<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Sangstat Medical Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): Not applicable.
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1997
TO THE STOCKHOLDERS OF SANGSTAT MEDICAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SangStat
Medical Corporation (the "Company"), a Delaware corporation, will be held on
June 19, 1997 at 10:00 a.m. local time, at the offices of the Company, located
at 1505 Adams Drive, Menlo Park, California, 94025, for the following purposes,
as more fully described in the Proxy Statement accompanying this Notice:
1. To elect directors to serve for one year terms or until their successors
are elected;
2. To approve a series of amendments to the Company's 1993 Stock Option
Plan, including a 750,000-share increase in the maximum number of shares
of Common Stock authorized for issuance under the 1993 Plan;
3. To approve the Company's 1996 Non-Employee Directors Stock Option Plan;
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997;
and
5. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 9, 1997 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed between the record date and the date of the meeting.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed Proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
/s/ Philippe Pouletty
Philippe Pouletty
Chairman of the Board and
Chief Executive Officer
May 27, 1997
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE> 3
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT....................................................................... 1
MATTERS TO BE CONSIDERED AT ANNUAL MEETING............................................ 2
PROPOSAL ONE -- ELECTION OF DIRECTORS....................................... 2
PROPOSAL TWO -- AMENDMENTS TO THE 1993 STOCK OPTION PLAN.................... 5
PROPOSAL THREE -- APPROVAL OF THE 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION
PLAN......................................................................... 11
PROPOSAL FOUR -- RATIFICATION OF INDEPENDENT AUDITORS....................... 15
OTHER MATTERS............................................................... 15
OWNERSHIP OF SECURITIES............................................................... 16
EXECUTIVE COMPENSATION AND RELATED INFORMATION........................................ 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION............................... 21
COMPARISON OF STOCKHOLDER RETURN...................................................... 24
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.................. 25
ANNUAL REPORT......................................................................... 25
FORM 10-K............................................................................. 25
</TABLE>
<PAGE> 4
SANGSTAT MEDICAL CORPORATION
1505 ADAMS DRIVE
MENLO PARK, CALIFORNIA 94025
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 1997
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of SangStat Medical Corporation, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on June 19,
1997 (the "Annual Meeting"). The Annual Meeting will be held at 10:00 a.m. local
time, at the offices of the Company located at the address above. These proxy
solicitation materials were mailed on or about May 27, 1997, to all stockholders
entitled to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. On May 9, 1997, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, 15,901,230 shares of the Company's common stock, $0.001 par value
("Common Stock"), were issued and outstanding. No shares of the Company's
preferred stock were outstanding. Each stockholder is entitled to one vote for
each share of Common Stock held by such stockholder on May 9, 1997. Abstentions
and broker non-votes are counted as present for the purpose of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting. Directors are elected by a plurality vote. Since votes are cast in
favor of or withheld from each nominee, abstentions will therefore have no
effect on the outcome. Each of the other proposals requires an affirmative vote
of a majority of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on such proposal. Abstentions will have the same
effect as negative votes, while broker non-votes are not included in the total
number of votes cast on a proposal and therefore will not be counted for
purposes of determining whether a proposal has been approved. All votes will be
tabulated by the inspector of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
REVOCABILITY OF PROXIES
You may revoke or change your Proxy at any time before the Annual Meeting
by filing with the Secretary of the Company, at the Company's principal
executive offices, a notice of revocation or another signed Proxy with a later
date. You may also revoke your Proxy by attending the Annual Meeting and voting
in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram, or other means by directors, officers or employees. No
additional compensation will be paid to those individuals for any such services.
