<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 24572
GENEMEDICINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0355802
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8301 New Trails Drive, The Woodlands, Texas 77381-4248
(Address of principal executive office) (zip code)
(281) 364-1150
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
---
As of April 29, 1997, there were outstanding 13,683,125 and 3,750,000 shares
of Common Stock and Series B Preferred Stock, par value $.001, respectively,
of the registrant.
<PAGE>
GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
COVER PAGE....................................................................... 1
TABLE OF CONTENTS................................................................ 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of March 31, 1997 and December 31, 1996................... 3
Statements of Operations for the three months ended March 31, 1997 and
March 31, 1996, and for the period from inception (January 2, 1992)
through March 31, 1997...................................................... 4
Statements of Cash Flows for the three months ended March 31, 1997 and
March 31, 1996, and for the period from inception (January 2, 1992)
through March 31, 1997...................................................... 5
Notes to Financial Statements............................................... 6
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 7
PART II. OTHER INFORMATION...................................................... 9
SIGNATURES....................................................................... 10
</TABLE>
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<PAGE>
GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- --------------
(unaudited)
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................... $ 2,194,433 $ 2,145,404
Short-term investments.............................. 29,622,650 28,726,602
Prepaid expenses and other.......................... 699,994 170,453
------------- -------------
Total current assets.............................. 32,517,077 31,042,459
------------- -------------
Equipment, furniture and leasehold improvements, net.. 3,464,189 2,998,416
Deposits and other assets............................. 8,395 8,395
------------- -------------
Total Assets.......................................... $ 35,989,661 $ 34,049,270
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities............ 1,158,222 $ 1,352,762
Deferred revenue.................................... 39,489 179,489
Notes payable and current portion of capital lease
obligations........................................ 374,037 408,387
------------- -------------
Total current liabilities......................... 1,571,748 1,940,638
------------- -------------
Long-term Liabilities:
Deferred contract revenue........................... 2,169,970 1,919,970
Capital lease obligations, net of current portion... 210,369 259,393
------------- -------------
Total long-term liabilities....................... 2,380,339 2,179,363
------------- -------------
Commitments
Stockholders' Equity:
Convertible preferred stock, $.001 par value;
20,000,000 shares authorized; 3,750,000 issued
and outstanding.................................... 3,750 3,750
Common stock, $.001 par value; 40,000,000 shares
authorized; 13,669,042 and 13,077,369 shares
issued and outstanding............................. 13,669 13,077
Additional paid in capital.......................... 69,629,457 65,485,846
Deferred compensation............................... (368,963) (465,803)
Deficit accumulated during the development stage.... (37,240,339) (35,107,601)
------------- -------------
Total stockholders' equity........................ 32,037,574 29,929,269
------------- -------------
Total Liabilities and Stockholders' Equity............ $ 35,989,661 $ 34,049,270
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION
THREE MONTHS ENDED (JANUARY 2, 1992)
MARCH 31, THROUGH
----------------------------- MARCH 31,
1997 1996 1997
------------- ------------- -----------------
<S> <C> <C> <C>
Revenues:
Contract revenue..................... $ 1,500,000 $ 1,000,000 $ 9,180,000
Research and development
grant revenue....................... 240,000 81,000 1,087,644
Interest income...................... 430,946 491,461 4,494,625
------------- ------------- --------------
2,170,946 1,572,461 14,762,269
Expenses:
Research and development............. 3,279,329 3,561,661 38,642,264
General and administrative........... 1,004,516 940,439 12,906,752
Interest expense..................... 19,839 30,909 453,592
------------- ------------- --------------
Total expenses......................... 4,303,684 4,533,009 52,002,608
------------- ------------- --------------
Net loss............................... $ (2,132,738) $ (2,960,548) $ (37,240,339)
============= ============= ==============
Loss per share......................... $ (0.16) $ (0.24)
