U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission file number 0-22872
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SYMBOLLON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Loring Drive, Framingham, MA 01702
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(Address of principal executive offices)
508-620-7676
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
August 13, 1999
-----------------
Class A Common Stock 3,786,048
Class B Common Stock 15,738
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- June 30, 1999 and December 31, 1998 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the six and three months
ended June 30, 1999 and June 30, 1998 2
Unaudited Condensed Statements of Cash Flows
- For the six months ended June 30, 1999
and June 30, 1998 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 11
INDEX TO EXHIBITS 12
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
June 30, December 31,
1999 1998
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 1,202,538 $ 1,514,115
Restricted cash......................................................... 301,550 297,554
Accounts receivable..................................................... 76,248 207,172
Inventory............................................................... 81,161 69,382
Prepaid expenses........................................................ 27,479 83,104
----------- -----------
Total current assets.............................................. $ 1,688,976 $ 2,171,327
Equipment and leasehold improvements, net of
accumulated depreciation and amortization................................ 108,990 125,572
Other assets:
Patent and trademark cost, net of accumulated amortization............ 213,455 205,226
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL............................................................. $ 2,013,785 $ 2,504,489
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 134,467 $ 87,654
Accrued expenses........................................................ 340,770 4,403
Other current liabilities............................................... 1,450 19,149
------------ -----------
Total current liabilities......................................... 476,687 111,206
Redeemable common stock, Class A, par value $.001 per share,
186,667 and 669,545 shares issued at June 30, 1999
and December 31, 1998, respectively (aggregate involuntary
liquidation value $350,000 and $850,000, respectively)................... 350,000 850,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares
authorized, none issued..................................................
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 3,404,164 and 2,919,786 shares issued at
June 30, 1999 and December 31, 1998, respectively........................ 3,404 2,920
Convertible Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 15,738 shares issued at
June 30, 1999 and December 31, 1998, respectively........................ 16 16
Additional paid-in capital................................................ 7,756,478 7,254,712
Deficit accumulated during the development stage.......................... (6,572,800) (5,714,365)
------------ -----------
Total stockholders' equity........................................... 1,187,098 1,543,283
------------ -----------
TOTAL............................................................. $ 2,013,785 $ 2,504,489
============ ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended Six Months Ended (Inception) to
June 30, June 30, June 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Net product sales................................. $ $ 110,501 $ 172,500 $ 110,501 $ 1,213,488
Contract revenue.................................. 105,886 188,879 833,629
License fee revenue............................... 2,190,000
----------- ----------- ----------- ----------- -----------
Total revenue............................. 105,886 110,501 361,379 110,501 4,237,117
Operating Expenses:
Cost of goods sold............................ $ 27,182 $ 73,208 $ 140,190 $ 73,208 $ 735,391
Research and development costs................ 474,003 281,508 914,108 533,895 6,195,822
General and administrative expenses........... 95,725 106,596 196,019 265,249 4,131,285
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 596,910 461,312 1,250,317 872,352 11,062,498
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations..................... (491,024) (350,811) (888,938) (761,851) (6,825,381)
Interest income................................... 13,373 24,874 30,503 55,076 608,841
Interest expense and debt issuance costs.......... (356,260)
----------- ----------- ----------- ----------- -----------
Net Income (Loss)................................. $ (477,651) $ (325,937) $ (858,435) $ (706,775) $(6,572,800)
===========
Basic Net Income (Loss) per share of common stock. $ (0.16) $ (0.13) $ (0.30) $ (0.28)
=========== =========== =========== ===========
Diluted Net Income (Loss) per share of common stock $ (0.16) $ (0.13) $ (0.30) $ (0.28)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding...................................... 2,905,069 2,498,691 2,905,069 2,498,691
=========== =========== =========== ===========
Weighted average number of common shares and
potential dilutive common shares outstanding..... 2,905,069 2,498,691 2,905,069 2,498,691
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Six Months Ended (Inception) to
June 30, June 30,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ (858,435) $ (706,775) $(6,572,800)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 22,892 23,533 451,271
Amortization of debt issuance costs................. 130,000
Accrued rent........................................
Loss on disposition of equipment.................... 19,542
Changes in:
Restricted cash................................... (3,996) (301,550)
Accounts receivable............................... 130,924 (21,953) (76,248)
Inventory......................................... (11,779) 16,611 (81,161)
Prepaid expenses.................................. 55,625 44,350 (27,479)
Accounts payable and other current liabilities.... 365,481 49,980 533,862
----------- ----------- -----------
Net cash provided by (used in)
operating activities.............................. (299,288) (594,254) (5,924,563)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (2,964) (24,173) (367,790)
Patent and trademark costs............................ (11,575) (35,866) (436,768)
Proceeds from sale of equipment....................... 11,300
Deposit............................................... (2,364)
----------- ----------- -----------
Net cash provided by (used in) investing activities. (14,539) (60,039) (795,622)
----------- ----------- -----------
Cash flows from financing activities:
Warrant conversion.................................... 629,204
Borrowings from stockholders.......................... 253,623
Repayment to stockholders............................. (127,683)
Sale of common stock and units........................ 2,250 1,312 8,060,981
Sale of option to purchase units...................... 100
Public offering costs................................. (1,343,502)
Issuance of preferred stock........................... 450,000
----------- ----------- -----------
Net cash provided by financing activities........... 2,250 1,312 7,922,723
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... (311,577) (652,981) 1,202,538
Cash at beginning of period............................... 1,514,115 2,527,865
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 1,202,538 $ 1,874,884 $ 1,202,538
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Description of Business:
Symbollon Corporation ("Symbollon" or the "Company") was formed to
develop and commercialize proprietary iodine-based products for infection
control and treatment in biomedical and bioagricultural industries. The Company
is in the development stage and its efforts since inception have been
principally devoted to research and development, securing patent and trademark
protection and raising capital. Management of the Company anticipates that
additional losses will be incurred as these efforts are pursued. In 1995, the
Company signed a marketing and supply agreement for its first product and
commenced shipping.
Note B - Accounting Policies and Disclosure:
The accompanying unaudited financial statements do not contain all of
the disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes included
in the Company's Form 10-KSB for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments, all of which are of a normal recurring nature, to fairly present
the Company's financial position, results of operations and cash flows. The
results of operations for the six and three-month periods ended June 30, 1999
are not necessarily indicative of the results to be expected for the full year.
Note C - Capitalization:
Pursuant to stockholder approval received on May 26, 1999 at the 1999
Annual Meeting, the Company is offering (the "Offering") in a private placement
up to 1,250,00 units (the "Units"), each Unit consisting of one share of Class A
Common Stock and one redeemable warrant. As of August 13, 1999, the Company has
sold in the third quarter 288,550 Units for $504,962.50 ($457,747.50 net of
underwriter's commissions). Under the Offering, the Company may sell up to an
additional 961,450 Units (see Part II - Item 2.
"Changes in Securities and Use of Proceeds" below).
On August 4, 1999, the Company was required to redeem 93,333 shares of
Class A Common Stock held by Bausch & Lomb Pharmaceuticals, Inc. in conjunction
with the satisfaction of a milestone payment under its collaboration and
sale/license agreement with Bausch & Lomb. The shares were redeemed at Bausch &
Lomb's original purchase price of $1.875 per share.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Symbollon Corporation ("Symbollon" or the "Company") is a development
stage company. Since inception of the Company's predecessor in 1986, the
Company's efforts have been principally devoted to research and development,
securing patent and trademark protection and raising capital, most of which
efforts commenced after May 1991. Except for revenue earned since 1995 on sales
of IodoZyme, the Company's sole revenue to date has been from research and
development contracts with corporate partners and interest income.
Forward-Looking Statements
In addition to the historical information contained herein, this
Quarterly Report on Form 10-QSB contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, including, but
not limited to statements concerning plans, objectives, goals, strategies,
prospects, financial needs, future performance, costs and expenditures and Year
2000 matters. Such statements may be identified or qualified, without
limitation, by words such as "likely", "will", "suggests", "may", "would",
"could", "should", "expects", "anticipates", "estimates", "plans", "projects",
"believes", or similar expressions (and variants of such words or expressions).
Investors are cautioned that forward-looking statements are inherently
uncertain. Actual performance, achievements and results may differ materially
from those expressed, projected or suggested in the forward-looking statements
due to certain risks and uncertainties, including, but not limited to, the
Company's early stage of development, dependence on collaborative partners,
additional financing requirements and availability, history (and expectation) of
losses, uncertainty of patent protection, uncertainty associated with
preclinical and clinical testing, market acceptance, intense competition,
government regulation, dependence on key personnel, lack of marketing and
manufacturing experience, reimbursement and drug pricing uncertainty, potential
product liability, material incompatibility, ability to maintain its Nasdaq
SmallCap Market listing, possible Year 2000 problems, hazardous materials, and
the other risks and uncertainties described or discussed in the section "Risk
Factors" in the Annual Report on Form 10-KSB for the period ended December 31,
1998. The forward-looking statements contained herein represent the Company's
judgment as of the date of the Quarterly Report on Form 10-QSB, and the Company
cautions readers not to place undue reliance on such statements.
Results of Operations
Symbollon's net loss for the three-month period ended June 30, 1999 was
$477,651, reflecting an increase of $151,714 or 46.5% from a net loss of
$325,937 in the comparable 1998 period. Symbollon's net loss for the six-month
period ended June 30, 1999 was $858,435, reflecting an increase of $151,660 or
21.5% from a net loss of $706,775 in the comparable 1998 period. The increased
loss for the three-month period resulted primarily from increased development
expenses related to the Company's ongoing Phase II clinical trial. The increased
loss for the six-month period resulted primarily from increased development
<PAGE>
expenses related to the Company's ongoing Phase II clinical trial, partially
offset by increased contract revenues from corporate partners and decreased
general and administrative expenses. The Company expects to continue to incur
operating losses for the foreseeable future.
Product revenues from sales of IodoZyme for the three and six-month
periods ended June 30, 1999 were none and $172,500, compared to $110,501 in the
comparable 1998 periods. Because the Company's exclusive marketing partner
orders IodoZyme a limited number of times each year, the changes between periods
reflect mostly timing differences in receipt of those orders from the marketing
partner, and the increased sales for the six-month period do not necessarily
reflect correspondingly increased sales for the entire year.
The gross profit margin on product sales for the six-month period ended
June 30, 1999 were 19%, compared to 34% in the comparable 1998 period. The
decrease in the gross profit margin on product sales was primarily due to
increased labor and component cost and overhead expenses.
Contract revenues for the three and six-month periods ended June 30,
1999 were $105,886 and $188,879, compared to none in the comparable 1998
periods. The contract revenues for the three and six-month periods ended June
30, 1999 were generated from development activities related to the corporate
relationship with Bausch & Lomb Pharmaceuticals, Inc.
Research and development expenses for the three and six-month periods
ended June 30, 1999 were $474,003 and $914,108, respectively, reflecting
increases of $192,495 and $380,213, respectively, from the comparable 1998
periods. The increases resulted from increased development expenses related to
the Company's drug candidate for the treatment of fibrocystic breast disease,
including consulting fees and clinical costs associated with the Company's
ongoing Phase II clinical trial and conducting a Phase I clinical trial. The
Company anticipates that research and development expenses will remain high over
the remainder of 1999 as the Company completes its ongoing Phase II clinical
trial for its drug to treat fibrocystic breast disease.