Except as described above, the Company does not presently intend to solicit
proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received no
later than January 19, 1998, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
<PAGE> 5
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
GENERAL
The Board of Directors has selected seven nominees, all of whom are
currently serving as directors of the Company. The names of the persons who are
nominees for director and their positions with the Company as of May 1, 1997 are
set forth in the table below. Each person nominated for election has agreed to
serve if elected, and management has no reason to believe that any nominee will
be unavailable to serve. In the event any nominee is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for
any nominee who may be designated by the present Board of Directors to fill the
vacancy. Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the nominees named below. The seven candidates receiving
the highest number of affirmative votes of the shares represented and voting on
this particular matter at the Annual Meeting will be elected directors of the
Company, to serve their respective terms and until their successors have been
elected and qualified.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD DIRECTOR
NOMINEE AGE WITH THE COMPANY SINCE
------------------------- --- ---------------------------- --------
<S> <C> <C> <C>
Philippe Pouletty........ 38 Chairman of the Board, 1988
Chief Executive Officer
Gordon Russell........... 62 Director 1990
Fredric J. Feldman....... 57 Director 1992
Elizabeth Greetham....... 47 Director 1996
Richard D. Murdock....... 49 Director 1993
Andrew J. Perlman........ 46 Director 1992
Vincent R. Worms......... 42 Director 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
PHILIPPE POULETTY, M.D., 38, founded SangStat in 1988 and has served as
Chief Executive Officer since then. Dr. Pouletty has also been a Director since
1988, and has served as Chairman since February 1995. Dr. Pouletty was a founder
and, from 1984 to 1988, a Director of Research at Clonatec, a French diagnostics
company. Dr. Pouletty has a M.D. degree from the University of Paris VI. He
holds a M.S. in immunology and a M.S. in virology from Institut Pasteur. Dr.
Pouletty conducted research as a post-doctoral fellow at Stanford University. He
serves as Vice-President of Fondation Transvie, a non-profit foundation for
xenotransplantation.
GORDON RUSSELL, 62, served as Chairman of the Board from January 1992 until
February 1995, and as a Director of the Company continuously since February
1990. In February 1995, Mr. Russell resigned from his post as Chairman of the
Board. Mr. Russell serves on the Board of ChemTrak Incorporated and has been a
General Partner of Sequoia Capital since 1979. Mr. Russell is Chairman of the
Board of Overseers of the Dartmouth Medical School and the C. Everett Koop
Institute at Dartmouth. He also serves as Chairman of the Board of Trustees of
the Palo Alto Medical Foundation. Mr. Russell has an A.B. in History from
Dartmouth College.
FREDRIC J. FELDMAN, PH.D., 57, has been a Director of the Company since
March 1992. He is currently CEO and a Director of Biex, Inc., a women's
healthcare company, and a Director of OrthoLogic Corporation and Oncogenetics,
Inc. From 1992 to 1995 he was Chairman and CEO of Oncogenetics, Inc. From 1988
to 1992, he was President and CEO of Microgenics Corporation, a medical
diagnostics product manufacturer. From 1984 to 1988, Dr. Feldman served as the
President of Instrumentation Laboratory, a diagnostic instrument company. Dr.
Feldman has a Ph.D. in Analytical Chemistry from the University of Maryland and
a B.S. in Chemistry from Brooklyn College of City University of New York.
ELIZABETH GREETHAM, 47, has been a Director of the Company since September
1996. She is currently Portfolio Manager of Life Sciences L.P. Funds and handles
analytical responsibilities for all healthcare
2
<PAGE> 6
investments for the institutional, Mutual and High Individual Net Worth Accounts
at Weiss, Peck & Greer Investments, where she has been employed since 1990. Ms.
Greetham also serves as a Director of various pharmaceutical companies,
including Medco Research, Chemex Pharmaceutical, Progenics Pharmaceutical,
Repligen, Guilford Pharmaceutical and ChiRex. Ms. Greetham has an M.A. in
Economics from Edinburgh University.
RICHARD D. MURDOCK, 49, has been a Director of the Company since October
1993. He is also a member of the board of directors of Matrix Pharmaceutical, a
public biotechnology company. Mr. Murdock has been the Chief Executive Officer
and a Director of CellPro, Incorporated, a public biotechnology company, since
June 1992. From August to December 1991, he was CellPro's Vice President of
Marketing and Corporate Development and in December 1991 he was appointed
President. From 1989 to 1991, he was European Vice President of the Fenwal
Division of Baxter, which specializes in automated blood-processing equipment.
From 1986 to 1989, he was Vice President of Marketing for Fenwal Automated
Systems Inc. Mr. Murdock received a B.S. in Zoology from the University of
California at Berkeley in 1969.
