2.
PLAN OF OPERATIONS
The following Plan of Operations contains forward looking statements
regarding, among other things, product development and effectiveness, corporate
partnering, capital and other expenditures, timing of FDA filings and FDA
approval thereof, and sufficiency of cash resources. These forward looking
statements concern matters that involve risks and uncertainties that could cause
actual results to differ materially from those projected in the forward-looking
statements. For a discussion of certain of these risks and uncertainties, please
see "Factors Affecting Future Results" below, the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995 and the "Risk Factors" section
in the Registration Statement on Form S-3 filed by the Company with the
Securities and Exchange Commission on March 1, 1996.
In January 1996, the Company raised approximately $8.6 million (net of
offering expenses) through a private placement offering and sale of 7,360,000
shares of the Company's common stock at a price of $1.25 per share (the "Private
Placement"). The Company also issued 736,000 shares of common stock to the
placement agent as a selling commission for the Private Placement and a warrant
to purchase an additional 736,000 shares of the Company's common stock at an
exercise price of $1.375 per share. A portion of the proceeds from the Private
Placement were used to repay $600,000 in short-term borrowings and accrued
interest from related parties, to pay approximately $660,000 in accounts payable
and other accrued liabilities, and to fund the Company's operations through the
second quarter. As of June 30, 1996, the remaining proceeds from the Private
Placement were invested in short-term interest bearing investments and amounted
to approximately $ 4.1 million.
In June 1996, the Company sold its first Scanning Laser Digital Imaging
prototype for $150,000. The cost of constructing the prototype was included in
research and development costs of previous periods, therefore the selling price
of the prototype was recorded as a reduction of research and development costs
for the six months ending June 30, 1996.
In April 1996, the Company agreed to purchase the rights to a patented
preservation solution for use during heart transplantation, to be called the
Cardiosol solution. This solution is expected to extend the viability of the
organ tissue by inhibiting cell death. As part of the agreement, one of the
solution's inventors is expected to join the Company's Scientific Advisory Board
and the co-inventor of the technology is expected to join the Company to
coordinate the project. In August 1996, the Company filed a 510K to obtain
marketing approval for the Cardiosol solution.
The Company filed an IND with the FDA in March 1996 to commence human
clinical trials of Lexirin for the suppression of severe diarrhea associated
with the pathogenesis of AIDS, as well as with the use of chemotherapeutic
agents and radiation in the treatment of cancer. The Company received approval
of its IND in April and Phase I clinical trials commenced in August 1996 at the
East Bay AIDS Clinic of Alta Bates Medical Center in Berkeley. The Company hopes
to file INDs with the FDA during the first quarter of 1997 to commence Phase
I/II trials of Elirex and Maspin.
It is expected that the Company's overall level of research and
development expenditures will increase over the next 12 months in order to
expand research and development relating to LXR015 (Elirex and Lexirin), Maspin,
the Cardiosol solution, Bak, Fas(DELTA)TM, and the Scanning Laser Digital
Imagers.
There can be no assurance that the Company will be able to successfully
conduct clinical trials of Lexirin, or any other drug candidate, or that the
trial results will be favorable; that the FDA will approve the Company's 510K
application for the Cardiosol solution; that the pre-clinical trial results of
Elirex, Maspin, or any other drug candidate will support the filing of an IND,
or that the FDA will approve any such IND; that the Company will have sufficient
funding to conduct clinical trials; or that the Company will be able to submit
to the FDA an application to market any product, or that any such application
will be approved by the FDA.
As of June 30, 1996, the Company employed 45 full-time employees.
During the remainder of 1996, the Company expects to increase its number of
employees to approximately 50 in order to support the Company's increased
research and development activities. Further increases in employees may occur as
the Company increases its spending in efforts to undertake clinical studies.
9
<PAGE> 10
PLAN OF OPERATIONS
(CONTINUED)
The Company's capital expenditures through the second quarter of 1996
were approximately $127,000. The Company expects that capital expenditures for
1996 will continue to increase in order to support the Company's expanding
research activities. Total capital expenditures for facility enhancements and
related equipment are expected to be approximately $400,000 during 1996.
As of June 30, 1996, there was $ 300,971 outstanding under the
Company's equipment lease line. The lease line bears interest at the rate of
15.3% per annum and is secured by a deposit of $194,128. There are no further
borrowings available under the equipment lease line.
The Company plans to continue to seek corporate partners for its
research and development activities. The Company is also seeking one or more
corporate partners to assist in the marketing of its Scanning Laser Digital
Imager. There can be no assurance that the Company will be able to secure any
corporate partner relationships. The Company expects to fund future research at
the Dana Farber Cancer Institute and the University of Kentucky at Louisville
relating to Maspin and Elirex, respectively, during 1996, and may enter into
research relationships with other universities and research institutions. The
Company also regularly evaluates the possibility of licensing or otherwise
acquiring technologies from third parties.
The Company currently has no source of revenues or capital other than
the remaining proceeds of the Private Placement, interest earned from investment
of these proceeds, and expected grant revenue of approximately $30,000.
Accordingly, the Company will need to raise substantial additional capital to
fund its operations, including the development of its lead compounds. The
Company intends to seek such funding through public or private financing and
corporate collaborations. Although the Company believes its current resources
will be adequate to fund the Company's operations through 1996, there can be no
assurance that unanticipated events affecting the Company's operating expenses
will not result in the Company depleting its funds before that time. There is
also no assurance that additional funding will be available on favorable terms,
if at all.
FACTORS AFFECTING FUTURE RESULTS
The Company's plan for operations depends on numerous factors,
including the progress of its research and development programs, the progress of
preclinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the cost of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, the cost of obtaining
certain technological rights, competing technological and market developments,
changes in the Company's existing research relationships, the ability of the
Company to establish collaborative arrangements, the development of
commercialization activities and arrangements, the purchase of additional
capital equipment, and legal expenses incurred in connection with defending the
securities lawsuits brought against the Company. Accordingly, the Company's
plans are subject to change.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information called for by Part II, Item 1 is incorporated by
reference to Note 5 of the Condensed Consolidated Financial Statements included
in Part I of this document.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1996, the Company held its Annual Meeting of Stockholders
with the following results:
1) The following individuals were elected as directors of the Company:
<TABLE>
<CAPTION>
Shares Voting Shares Voting
in Favor Against
------------- -------------
<S> <C> <C>
Eugene Eidenberg 10,574,121 13,000
L. David Tomei 10,574,321 12,800
Mark J. Tomei 10,569,821 17,300
Jack H. Watson, Jr. 10,574,321 12,800
</TABLE>
2) The proposal to amend the Company's Restated Certificate of
Incorporation to increase the number of shares of common stock authorized for
issuance was approved with 10,412,291 shares cast in favor of the amendment,
152,925 shares voting against and 21,405 shares withheld and/or abstaining.
3) The proposal to amend the Company's 1993 Stock Option Plan to
increase the number of shares of common stock reserved for issuance by 300,000
was approved with 10,281,585 shares cast in favor of the amendment, 188,112
shares voting against and 26,505 shares withheld and/or abstaining.