Shares used in computing
loss per share 13,462,240 12,331,350
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION
THREE MONTHS ENDED (JANUARY 2, 1992)
MARCH 31, THROUGH
----------------------------- MARCH 31,
1997 1996 1997
------------- ------------- -----------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss............................................ $ (2,132,738) $ (2,960,548) $ (37,240,339)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization..................... 221,026 188,978 2,036,791
Issuance of convertible debt for noncash
consideration.................................... -- -- 905,000
Issuance of stock for noncash consideration....... -- -- 21,050
Purchases of short-term investments............... -- -- (3,997,171)
Compensation expense related to stock plans....... 96,840 98,611 1,625,562
Loss on equipment retirements..................... -- -- 5,293
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and
other assets................................... (529,541) 63,671 (605,262)
Increase (decrease) in accounts payable and
accrued liabilities............................ (194,540) 71,623 1,158,222
Increase in deferred revenue and deferred
contract revenue............................... 110,000 250,000 2,209,459
-------------- ------------- --------------
Net cash used in operating activities......... (2,428,953) (2,287,665) (33,881,395)
-------------- ------------- --------------
Cash flows used in investing activities:
Purchase of equipment, furniture and leasehold
improvements....................................... (686,799) (275,157) (5,509,400)
Purchases of short-term investments................. (896,048) (3,440,323) (25,625,479)
Purchase of certificates of deposit................. -- (100,000)
-------------- ------------- --------------
Net cash used in investing activities............. (1,582,847) (3,715,480) (31,234,879)
-------------- ------------- --------------
Cash flows from financing activities:
Proceeds from notes payable and capital lease
obligations........................................ -- -- 2,030,823
Repayment of notes payable and capital lease
obligations........................................ (83,374) (125,109) (1,315,417)
Advance on line of credit........................... -- -- 750,000
Proceeds from issuance of preferred stock, net...... -- -- 22,264,465
Proceeds from issuance of common stock, net......... 4,144,203 4,012,863 43,580,836
-------------- ------------- --------------
Net cash provided by financing activities......... 4,060,829 3,887,754 67,310,707
-------------- ------------- --------------
Net increase (decrease) in cash and cash
equivalents.......................................... 49,029 (2,115,391) 2,194,433
Cash and cash equivalents, beginning of period........ 2,145,404 15,420,772 --
-------------- ------------- --------------
Cash and cash equivalents, end of period.............. $ 2,194,433 $ 13,305,381 $ 2,194,433
============== ============= ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............ $ 19,839 $ 30,909 $ 452,892
Supplemental schedule of noncash financing activity:
Conversion of debt to preferred and common stock.... $ -- $ -- $ 1,786,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
GeneMedicine, Inc. (the "Company") is a Delaware corporation in the
development stage. The Company is developing non-viral gene therapies that
may provide unique clinical benefits in the treatment of a number of human
diseases. The Company intends to develop its products through alliances with
major pharmaceutical and biotechnology companies.
The Company has devoted substantially all of its efforts to research
and product development and has not yet generated any revenues from the sale
of products, nor is there any assurance of future product revenues. In
addition, the Company expects to continue to incur losses for the foreseeable
future, and there can be no assurance that the Company will successfully
complete the transition from a development stage company to successful
operations. The research and development activities engaged in by the Company
involve a high degree of risk and uncertainty. The ability of the Company to
successfully develop, manufacture and market its proprietary products is
dependent upon many factors. These factors include, but are not limited to,
the need for additional financing, the ability to establish and maintain
collaborative arrangements for research, development and commercialization of
product with corporate partners, and the ability to develop or access
manufacturing, sales and marketing experience. Additional factors include
uncertainties as to patents and proprietary technologies, technological change
and risk of obsolescence, development of products, competition, government
regulations and regulatory approval, and product liability exposure. As a
result of the aforementioned factors and the related uncertainties, there can
be no assurance of the Company's future success.