General and administrative expenses for the three and six-month periods
ended June 30, 1999 were $95,725 and $196,019, respectively, reflecting
decreases of $10,871 and $69,230, respectively, from the comparable 1998
periods. The decreases resulted primarily from decreased employee salaries and
related costs and investor and public relations expenses.
Liquidity and Capital Resources
The Company has funded its activities through proceeds from private and
public placements of equity and debt securities. As of June 30, 1999, the
Company had working capital of $1,212,289.
The Company continues to incur operating losses and has incurred a
cumulative loss through June 30, 1999 of $6,572,800. However, the Company
believes that it has the necessary liquidity and capital resources, together
with anticipated future revenues, to sustain planned operations for the twelve
months following June 30, 1999. In the event that the Company's internal
<PAGE>
estimates relating to its planned revenues or expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures. In any event, the Company
anticipates that it will require additional funds after June 30, 2000, and
therefore, the Company will continue to seek new financing during the next
twelve months.
The Company's ability to obtain new financing may, in part, be affected
by the Company's ability to maintain its listing on the Nasdaq SmallCap Market.
Nasdaq's current SmallCap continued listing criteria require, in part, that the
Company maintain net tangible assets (as defined by Nasdaq, total assets less
total liabilities and goodwill) of at least $2,000,000, a minimum bid price of
$1.00 per share of common stock and two market makers for its securities. The
Company has received notification from Nasdaq that the Company failed to meet
the continued listing requirements because its net tangible assets were below
$2,000,000 as of December 31, 1998, and remain below as of June 30, 1999. The
Company's qualification hearing with Nasdaq was held on August 12, 1999. The
Company requested a temporary waiver from the continued listing requirements
while the Company attempts to complete its planned financing. If such a waiver
is not granted, or if granted, the Company is not able to obtain sufficient
equity financing, then the Company's Class A Common Stock will be delisted from
the Nasdaq SmallCap Market. There can be no assurance that Nasdaq will grant
such waiver, or if such waiver is granted, that the Company will be able to
obtain sufficient equity financing to maintain such Nasdaq listing.
During the remainder of 1999, the Company anticipates paying
approximately $152,500 as compensation for its current executive officers, and
approximately $15,300 for lease payments on its facilities. The Company
anticipates that the Phase II clinical trial for its drug to treat fibrocystic
breast disease will cost approximately $450,000 over the remainder of 1999. At
December 31, 1998, the Company had a net operating loss carryforward for Federal
income tax purposes of approximately $5,452,000 expiring through 2018.
The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to disruptions in
operations. The Company has identified three major areas determined to be
critical for successful Y2K compliance: (1) financial and information system
applications, (2) manufacturing applications and (3) third-party relationships.
In the financial and information system and manufacturing areas, the Company's
core financial and reporting systems, which were not Y2K compliant, have been
replaced with Y2K compliant systems. The Company is requesting assurances from
all software vendors from which it has purchased or from which it may purchase
software that such software will correctly process all date information at all
times. In the third-party area, the Company is in the process of identifying
areas of exposure. The Company is querying its suppliers and contractors as to
their progress in identifying and addressing problems that their computer
systems will face in correctly processing date information as the Year 2000
approaches. The Company has not determined what costs, if any, will be incurred
in connection with the third-party area. The failure by the Company or a third
party supplier or contractor to correct a material Y2K problem could result in
an interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
<PAGE>
uncertainty inherent in the Y2K problem, resulting in part from the uncertainty
of the Y2K readiness of the Company's customers, suppliers, and other
third-party providers, the Company is unable to determine at this time whether
the consequences of any Y2K failures will have a material impact on the
Company's results of operations, liquidity or financial condition.
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
A. On May 26, 1999, at the 1999 Annual Meeting the Company's
stockholders approved certain amendments to the Company's Certificate of
Incorporation to: (a) classify the Board, effective with the 1999 Annual
Meeting, into three classes, as nearly as equal as possible, so that each
director (after a transitional period) will serve for three years, with one
class of directors being elected each year; (b) provide that directors may be
removed only for cause by the affirmative vote of at least eighty percent (80%)
of the voting power of all of the outstanding shares of capital stock of the
Company entitled to vote generally in the election of directors, voting together
as a single class; (c) provide that any vacancy on the Board may be filled only
by a majority vote of the directors then in office, even if less than a quorum,
and that a director elected to fill a vacancy hold office until the next
election of the class for which such director shall have been chosen; (d)
increase the stockholder vote required to alter, amend, repeal or adopt any
provision inconsistent with these proposed amendments to at least eighty percent
(80%) of the voting power of all of the outstanding shares of capital stock of
the Company entitled to vote generally in the elections of directors, voting
together as a single class; and (e) provide for certain other related matters.
The full text of the proposed amendments to the Certificate of Incorporation are
set forth in Exhibit A to this Proxy Statement, and the descriptions thereof in
this Proxy Statement are qualified in their entirety by reference thereto. The
Company's Amended Certificate of Incorporation is filed herewith as Exhibit 3.1.
B. Not applicable.
C.(i). Pursuant to stockholder approval received on May 26, 1999 at the
1999 Annual Meeting, the Company is offering (the "Offering") in a private
placement for sale to persons who qualify as "accredited investors" as that term
is defined in Rule 501 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), units (the "Units"), each Unit consisting of one share
of Class A Common Stock and one redeemable warrant (the "Warrants"), with a
minimum offering of 100,000 Units and a maximum offering of 1,250,000 Units (the
"Maximum Offering"). Each Warrant will be exercisable for a four-year period,
beginning on the date of the initial closing of the Offering, to purchase one
share of Class A Common Stock at exercise prices per share of $3.00 during the
first year, $4.00 during the second year, $5.00 during the third year and $6.00
thereafter. It is currently anticipated that the Warrants will be redeemable at
the option of Company at $0.01 per Warrant in the event that the average closing
bid price as quoted by Nasdaq (the average last reported sales price if then
listed on any national securities exchange) of the Class A Common Stock over
twenty successive trading days is equal to or greater than $5.00 during the
first year, $6.00 during the second year, $7.00 during the third year and $8.00
thereafter, subject to the holder's right to exercise. If the Class A Common
<PAGE>
Stock is neither quoted on the Nasdaq Market nor listed on any national
securities exchange, it is anticipated that the Warrants will be redeemable at
the option of the Company if the average closing bid price of the Common Stock
as reported in the over-the-counter market in the so-called "pink sheets" or the
"OTC Bulletin Board Service" over twenty successive trading days is $1.00 higher
than the price for each relevant redemption period set forth in the preceding
sentence.
The Company has retained Indianapolis Securities, Inc., a National
Association of Securities Dealers (NASD) member, as placement agent (the
"Placement Agent") in connection with the Offering of the Units on a "best
efforts" basis. The Company has agreed to pay the Placement Agent a ten percent
(10.0%) cash commission and Warrants equal to 10.0% of the Units sold (the
"Placement Agent Warrants") for investors identified and brought to the Offering
by the Placement Agent. For investors identified and brought to the Offering by
the Company, the Placement Agent will not receive any cash commissions or
Placement Agent Warrant allocations.
The Units will be offered in accordance with Rule 506 of Regulation D
promulgated under the Securities Act, and accordingly the securities offered in
the Offering will not be registered under the Securities Act and may not be
offered or sold by the holders thereof absent registration or an applicable
exemption from the registration requirements. The Company will, however,
undertake to use its commercially reasonable best efforts to file a registration
statement under the Securities Act to register for resale the shares of the
Class A Common Stock included in the Units and issuable upon exercise of the
Warrants no later than eight (8) months following the final closing of the
Offering.
As of August 13, 1999, the Company has sold in the third quarter
288,550 Units for $504,962.50 ($457,747.50 net of underwriter's commissions).
Under the Offering, the Company may sell up to an additional 961,450 Units.
C.(ii). On August 4, 1999, the Company was required to redeem 93,333
shares of Class A Common Stock held by Bausch & Lomb Pharmaceuticals, Inc. in
conjunction with the satisfaction of milestone payment under its collaboration
and sale/license agreement with Bausch & Lomb. The shares were redeemed at
Bausch & Lomb's original purchase price of $1.875 per share.
Item 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote of the stockholders at the
Company's Annual Meeting on May 26, 1999:
<PAGE>
1. Election of Directors. The following directors were elected:
Votes
For Against Withheld
James C. Richards 3,340,241 32,022 0
Jack H. Kessler 3,340,241 32,022 0
Paul C. Desjourdy 3,340,241 32,022 0
Richard F. Maradie 3,340,241 32,022 0
Eugene Lieberstein 3,340,241 32,022 0
2. Amendment to the Company's 1993 Stock Option Plan.
Votes
For Against Withheld
2,457,550 95,322 12,900
3. Amendment to the Company's Certificate of Incorporation.
Votes
For Against Withheld
2,457,550 95,322 12,900
4. Proposal to issue and sell 1,250,000 Units in a private placement.
Votes
For Against Withheld
2,478,488 79,784 7,500
5. Ratification of BDO Seidman, LLP as the independent auditors of the
Company:
Votes
For Against Withheld
3,348,341 18,922 5,000
Each item identified above was described in the Company's Proxy
Statement for the Annual Meeting of Stockholders. Each item received the
necessary votes for approval.
Item 5. Other Information
1. In July 1999, the Company received a notice of termination from
Watson Pharmaceuticals, Inc. regarding the Company's collaborative agreement
with Oclassen Pharmaceuticals, Inc. covering the field of dermatology. Upon
receipt of the notice, Symbollon is free to pursue the commercialization of the
Company's technology in the field of dermatology independent of Oclassen.
<PAGE>
2. On August 4, 1999, pursuant to the Company's collaboration and
sale/license agreement with Bausch & Lomb Pharmaceuticals, Inc., Symbollon
received a $750,000 milestone payment. As allowed under its Stock Purchase
Agreement, Bausch & Lomb satisfied $175,000 of its obligation by requiring the
Company to redeem 93,333 shares of its redeemable Class A Common Stock. The
shares were redeemed at Bausch & Lomb's original purchase price of $1.875 per
share.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: August 13, 1999 By: /s/ Paul C. Desjourdy
-------------------------------------------
Paul C. Desjourdy, Exec. Vice President/CFO
and authorized signatory
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
3.1 Amended Certificate of Incorporation of the Company; including
Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of the Company.
3.2 Amended By-Laws of the Company.
10.1 1993 Stock Option Plan of the Company, as amended.
27.1 Financial Data Schedule.
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
SYMBOLLON CORPORATION
FIRST: The name of the corporation is SYMBOLLON CORPORATION
(hereinafter referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent,
19901. The name of the registered agent at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: I. The aggregate number of shares which the Corporation
shall have authority to issue is Twenty Five Million (25,000,000) shares,
consisting of (i) Eighteen Million Seven Hundred Fifty Thousand (18,750,000)
shares of Class A Common Stock, par value $.001 per share ("Class A Common
Stock"), (ii) One Million Two Hundred Fifty Thousand (1,250,000) shares of Class
B Common Stock, par value $.001 per share ("Class B Common Stock"), and (iii)
Five Million (5,000,000) shares of Preferred Stock, par value $.001 per share
("Preferred Stock").