4) The proposal to amend the Company's Director's Stock Option Plan to
provide for an additional option grant of 10,000 shares of common stock to the
Chairman of the Board of Directors was approved with 10,206,639 shares cast in
favor of the amendment, 263,758 shares voting against, and 25,805 shares
withheld and/or abstaining.
5) The selection of KPMG Peat Marwick LLP as the Company's certified
public accountants was ratified with 10,522,056 shares cast in favor of the
selection, 8,725 shares voting against, and 56,340 shares withheld and/or
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are attached hereto:
Exhibit
Number Title
------- -----
3.01 The Company's Certificate of Incorporation.
3.03 Amendment to the Company's Certificate of Incorporation.
10.01 1993 Stock Option Plan, as amended to date, and related Stock
Option Agreement and Exercise Agreement.
10.02 1993 Director's Stock Option Plan, as amended to date, and
related Stock Option Agreement and Exercise Agreement.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the period for
which this report is filed.
11
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LXR BIOTECHNOLOGY INC.
Date: August 12, 1996 By: /s/ Mark J. Tomei
----------------- ---------------------------
Mark J. Tomei
Chief Financial Officer, Chief Operating
Officer, and Secretary
12
<PAGE> 13
EXHIBIT INDEX
Exhibit
Number Title
------- -----
3.01 The Company's Certificate of Incorporation.
3.03 Amendment to the Company's Certificate of Incorporation.
10.01 1993 Stock Option Plan, as amended to date, and related Stock
Option Agreement and Exercise Agreement.
10.02 1993 Director's Stock Option Plan, as amended to date, and
related Stock Option Agreement and Exercise Agreement.
27.01 Financial Data Schedule.
13
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
LXR BIOTECHNOLOGY INC.
LXR Biotechnology Inc., a Delaware corporation, does hereby certify that
the following amendment to the corporation's Restated Certificate of
Incorporation has been duly adopted by the corporation's Board of Directors and
stockholders in accordance with the provisions of Section 242 of the Delaware
General Corporation Law:
Article IV of the Restated Certificate of Incorporation is hereby amended
to read in full as follows:
The Corporation is authorized to issue two classes of shares
designated, respectively, Common Stock, of which the Corporation is
authorized to issue 45,000,000 shares, each having a par value of
$0.0001, and Preferred Stock, of which the Corporation is authorized to
issue 5,000,000 shares, each having a par value of $0.01. The Preferred
Stock may be issued from time to time in one or more series. The Board
of Directors is authorized to fix or alter any or all of the rights,
preferences, privileges and restrictions, including, without
limitation, the dividend rights, dividend rate, conversion rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, preemptive rights and the
liquidation preferences, of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the
designation thereof, or any of them; and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of
that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally
fixing the number of share of such series.
IN WITNESS WHEREOF, said corporation has caused this Certificate of
Amendment to be signed and attested by its duly authorized officers this 13th
day of June, 1996.
LXR BIOTECHNOLOGY INC.
/s/ L. David Tomei
---------------------------------
L. David Tomei, President
ATTEST:
/s/ Mark J. Tomei
- ------------------------------
Mark J. Tomei, Secretary
<PAGE> 1
RESTATED CERTIFICATE OF INCORPORATION
OF
LXR BIOTECHNOLOGY, INC.
(Originally incorporated on April 20, 1992)
LXR Biotechnology, Inc., a Delaware corporation, hereby certifies
that the Restated Certificate of Incorporation of the corporation attached
hereto as Exhibit "A", which is incorporated herein by this reference, and which
restates, integrates and further amends the provisions of the Restated
Certificate of Incorporation of this corporation as heretofore amended or
supplemented, has been duly adopted by the corporation's Board of Directors and
stockholders in accordance with Sections 228, 242 and 245 of the Delaware
General Corporation Law, notice to nonconsenting stockholders having been given
in accordance with Section 228(d) of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this Restated
Certificate of Incorportion to be signed by its duly authorized officers this
9th day of December, 1993.
LXR BIOTECHNOLOGY, INC.
By: /s/ L. Scott Minick
-----------------------------
L. Scott Minick, President
ATTEST:
/s/ Mark J. Tomei
- -------------------------------
Mark J. Tomei, Secretary
<PAGE> 2
EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
LXR BIOTECHNOLOGY, INC.
ARTICLE I
The name of the corporation (hereinafter called the "Corporation") is LXR
Biotechnology Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent,
and the name of the registered agent of the Corporation in the State of Delaware
at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of shares designated,
respectively, Common Stock, of which the Corporation is authorized to issue
30,000,000 shares, each having a par value of $0.0001, and Preferred Stock, of
which the Corporation is authorized to issue 5,000,000 shares, each having a par
value of $0.01. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to fix or alter any or all of
the rights, preferences, privileges and restrictions, including, without
limitation, the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
redemption price or prices, preemptive rights and the liquidation preferences,
of any wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the number of
share of such series.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors shall have the power to adopt, amend, repeal or otherwise
alter the Bylaws of the
<PAGE> 3
Corporation without any action on the part of the stockholders; provided,
however, that any Bylaws made by the Board of Directors and any and all powers
conferred by any of said Bylaws may be amended, altered or repealed by the
stockholders; and provided further, that no amendment to the Bylaws adopted by
the Board of Directors shall vary or conflict with any amendment adopted by the
stockholders that expressly states that it may not be amended by the Board of
Directors.
ARTICLE VI
A director of the Corporation shall, to the full extent permitted by the
General Corporation Law of the State of Delaware, not be liable to the
Corporation or its stockholders for monetary damages for breach of his fiduciary
duty as a director.
2
<PAGE> 1
LXR BIOTECHNOLOGY INC.
1993 STOCK OPTION PLAN
As adopted May 20, 1993 and
amended through February 27, 1996
1. PURPOSE. This 1993 Stock Option Plan ("Plan") is established as a
compensatory plan to attract, retain and provide equity incentives to selected
persons to promote the financial success of LXR Biotechnology Inc., a Delaware
corporation, (the "Company"). Capitalized terms not previously defined herein
are defined in Section 17 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"Options") may be either (a) incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Revenue
Code"), or (b) nonqualified stock options ("NQSOs"), as designated at the time
of grant. The shares of stock that may be purchased upon exercise of Options
granted under this Plan (the "Shares") are shares of the common stock, $0.0001
par value per share, of the Company.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued
pursuant to Options granted under this Plan is 1,049,850 Shares, subject to
adjustment as provided in this Plan. "Named Executive Officers" (as that term is
defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act
of 1934, as amended, (the "Exchange Act") shall each be eligible to receive up
to an aggregate maximum of 333,333 Shares over the term of the Plan. If any
Option expires or is terminated without being exercised in whole or in part, the
unexercised or released Shares from such Option shall be available for future
grant and purchase under this Plan. At all times during the term of this Plan,
the Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under this Plan.