The accompanying interim financial statements are unaudited and
reflect all adjustments which, in the opinion of management, are necessary for
a fair presentation of the results for the interim periods presented. These
financial statements should be read in conjunction with the Company's audited
financial statements included with the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
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<PAGE>
GENEMEDICINE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Except for the historical information contained herein, the
following discussion contains forward-looking statements that involve risks
and uncertainties. Actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, the early stage of the GeneMedicine, Inc.'s
development and technological uncertainty, future capital needs and
uncertainty of additional funding, dependence on collaborative partners and
licenses, the failure of existing or future partnerships to be successful,
uncertainty of patent protection, uncertainty of government regulatory
requirements, level of competition and rapid technological change, as well as
those set forth in this section and in "Risk Factors" and elsewhere in the
Company's Form 10-K for the year ended December 31, 1996.
Since its inception in January 1992, GeneMedicine has devoted its
resources primarily to fund its research and development programs. The Company
has been unprofitable since inception and to date has not received any
revenues from the sale of products. No assurance can be given that the
Company will be able to generate sufficient product revenues to attain
profitability on a sustained basis or at all. The Company expects to incur
substantial losses for the next several years as it continues to invest in
product research and development, preclinical studies, clinical trials and
regulatory compliance. At March 31, 1997, the Company's accumulated deficit
was approximately $37.2 million.
RESULTS OF OPERATIONS
Revenues of $2.2 million were recorded for the quarter ended March
31, 1997. Such revenues consisted of contract revenue of $1.5 million,
research and development grant revenue of $0.2 million and interest income of
$0.4 million. This compares with revenues of $1.6 million for the quarter
ended March 31, 1996, which consisted of contract revenue of $1.0 million,
research and development grant revenue of $0.1 million and interest income of
$0.5 million. Contract revenues in respective quarters resulted from a
corporate partnership with Boehringer Mannheim to develop certain non-viral
gene medicines to treat selected cancer indications. The increase in contract
revenue in the first quarter of 1997 compared to the same period in 1996 was
due to the recognition of a $0.5 million milestone payment from Boehringer
Mannheim for achieving clearance from the U.S. Food and Drug Administration to
commence a Phase I clinical trial using its IL-2 Gene Medicine that it is
developing for the treatment of head and neck cancer.
The Company's research and development expenses for the quarter
ended March 31, 1997 were $3.3 million, compared to $3.6 million for the first
quarter of 1996. The slight decrease in research and development expenses was
due primarily to a reduction in costs associated with external sponsored
research activities. The Company anticipates that research and development
expenditures will increase over the next several years as it expands its
research and product development efforts.
General and administrative expenses remained relatively unchanged at
$1.0 million for the quarter ended March 31, 1997 compared to the same period
in 1996.
Net loss per share for the three months ended March 31, 1997 was
$0.16 compared to a net loss per share of $0.24 for the same period in 1996.
The decrease in the Company's net loss per share was primarily the result of
increased contract revenue, slightly decreased research and development
expenses, and an increased average number of shares outstanding.
7 of 10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations
primarily through private and public sales of its equity securities and
revenues from corporate alliances. Through March 31, 1997, the Company had
received approximately $65.8 million in net proceeds from sales of its equity
securities. At March 31, 1997, the Company had working capital of $30.9
million and cash, cash equivalents and short-term investments of $31.8
million. In addition, in April 1997 the Company received $1.75 million from
Boehringer Mannheim, representing a $1.25 million contract research payment
and a $0.5 million milestone payment.
The Company expects its cash requirements to increase significantly
in future periods. The Company will require substantial funds to conduct
research and development programs, preclinical studies and clinical trials of
its potential products and to market with its partners any products that are
developed. In addition, the Company currently plans to manufacture clinical
scale quantities of its products, which will require the Company to expend
substantial additional capital. The Company's future capital requirements will
depend on many factors, including continued scientific progress in its
research and development programs, the scope and results of preclinical
testing and clinical trials, the time and costs involved in obtaining
regulatory approvals, the costs involved in filing, prosecuting and enforcing
patent claims, competing technological developments, the cost of manufacturing
and scale-up and the ability to establish and maintain effective
commercialization activities and arrangements. Based on its current plans, the
Company believes that its available cash, including proceeds from projected
interest income and committed funding from corporate partners, will be
sufficient to meet the Company's operating expenses and capital requirements
into the second half of 1999. There can be no assurance, however, that changes
in the Company's research and development plans or other changes affecting the
Company's operating expenses will not result in the expenditure of such
resources before such time.