II. Except as otherwise provided in this Article FOURTH, the
rights, preferences and limitations of Class A Common Stock and Class B Common
Stock shall be identical in all respects:
(a) The dividend rights of the holders of shares of Class A
Common Stock and Class B Common Stock shall be identical, except that no stock
dividends on the Class A Common Stock may be paid in Class B Common Stock and no
stock dividends on the Class B Common Stock may be paid in Class A Common Stock.
Whenever a stock dividend is paid, the holder of a share of any class of common
stock shall be paid in the same number of shares of common stock of the class of
such shares as are paid to the holder of a share of common stock of any other
class in shares of common stock of such other class. Whenever a combination
or subdivision of the shares of any class of common stock is made, the same
combination or subdivision shall be made with respect to the other classes of
common stock.
(b) Each share of Class A Common Stock shall entitle the holder
to one vote and each share of Class B Common
<PAGE>
Stock shall entitle the holder to
five votes on all matters with respect to which holders of such classes of stock
are entitled to vote.
(c) (i) All outstanding shares of Class B Common Stock shall
be convertible at all times, at the election of the holder thereof, into an
equal number of fully paid and nonassessable shares of Class A Common Stock by
delivery of written notice by the holder of such shares of Class B Common Stock
to the Corporation, or its transfer agent, of his election together with the
certificate(s) representing the shares to be converted. Thereupon, the
Corporation, or its transfer agent, as the case may be, shall exchange such
certificate(s) for a certificate or certificates representing an equal number of
shares of Class A Common Stock. Shares of Class B Common Stock shall be deemed
to have been converted immediately prior to the close of business on the day
upon which the Corporation, or its transfer agent, receives such shares for
conversion. The person entitled to receive the Class A Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder of
such Class A Common Stock at such time.
(ii) Except as provided in subparagraph (iii) below, upon
the sale, assignment, transfer, conveyance, or other disposition, whether
voluntary, by operation of law or otherwise (a "Transfer", which, for the
purpose hereof, shall not include a pledge) of shares of Class B Common Stock,
other than a transfer to another holder of Class B Common Stock or to a private
charitable foundation as to which a holder of Class B Common Stock is the sole
voting member, the shares so transferred shall, by virtue of such Transfer,
automatically be converted into an equal number of fully paid and nonassessable
shares of Class A Common Stock.
(iii) Upon the death of any holder of Class B Common Stock,
the shares of Class B Common Stock so held as of the date of death of the
deceased stockholder shall be automatically converted into an equal number of
fully paid and nonassessable shares of Class A Common Stock unless and to the
extent that any of such shares are purchased by another holder of Class B Common
Stock on or prior to 90 days from the date that a legal representative is duly
appointed by a court of competent jurisdiction, or 120 days from such date if
within such 90 day period another holder of Class B Common Stock has exercised
any right to purchase shares of Class B Common Stock held by such legal
representative. If there should be only one holder of Class B Common Stock,
effective immediately upon his death, the shares of Class B Common Stock so held
as of the date of death shall be automatically converted into an equal number of
fully paid and nonassessable shares of Class A Common Stock.
<PAGE>
(iv) With respect to any shares of Class B Common Stock
converted into Class A Common Stock pursuant to paragraphs (i), (ii) and (iii)
above, until surrender as hereinafter provided, each outstanding certificate,
which prior to such conversion represented shares of Class B Common Stock, shall
be deemed for all purposes to evidence ownership of the number of shares of
Class A Common Stock into which the shares of Class B Common Stock shall have
been converted. Upon surrender to the Corporation, or its transfer agent, for
cancellation of the certificate or certificates representing such shares, the
holder thereof shall be entitled to receive a certificate or certificates
representing the number of shares of Common Stock to which such holder is
entitled.
(v) With respect to any shares of Class B Common Stock
converted into Class A Common Stock pursuant to paragraphs (i), (ii) or (iii)
above, such converted shares of Class B Common Stock shall, from and after the
date of conversion, have the status of authorized and unissued shares of Class B
Common Stock and may be reissued as shares of Class B Common Stock.
III. The Board of Directors of the Corporation is authorized,
subject to limitations prescribed by law and the provisions of this Article
FOURTH, to provide for, from time to time, in one or more series of any number,
the issuance of shares of Preferred Stock, and, by filing a certificate pursuant
to the General Corporation Law of the State of Delaware, to establish the number
of shares to be included in each such series and to fix the designation,
relative rights, preferences, qualifications and limitations of the shares of
each such series. The authority of the Board Directors with respect to each
series shall include, but not be limited to, determination of each of the
following:
A. The number of shares constituting that series and the
distinctive designation of that series;
B. The dividend rate on the shares of the series, whether
dividends shall be cumulative and, if so, from which date or dates, and whether
they shall be payable in preference to, or in another relation to, the dividends
payable on any other class or classes or series of stock;
C. Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;
D. Whether that series shall have conversion or exchange
privileges, and, if so, the terms and
<PAGE>
conditions of such conversion or exchange,
including provision for adjustment of the conversion or exchange rate in such
events as the Board of Directors shall determine;
E. Whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption, including
the manner of selecting shares for redemption if less than all such shares are
to be redeemed, the date or dates upon or after which they shall be redeemable,
and the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
F. Whether that series shall be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of shares of that
series and, if so, the terms and amounts of such sinking fund;
G. The right of the shares of the series to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on and the purchase, redemption or
other acquisition by the Corporation or any subsidiary of, any outstanding stock
of the Corporation;
H. The right of the shares of that series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and whether such rights shall be in preference to or in another
relation to the comparable rights of any other class or classes or series of
stock; and
I. Any other relative, participating optional or other
special, rights, qualifications, limitations or restrictions of that series.
IV. Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise) or
which, if convertible or exchangeable, have been converted into or exchanged for
shares of stock of any other class or classes, shall have the status of
authorized and unissued shares of Preferred Stock of the same series and may be
reissued as part of the series of which they were originally a part or may be
reclassified and reissued as part of any other series of Preferred Stock or of a
new series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors, all subject to the conditions and the restrictions on
<PAGE>
issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of Preferred Stock.
V. Except as otherwise provided by the resolution or
resolutions providing for the issue of any series of Preferred Stock, after
payment shall have been made to the holders of Preferred Stock of the full
amount of dividends to which they shall be entitled pursuant to the resolution
or resolutions providing for the issuance of any series of preferred Stock, the
holders of Class A and Class B Common Stock shall be entitled, to the exclusion
of the holders of Preferred Stock of any and all series, to receive such
dividends as from time to time may be declared by the Board of Directors.
VI. Except as otherwise provided by the resolution or
resolutions providing for the issue of any series of Preferred Stock, in the
event of any liquidation, dissolution of winding up of the Corporation, whether
voluntary or involuntary, the holders of Class A and Class B Common Stock shall
be entitled, after payment shall have been made to the holders of Preferred
Stock of the full amount to which they shall be entitled pursuant to the
resolution or resolutions providing for the issuance of any series of Preferred
Stock, to share, to the exclusion of the holders of Preferred Stock of any and
all series, in all remaining assets of the Corporation available for
distribution to its stockholders ratably according to the number of shares of
Class A and Class B Common Stock held by them.
VII. The number of authorized shares of any class may be
increased or decreased by the affirmative vote of the holders of a majority of
the stock of the Corporation entitled to vote.
FIFTH: The name and mailing address of the sole incorporator are as
follows:
Veronica Andrews Goldberg
Rubin Baum Levin Constant & Friedman
30 Rockfeller Plaza, 29th Floor
New York New York 11012
SIXTH:
I. Number of Directors. The number of directors of the
Corporation shall not be less than three. The exact number of directors within
the limitations specified in the preceding sentence shall be fixed from time to
time by the Board of Directors.
<PAGE>
II. Classes of Directors. The Board of Directors shall be and
is divided into three classes: Class I, Class II and Class III. No one class
shall have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
III. Terms of Office. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected; provided, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting in 2000; each
initial director in Class II shall serve for a term ending on the date of the
annual meeting in 2001; and each initial director in Class III shall serve for a
term ending on the date of the annual meeting in 2002; and provided further,
that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
IV. Allocation of Directors Among Classes in the Event of
Increases or Decreases in the Number of Directors. In the event of any increase
or decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of which
he is a member for the full term of such class and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so as
to ensure that no one class has more than one director more than any other
class. To the extent possible, consistent with the foregoing rule, any newly
created directorships shall be added to those classes whose terms of office are
to expire at the latest dates following such allocation, and any newly
eliminated directorships shall be subtracted from those classes whose terms of
offices are to expire at the earliest dates following such allocation, unless
otherwise provided from time to time by resolution adopted by the Board of
Directors.
<PAGE>
V. Quorum; Action at Meeting. A majority of the number of
directors fixed pursuant to Section I above shall constitute a quorum except
when a vacancy or vacancies exist, whereupon a majority of the directors then in
office shall constitute a quorum for the transaction of business, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section I above constitute a quorum. If at any meeting of the Board of
Directors there shall be less than such a quorum, a majority of those present
may adjourn the meeting from time to time. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors unless a greater
number is required by law, by the By-laws of the Corporation or by this
Certificate of Incorporation.
VI. Removal. Directors of the Corporation may be removed only
for cause by the affirmative vote of the holders of at least eighty percent
(80%) of the combined voting power of all shares of the capital stock of the
Corporation issued and outstanding and entitled to vote generally in the
election of directors, voting together as a single class.
VII. Vacancies. Any vacancy in the Board of Directors, however
occurring, including (without limitation) a vacancy resulting from an increase
in the number of directors, shall be filled only by a vote of a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected to hold office
until the next election of the class for which such director shall have been
chosen, subject to the election and qualification of his successor and to his
earlier death, resignation or removal.
VIII. Preferred Stock. Notwithstanding the foregoing, whenever
the holders of any one or more series of Preferred Stock issued by the
Corporation after approval by the Board of Directors shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of this
Certificate of Incorporation (including such terms as may be adopted by the
Board of Directors pursuant to Section III of Article FOURTH of the Certificate
of Incorporation) applicable thereto, such directors so elected shall not be
divided into classes pursuant to this Article SIXTH, and the number of such
directors shall not be counted in determining the maximum number of directors
permitted under the foregoing provisions of this Article SIXTH, in each case
unless expressly provided by such terms.
IX. Amendments to Article. Notwithstanding any other provisions
of law, the Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least eighty percent (80%) of the combined
voting power of all shares of capital stock of the Corporation issued and
outstanding and entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with, any provision of this Article SIXTH.
<PAGE>
SEVENTH: No directors of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article SEVENTH shall not eliminate or
limit the liability of a director (i) for any breach of such director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions of
such director not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which such director derived an
improper personal benefit; nor shall this Article SEVENTH eliminate or limit the
liability of a director for any act or omission occurring prior to the date this
Article SEVENTH becomes effective.