4. ELIGIBILITY. Options may be granted to employees, officers, directors,
consultants, independent contractors and advisers (provided such consultants,
contractors and advisers render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction) of the Company or
any Parent, Subsidiary or Affiliate of the Company. ISOs may be granted only to
employees (including officers and directors who are also employees) of the
Company or a Parent or Subsidiary of the Company. The Committee (as defined in
Section 14) in its sole discretion shall select the recipients of Options
("Optionees"). An Optionee may be granted more than one Option under this Plan.
The Company may also, from time to time, substitute or assume outstanding
options granted by another company, whether in connection with an acquisition of
such other company or otherwise, by either (a) granting an Option under this
Plan in replacement of the option assumed by the Company, or (b) treating the
assumed option as if it had been granted under this Plan if the terms of such
assumed option could be applied to an Option granted under this Plan. Such
substitution or assumption shall be permissible if the holder of the substituted
or assumed option would have been eligible to be granted an Option hereunder if
the other company had applied the rules of this Plan to such grant.
<PAGE> 2
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine whether
each Option is to be an ISO or an NQSO, the number of Shares subject to the
Option, the exercise price of the Option, the period during which the Option may
be exercised, and all other terms and conditions of the Option, subject to the
following:
5.1 Form of Option Grant. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant (the "Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option shall be the date
on which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option will be
delivered to Optionee with a copy of this Plan within a reasonable time after
the granting of the Option.
5.3 Exercise Price. The exercise price of an Option shall be not
less than 100% of the Fair Market Value of the Shares on the date the Option is
granted. The exercise price of any Option granted to a person owning more than
l0% of the total combined voting power of all classes of stock of the Company or
any Parent or Subsidiary of the Company ("Ten Percent Shareholder") shall not be
less than 110% of the Fair Market Value of the Shares on the date the Option is
granted.
5.4 Exercise Period. Options shall be exercisable within the times
or upon the events determined by the Committee as set forth in the Grant;
provided, however, that no Option shall be exercisable after the expiration of
ten (10) years from the date the Option is granted, and provided further that no
ISO granted to a Ten Percent Stockholder shall be exercisable after the
expiration of five (5) years from the date the Option is granted.
5.5 Limitations on ISOs. The aggregate Fair Market Value (determined
as of the time an Option is granted) of stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares with respect to which ISOs are exercisable for the first
time by an Optionee during any calendar year exceeds $100,000, the Options for
the first $100,000 worth of Shares to become exercisable in such year shall be
ISOs and the Options for the amount in excess of $100,000 that becomes
exercisable in that year shall be NQSOs. In the event that the Revenue Code or
the regulations promulgated thereunder are amended after the effective date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.
5.6 Options Non-Transferable. Options granted under this Plan, and
any interest therein, shall not be transferable or assignable by Optionee, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Revenue Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder, and shall
be exercisable during the lifetime of Optionee only by Optionee; provided,
however, that NQSOs
-2-
<PAGE> 3
held by an Optionee who is not an officer or director of the Company or other
person (in each case, an "Insider") whose transactions in the Company's common
stock are subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), may be transferred to such family members, trusts
and charitable institutions as the Committee, in its sole discretion, shall
approve at the time of the grant of such Option.
5.7 Assumed Options. In the event the Company assumes an option
granted by another company, the terms and conditions of such option shall remain
unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
424 of the Revenue Code). In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section 4), such new
option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.
6. EXERCISE OF OPTIONS.
6.1 Notice. Options may be exercised only by delivery to the Company
of a written stock option exercise agreement (the "Exercise Agreement") in a
form approved by the Committee (which need not be the same for each Optionee),
stating the number of Shares being purchased, the restrictions imposed on the
Shares, if any, and such representations and agreements regarding Optionee's
investment intent and access to information, if any, as may be required by the
Company to comply with applicable securities laws, together with payment in full
of the exercise price for the number of Shares being purchased.
6.2 Payment. Payment for the Shares may be made in cash (by check)
or, where approved by the Committee in its sole discretion and where permitted
by law: (a) by cancellation of indebtedness of the Company to the Optionee; (b)
by surrender of shares of common stock of the Company having a Fair Market Value
equal to the applicable exercise price of the Options that have been owned by
Optionee for more than six (6) months (and which have been paid for within the
meaning of the Securities and Exchange Commission ("SEC") Rule 144 and, if such
Shares were purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares), or were obtained by Optionee
in the open public market; (c) by waiver of compensation due or accrued to
Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of Securities Dealers
(an "NASD Dealer") whereby Optionee irrevocably elects to exercise the Option
and to sell a portion of the Shares so purchased to pay for the exercise price
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (e) provided that a public
market for the Company's stock exists, through a "margin" commitment from
Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the Company; or (f) by any
combination of the foregoing.
-3-
<PAGE> 4
6.3 Withholding Taxes. Prior to issuance of the Shares upon exercise
of an Option, Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable. Where approved by
the Committee in its sole discretion, Optionee may provide for payment of
withholding taxes upon exercise of the Option by requesting that the Company
retain Shares with a Fair Market Value equal to the minimum amount of taxes
required to be withheld. In such case, the Company shall issue the net number of
Shares to Optionee by deducting the Shares retained from the Shares exercised.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined in accordance
with Section 83 of the Revenue Code (the "Tax Date"). All elections by Optionees
to have Shares withheld for this purpose shall be made in writing in a form
acceptable to the Committee and shall be subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares as to which the election is
made; and
(c) all elections shall be subject to the consent or
disapproval of the Committee.
In addition, if Optionee is an Insider, and if the
Company is subject to Section 16(b) of the Exchange
Act, the following shall apply:
(d) the election may not be made within six (6) months
of the date of grant of the Option; except as
otherwise permitted by Rule 16b-3(e) promulgated
under Section 16 of the Exchange Act;
(e) the election must be made either six (6) months
prior to the Tax Date or in the 10-day period
beginning on the third day following the public
release of the Company's quarterly or annual
summary statement of operations; and
(f) if the Option is exercised within six months of the
date of grant and the Tax Date is deferred until
six months after the date of grant of the Option
because no election is filed under Section 83(b) of
the Revenue Code, Optionee shall receive the full
number of Shares with respect to which the Option
is exercised, but Optionee shall be unconditionally
obligated to tender back to the Company the proper
number of Shares on the Tax Date.
-4-
<PAGE> 5
6.4 Limitations on Exercise. Notwithstanding the exercise periods
set forth in the Grant, exercise of an Option shall always be subject to the
following:
6.4.1 If Optionee ceases to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company for any reason except death or
disability, Optionee may exercise such Optionee's Options to the extent (and
only to the extent) that they would have been exercisable upon the date of
termination, within ninety (90) days after the date of termination (or such
shorter time period as may be specified in the Grant).