The Company intends to seek additional funding through research and
development arrangements with potential corporate partners, public or private
financing, or from other sources. There can be no assurance that additional
financing will be available on favorable terms, if at all. In the event that
adequate funding is not available, the Company may be required to delay,
reduce or eliminate one or more of its research or development programs or
obtain funds through arrangements with corporate collaborators or others that
may require the Company to relinquish greater or all rights to product
candidates at an earlier stage of development or on less favorable terms than
the Company would otherwise seek. Insufficient financing may also require the
Company to relinquish rights to certain of its technologies that the Company
would otherwise develop or commercialize itself.
The Company's business is subject to significant risks, including,
without limitation, uncertainties associated with the length and expense of
the regulatory approval process and with obtaining and enforcing patents.
Although the Company's products may appear promising at an early stage of
development, they may not be successfully commercialized for a number of
reasons, such as the possibility that the potential products will be
determined to be ineffective during clinical trials, fail to receive necessary
approvals, be uneconomical to manufacture or market, or be precluded from
commercialization by proprietary rights of third parties. In addition, the
failure by the Company to obtain patent protection for its products may make
certain of its products commercially unattractive.
8 of 10
<PAGE>
GENEMEDICINE, INC.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
In February 1997, the Company issued 533,333 shares of Common Stock, at a
price per share of $7.50, to Corange International Ltd., the parent company
of Boehringer Mannheim pursuant to the Boehringer Mannheim Alliance. The
Company issued such shares in reliance on the exemption provided by section
4(2) of the Securities Act of 1933, as amended.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) 10.1 - 1993 Stock Option Plan, as amended
10.4 - 1994 Non-Employee Directors' Stock Option Plan, as amended
(b) None
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<PAGE>
GENEMEDICINE, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENEMEDICINE, INC.
Date: 05/01/97 By: John M. Dodson
--------- --------------------------------
John M. Dodson
Director, Administration, Finance & Accounting
(on behalf of the Registrant and as the
Registrant's Principal Accounting Officer)
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<PAGE>
EXHIBIT 10.1 GENEMEDICINE, INC.
1993 STOCK OPTION PLAN
ADOPTED APRIL 8, 1993
AMENDED THROUGH JANUARY 12, 1995
AMENDED SEPTEMBER 4, 1996
1. PURPOSES.
(A) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(B) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(C) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CODE" means the Internal Revenue Code of 1986, as amended.
(D) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(E) "COMPANY" means GeneMedicine, inc., a Delaware corporation.
(F) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(G) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(H) "DIRECTOR" means a member of the Board.
1.
<PAGE>
(I) "DISABILITY" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(J) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(K) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(L) "FAIR MARKET VALUE" means the value of the common stock as determined
in good faith by the Board.
(M) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(N) "NON-EMPLOYEE DIRECTOR" means a director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K"), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(O) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(P) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(Q) "OPTION" means a stock option granted pursuant to the Plan.
(R) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(S) "OPTIONED STOCK" means the common stock of the Company subject to an
Option.
(T) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(U) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an affiliated corporation receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an affiliated corporation at
any time, and is not currently receiving direct or indirect remuneration for
services in any capacity other than as a Director, or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(V) "PLAN" means this 1993 Stock Option Plan.
(W) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
2.
<PAGE>
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
whether an Option will be an Incentive Stock Option or a Nonstatutory Stock
Option; the provisions of each Option granted (which need not be identical),
including the time or times such Option may be exercised in whole or in part;
and the number of shares for which an Option shall be granted to each such
person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company.