EIGHTH: The Board of Directors is expressly authorized to adopt, amend
and repeal the By-Laws of the Corporation.
NINETH: The Corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law as the same may be amended
or supplemented, indemnify any and all persons whom it shall have power to
indemnify from and against any and all expenses, liabilities or other matters.
TENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise of arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A PREFERRED STOCK
OF
SYMBOLLON CORPORATION
The undersigned officers of Symbollon Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware, do hereby
certify that, pursuant to authority conferred by the Certificate of
Incorporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of Symbollon
Corporation at a meeting duly authorized and validly held on August 13, 1996,
adopted a resolution providing for certain powers, designations, number,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, of 444,444 shares of Series
A Preferred Stock, $.001 par value, which resolution is as follows:
RESOLVED: That pursuant to Article Fourth of the Certificate of
Incorporation of this Corporation, the Board of Directors hereby
establishes a series of Preferred Stock, $.001 par value, of the
Corporation having the following powers, designations, number,
preferences and relative, participating, option of or others special
rights, and qualifications, limitations or restrictions thereof:
Description and Designation of Series A Preferred Stock
1. Designation. A total of 444,444 shares of the Corporation's
Preferred Stock shall be designated the "Series A Preferred Stock". As used
herein, the term "Preferred Stock" used without reference to any other
outstanding series of Preferred Stock of the Corporation as from time to time
may be outstanding means all such outstanding series of the Corporation's
Preferred Stock, share for share alike and without distinction as to series,
except as otherwise expressly provided for herein, or as the context otherwise
requires.
2. Dividends.
(a) Computation of Cumulative Dividends. The holders of the
outstanding shares of Series A Preferred Stock shall be entitled to receive, out
of funds legally available therefor, cumulative dividends at the annual rate of
$0.09 per share. Cumulative dividends on the Series A Preferred Stock shall be
payable if, as and when declared.
Dividends on the Series A Preferred Stock shall accrue from
day to day on each share of Series A Preferred Stock from the date of original
issuance of such share, whether or not earned or declared, and shall accrue
until paid.
<PAGE>
All numbers relating to calculation of cumulative dividends
shall be subject to equitable adjustment in the event of any stock dividend,
stock split, combination, reorganization, recapitalization, reclassification or
other similar event involving a change in the capital structure of the Series A
Preferred Stock. Such dividends on the Series A Preferred Stock shall be
cumulative so that if such dividends in respect of any previous or current
annual dividend period, at the annual rate specified above, shall not have been
paid or declared and a sum sufficient for the payment thereof set apart, the
deficiency shall first be fully paid before any dividend or other distribution
shall be paid or declared and set apart for the Class A Common Stock and Class B
Common Stock (collectively, the "Common Stock"). Upon any conversion of the
Series A Preferred Stock under Section 5 hereof, all such accrued and unpaid
dividends on the Series A Preferred Stock to and until the date of such
conversion shall be forfeited and shall not be due and payable.
(b) Restriction on Distributions. Except to the extent in any
instance approval is provided in writing by the holders of a majority of the
outstanding shares of Preferred Stock (all series acting together as a class)
and except for any transaction related to the Corporation's Class A Warrants or
Class B Warrants, the Corporation shall not declare or pay any dividends, or
purchase, redeem, retire, or otherwise acquire for value any shares of its
capital stock (or rights, options or warrants to purchase such shares) now or
hereafter outstanding, return any capital to its stockholders as such, or make
any distributions of assets to its stockholders as such; provided, however, if
any such action is effected with respect to the Preferred Stock, it shall be
done proportionately equivalent for the holders of all series of outstanding
Preferred Stock.
Nothing herein contained shall prevent the Corporation from:
(i) effecting a stock split or declaring or paying any dividend consisting of
shares of any class of capital stock paid to the holders of shares of such class
of capital stock; or (ii) complying with any specific provision of the terms of
the Preferred Stock.
(c) Participating Dividends. In the event that the Board of
Directors of the Corporation shall declare a dividend payable upon the then
outstanding shares of Common Stock (other than a stock dividend on the Common
Stock distributed solely in the form of additional shares of Common Stock), the
holders of the Preferred Stock shall be entitled, in addition to any cumulative
dividends to which they may be entitled under Section 2(a) hereof, to the amount
of dividends per share of Preferred Stock as would be declared payable on the
largest number of whole shares of Common Stock into which each share of
Preferred Stock held by each holder thereof could be converted pursuant to the
provisions of Section 5 hereof, such number determined as of the record date for
the determination of holders of Common Stock entitled to receive such dividend,
less any dividends theretofore paid under Section 2(a) above.
<PAGE>
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Preferred Stock, and subject to the liquidation rights and preferences of
any class or series of Preferred Stock designated in the future to be senior to,
or on a parity with, the Series A Preferred Stock with respect to liquidation
preferences, the holders of each share of Preferred Stock shall be entitled to
be paid first out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes, whether such assets
are capital, surplus or earnings, an amount equal to the greater of:
(i) $1.125 per share of Series A Preferred Stock,
plus all accrued but unpaid cumulative dividends thereon,
whether or not earned or declared, or
(ii) such amount per share of Preferred Stock as
would have been payable had each such share of each series of
Preferred Stock been converted to Common Stock immediately
prior to such event of liquidation, dissolution or winding up
pursuant to the provisions of Section 5 hereof.
The amounts set forth above shall be subject to equitable
adjustment whenever there shall occur a stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Preferred Stock.
If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of all outstanding series
of Preferred Stock the full amounts to which they otherwise would be entitled,
the holders of all outstanding series of Preferred Stock (which is deemed for
purposes of this Section 3 to be on a parity) shall share ratably in any
distribution of available assets pro rata in proportion to the respective
liquidation preference amounts which would otherwise be payable upon liquidation
with respect to the outstanding shares of Preferred Stock if all liquidation
preference dollar amounts with respect to such shares were paid in full, based
upon the aggregate liquidation preference dollar amounts payable upon all shares
of Preferred Stock then outstanding (the "Liquidation Formula").
<PAGE>
After such payment shall have been made in full to the holders
of the Preferred Stock, or funds necessary for such payment shall have been set
aside by the Corporation in trust for the account of holders of the Preferred
Stock so as to be available for such payment, the remaining assets available for
distribution shall be distributed ratably among the holders of the Common Stock.
(b) Distributions Other than Cash. Whenever the distribution
provided for in this Section shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation. All
distributions (including distributions other than cash) made hereunder shall be
made pro rata to each series of Preferred Stock in accordance with the
Liquidation Formula described in Section 3(a) above. In the event of any dispute
between the holders of the Preferred Stock and the Corporation regarding the
determination of the fair market value of non-cash distributions, at the
election of the holders of a majority of the outstanding shares of Preferred
Stock, the Corporation shall engage a consulting or investment banking firm
selected by the Board of Directors and approved by the holders of a majority of
the outstanding shares of Preferred Stock to prepare an independent appraisal of
the fair market value of such property to be distributed. Each of the
Corporation and the holders of a majority of the outstanding shares of Preferred
Stock shall provide such approved appraiser with a written estimate of the fair
market value of such property, and the expenses of any appraisal by such a
consulting or investment banking firm shall be borne by the party whose own
written estimate of fair market value proves to be furthest from that of such
consulting or investment banking firm. In the event that the parties' estimates
of fair market value differ from that of the consulting or investment banking
firm by an equal amount, then the Corporation, on the one hand, and the holders
of the Preferred Stock, on the other, shall each pay fifty percent (50%) of such
expenses.
4. Voting Power
Except as otherwise expressly provided in this Section 4 or Section 6
hereof or as otherwise required by law, each holder of Series A Preferred Stock
shall be entitled to vote on all matters and shall be entitled to that number of
votes equal to the largest number of whole shares of Common Stock into which
such holder's shares of Series A Preferred Stock could be converted, pursuant to
the provisions of Section 5 hereof, at the record date for the determination of
stockholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided in this
instruments, the Certificate of Designations, Preferences and Rights of any
other series of outstanding Preferred Stock or as otherwise required by law, the
holders of shares of Preferred Stock and Common Stock shall vote together (or
render written consents in lieu of a vote) as a single class on all matters
submitted to the stockholders of the Corporation.
<PAGE>
5. Conversion Rights. The holders of the Series A Preferred
Stock shall have the following rights with respect to the conversion of such
shares into shares of Class A Common Stock:
(a) General. Subject to and in compliance with the provisions
of this Section 5, any shares of the Series A Preferred Stock may, at the option
of any holder, be converted at any time and from time to time into fully-paid
and non-assessable shares of Class A Common Stock. The number of shares of Class
A Common Stock which a holder of Series A Preferred Stock shall be entitled to
receive upon conversion shall be the product obtained by multiplying the
Applicable Conversion Rate (determined as provided in Section 5(b)) by the
number of shares of Series A Preferred Stock being converted at any time.
(b) Applicable Conversion Rate. The conversion rate in effect
at any time for the Series A Preferred Stock (the "Applicable Conversion Rate")
shall be the quotient obtained by dividing $1.125 by the Series A Applicable
Conversion Value, calculated as provided in Section 5(c) (the "Series A
Applicable Conversion Rate").
(c) Applicable Conversion Value. The Series A Applicable
Conversion Value in effect from time to time, except as adjusted in accordance
with Section 5(d) hereof, shall be $1.125 with respect to the Series A Preferred
Stock (the "Series A Applicable Conversion Value").
(d) Adjustments to Series A Applicable Conversion Value.
(i) Closing Bid Price. At any time after August 14, 1997,
if at the time of conversion the average Closing Bid Price (as hereinafter
defined) of the Class A Common Stock of the Corporation for the immediately
preceding twenty (20) consecutive trading days (the "Twenty-Day Average") is
below the Series A Applicable Conversion Value then in effect, then the Series
A Applicable Conversion Value relevant only for the shares of Series A Preferred
Stock being then converted shall automatically be adjusted immediately prior to
conversion to equal 83.33% of the Twenty-Day Average. The preceding adjustment
to the Series A Applicable Conversion Value relevant to the shares being then
converted shall not adjust or otherwise effect the Series A Applicable
Conversion Value of the remaining outstanding shares of Series A Preferred
Stock.
The "Closing Bid Price" shall mean (1) if the Class A Common
Stock is then listed on any national securities exchange, the closing sales
price on the principal national securities exchange on which it is so traded,
(2) if the Class A Common Stock is not then listed on any such exchange, the
closing bid price on the over-the-counter market as reported by NASDAQ's
National Market System or Small Capitalization System ("NASDAQ"), or (3) if the
Class A Common Stock is not then listed on any such exchange or quoted in
NASDAQ, the average of the closing bids on the National Daily Quotation Service.
If for any trading day the Class A Common Stock is listed on any
<PAGE>
such exchange,
or quoted in NASDAQ or National Daily Quotation Service and the actual Closing
Bid Price is not determinable in accordance with the above, then for such
trading day the Closing Bid Price shall be the last immediately reported Closing
Bid Price. If the Class A Common Stock is not listed on any such exchange, or
quoted in NASDAQ or National Daily Quotation Service, the Closing Bid Price
shall be determined in good faith by the Board of Directors of the Corporation.