6.4.2 If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated because of the death of
Optionee or disability of Optionee, Optionee's Options may be exercised to the
extent (and only to the extent) that they would have been exercisable by
Optionee on the date of termination, by Optionee (or Optionee's legal
representative) within twelve (12) months after the date of termination (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options; provided that in the event of
termination due to disability, other than as defined in Section 22(a)(3) of the
Internal Revenue Code, as amended, any ISO which remains exercisable after 90
days after the date of termination shall be deemed a NQSO.
6.4.3 If Optionee is an Insider and the Company is subject to
Section 16(b) of the Exchange Act, and Optionee ceases to be employed by the
Company for any reason, Optionee's Option will remain exercisable as to the
extent that it was exercisable on the date of termination, until the later of
(i) that last date such option would be exercisable under 6.4.1 or 6.4.2, as
applicable, or (ii) the end of the thirty day period commencing on the date six
months after the date of grant of such option, with any extension beyond ninety
(90) days after termination of employment deemed to be as an NQSO, and provided
further that in no event may an Option be exercisable later than the expiration
date of the Option.
6.4.4 The Committee shall have discretion to determine whether
Optionee has ceased to be employed by the Company or any Parent, Subsidiary or
Affiliate of the Company and the effective date on which such employment
terminated.
6.4.5 In the case of an Optionee who is a director,
independent consultant or adviser, the Committee will have the discretion to
determine whether Optionee is "employed by the Company or any Parent, Subsidiary
or Affiliate of the Company" pursuant to the foregoing Sections.
6.4.6 The Committee may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an Option, provided that such
minimum number will not prevent Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
6.4.7 An Option shall not be exercisable unless such exercise
is in compliance with the Securities Act of 1933, as amended (the "Securities
Act"), all applicable state securities laws and the requirements of any stock
exchange or national market system upon which the Shares may then be listed, as
they are in effect on the date of exercise. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the
-5-
<PAGE> 6
registration, qualification or listing requirements of any state securities
laws, stock exchange or national market system, and the Company shall have no
liability for any inability or failure to do so.
7. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company
may reserve to itself and/or its assignee(s) in the Grant a right of first
refusal to purchase all Shares that an Optionee (or a subsequent transferee) may
propose to transfer to a third party. Further, at the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Grant
a right to repurchase a portion of or all Shares held by an Optionee upon
Optionee's termination of employment or service with the Company or a Parent,
Subsidiary or Affiliate of the Company, for any reason within a specified time
as determined by the Committee at the time of grant at Optionee's original
purchase price, the Fair Market Value of such Shares or a price determined by a
formula or other provision set forth in the Grant.
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Committee shall
have the power to modify, extend or renew outstanding Options and to authorize
the grant of new Options in substitution therefor, provided that any such action
may not, without the written consent of Optionee, impair any rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Revenue Code. The Committee shall have the power to reduce the exercise
price of outstanding Options without the consent of Optionees by a written
notice to the Optionees affected; provided, however, that the exercise price per
Share may not be reduced below the minimum exercise price that would be
permitted under Section 5.3 of this Plan for Options granted on the date the
action is taken to reduce the exercise price; and provided that the exercise
price per Share may not be reduced below the par value per Share.
9. STOCK OWNERSHIP; FINANCIAL STATEMENTS. No Optionee shall have any of
the rights of a stockholder with respect to any Shares subject to an Option
until such Option is properly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
such date, except as provided in this Plan. However, the Company shall provide
to each Optionee, during the period for which Optionee has one or more Options
outstanding, copies of the financial statements of the Company, consisting of,
at a minimum, a balance sheet and an income statement, at least annually. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assume their access to equivalent
information.
10. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Optionee's
employment or other relationship at any time, with or without cause.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company
without consideration, or if a substantial portion of the assets of the
-6-
<PAGE> 7
Company are distributed, without consideration in a spin-off or similar
transaction, to the stockholders of the Company, the number of Shares available
under this Plan and the number of Shares subject to outstanding Options and the
exercise price per Share of such Options shall be proportionately adjusted,
subject to any required action by the Board of Directors (the "Board") or
stockholders of the Company and compliance with applicable securities laws;
provided, however, that a fractional share shall not be issued upon exercise of
any Option and any fractions of a Share that would have resulted shall either be
cashed out at Fair Market Value or the number of Shares issuable under the
Option shall be rounded up to the nearest whole number, as determined by the
Committee; and provided further that the exercise price may not be decreased to
below the par value, if any, for the Shares.
12. ASSUMPTION OF OPTIONS BY SUCCESSORS.
12.1 Assumption or Substitution. In the event of (a) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly owned subsidiary, a reincorporation, or
other transaction in which there is no substantial change in the stockholders of
the corporation and the Options granted under this Plan are assumed or replaced
by the successor corporation, which assumption shall be binding on all
Optionees), (b) a dissolution or liquidation of the Company, (c) the sale of
substantially all of the assets of the Company, or (d) any other transaction
which qualifies as a "corporate transaction" under Section 424(a) of the Revenue
Code wherein the stockholders of the Company give up all of their equity
interest in the Company (except for the acquisition, sale or transfer of all or
substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed or replaced by the successor corporation,
which assumption shall be binding on all Optionees. In the alternative, the
successor corporation may substitute an equivalent option or provide
substantially similar consideration to Optionees as was provided to stockholders
(after taking into account the existing provisions of Optionee's options, such
as the exercise price and the vesting schedule). The successor corporation may
also issue, in place of outstanding shares of the Company held by Optionee as a
result of the exercise of an Option that is subject to repurchase, substantially
similar shares or other property subject to similar repurchase restrictions no
less favorable to Optionee.
12.2 Expiration. In the event such successor corporation, if any,
refuses to assume or substitute Options, as provided above, pursuant to a
transaction described in Subsections 12.1 above, or there is no successor
corporation, and if the Company is ceasing to exist as a separate corporate
entity, the Options shall, notwithstanding any contrary terms in the Grant,
expire on (and, in the case of a transaction described in Subsection 12.1(a)
above, if the Company has reserved to itself a right to repurchase Shares issued
on exercise of Options at the original purchase price of such Shares, such right
shall terminate on), a date at least 20 days after the Board gives written
notice to Optionees specifying the terms and conditions of such termination.
12.3 Additional Provisions. Subject to the foregoing provisions of
this Section 12, in the event of the occurrence of any transaction described in
Section 12.1, any outstanding Option shall be treated as provided in the
applicable agreement or plan of merger, consolidation, dissolution, liquidation,
sale of assets or other "corporate transaction".
-7-
<PAGE> 8
13. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board of the Company. This Plan shall be
approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve months before or after the date this
Plan is adopted by the Board. Upon the effective date of the Plan, the Board may
grant Options pursuant to this Plan; provided that, in the event that
Stockholder approval is not obtained within the time period provided herein, all
Options granted hereunder shall terminate. No Option that is issued as a result
of any increase in the number of shares authorized to be issued under this Plan
shall be exercised prior to the time such increase has been approved by the
Stockholders of the Company and all such Options granted pursuant to such
increase shall similarly terminate if such Stockholder approval is not obtained.