ANDREW J. PERLMAN, M.D., PH.D., 46, has been a Director of the Company
since December 1992. Dr. Perlman has been the Vice President of Medical Research
at Tularik, Inc., a private biotechnology company, since January 1993. From 1987
to 1993, Dr. Perlman served in various positions at Genentech, Inc., most
recently as Senior Director, Clinical Research. Dr. Perlman has an M.D. and a
Ph.D. in Physiology from New York University.
VINCENT R. WORMS, 42, has been a Director of the Company since October
1991. Mr. Worms has been a General Partner of Partech International since 1982.
He has an engineering degree from Ecole Polytechnique in Paris, and an M.S.
degree from the Massachusetts Institute of Technology. Mr. Worms is presently a
Director of Visioneer and Business Objects.
The Company's bylaws authorize the Board of Directors to fix the number of
directors by resolution. The number is currently fixed at seven. All directors
hold office until the next annual meeting of stockholders and until their
successors have been elected and qualified. Officers are appointed to serve at
the discretion of the Board of Directors. There are no family relationships
among executive officers or directors of the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors held
six meetings and did not act by unanimous written consent on any occasion. The
Board of Directors has an Audit Committee and a Compensation Committee. Each of
the directors attended or participated in 75% or more of the aggregate of (i)
the total number of meetings of the Board of Directors (held during the period
he or she served) and (ii) the total number of meetings held by all committees
on which he or she served (held during the period he or she served) during the
past fiscal year.
The Audit Committee currently consists of two directors, Gordon Russell and
Vincent Worms, and is primarily responsible for approving the services performed
by the Company's independent auditors and reviewing their reports regarding the
Company's accounting practices and systems of internal accounting controls. The
Audit Committee held three meetings during the last fiscal year.
The Compensation Committee currently consists of three directors, Elizabeth
Greetham, Andrew J. Perlman and Vincent Worms, and is primarily responsible for
reviewing and approving the Company's general compensation policies and setting
compensation levels for the Company's executive officers. The Compensation
Committee also has the exclusive authority to administer the Company's 1993
Stock Option Plan (the "1993 Plan") and make option grants thereunder. The
Compensation Committee held four meetings during the last fiscal year.
DIRECTOR COMPENSATION
On July 24, 1996, the Company implemented the 1996 Non-Employee Directors
Stock Option Plan (the "Directors Plan"), subject to stockholder approval at the
1997 Annual Meeting. Under the Directors Plan, the following option grants were
made to the non-employee Board members on July 24, 1996: Fredric Feldman
3
<PAGE> 7
and Richard Murdock each received an option grant for 9,000 shares, and Andrew
Perlman, Gordon Russell and Vincent Worms each received an option grant for
14,000 shares. Each of those options has an exercise price of $13.50 per share,
the fair market value per share of Common Stock on the grant date based on the
closing selling price per share of Common Stock on the Nasdaq National Market.
In addition, Elizabeth Greetham received an option for 19,000 shares on
September 25, 1996 in connection with her appointment to the Board on that date.
That option has an exercise price of $23.50 per share, the fair market value per
share of Common Stock on the grant date. Each of the options will have a maximum
term of ten (10) years, measured from the grant date, and the shares subject to
each option will vest in a series of installments over the optionee's period of
Board service, subject to acceleration in the event of certain changes in the
ownership or control of the Company. For further information concerning the
terms of the option grants, please see Proposal Three below.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE ABOVE NOMINEES.
4
<PAGE> 8
PROPOSAL TWO -- AMENDMENTS TO THE 1993 STOCK OPTION PLAN
The Company's stockholders are being asked to approve a series of
amendments to the Company's 1993 Stock Option Plan (the "1993 Plan") which will
effect the following changes: (i) increase the maximum number of shares of
Common Stock authorized for issuance over the term of the 1993 Plan from
1,542,200 to 2,292,200 shares, (ii) render the non-employee Board members
eligible to receive option grants under the 1993 Plan, (iii) allow unvested
shares issued under the 1993 Plan and subsequently repurchased by the Company at
the option exercise price paid per share to be reissued under the 1993 Plan,
(iv) remove certain restrictions on the eligibility of non-employee Board
members to serve as Plan Administrator, and (v) effect a series of additional
changes to the provisions of the 1993 Plan (including the stockholder approval
requirements, the transferability of non-statutory stock options and the
elimination of the six (6)-month holding period requirement as a condition to
the exercise of stock appreciation rights) in order to take advantage of the
recent amendments to Rule 16b-3 of the Securities and Exchange Commission which
exempts certain officer and director transactions under the 1993 Plan from the
short-swing liability provisions of the federal securities laws.