(ii) Upon Extraordinary Common Stock Event. Upon the
happening of an Extraordinary Common Stock Event (as hereinafter defined), the
Series A Applicable Conversion Value shall, simultaneously with the happening
of such Extraordinary Common Stock Event, be adjusted by multiplying the Series
A Applicable Conversion Value by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Series A Applicable Conversion Value. The Series A Applicable Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (I) the issue
of additional shares of Common Stock as a dividend or other distribution on
outstanding shares of Common Stock, (ii) a subdivision of outstanding shares of
Common Stock into a greater number of shares of Common Stock, or (iii) a
combination or reverse stock split of outstanding shares of Common Stock into a
smaller number of shares of the Common Stock.
(e) Automatic Conversion.
(i) Mandatory Conversion of Preferred Stock. Immediately
upon (1) the effectiveness of an underwritten public offering on a firm
commitment basis pursuant to an effective registration statement filed pursuant
to the Securities Act of 1933, as amended, covering the offer and sale of Common
Stock for the account of the Corporation in which the Corporation actually
receives gross proceeds equal to or greater than $5,000,000 (calculated after
deducting underwriters' discounts and commissions but before calculation of
expenses), and in which the price per share of Common Stock equals or exceeds
$3.00 (such price subject to equitable adjustment in the event of any stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the Common Stock),
(2) the approval, set forth in a written notice to the Corporation, of the
holders of at least a majority of the outstanding shares of Series A Preferred
Stock of an election to convert Series A Preferred Stock into Class A Common
Stock, or (3) August 14, 2001, then all outstanding shares of Series A Preferred
Stock shall be converted automatically into the number of shares of Class A
Common Stock into which such shares of Series A Preferred Stock are then
convertible pursuant to Section 5
<PAGE>
hereof as of the closing and consummation of
such underwritten public offering, the stated date of approval of such holders
of Series A Preferred Stock or August 14, 2001, without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent.
(ii) Surrender of Certificates Upon Mandatory Conversion.
Upon the occurrence of the conversion events specified in the preceding
paragraph (i), the holders of the Series A Preferred Stock shall, upon notice
from the Corporation, surrender the certificates representing such shares at the
office of the Corporation or of its transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to such holder a certificate or
certificates for the number of shares of Class A Common Stock into which the
shares of Series A Preferred Stock so surrendered were convertible on the date
on which such conversion occurred. The Corporation shall not be obligated to
issue such certificates unless certificates evidencing the shares of Series A
Preferred Stock being converted are either delivered to the Corporation or any
such transfer agent, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith.
(f) Dividends. In the event the Corporation shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock payable in (i) securities of the Corporation
other than shares of Common Stock, or (ii) other assets (excluding cash
dividends or distributions), then and in each such event provision shall be made
so that the holders of the Series A Preferred Stock shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their Series A Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in Section 5(j)), retained
such securities or such other assets receivable by them during such period,
giving application to all other adjustments called for during such period under
this Section 5 with respect to the rights of the holders of the Series A
Preferred Stock.
(g) Capital Reorganization or Reclassification. If the Common
Stock issuable upon the conversion of the Series A Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5, or the sale of all
or substantially all of the Corporation's capital stock or assets to any other
person), than and in each such event the holder of each share of
<PAGE>
Series A
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock into which such
shares of Series A Preferred Stock might have been converted immediately prior
to such reorganization, recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at
any time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, recapitalization,
reclassification or exchange of shares provided for elsewhere in this Section 5)
or a merger or consolidation of the Corporation with or into another corporation
(other than a merger or reorganization involving only a change in the state of
incorporation of the Corporation or the acquisition by the Corporation of
another business where the Corporation survives as a going concern, as further
provided in Section 3 hereof), or the sale of all or substantially all of the
Corporation's capital stock or assets to any other person, then, as a part of
such reorganization, merger, or consolidation or sale, provision shall be made
so that the holders of the Series A Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Preferred Stock the number of shares
of stock or other securities or property (including cash) of the Corporation, or
of the successor corporation resulting from such merger, consolidation or sale,
to which such holder would have been entitled if such holder had converted its
shares of Series A Preferred Stock immediately prior to such capital
reorganization, merger, consolidation or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
to the end that the provisions of this Section 5 (including adjustment of the
Series A Applicable Conversion Value then in effect and the number of shares of
Common Stock or other securities issuable upon conversion of such shares of
Series A Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable.
The holders of at least a majority of the outstanding shares
of Preferred Stock, upon the occurrence of a capital reorganization, merger or
consolidation of the Corporation, or the sale of all or substantially all its
capital stock or assets, as such events are more fully set forth in the first
paragraph of this Section 5(h), shall have the option of electing treatment for
the Preferred Stock as would be required for an event covered under either (i)
this Section 5(h) or (ii) Section 3 hereof regard a liquidation, dissolution or
winding up of the affairs of the Corporation, notice of which election shall be
submitted in writing to the Corporation at its principal office no later than
twenty (20) business days before the effective date of such event.
(i) Certificate as to Adjustments; Notice by Corporation. In
each case of an adjustment or readjustment of the Series A Applicable Conversion
Rate, the Corporation at its expense will furnish each holder of Series A
Preferred Stock so affected with a certificate prepared by the Treasurer or
Chief Financial Officer of the
<PAGE>
Corporation, showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(j) Exercise of Conversion Privilege. To exercise its
conversion privilege, a holder of Series A Preferred Stock shall surrender the
certificate or certificates representing the shares being converted to the
Corporation at its principal office, and shall give written notice to the
Corporation at that office that such holder elects to convert such shares. Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Class A Common Stock issuable upon
such conversion shall be issued. The certificate or certificates for shares of
Series A Preferred Stock surrendered for conversion shall be accompanied by
proper assignment thereof to the Corporation or in blank. The date when such
written notice is received by the Corporation, together with the certificate or
certificates representing the shares of Series A Preferred Stock being
converted, shall be the "Conversion Date". As promptly as practicable after the
Conversion Date, the Corporation shall issue and shall deliver to the holder of
the shares of Series A Preferred Stock being converted, or on its written order,
such certificate or certificates as it may request for the number of whole
shares of Class A Common Stock issuable upon the conversion of such shares of
Series A Preferred Stock in accordance with the provisions of this Section 5,
and cash, as provided in Section 5(k), in respect of any fraction of a share of
Class A Common Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Series A Preferred Stock shall cease and the person(s) in
whose name(s) any certificate(s) for shares of Class A Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Class A Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of
Class A Common Stock or scrip representing fractional shares shall be issued
upon the conversion of shares of Series A Preferred Stock. Instead of any
fractional shares of Class A Common Stock which would otherwise be issuable upon
conversion of Series A Preferred Stock, the Corporation shall pay to the holder
of the shares of Series A Preferred Stock which were converted a cash adjustment
in respect of such fractional shares in an amount equal to the same fraction of
the market price per share of the Class A Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the aggregate number of shares of Series
A Preferred Stock being converted at any one time by any holder thereof, not
upon each share of Series A Preferred Stock being converted.
<PAGE>
(l) Partial Conversion. In the event some but not all of the
shares of Series A Preferred Stock represented by a certificate(s) surrendered
by a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series A Preferred Stock which were not
converted.
(m) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Class A Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series A Preferred Stock, such number of its shares of Class A
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series A Preferred Stock (including any shares
of Series A Preferred Stock represented by any warrants, options, subscription
or purchase rights for Series A Preferred Stock), and if at any time the number
of authorized but unissued shares of Class A Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
A Preferred Stock (including any shares of Series A Preferred Stock represented
by any warrants, options, subscriptions or purchase rights for such Series A
Preferred Stock), the Corporation shall take such action as may be necessary to
increase its authorized but unissued shares of Class A Common Stock to such
number of shares as shall be sufficient for such purpose.
(n) Reissuance of Preferred Stock. No share or shares of
Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued as Series A Preferred Stock,
but all such shares shall be considered authorized but unissued shares of
Preferred Stock.
6. Restrictions and Limitations.
(a) Corporate Action; Amendments to Charter. The Corporation
shall not take any corporate action or otherwise amend its Certificate of
Incorporation without the approval by vote or written consent of the holders of
at least a majority of the then outstanding shares of Preferred Stock, voting
together as a single class, each share of Preferred Stock to be entitled to one
vote in each instance, if such corporate action or amendment would materially
adversely affect any of the rights, preferences, privileges of or limitations
provided for herein for the benefit of any shares of Preferred Stock or
otherwise materially adversely affect the rights of the holders of the Preferred
Stock. Without limiting the generality of the preceding sentence, the
Corporation will not amend its Certificate of Incorporation or take any other
corporate action without the approval by the holders of at least a majority of
the then outstanding shares of Preferred Stock, voting together as a single
class, if such amendment or corporate action would:
<PAGE>
(i) authorize or issue, or obligate the Corporation
to authorize or issue, additional shares of Preferred
Stock senior to or on a parity with the Preferred
Stock with respect to liquidation preferences,
dividend rights or redemption rights, except for the
designation and issuance of shares of Preferred Stock
approved in any instance by the holders of a majority
of the outstanding shares of Preferred Stock; or
(ii) reduce the amount payable to the holders of
Preferred Stock upon the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation; or
(iii) adversely affect the liquidation preferences,
dividend rights, voting rights or redemption rights
of the holders of Preferred Stock; or
(iv) cancel or adversely modify the conversion rights
of the holders of Preferred Stock provided for in
Section 5 herein.
7. No Dilution or Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
capital stock or assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Preferred Stock set forth herein, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of the Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not increase the par value of any shares of stock
receivable on the conversion of the Preferred Stock above the amount payable
therefor on such conversion, and (b) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of stock on the conversion of all
Preferred Stock from time to time outstanding.
8. Notices of Record Date. In the event of:
(a) any taking by the Corporation of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
<PAGE>
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other corporation, or
any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation,
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Series A Preferred Stock a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up. Such notice shall be mailed by
first class mail, postage prepaid, at least ten (10) days prior to the date
specified in such notice on which such action is to be taken.
Exhibit 3.2
BY-LAWS
OF
SYMBOLLON CORPORATION
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE; REGISTERED AGENT. The registered office
shall be located at 32 Loockerman Square, Suite L-100, in the city of Dover,
County of Kent, State of Delaware. The name of the registered agent at such
address is the Prentice-Hall Corporation System, Inc.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. Annual Meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
Section 2. TIME. Annual meetings of stockholders shall be held on such
date and at such time as the directors may, from time to time, fix. Special
meetings shall be held on the date and at the time fixed by the directors.
Section 3. BUSINESS TO BE TRANSACTED. The stockholders at an annual
meeting shall elect directors and transact any other proper business to come
before the meeting. The stockholders at any special meeting of stockholders
shall transact any proper business to come before the meeting.
Section 4. CALL. Annual meetings and special meetings may be called
by the directors or by any officer authorized by the directors to call the
meeting.