After the Company becomes subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 with respect to
Stockholder approval.
14. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). If the Company registers
under the Exchange Act, the Company will take appropriate steps to comply with
the disinterested director requirements of Section 16(b) of the Exchange Act,
which shall consist of the appointment by the Board of a Committee consisting of
not less than two members of the Board, each of whom is a Disinterested Person.
If two or more members of the Board are Outside Directors, the Committee shall
be comprised of at least two members of the Board of Directors, all of whom are
Outside Directors and Disinterested Persons. As used in this Plan, references to
the "Committee" shall mean either the committee appointed by the Board to
administer this Plan or the Board if no committee has been established. The
interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option. The Committee may delegate to officers of the Company the authority
to grant Options under this Plan to Optionees who are not Insiders of the
Company.
15. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years after the date on which this Plan is
adopted by the Board.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect including (but not limited to)
amendment of any form of grant, exercise agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Committee shall not, without
the approval of the stockholders of the Company, amend this Plan in any manner
that requires such stockholder approval pursuant to the Revenue Code or the
regulations promulgated thereunder as such provisions apply to ISO plans or
pursuant to the Exchange Act or Rule 16b-3 (or its successor) promulgated
thereunder.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
17.1 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
-8-
<PAGE> 9
17.2 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
17.3 "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
17.4 "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the SEC under Section 16(b) of the Exchange
Act, as such rule is amended from time to time and as interpreted by the SEC.
17.5 "Fair Market Value" shall mean the fair market value of the
Shares as determined by the Committee from time to time in good faith. If a
public market exists for the Shares, the Fair Market Value shall be the average
of the last reported bid and asked prices for common stock of the Company on the
last trading day prior to the date of determination (or the average closing
price over the number of consecutive working days preceding the date of
determination as the Committee shall deem appropriate) or, in the event the
common stock of the Company is listed on a stock exchange or on the Nasdaq
National Market, the Fair Market Value shall be the closing price on such
exchange or quotation system on the last trading day prior to the date of
determination (or the average closing price over the number of consecutive
working days preceding the date of determination as the Committee shall deem
appropriate).
17.6 "Outside Director" shall mean any director who is not (i) a
current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company, (ii) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services (other
than benefits under a tax-qualified pension plan), (iii) a current or former
officer of the Company or any Parent, Subsidiary or Affiliate of the Company or
(iv) currently receiving compensation for personal services in any capacity,
other than as a director, from the Company or any Parent, Subsidiary or
Affiliate of the Company; provided, however, that at such time as the term
"Outside Director", as used in Section 162(m) is defined in regulations
promulgated under Section 162(m) of the Revenue Code, "Outside Director" shall
have the meaning set forth in such regulations, as amended from time to time and
as interpreted by the Internal Revenue Service.
-9-
<PAGE> 10
FOR USE
POST-IPO ONLY
Exhibit A
LXR BIOTECHNOLOGY INC.
1993 STOCK OPTION PLAN
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock, $0.0001 par
value per share, as set forth below:
Optionee___________________________ Number of Shares Purchased:______________
Social Security Number:____________ Purchase Price per Share:________________
Address:___________________________ Aggregate Purchase Price:________________
Date of Option Grant:____________________
Type of Option:[ ]Incentive Stock Exact Name of Title to Shares:___________
Option _________________________________________
[ ]Nonqualified Stock _________________________________________
Option
Optionee hereby delivers to the Company the Aggregate Purchase Price, to
the extent permitted in the Grant, as follows (check as applicable and
complete):
[ ] in cash (by check) in the amount of $__________, receipt of which is
acknowledged by the Company;
[ ] by delivery of _________ fully-paid, nonassessable and vested shares of
the common stock of the Company owned by Optionee for at least six (6)
months prior to the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Optionee in the open public
market, and owned free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market Value of $________
per share;
[ ] by cancellation of indebtedness of the Company to Optionee in the amount
of $_________;
[ ] by the waiver hereby of compensation due or accrued for services
rendered in the amount of $___________;
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein, in the amount of $_________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein, in the amount of $___________.
TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by reference.
This Exercise Agreement, the Plan and the Grant constitute the entire agreement
of the parties and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by Delaware law except for that body of law pertaining
to conflict of laws.
Date:______________________________ _________________________________________
Signature of Optionee
<PAGE> 11
LXR BIOTECHNOLOGY INC.
STOCK OPTION GRANT
Optionee: ____________________________________
Address: ____________________________________
____________________________________
Total Shares Subject to Option: ____________________________________
Exercise Price per Share ____________________________________
Date of Grant: ____________________________________
Expiration Date: ____________________________________
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. GRANT OF OPTION. LXR Biotechnology Inc., a Delaware corporation (the
"Company"), hereby grants to the optionee named above ("Optionee") an option
(this "Option") to purchase the total number of shares of common stock $0.0001
par value per share, of the Company set forth above (the "Shares") at the
exercise price per share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Stock Option Grant (this "Grant") and the
Company's 1993 Stock Option Plan, as amended to the date hereof (the "Plan"). If
designated as an Incentive Stock Option above, this Option is intended to
qualify as an "incentive stock option" ("ISO") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Revenue Code"). Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall become exercisable as to portions of the
Shares as follows: (a) This Option shall not be exercisable with respect to any
of the Shares until __________, 199 (the "First Vesting Date"); (b) if Optionee
has been continuously employed by the Company within the meaning of Section 4
below at all times during the time period beginning on the Date of Grant set
forth above and ending on the First Vesting Date, then on the First Vesting Date
this Option shall become exercisable as to ______ percent (_____%) of the
Shares; and (c) thereafter this Option shall become exercisable as to an
additional ________ percent (______%) of the Shares on the ________ day of each
month following the First Vesting Date if Optionee has remained continuously
employed by the Company at all times on or prior to the relevant vesting date;
provided that Optionee shall in no event be entitled under this Option to
purchase a number of shares of the Company's common stock greater than the
"Total Shares Subject to Option"
<PAGE> 12
indicated above. Notwithstanding anything herein to the contrary, this Option
shall expire on the Expiration Date set forth above and must be exercised, if at
all, on or before the Expiration Date; and provided further that this Option
must become exercisable as to at least 20% of the Shares for each full year
since the Date of Grant.
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act and all applicable state
securities laws as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's common stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the SEC, any state securities commission or any stock exchange
to effect such compliance.
4. TERMINATION OF OPTION. Except as provided below in this Section , this
Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or, in the
case of a nonqualified stock option, an Affiliate of the Company). Optionee
shall be considered to be employed by the Company for all purposes under Section
2 and this Section 4 if Optionee is an officer, director or full-time employee
of the Company or any Parent, Subsidiary or Affiliate of the Company or if the
Committee determines that Optionee is rendering substantial services as a
part-time employee, consultant or adviser to the Company or any Parent,
Subsidiary or Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated (the "Termination Date").