(C) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Non-Employee Directors and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
(D) Any requirement that an administrator of the Plan be a Non-Employee
Directors shall not apply if the Board or the Committee expressly declares that
such requirement shall not apply. Any Non-Employee Directors shall otherwise
comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Three Million Nine Hundred Forty-Five Thousand Seven
Hundred Fourteen (3,945,714) shares of the Company's common stock. If any
Option shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(B) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Options may be granted, or in the determination of the number of
shares which may be covered by Options granted to the Director the Plan complies
with the requirements of Rule 16b-3. The Board shall otherwise
3.
<PAGE>
comply with the requirements of Rule 16b-3. This subsection 5(b) shall not
apply if the Board or Committee expressly declares that it shall not apply.
(C) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(D) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than Two Hundred Fifty Thousand (250,000) shares of the Company's common
stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(B) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(D) TRANSFERABILITY. An Option shall not be transferable except by will or
by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person.
(E) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the
4.
<PAGE>
remainder of the term of the Option (if its term extends beyond the end of the
installment periods), the Option may be exercised from time to time with respect
to any shares then remaining subject to the Option. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(F) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(G) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(H) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
5.
<PAGE>
(I) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within thirty (30) days of the termination of, the Optionee's Continuous
Status as an Employee, Director or Consultant, the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option at the date of
death) by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii)
the expiration of the term of such Option as set forth in the Option Agreement.
If, at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(J) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(K) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the Option;
or (3) delivering to the Company owned and unencumbered shares of the common
stock of the Company.
7. COVENANTS OF THE COMPANY.
(A) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
6.
<PAGE>
(B) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(C) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.
(D) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(E) Shares subject to an Option that is canceled shall continue to be
counted against the maximum award of Options permitted to be granted pursuant to
subsection 5(d) of the Plan. In the event of a repricing of an Option resulting
in a reduction of the exercise price, the original Option shall be deemed to be
canceled and a substitute Option deemed to be granted, and both the original and
the substituted Options shall be counted against the maximum award of Options
permitted to be granted pursuant to subsection 5(d) of the Plan. The provisions
of this subsection 9(e) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to such
outstanding Options.
(B) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
or (3) a reverse merger in which the Company is the surviving corporation but
the shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then to the extent permitted by
applicable law: (i) any surviving corporation shall assume any Options
outstanding under the Plan or shall substitute similar Options for those
outstanding under the Plan, or (ii) such Options shall continue in full force
and effect. In the event any surviving corporation refuses to assume or
continue such Options, or to substitute similar options for those outstanding
under the Plan, then, with respect to Options held by persons then performing
services as Employees, Directors or Consultants, the time during which such
Options may be exercised shall be accelerated and the Options terminated if not
exercised prior to such event.
7.
<PAGE>
11. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the Plan;
(2) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code.
(B) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(C) Rights and obligations under any Option granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on April 8, 2003, which shall be within ten
(10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
(A) The Plan, as amended, shall become effective upon adoption by the Board
of Directors, subject to the condition subsequent that the Plan is approved by
the stockholders of the Company.
(B) Notwithstanding any other provision in the Plan to the contrary, no
option granted under the Plan on or after January 12, 1995 shall be exercised or
exercisable unless and until the condition of subsection 13(a) above has been
met.
8.
<PAGE>
EXHIBIT 10.4 GENEMEDICINE, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON MARCH 21, 1994
APPROVED BY STOCKHOLDERS ON JUNE 20, 1994;
AMENDED BY THE BOARD ON JANUARY 12, 1995 AND
APPROVED BY STOCKHOLDERS ON APRIL 26, 1995
AMENDED SEPTEMBER 4, 1996
1. PURPOSE.
(A) The purpose of the 1994 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of GENEMEDICINE, INC. (the
"Company") who is not otherwise an employee of or consultant to the Company or
of any Affiliate of the Company (each such person being hereafter referred to as
a "Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(B) The Board may delegate administration of the Plan to a committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Three Hundred Ninety Thousand
(390,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without
1.