<PAGE>
Section 5. NOTICE AND WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date and hour of the meeting and stating the
place at which the list of stockholders of the corporation may be examined. The
notice of an annual meeting shall state that the meeting is called for the
election of directors and for the transaction of other business which may
properly come before the meeting. The notice of a special meeting shall in all
instances state the purpose or purposes for which the meeting is called. If any
action is proposed to be taken which would, if taken, entitle stockholders to
receive payment for their shares of stock, the notice shall include a statement
of that purpose and to that effect. Except as otherwise provided by the Delaware
General Corporation Law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than ten days nor more than sixty days before
the date of the meeting, unless the lapse of the prescribed period of time shall
have been waived, and directed to each stockholder at his record address or at
such other address which he may have furnished by request in writing to the
Secretary of the Corporation. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in the United States mail. If a meeting
is adjourned to another time, not more than thirty days hence, and/or to another
place, and if an announcement of the adjourned time and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the directors after adjournment, fix a new record date for the adjourned
meeting. Notice need not be given to any stockholder who in person or by
attorney thereunto authorized, submits a waiver of notice by him in writing, or
by telegraph, cable or wireless, before or after the time stated therein.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
Section 6. STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during the ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city or other
municipality or community where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The original or duplicate stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
corporation, or to vote at any meeting of stockholders.
<PAGE>
Section 7. QUORUM. The holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, until a quorum
shall be present or represented. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which adjournment is taken. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 8. VOTING. Except as otherwise provided in the Certificate of
Incorporation, at every meeting of the stockholders, each stockholder having the
right to vote shall be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stock holder. In the
election of directors, a plurality of the votes cast shall elect. Any other
action shall be authorized by a majority of the votes cast except where the
Delaware General Corporation Law or the corporation's Certificate of
Incorporation prescribes a different percentage of votes and/or a different
exercise of voting power. In the election of directors, voting need not be by
ballot. Voting by ballot shall not be required for any other corporate action
except as otherwise provided by the General Corporation Law.
Section 9. PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
<PAGE>
Section 10. RECORD DATE FOR STOCKHOLDERS. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to or dissent
from any corporate action in writing without a meeting, or for the purpose of
determining stockholders entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the directors may fix, in advance, a date as the
record date for any such determination of stockholders. Such date shall not be
more than sixty days nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. If no record date is fixed, the
record date for the determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the board of directors adopt the
resolution relating thereto. When a determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders has been as
provided in this paragraph, such determination shall apply to any adjournment
thereof; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 11. CONDUCT OF MEETINGS. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting: the Chairman of the Board, if any, the President, an
Executive Vice President, a Vice President, or, if none of the foregoing is in
office and present and acting, by a Chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present, the Chairman of the meeting shall appoint a
secretary of the meeting.
<PAGE>
Section 12. INSPECTOR AND JUDGES. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election or judges
of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If an inspector or inspectors or judge or judges are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by appointment made by
the directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector or judge, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector or judge at such meeting with strict impartiality and
according to the best of his ability. The inspectors or judges, if any, and, if
there are none, the person presiding shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, the validity and effect or proxies,
and shall receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors or
judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them and execute a certificate of any
fact found by him or them.
Section 13. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required to
or which may be taken at any annual or special meeting of stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote therein were present and voted. Prompt notice of the taking of
the corporate present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. FUNCTIONS AND DEFINITION. The business of the corporation
shall be managed by the board of directors of the corporation. The use of the
phrase "whole board" herein refers to the total number of directors which the
corporation would have if there were no vacancies.
Section 2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. Unless otherwise set forth in the Certificate of Incorporation, the
number of directors shall be determined from time to time by resolution of the
board of directors.
<PAGE>
Section 3. CLASSIFICATION OF DIRECTORS; ELECTION AND TERM. The board of
directors shall be and is divided into three classes: Class I, Class II and
Class III. No one class shall have more than one director more than any other
class. If a fraction is contained in the quotient arrived at by dividing the
designated number of directors by three, then if such fraction is one third, the
extra director shall be a member of Class I, and if such fraction is two-thirds,
one of the extra directors shall be a member of Class I and one of the extra
directors shall be a member of Class II, unless otherwise provided from time to
time by resolution adopted by the board of directors. Each director shall serve
for a term ending on the date of the third annual meeting of stockholders
following the annual meeting of stockholders at which such director was elected;
provided, that each initial director in Class I shall serve for a term ending on
the date of the annual meeting of stockholders in 2000; each initial director in
Class II shall serve for a term ending on the date of the annual meeting of
stockholders in 2001, and each initial director in Class III shall serve for a
term ending on the date of the annual meeting of stockholders in 2002; and
provided further, that the term of each director shall be subject to the
election and qualification of his successor and to his earlier death,
resignation or removal. In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he is a member for the
full term of such class and (ii) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the board of
directors among the three classes of a directors so as to ensure that no one
class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation, and any newly eliminated directorships
shall be subtracted from those classes whose terms of offices are to expire at
the earliest dates following such allocation, unless otherwise provided from
time to time by resolution adopted by the board of directors. Any vacancy in the
board of directors, however occurring, including (without limitation) a vacancy
resulting from an increase in the number of directors, shall be filled only by a
vote of a majority of the directors then in office, although less than a quorum,
or by a sole remaining director. A director elected to fill a vacancy shall be
elected to hold office until the next election of the class for which such
director shall have been chosen, subject to the election and qualification of
his successor and to his earlier death, resignation or removal. Notwithstanding
the foregoing, whenever the holders of any one or more series of Preferred Stock
issued by the Corporation after approval by the Board of Directors shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation (including such terms as may be
adopted by the Board of Directors pursuant to Section III of Article FOURTH of
the Certificate of Incorporation) applicable thereto, such directors so elected
shall not be divided into classes pursuant to this Article III, Section 3, and
the number of such directors shall not be counted in determining the maximum
number of directors permitted under the foregoing provisions of this Article
III, Section 3, in each case unless expressly provided by such terms.
<PAGE>
Section 4. MEETINGS.
(a) - TIME. Regular meetings shall be held at such time as the
board shall fix, except that the first meeting of a newly elected board shall be
held as soon after its election as the directors may conveniently assemble.
Special meetings shall be held at such time as the parties calling such meeting
shall specify in the notice of meeting.
(b) - PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the board.
(c) - CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, the President, or of a
majority of the directors in office.
(d) - NOTICE OF ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall
be required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings two days or less prior to the date of such meeting,
provided notice is given in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not specify the purpose of the
meeting. Any requirement of furnishing a notice shall be waived by any director
who submits a waiver of such notice in writing, or by telegraph, cable or
wireless, before or after the time stated therein.
(e) - QUORUM AND ACTION. A majority of the whole board shall
constitute a quorum except when a vacancy or vacancies exist, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place, without notice other than announcement at the
meeting. Except as herein otherwise provided, and except as otherwise provided
by the General Corporation Law and Certificate of Incorporation, the act of the
board shall be the act by vote of a majority of the directors present at a
meeting, a quorum being present. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law, the Certificate of Incorporation or these By-Laws which govern
a meeting of directors held to fill vacancies and newly created directorships in
the board.
(f) - CHAIRMAN OF THE MEETING. The Chairman of the Board, if
any, and if present and acting, shall preside at all meetings. Otherwise, the
President, if present and acting, or any other director chosen by the board,
shall preside.
Section 5. REMOVAL OF DIRECTORS. Directors of the Corporation may be
removed only for cause by the affirmative vote of the holders of at least eighty
percent (80%) of the combined voting power of all shares of the capital stock of
the Corporation issued and outstanding and entitled to vote generally in the
election of directors, voting together as a single class.
<PAGE>
Section 6. COMMITTEES. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
board, shall have and may exercise the powers of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it. In the
absence or disqualification of any member of any such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Section 7. ACTION IN WRITING. Any action required or permitted to be
taken at any meeting of the board of directors or any committee thereof may be
taken without a meeting, if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Section 8. COMPENSATION. The board of directors may, by resolution
passed by a majority of the whole board, authorize that the directors be paid
their expenses, if any, of attendance at each meeting of the board of directors
and be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
<PAGE>
Section 9. TRANSACTIONS IN WHICH DIRECTORS MAY BE INTERESTED. No
contract or transaction between the corporation and one or more of its directors
or officers, or between a corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because such directors or officers
are present at or participate in the meeting or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose; provided that the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, or a majority of such
members thereof as shall be present at any meeting thereof at which action upon
any such contract or transaction shall be taken, and the board of directors or
committee in good faith authorizes the contract or transaction without counting
the vote of the interested director or directors. In any case described in this
Section 9 any interested director may be counted in determining the existence of
a quorum at any meeting of the board of directors or any committee which shall
authorize any such contract or transaction and may vote thereat to authorize any
such contract or transaction. Any director of the corporation may vote upon any
contract or other transaction between the corporation and any subsidiary or
affiliated corporation without regard to the fact that he is also a director of
such subsidiary or affiliated corporation.
Section 10. RATIFICATION OF DIRECTORS' ACTS. Any contract, transaction
or act of the corporation or of the board of directors which shall be ratified
by a majority of a quorum of the stockholders entitled to vote at any annual
meeting or at any special meeting called for that purpose shall be as valid and
binding as though ratified by every stockholder of the corporation; provided,
however, that any failure of the stockholders to approve or ratify such
contract, transaction or act when and if submitted to them shall not be deemed
in any way to invalidate the same or to deprive the corporation, its directors
or officers of their right to proceed with such contract, transaction or act.
ARTICLE IV
OFFICERS
The directors shall elect a President and a Secretary, and may elect or
appoint such other officers and agents (including a Chairman, or more than one
Co-Chairmen, of the board of directors and/or a Chief Executive Officer, or more
than one Co-Chief Executive Officers) as are desired. The President may but need
not be a director. Any number of offices may be held by the same person.
Unless otherwise provided in the resolution of election or appointment,
each officer shall hold office until the meeting of the board of directors
following the next annual meeting of stockholders and until his successor has
been elected and qualified.
Officers shall have the powers and duties customarily associated with
their office or as defined in the resolutions appointing them; provided, that
the Secretary shall record all proceedings of the meetings or of the written
actions of the stockholders and of the directors, and any committee thereof, in
a book to be kept for that purpose.
The board of directors may remove any officer for cause or without
cause. Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
ARTICLE V
CERTIFICATES REPRESENTING STOCK
<PAGE>
Section 1. CERTIFICATES REPRESENTING STOCK. Certificates for shares of
the capital stock of the corporation shall be in such form as shall be approved
by the directors. They shall exhibit the holder's name and number of shares and
shall be appropriately numbered in the order of their issue. Every holder of
stock in the corporation shall be entitled to have a certificate signed by, or
in the name of, the corporation by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the corporation certifying the number of shares owned by him in the
corporation. If such certificate is countersigned by a transfer agent other than
the corporation or its employee or by a registrar other than the corporation or
its employee, any other signature on the certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar for any reason whatsoever before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class of
stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the board of directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
Section 2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share of stock or it may pay in cash
the fair value of fractions of a share of stock as of the time when those
entitled to receive such fractions are determined or it may issue scrip or
fractional warrants in registered or bearer form over the manual or facsimile
signature of an officer of the corporation or of its agents, exchangeable as
therein provided for full shares of stock, but such scrip or fractional warrants
shall not entitle the holder to any rights of a stockholder except as the board
of directors shall provide. Such scrip or fractional warrants may be issued
subject to the condition that the same shall become void if not exchanged for
certificates representing full shares of stock before a specified date, or
subject to the condition that the shares of stock for which such scrip or
fractional warrants are exchangeable may be sold by the corporation and the
proceeds thereof distributed to the holders of such scrip or fractional
warrants, or subject to any other conditions which the board of directors may
determine.