4.1 Termination Generally. If Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for any reason
except death or disability, this Option, to the extent (and only to the extent)
that it would have been exercisable by Optionee on the Termination Date, may be
exercised by Optionee within ninety (90) days months after the Termination Date,
but in no event later than the Expiration Date.
4.2 Death or Disability. If Optionee's employment with the Company
or any Parent, Subsidiary or Affiliate of the Company is terminated because of
the death of Optionee or the disability of Optionee, this Option, to the extent
(and only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee (or Optionee's legal
representative) within twelve (12) months after the Termination Date, but in no
event later than the Expiration Date.
4.3 No Right to Employment. Nothing in the Plan or this Grant shall
confer on Optionee any right to continue in the employ of, or other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Optionee's employment or other relationship at any
time, with or without cause.
-2-
<PAGE> 13
5. MANNER OF EXERCISE.
5.1 Exercise Agreement. This Option shall be exercisable by delivery
to the Company of an executed written Stock Option Exercise Agreement in the
form attached hereto as Exhibit A, or in such other form as may be approved by
the Company, which shall set forth Optionee's election to exercise some or all
of this Option, the number of Shares being purchased, any restrictions imposed
on the Shares and such other representations and agreements as may be required
by the Company to comply with applicable securities laws.
5.2 Exercise Price. Such notice shall be accompanied by full payment
of the Exercise Price for the Shares being purchased. Payment for the Shares may
be made in cash (by check) or, where approved by the Committee in its sole
discretion and where permitted by law: (a) by cancellation of indebtedness of
the Company to Optionee; (b) by surrender of shares of common stock of the
Company having a Fair Market Value equal to the exercise price of the Option
that have been owned by Optionee for more than six (6) months (and which have
been paid for within the meaning of SEC Rule 144 and, if such Shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares), or were obtained by Optionee in the open
public market; (c) by waiver of compensation due or accrued to Optionee for
services rendered; (d) provided that a public market for the Company's stock
exists, through a "same day sale" commitment from Optionee and a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
Dealer") whereby Optionee irrevocably elects to exercise the Option and to sell
a portion of the Shares so purchased to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; (e) provided that a public market for
the Company's stock exists, through a "margin" commitment from Optionee and an
NASD Dealer whereby Optionee irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or (f) by any combination of
the foregoing.
5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee must pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee, Optionee's legal
representative or Optionee's donee.
6. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO within (a) the date
two years after the Date of Grant, or (b) the date one year after exercise of
the ISO with respect to the Shares to be sold or disposed, Optionee shall
immediately notify the Company in writing of such disposition. Optionee
acknowledges and
-3-
<PAGE> 14
agrees that Optionee may be subject to income tax withholding by the Company on
the compensation income recognized by Optionee from any such early disposition
by payment in cash (or in Shares, to the extent permissible under Section 5.3)
or out of the current wages or other earnings payable to Optionee.
7. NONTRANSFERABILITY OF OPTION. If this Option is an ISO, or if Optionee
is an Insider subject to Section 16(b) of the Exchange Act, then this Option may
not be transferred in any manner other than by will or by the law of descent and
distribution and may be exercised during the lifetime of Optionee only by
Optionee. Otherwise, this Option may only be transferred (a) pursuant to a
qualified domestic relations order as defined by the Revenue Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder, or (b) to
Optionee's immediate family, to a trust for the benefit of Optionee or
Optionee's immediate family, or to a charitable entity qualified under Revenue
Code Section 501(c), where "immediate family" shall mean spouse, lineal
descendant or antecedent, brother or sister. The terms of this Option shall be
binding upon the executors, administrators, successors and assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
this form of Grant was adopted of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal
income tax purposes and may subject Optionee to an alternative minimum tax
liability in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price. The Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
8.3 Disposition of Shares. In the case of an NQSO, if Shares are
held for more than one year before disposition, any gain on disposition of the
Shares will be treated as long- term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares are held for more than one
year after the date of exercise and more than two years after the Date of Grant,
any gain on disposition on the Shares will be treated as long-term capital gain
for federal and California income tax purposes. If Shares acquired pursuant to
an ISO are disposed of within
-4-
<PAGE> 15
such one year or two year periods (a "disqualifying disposition"), gain on such
disqualifying disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price (the
"Spread"), or, if less, the difference between the amount realized on the sale
of such Shares and the Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the Company's Board of
Directors or the Committee thereof that administers the Plan, which shall review
such dispute at its next regular meeting. The resolution of such a dispute by
the Board or Committee shall be final and binding on the Company and on
Optionee.
10. ENTIRE AGREEMENT. The Plan and the Stock Option Exercise Agreement
attached as Exhibit A are incorporated herein by this reference. This Grant, the
Plan and the Stock Option Exercise Agreement constitute the entire agreement of
the parties hereto and supersede all prior undertakings and agreements with
respect to the subject matter hereof.
LXR BIOTECHNOLOGY INC.
By:_________________________________
Title:______________________________
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and conditions of the Plan and this
Stock Option Grant. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or disposition.
_____________________
Optionee
-5-
<PAGE> 1
LXR BIOTECHNOLOGY INC.
1993 DIRECTORS STOCK OPTION PLAN
As adopted on December 8, 1993 and
as amended as of October 4, 1994 and December 1, 1995
1. PURPOSE. This 1993 Directors Stock Option Plan (this "Plan") is
established to provide equity incentives for nonemployee members of the Board of
Directors of LXR Biotechnology Inc. (the "Company") who are described in Section
6.1 below, by granting such persons options to purchase shares of stock of the
Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board of Directors (the "Board") of the
Company. This Plan shall be approved by the stockholders of the Company,
consistent with applicable laws, within twelve months after the date that it is
adopted by the Board. After adoption of this Plan by the Board, options
("Options") may be granted under this Plan provided that, in the event that
stockholder approval is not obtained within the time period provided herein,
this Plan, and all Options granted hereunder, shall terminate. Following
adoption by the Board of a material amendment to this Plan requiring stockholder
approval pursuant to Rule 16b-3(b) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), Options may be granted under this Plan
in accordance with such material amendment, provided that, any such Option shall
not be exercisable prior to the time such material amendment has been approved
by the stockholders of the Company and provided further that, in the event
stockholder approval is not obtained within the time period provided herein, all
such Options granted pursuant to such material amendment shall terminate. No
Option that is issued as a result of any increase in the number of shares
authorized to be issued under this Plan shall be exercised prior to the time
such increase has been approved by the stockholders of the Company and all such
Options granted pursuant to such increase shall similarly terminate if such
stockholder approval is not obtained. So long as the Company is subject to
Section 16(b) of the Exchange Act, the Company will comply with the requirements
of Rule 16b-3 with respect to stockholder approval.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
nonqualified stock options ("NQSOs"). The shares of stock that may be purchased
upon exercise of Options granted under this Plan (the "Shares") are shares of
the Common Stock, $0.0001 par value per Share, of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 200,000 Shares, subject to
adjustment as provided in this Plan. If any Option is terminated for any reason
without being exercised in whole or in part, the Shares thereby released from
such Option shall be available for purchase under other Options subsequently
granted under this Plan. At all times during the term of this Plan, the
<PAGE> 2
1993 Directors Stock Option Plan
As amended as of December 1, 1995
Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under this Plan.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 Eligibility. Options may be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 18 below (each
an "Optionee").