<PAGE>
having been exercised in full, the stock not purchased under such option shall
again become available for the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(A) Upon the date of the approval of the Plan by the stockholders of the
Company (the "Adoption Date"), each person who is then a Non-Employee Director
automatically shall be granted an option to purchase Ten Thousand (10,000)
shares of common stock of the Company on the terms and conditions set forth
herein.
(B) Each person who, after the Adoption Date, is elected for the first time
to be a Non-Employee Director automatically shall, upon the date of his initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase Thirty Thousand (30,000) shares of
common stock of the Company on the terms and conditions set forth herein;
provided that such option shall not be exercisable and shall automatically
terminate with respect to Ten Thousand (10,000) shares of common stock effective
January 12, 1996 if the amendment of this Section 5(b) is not approved by the
stockholders of the Company by such date.
(C) Upon the date of approval of this Section 5(c) by the stockholders of
the Company (the "Amendment Approval Date"), and thereafter upon each
anniversary of the Amendment Approval Date, each person who, as of the
applicable date, is then a Non-Employee Director and has been a Non-Employee
Director for at least six (6) months shall automatically be entitled to receive
an option to purchase Five Thousand (5,000) shares of common stock of the
Company on the terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(A) The term of each option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
ten (10) years from the date of grant. If the optionee's service as a Non-
Employee Director or as an employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date three (3) months following the
date of termination of service; provided, however, that if such termination of
service is due to the optionee's death or disability, the option shall terminate
on the earlier of the Expiration Date or twelve (12) months following the date
of such optionee's death or disability. In any and all circumstances, an option
may be exercised following termination of the optionee's service as a Non-
Employee Director or as an employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable on the
date of termination of such service under the provisions of subparagraph 6(e).
(B) The exercise price of each option shall be equal to the fair market
value of the stock subject to such option on the date such option is granted.
(C) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than One Thousand (1,000) shares; but when the number of shares being
purchased upon an exercise is One Thousand (1,000)
2.
<PAGE>
or more shares, the optionee may elect to make payment of the exercise price
under one of the following alternatives:
(I) Payment of the exercise price per share in cash at the time of
exercise; or
(II) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
(III) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(D) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative. The person to whom the option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of death of the optionee, shall
thereafter be entitled to exercise the option.
(E) The option shall become exercisable over a period of four (4) years
from the date of grant in four (4) equal annual installments commencing on the
first anniversary of the date of grant of the option, provided that the optionee
has, during the entire period prior to such vesting date, continuously served as
a Non-Employee Director or as an employee of or consultant to the Company or any
Affiliate, whereupon such option shall become fully exercisable in accordance
with its terms with respect to that portion of the shares represented by that
installment.
(F) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then-applicable securities laws.
(G) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
3.
<PAGE>
7. COVENANTS OF THE COMPANY.
(A) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(A) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(B) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director with or without cause.
(C) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(D) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(E) As used in this Plan, fair market value means, as of any date, the
value of the common stock of the Company determined as follows:
(I) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market, the fair market value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in common stock) on the last market trading day prior to the day of
4.
<PAGE>
determination, as reporting in the Wall Street Journal or such other source as
the Board deems reliable;
(II) If the common stock is quoted on the Nasdaq Stock Market (but not
on the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(III) In the absence of an established market for the common stock,
the fair market value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(B) In the event of: (1) a merger or consolidation in which the Company is
not the surviving corporation; (2) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (3) any
other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged any surviving corporation,
other than the Company, shall assume any options outstanding under the Plan or
shall substitute similar options for those outstanding under the Plan or, if the
Company is the surviving corporation, such options shall continue in full force
and effect.
11. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will increase the number of shares which may be
issued under the Plan.
(B) Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
5.
<PAGE>
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 20, 2004. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(C) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(A) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(B) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
6.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,194,433
<SECURITIES> 29,622,650
<RECEIVABLES> 699,994
<ALLOWANCES> 0
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0
3,750
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