Section 3. STOCK TRANSFERS. Upon compliance with the provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon.
<PAGE>
Section 4. TRANSFER AGENT AND REGISTRAR. The Corporation shall, if and
whenever the board of directors shall so determine, maintain one or more
transfer offices or agencies, each in charge of a transfer agent designated by
the board of directors where the shares of the capital stock of the corporation
shall be directly transferable, and one or more registry offices, each in charge
of a registrar designated by the board of directors where such shares of stock
shall be registered, and no certificate for shares of the capital stock of the
corporation in respect of which a transfer agent and registrar shall have been
designated, shall be valid unless countersigned by such transfer agent and
registered by such registrar. The board of directors may also make such
additional rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of the capital stock of the
corporation.
Section 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof, and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VI
DIVIDENDS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. SPECIAL PURPOSE RESERVES. Before payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE VII
GENERAL PROVISIONS
Section 1. CHECKS, ETC. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may from time to time designate.
Section 2. FISCAL YEAR. The fiscal year of the corporation shall be
fixed, and shall be subject to change, by resolution of the board of directors.
<PAGE>
Section 3. VOTING STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the board of directors, the Chairman of the Board, if
any, and if none, the President may, from time to time, appoint an attorney or
attorneys or agent or agents of the corporation, in the name and on behalf of
the Corporation, to cast the votes which the corporation may be entitled to cast
as a stockholder or otherwise in any other corporation, any of whose stock or
securities may be held by the corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing to
any action by any such other corporation, and may instruct the person or persons
so appointed as to the manner of casting such votes or giving such consent, and
may execute or cause to be executed in the name and on behalf of the corporation
and under its seal or otherwise, such written proxies, consents, waivers or
other instruments as such person or persons so appointed may deem necessary or
proper in the premises.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each director, officer and employee, past or present of the
corporation, and each person who serves or may have served at the request of the
corporation as a director, officer or employee of another corporation and their
respective heirs, administrators and executors, shall be indemnified by the
corporation in accordance with, and to the fullest extent permitted by, the
provisions of the General Corporation Law of the State of Delaware as it may
from time to time be amended. Each agent of the corporation and each person who
serves or may have served at the request of the corporation as an agent of
another corporation, or as an employee or agent of any partnership, joint
venture, trust or other enterprise may, in the discretion of the board of
directors, be indemnified by the corporation to the same extent as provided
herein with respect to directors, officers and employees of the corporation. The
provisions of this Article VIII shall apply to any member of any committee
appointed by the board of directors as fully as though such person shall have
been an officer or director of the corporation.
The board of directors may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the Certificate of Incorporation, By-Laws or the General
Corporation Law.
The provisions of this Article VIII shall be in addition to and not in
limitation of any other rights, indemnities, or limitations of liability to
which any person may be entitled, as a matter of law or under the Certificate of
Incorporation, and By-Law, agreement, vote of stockholders or otherwise.
ARTICLE IX
CONTROL OVER BY-LAWS
If the Certificate of Incorporation so provides, the power to adopt,
amend, or repeal By-Laws shall be vested in the board of directors; provided,
that the board of directors may delegate such power, in whole or in part, to the
stockholders. If the Certificate of Incorporation does not so provide, the power
to make, alter, or repeal By-Laws shall be in the stockholders.
Exhibit 10.1
SYMBOLLON CORPORATION
1993 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Symbollon Corporation 1993 Stock Option Plan (the
"Plan") is to advance the interests of Symbollon Corporation, a Delaware
corporation (the "Company"), by providing an opportunity for ownership of the
stock (or, in the case of SARs, as defined below, the appreciation of the value
of the stock) of the Company by employees, agents and directors of, and
consultants to, the Company and its subsidiaries, as defined below. By providing
such opportunity, the Company seeks to attract and retain such qualified
personnel, and otherwise to provide additional incentive for grantees to promote
the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
treasury shares of the class A common stock, $.001 par value per share, of the
Company (the "Common Stock") for which options (the "Options") and stock
appreciation rights ("SARs") may be granted under the Plan shall be 400,000,
subject to adjustment as provided in Section 14 hereof.
(b) If an Option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent Option grants
under the Plan; provided, however, that shares as to which an Option has been
surrendered in connection with the exercise of a related SAR will not again be
available for subsequent Option or SAR grants under the Plan.
(c) Stock issuable upon exercise of an Option may be subject to such
restrictions on transfer, repurchase rights or other restrictions as shall be
determined by the Board of Directors of the Company (the "Board").
3. Administration of the Plan.
(a) The Plan shall be administered by the Board. No member of the
Board shall act upon any matter exclusively affecting any Option or SAR granted
or to be granted to himself or herself under the Plan. A majority of the members
of the Board shall constitute a quorum, and any action may be taken by a
majority of those present and voting at any meeting. The decision of the Board
as to all questions of interpretation and application of the Plan shall be
<PAGE>
final, binding and conclusive on all persons. The Board, in its sole discretion,
may grant Options to purchase shares of Common Stock and may grant SARs, as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective Option and SAR agreements and
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective Option and SAR
agreements, which may but need not be identical, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option or SAR
agreement in the manner and to the extent it shall deem expedient to implement
the Plan and shall be the sole and final judge of such expediency. No director
shall be liable for any action or determination made in good faith. The Board,
in its discretion, may delegate its power, duties and responsibilities to a
committee, consisting of two or more members of the Board, all of whom must be
"non-employee" directors (as defined under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), as such term
is interpreted from time to time.hereinafter. If a committee is so appointed,
all references to the Board herein shall mean and relate to such committee,
unless the context otherwise requires.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Board. Options designated as incentive stock options that fail
to continue to meet the requirements of Section 422 of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424(f) of
the Code and the Treasury regulations (the "Regulations") promulgated
thereunder. Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options pursuant
to the Plan. Options designated as non-qualified options may be granted to (i)
officers and key employees of the Company or of any of its subsidiaries, or (ii)
agents, directors of and consultants to the Company, whether or not otherwise
employees of the Company.
<PAGE>
In determining the eligibility of an individual to be granted an
Option or SAR, as well as in determining the number of shares to be subject to
any such Option or SAR, the Board shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options) granted under
this Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which
incentive stock options are granted (determined as of the date the
incentive stock options are granted), exercisable for the first time
by an individual during any calendar year shall not exceed $100,000.
If an incentive stock option is granted pursuant to which the
aggregate fair market value of shares with respect to which it first
becomes exercisable in any calendar year by an individual exceeds
such $100,000 limitation, the portion of such option which is in
excess of the $100,000 limitation shall be treated as a non-qualified
option pursuant to Section 422(d)(1) of the Code. In the event that
an individual is eligible to participate in any other stock option
plan of the Company or any subsidiary of the Company which is also
intended to comply with the provisions of Section 422 of the Code,
such $100,000 limitation shall apply to the aggregate number of
shares for which incentive stock options may be granted under this
Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an
incentive stock option is granted pursuant to the provisions of this
Plan is on the date of grant the owner of stock (as determined under
Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
subsidiary of the Company, then the following special provisions
shall be applicable to the incentive stock options granted to such
individual:
(i) The Option price per share subject to such
incentive stock options shall be not less than 110%
of the fair market value of the stock determined at
the time such Option was granted. In determining
the fair market value under this clause (i), the
provisions of Section 8 hereof shall apply.
(ii) The incentive stock option by its terms shall not
be exercisable after the expiration of five (5)
years from the date such Option is granted.
<PAGE>
7. Option and SAR Agreements.
Each Option and SAR shall be evidenced by an agreement (the
"Agreement") duly executed on behalf of the Company and by the grantee to whom
such Option or SAR is granted, which Agreement shall comply with and be subject
to the terms and conditions of the Plan. The Agreement may contain such other
terms, provisions and conditions which are not inconsistent with the Plan as may
be determined by the Board; provided that Options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. No Option or SAR shall be granted within the meaning
of the Plan and no purported grant of any Option or SAR shall be effective until
the Agreement shall have been duly executed on behalf of the Company and the
grantee. More than one Option and SAR may be granted to an individual, subject,
if applicable, to the limitations of Section 6.
8. Option Price.
(a) The Option price or prices of shares of the Common Stock for
Options designated as non-qualified stock options shall be as determined by the
Board; provided, however, that such Option price shall be not less than 85% of
the fair market value of the shares subject to such Option, determined as of the
date of grant of such Option.
(b) Subject to the conditions set forth in Section 6(b) hereof, the
Option price or prices of shares of the Company's Common Stock for incentive
stock options shall be at least the fair market value of such Common Stock at
the time the Option is granted as determined by the Board in accordance with the
Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities
exchange, the fair market value shall be the mean between the high and low sales
prices, if any, on the largest such exchange on the date of the grant of the
Option or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant in accordance with Section 25.2512-2 of
the Regulations. If the shares are not then listed on any such exchange, the
fair market value of such shares shall be the mean between the closing "Bid" and
the closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the Option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales prices on the nearest
date before and the nearest date after the date of grant in accordance with
Section 25.2512-2 of the Regulations. If the shares are not then either listed
on any such exchange or quoted in NASDAQ, the fair market value shall be the
mean between the average of the "Bid" National Daily Quotation Service for the
date of the grant of the Option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on the
nearest date before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Board.
9. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such Options, (ii) shares of
Common Stock owned by the grantee having a fair market value equal in amount to
the exercise price of the Options being exercised, or (iii) any combination of
(i) and (ii); provided, however, that payment of the exercise price by delivery
of shares of Common Stock owned by such grantee may be made only upon the
condition that such payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board, unless such condition
is waived by the Board. The fair market value of any shares of Common Stock
which may be delivered upon exercise of an Option shall be determined by the
Board in accordance with Section 8 hereof.
<PAGE>
(b) To the extent that the right to purchase shares under an Option
has accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option.
10. Exercise of Options and SARs.
Each Option and SAR granted under the Plan shall, subject to Section
11(b) and Section 14 hereof, be exercisable at such time or times and during
such period as shall be set forth in the Agreement; provided, however, that no
Option or SAR granted under the Plan shall have a term in excess of ten (10)
years from the date of grant. To the extent that an Option or SAR is not
exercised by a grantee when it becomes initially exercisable, it shall not
expire but shall be carried forward and shall be exercisable, on a cumulative
basis, until the expiration of the exercise period. No partial exercise may be
made for less than one hundred (100) full shares of Common Stock. The exercise
of an Option shall result in the cancellation of any related SAR with respect to
the same number of shares of Common Stock as to which the Option was exercised.
11. Term of Options and SARs; Exercisability.
(a) Term.
(i) Each Option and SAR shall expire on a date
determined by the Board which is not more than
ten (10) years from the date of the granting
thereof, except (a) as otherwise provided
pursuant to the provisions of Section 6(b)
hereof, and (b) for earlier termination as
herein provided.