6.2 Option Grant. Each Optionee who was a member of the Board on the
date that this Plan was first adopted by the Board shall automatically be
granted an Option for 5,000 Shares on March 31 of each calendar year, commencing
March 31, 1995, provided the Optionee is still a member of the Board. Each
Optionee who on or after October 5, 1994 becomes a member of the Board shall
automatically be granted an Option for 5,000 Shares on the date such Optionee
becomes a member of the Board, and on each anniversary of joining the Board, if
the Optionee is still a member of the Board, each such Optionee shall
automatically be granted an additional Option for 5,000 Shares.
6.3 Chairman of the Board Grant. An Optionee who on or after December
1, 1995 is or becomes "Chairman of the Board" shall automatically be granted an
additional Option for 10,000 Shares on the later of December 1, 1995 or the date
such Optionee becomes "Chairman of the Board".
6.4 Maximum Shares. No grant will be made if such grant will cause
the number of Shares issued or subject to outstanding Options under this Plan to
exceed the number specified in Section 4 above.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant ("Grant") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. The date of grant of each Option is the respective
"Start Date" for each such Option. Each Option granted under the Plan will vest
as to twenty percent
-2-
<PAGE> 3
1993 Directors Stock Option Plan
As amended as of December 1, 1995
(20%) of the Shares subject to it on the date one year after the Start Date and
will vest as to an additional 1.667% of the Shares each calendar month
thereafter, so long as the Optionee continuously remains a director of the
Company.
7.3 Exercise Price. The exercise price of an Option shall be the Fair
Market Value (as defined in Section 18.4) of the Shares, at the time that the
Option is granted.
7.4 Termination of Option. Except as provided below in this Section,
each Option shall expire ten years after the Start Date (the "Expiration Date").
The Option shall cease to vest if Optionee ceases to be a member of the Board.
The date on which Optionee ceases to be a member of the Board shall be referred
to as the "Termination Date." An Option may be exercised after the Termination
Date only as set forth below:
(a) Termination Generally. If Optionee ceases to be a member of
the Board for any reason except death or disability, each Option, to the extent
(and only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee within six (6) months after the
Termination Date, but in no event later than the Expiration Date.
(b) Death or Disability. If Optionee ceases to be a member of the
Board because of the death of Optionee or the disability of Optionee within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"), each Option, to the extent (and only to the extent) that
it would have been exercisable by Optionee on the Termination Date, may be
exercised by Optionee (or Optionee's legal representative) within twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
8. EXERCISE OF OPTIONS.
8.1 Notice. Options may be exercised only by delivery to the Company
of an exercise agreement in a form approved by the Committee, stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.2 Payment. Payment for the Shares may be made (a) in cash or by
check; (b) by surrender of shares of Common Stock of the Company that have been
owned by Optionee for more than six (6) months (and which have been paid for
within the meaning of SEC Rule 144 and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with respect
to such shares) or were obtained by the Optionee in the open public market,
having a Fair Market Value equal to the exercise price of the Option; (c) by
waiver of compensation due or accrued to Optionee for services rendered; (d)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Optionee and a broker-dealer that is a member of
the National
-3-
<PAGE> 4
1993 Directors Stock Option Plan
As amended as of December 1, 1995
Association of Securities Dealers (a "NASD Dealer") whereby the Optionee
irrevocably elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the exercise price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the exercise price directly to
the Company; (e) provided that a public market for the Company's stock exists,
through a "margin" commitment from the Optionee and a NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; or (f) by any combination of the foregoing.
8.3 Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision
for any federal or state withholding obligations of the Company, if
applicable.
8.4 Limitations on Exercise. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable until such time as the
Plan or, in the case of Options granted pursuant to an amendment to the number
of shares that may be issued pursuant to the Plan, the amendment has been
approved by the stockholders of the Company in accordance with Section 16
hereof.
(b) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and all applicable state securities laws, as they are in effect on the date of
exercise.
(c) The Committee may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise permitted by the Committee. No Option
may be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.
-4-
<PAGE> 5
1993 Directors Stock Option Plan
As amended as of December 1, 1995
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company and compliance with applicable securities laws;
provided, however, that no certificate or scrip representing fractional shares
shall be issued upon exercise of any Option and any resulting fractions of a
Share shall be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue as a director
of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act, any required approval by the Commissioner of
Corporations of the State of California, compliance with all other applicable
state securities laws and compliance with the requirements of any stock exchange
or national market system on which the Shares may be listed. The Company shall
be under no obligation to register the Shares with the Securities and Exchange
Commission or to effect compliance with the registration or qualification
requirement of any state securities laws, stock exchange or national market
system.
l4. RESTRICTIONS ON SHARES. The Company may reserve to itself or its
assignee(s) in the Grant, a right to repurchase any or all unvested shares held
by an Optionee upon the Optionee's termination of service with the Company for
any reason at the Optionee's original exercise price. Such repurchase rights
shall lapse in accordance with the exercise period set forth in Section 7.2
above.
15. ASSUMPTION OF OPTIONS BY SUCCESSORS. In the event of a dissolution or
liquidation of the Company, a merger in which the Company is not the surviving
corporation, the sale of substantially all of the assets of the Company, or any
other transaction which qualifies as a "corporate transaction" under Section 424
of the Revenue Code wherein the stockholders of the Company give up all of their
equity interest in the Company, the vesting of all options granted pursuant to
the Plan will accelerate and the options will become exercisable in full prior
to the consummation of such event at such times and on such conditions as the
Committee determines.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan but not the terms of any outstanding option;
provided, however, that the Committee shall not, without the approval of the
stockholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 4 and 11 above) or
change the class of persons eligible to receive Options. Further, the provisions
in Sections 6 and 7 of this Plan shall not be amended more than once every six
-5-
<PAGE> 6
1993 Directors Stock Option Plan
As amended as of December 1, 1995
(6) months, other than to comport with changes in the Revenue Code, the Employee
Retirement Income Security Act or the rules thereunder. In any case, no
amendment of this Plan may adversely affect any then outstanding Options or any
unexercised portions thereof without the written consent of the Optionee.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the date this Plan is adopted by
the Board of Directors.
18. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
18.1 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
18.2 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
18.3 "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
18.4 "Fair Market Value" shall mean the fair market value of the
Shares as determined by the Committee from time to time in good faith. If a
public market exists for the Shares, the Fair Market Value shall be the average
of the last reported bid and asked prices for common stock of the Company on the
last trading day prior to the date of determination (or the average closing
price over the number of consecutive working days preceding the date of
determination as the Committee shall deem appropriate) or, in the event the
common stock of the Company is listed on a stock exchange or on the Nasdaq
National Market, the Fair Market Value shall be the closing price on such
exchange or quotation system on the last trading day prior to the date of
determination (or the average closing price over the number of consecutive
working days preceding the date of determination as the Committee shall deem
appropriate).