(ii) Except as otherwise provided in this Section 11,
an Option or SAR granted to any grantee whose
employment, for the Company or any of its
subsidiaries, is terminated, shall terminate on
the earlier of (i) ninety days after the date
such grantee's employment, for the Company or
any such subsidiary, is terminated, or (ii) the
date on which the Option or SAR expires by its
terms.
(iii) If the employment of a grantee is terminated by
the Company or any of its subsidiaries for cause
or because the grantee is in breach of any
employment agreement, such Option or SAR will
terminate on the date the grantee's employment
is terminated by the Company or any such
subsidiary.
<PAGE>
(iv) If the employment of a grantee is terminated by
the Company or any of its subsidiaries because
the grantee has become permanently disabled
(within the meaning of Section 22(e)(3) of the
Code), such Option or SAR shall terminate on the
earlier of (i) one year after the date such
grantee's employment, for the Company or any
such subsidiary, is terminated, or (ii) the date
on which the Option or SAR expires by its terms.
(v) In the event of the death of any grantee, any
Option or SAR granted to such grantee shall
terminate one year after the date of death, or
on the date on which the Option or SAR expires
by its terms, whichever occurs first.
(b) Exercisability.
(i) Except as provided below, an Option or SAR
granted to a grantee whose employment, for the
Company or any of its subsidiaries, is
terminated, shall be exercisable only to the
extent that such Option or SAR has accrued and
is in effect on the date such grantee's
employment, for the Company or any such
subsidiary, is terminated.
(ii) An Option or SAR granted to a grantee whose
employment is terminated by the Company or any
of its subsidiaries because he or she has become
permanently disabled, as defined above, shall be
immediately exercisable as to the full number of
shares covered by such Option or SAR, whether or
not under the provisions of Section 10 hereof
such Option or SAR was otherwise exercisable as
of the date of disability.
(iii) In the event of the death of a grantee, the
Option or SAR granted to such grantee may be
exercised as to the full number of shares
covered thereby, whether or not under the
provisions of Section 10 hereof the grantee was
entitled to do so at the date of his or her
death, by the executor, administrator or
personal representative of such grantee, or by
any person or persons who acquired the right to
exercise such Option or SAR by bequest or
inheritance or by reason of the death of such
grantee.
(iv) Neither an SAR nor an Option granted granted in
connection with an SAR to a person subject to
Section 16(b) of the Exchange Act may be
exercised before six months after the date of
grant.
<PAGE>
12. Options and SARs Not Transferable.
The right of any grantee to exercise any Option or SAR granted to him
or her shall not be assignable or transferable by such grantee other than by
will or the laws of descent and distribution or pursuant to a domestic relations
order as defined in the Code or Title 1 of the Employee Retirement Income
Security Act, or the rules thereunder, and any such Option or SAR shall be
exercisable during the lifetime of such grantee only by him or her. Any Option
or SAR granted under the Plan shall be null and void and without effect upon the
bankruptcy of the grantee to whom the Option or SAR is granted, or upon any
attempted assignment or transfer, except as herein provided, including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon such Option or SAR.
13. Terms and Conditions of SARs.
(a) An SAR may be granted separately or in connection with an Option
(either at the time of grant or at any time during the term of the Option).
(b) The exercise of an SAR shall result in the cancellation of the
Option to which it relates with respect to the same number of shares of Common
Stock as to which the SAR was exercised.
(c) An SAR granted in connection with an Option shall be exercisable
or transferable only to the extent that such related Option is exercisable or
transferable.
(d) Upon the exercise of an SAR related to an Option, the holder will
be entitled to receive payment of an amount determined by multiplying:
(i) The difference obtained by subtracting the purchase
price of a share of Common Stock specified in the related Option from the fair
market value of a share of Common Stock on the date of exercise of such SAR (as
determined by the Board), by
(ii) The number of shares as to which such SAR is exercised.
(e) An SAR granted without relationship to an Option shall be
exercisable as determined by the Board, but in no event after ten years from the
date of grant.
(f) An SAR granted without relationship to an Option will entitle the
holder, upon exercise of the SAR, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the fair market
value of the a share of Common Stock on the date the SAR was granted from the
fair market value of a share of Common Stock on the date of exercise of such SAR
(as determined by the Board), by
(ii) The number of shares as to which such SAR is exercised.
(g) Notwithstanding subsections (d) and (f) above, the Board may
limit the amount payable upon exercise of an SAR. Any such limitation shall be
determined as of the date of grant and noted on the instrument evidencing the
SAR granted.
(h) At the discretion of the Board, payment of the amount determined
under subsections (d) and (f) above may be made solely in whole shares of Common
Stock valued at their fair market value on the date of exercise of the SAR (as
determined by the Board), or solely in cash, or in a combination of cash and
shares. If the Board decides to make full payment in shares of Common Stock and
the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.
<PAGE>
14. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which Options and SARs may be granted under the Plan and as to which outstanding
Options, SARs, or portions thereof then unexercised, shall be exercisable, to
the end that the proportionate interest of the grantee shall be maintained as
before the occurrence of such event; such adjustment in outstanding Options and
SARs shall be made without change in the total price applicable to the
unexercised portion of such Options and SARs and with a corresponding adjustment
in the Option price per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock, in his, her or its sole discretion, may deliver to
the grantee the same kind of consideration that is delivered to the shareholders
of the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding Options in exchange for consideration in cash
or in kind, which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the grantee would have
received had the Option been exercised (but only to the extent then exercisable)
and had no disposition of the shares acquired upon such exercise been made prior
to such sale, conveyance or Change in Control, less the Option price therefor.
Upon receipt of such consideration, all Options (whether or not then
exercisable) shall immediately terminate and be of no further force or effect.
The value of the stock or other securities the grantee would have received if
the Option had been exercised shall be determined in good faith by the Board,
and in the case of shares of Common Stock, in accordance with the provisions of
Section 8 hereof.
The Board shall also have the power and right to accelerate the
exercisability of any Options, notwithstanding any limitations in this Plan or
in the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any Options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options under Section
422 of the Code as a result of such acceleration shall be redesignated as
non-qualified stock options without the necessity of further Board action.
A "Change in Control" shall be deemed to have occurred if any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned less than fifty percent (50%) of the
then outstanding Common Stock, shall acquire such additional shares of Common
Stock in one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own fifty percent (50%) or more of the Common Stock outstanding.
Upon dissolution or liquidation of the Company, all Options and SARs
granted under this Plan shall terminate, but each grantee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries as a director, agent or consultant) shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
Option or SAR to the extent then exercisable.
<PAGE>
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old Option, or substitution of a new option for the old
Option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option grant shall not reduce the
number of shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any Option, but in the event any adjustment hereunder in the number
of shares covered by the Option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
15. No Special Employment Rights.
Nothing contained in the Plan or in any Option or SAR granted under
the Plan shall confer upon any grantee any right with respect to the
continuation of his or her employment by the Company or any subsidiary or
interfere in any way with the right of the Company or any subsidiary, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Option or SAR holder from the rate in existence at the time of the grant of an
Option or SAR. Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time of such occurrence pursuant to uniform
nondiscriminatory criteria.
16. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified Option granted under the Plan, or cash upon the exercise of an SAR
granted under the Plan, shall be subject to the grantee's satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements. The Company and grantee may agree to withhold shares of Common
Stock purchased upon exercise of an Option to satisfy the above-mentioned
withholding requirements; provided, however, no such agreement may be made by a
grantee who is an "officer" or "director" within the meaning of Section 16 of
the Exchange Act, except pursuant to a standing election to so withhold shares
of Common Stock purchased upon exercise of an Option, such election to be made
not less than six months prior to such exercise and which election may be
revoked only upon six months prior written notice.
17. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9, the Company may
delay the issuance of shares covered by the exercise of an Option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
<PAGE>
(i) The shares with respect to which such Option has
been exercised are at the time of the issue of
such shares effectively registered or qualified
under applicable Federal and state securities
acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably
conditioned or withheld, that such shares are
exempt from registration and qualification under
applicable Federal and state securities acts now
in force or as hereafter amended.
(b) It is intended that all exercises of Options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any Option may be
exercised, except as otherwise agreed to by the Company in writing in its sole
discretion.
18. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless and until the shares to be issued upon exercise of an Option
granted under the Plan have been effectively registered under the Securities Act
of 1933, as amended (the "1933 Act"), as now in force or hereafter amended, the
Company shall be under no obligation to issue any shares covered by any Option
unless the person who exercises such Option, in whole or in part, shall give a
written representation and undertaking to the Company which is satisfactory in
form and scope to counsel for the Company and upon which, in the opinion of such
counsel, the Company may reasonably rely, that he or she is acquiring the shares
issued pursuant to such exercise of the Option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the 1933 Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary
or desirable to register under the 1933 Act or other applicable statutes any
shares with respect to which an Option shall have been exercised, or to qualify
any such shares for exemption from the 1933 Act or other applicable statutes,
then the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
<PAGE>
19. Loans.
At the discretion of the Board, the Company may loan to the grantee
some or all of the purchase price of the shares acquired upon exercise of an
Option.
20. Modification of Outstanding Options and SARs.
Subject to any applicable limitations contained herein, the Board may
authorize the amendment of any outstanding Option or SAR with the consent of the
grantee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
21. Approval of Stockholders.
The Plan shall become effective upon adoption by the Board; provided,
however, that the Plan shall be submitted for approval by the stockholders of
the Company no later than twelve (12) months after the date of adoption of the
Plan by the Board. Should the stockholders of the Company fail to approve the
Plan within such twelve-month period, all Options granted thereunder shall be
and become null and void.
22. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of the Company. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, (i)
the Board may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 21, increase the maximum number of
shares for which Options and SARs may be granted or change the designation of
the class of persons eligible to receive Options and SARs under the Plan, and
(ii) any such modification or amendment of the Plan shall be approved by a
majority of the stockholders of the Company to the extent that such stockholder
approval is necessary to comply with applicable provisions of the Code, rules
promulgated pursuant to Section 16 of the Exchange Act, applicable state law, or
applicable NASD or exchange listing requirements. Termination or any
modification or amendment of the Plan shall not, without the consent of a
grantee, affect his or her rights under an Option or SAR theretofore granted to
him or her.
23. Limitation of Rights in the Option Shares.
A grantee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the Options except to the extent that the
Option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the grantee.
24. Notices.
Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the President at the
Company's principal place of business; and, if to a grantee, to his or her
address as it appears on the records of the Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,202,538
<SECURITIES> 0
<RECEIVABLES> 76,248
<ALLOWANCES> 0
<INVENTORY> 81,161
<CURRENT-ASSETS> 1,688,976
<PP&E> 286,134
<DEPRECIATION> 177,144
<TOTAL-ASSETS> 2,013,785
<CURRENT-LIABILITIES> 476,687
<BONDS> 0
350,000
0
<COMMON> 3,420
<OTHER-SE> 1,187,098
<TOTAL-LIABILITY-AND-EQUITY> 2,013,785
<SALES> 172,500
<TOTAL-REVENUES> 361,379
<CGS> 140,190
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 914,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (858,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (858,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (858,435)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