-6-
<PAGE> 7
LXR BIOTECHNOLOGY INC.
DIRECTORS NONQUALIFIED STOCK OPTION GRANT
Optionee: ____________________________________
Address: ____________________________________
____________________________________
Total Shares Subject to Option: ____________________________________
Exercise Price Per Share: $___________________________________
Date of Grant: ____________________________________
Expiration Date: ____________________________________
1. GRANT OF OPTION. LXR Biotechnology Inc., a Delaware corporation (the
"Company"), has granted to the optionee named above ("Optionee") an option (this
"Option") to purchase the total number of shares of Common Stock, $0.0001 par
value per share, of the Company set forth above (the "Shares") at the exercise
price per Share set forth above (the "Exercise Price"), subject to all of the
terms and conditions of this Grant and the Company's 1993 Directors Stock Option
Plan, as amended to the date hereof (the "Plan"). Unless otherwise defined
herein, capitalized terms used herein shall have the meanings ascribed to them
in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall become exercisable as to 20% of the
Shares on the date one year after the Date of Grant, and as to an additional
1.667% of the Shares each calendar month thereafter, so long as the Optionee
continuously remains a member of the Board of Directors of the Company (a "Board
Member").
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act of 1933, as amended (the
"Act"), and all applicable state securities laws, as they are in effect on the
date of exercise, and the requirements of any stock exchange or national market
system on which the Company's Common Stock may be listed at the time of
exercise. Optionee understands that the Company is under no obligation to
register, qualify or list the Shares with the Securities and Exchange Commission
(the "SEC"), any state securities commission or any stock exchange or national
market system to effect such compliance.
4. TERMINATION OF OPTION. Except as provided below in this Section , this
Option shall terminate and may not be exercised if Optionee ceases to be a Board
Member. The date on which Optionee ceases to be a Board Member shall be referred
to as the "Termination Date."
4.1 Termination Generally. If Optionee ceases to be a Board Member
for any reason except death or disability, this Option, to the extent (and only
to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee within six (6) months after the
Termination Date, but in no event later than the Expiration Date.
4.2 Death or Disability. If Optionee ceases to be a Board Member
because of the death of Optionee or the disability of Optionee within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended,
this Option, to the extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be exercised by Optionee
(or Optionee's legal representative) within twelve (12) months after the
Termination Date, but in no event later than the Expiration Date.
1
<PAGE> 8
5. MANNER OF EXERCISE.
5.1 Exercise Agreement. This Option shall be exercisable by delivery
to the Company of an executed written Directors Stock Option Exercise Agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Committee, which shall set forth Optionee's election to exercise
some or all of this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and such other representations and agreements
as may be required by the Company to comply with applicable securities laws.
5.2 Payment. Payment for the Shares may be made (a) in cash (by
check); (b) by surrender of shares of Common Stock of the Company that have been
owned by Optionee for more than six (6) months (and which have been paid for
within the meaning of SEC Rule 144 and, if such shares were purchased from the
Company by use of a promissory note, such note has been fully paid with respect
to such shares) or were obtained by the Optionee in the open public market,
having a Fair Market Value equal to the exercise price of the Option; (c) by
waiver of compensation due or accrued to Optionee for services rendered; (d)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Optionee and a broker-dealer that is a member of
the National Association of Securities Dealers (an "NASD Dealer") whereby the
Optionee irrevocably elects to exercise the Option and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Optionee and an NASD Dealer
whereby the Optionee irrevocably elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the exercise price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; or (f) by any combination of the
foregoing.
5.3 Withholding Taxes. Prior to the issuance of the Shares upon
exercise of this Option, Optionee shall pay or make adequate provision for any
applicable federal or state withholding obligations of the Company.
5.4 Issuance of Shares. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative.
6. NONTRANSFERABILITY OF OPTION. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise permitted by the Committee. No Option
may be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.
7. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the Committee that administers
the Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and on Optionee. Nothing in the Plan or this Grant shall confer on
Optionee any right to continue as a Director, employee, officer or consultant of
the Company.
8. ENTIRE AGREEMENT. The Plan and the Directors Stock Option Exercise
Agreement are incorporated herein by this reference. This Grant, the Plan and
the Stock Option Exercise Agreement constitute the entire agreement of the
parties hereto and supersede all prior undertakings and agreements with respect
to the subject matter hereof.
LXR BIOTECHNOLOGY INC.
By: _______________________________
2
<PAGE> 9
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts this Option subject to all the terms and conditions of the Plan and this
Grant. Optionee acknowledges that there may be adverse tax consequences upon
exercise of this Option or disposition of the Shares and that Optionee should
consult a qualified tax advisor prior to such exercise or disposition.
__________________________________
Optionee
3
<PAGE> 10
Exhibit A
LXR BIOTECHNOLOGY INC.
1993 DIRECTORS STOCK OPTION PLAN
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock, $0.0001 par
value per share, as set forth below:
Optionee______________________________ Number of Shares Purchased:__________
Social Security Number:_______________ Purchase Price per Share:____________
Address:______________________________ Aggregate Purchase Price:____________
Date of Option Grant:________________
Type of Option:[ ]Incentive Stock Option Exact Name of Title to Shares:_______
[ ]Nonqualified Stock _____________________________________
Option _____________________________________
Optionee hereby delivers to the Company the Aggregate Purchase Price, to
the extent permitted in the Grant, as follows (check as applicable and
complete):
[ ] in cash or by check in the amount of $__________________, receipt of
which is acknowledged by the Company;
[ ] where approved by the Committee at the time of grant, by delivery of
___________ fully-paid, nonassessable and vested shares of the common
stock of the Company owned by Optionee for at least six (6) months
prior to the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Optionee in the open public
market, and owned free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market Value of
$_________ per share;
[ ] by the waiver hereby of compensation due or accrued to Optionee for
services rendered in the amount of $______________________.
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein, in the amount of $___________________;
or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein, in the amount of $_____________________.
TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by reference.
This Exercise Agreement, the Plan and the Grant constitute the entire agreement
of the parties and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by Delaware law except for that body of law pertaining
to conflict of laws.
Date:______________________________ _________________________________________
Signature of Optionee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10QSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,127,935
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,642,981
<PP&E> 2,166,724
<DEPRECIATION> 1,405,923
<TOTAL-ASSETS> 5,633,317
<CURRENT-LIABILITIES> 818,404
<BONDS> 0
0
0
<COMMON> 1,584
<OTHER-SE> 4,728,834
<TOTAL-LIABILITY-AND-EQUITY> 5,633,317
<SALES> 0
<TOTAL-REVENUES> 70,246
<CGS> 0
<TOTAL-COSTS> 3,495,287
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,139
<INCOME-PRETAX> (3,307,312)
<INCOME-TAX> 8,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,315,912)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> 0.00
</TABLE>