The proposed share increase will assure that a sufficient reserve of Common
Stock is available under the 1993 Plan to attract and retain the services of key
individuals essential to the Company's long-term growth and success. The
remaining amendments will provide the Company with more opportunities to make
equity incentives available to the non-employee Board members as an inducement
for their continued service and will facilitate plan administration by
eliminating a number of limitations and restrictions previously incorporated
into the 1993 Plan to comply with the applicable requirements of SEC Rule 16b-3
prior to its recent amendment.
The 1993 Plan was originally adopted by the Board and approved by the
stockholders in 1993 as successor to the Company's 1990 Stock Option Plan. The
1993 Plan was amended on March 30, 1995 to increase the share reserve by 340,000
shares. Such amendment was approved by the shareholders at the 1995 Annual
Meeting. The 1993 Plan was further amended by the Board on April 26, 1996 to
increase the share reserve by an additional 500,000 shares, and that increased
was approved by the stockholders at the 1996 Annual Meeting. The amendments
which are the subject of this Proposal were adopted by the Board on April 3,
1997.
The Company also has a 1993 Stock Option Plan (France) (the "France Plan")
pursuant to which 48,000 shares of Common Stock are available for issuance to
employees of Sangstat Atlantique.
The following is a summary of the principal features of the 1993 Plan, as
most recently amended. However, the summary does not purport to be a complete
description of all the provisions of the 1993 Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Corporate Secretary at the Company's principal executive
offices in Menlo Park, California.
PLAN DESCRIPTION
SHARE RESERVE
A total of 2,292,200 shares of Common Stock has been reserved for issuance
over the term of the 1993 Plan, assuming stockholder approval of the
750,000-share increase which forms part of this Proposal. In no event may any
one participant in the 1993 Plan be granted stock options and separately
exercisable stock appreciation rights for more than 700,000 shares in the
aggregate over the 1993 Plan, exclusive, however, of any stock options or stock
appreciation rights granted prior to January 1, 1995.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and class of securities issuable under the 1993
Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options and separately
5
<PAGE> 9
exercisable stock appreciation rights under the 1993 Plan and (iii) the number
and class of securities and the exercise price per share in effect under each
outstanding option.
Should an option expire or terminate for any reason prior to exercise in
full or be cancelled in accordance with the provisions of the 1993 Plan, the
shares subject to the portion of the option not so exercised or cancelled will
be available for subsequent issuance under the 1993 Plan. Unvested shares issued
under the 1993 Plan and subsequently repurchased by the Company at the option
exercise price paid per share will also be added back to the share reserve and
will accordingly be available for subsequent issuance under the 1993 Plan.
Shares subject to any option surrendered in accordance with the stock
appreciation right provisions of the 1993 Plan will not be available for
subsequent issuance.
PLAN ADMINISTRATION
The 1993 Plan will be administered by the Compensation Committee of the
Board. This committee (the "Plan Administrator") will have complete discretion
(subject to the provisions of the 1993 Plan) to set the terms of each option
grant under the 1993 Plan.
ELIGIBILITY
Employees of the Company or any parent or subsidiary, non-employee members
of the Board or the board of directors of any parent or subsidiary corporation,
and consultants and other independent advisors in the service of the Company or
its parent or subsidiary corporations will be eligible to participate in the
1993 Plan. Non-employee members of the Board will also be eligible to
participate in the new 1996 Non-Employee Director Stock Option Plan which is the
subject of Proposal No. 3 below.
As of May 1, 1997, eleven (11) executive officers, six (6) non-employee
Board members and approximately sixty-three (63) other employees were eligible
to participate in the 1993 Plan.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1996 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On May 1, 1997, the closing selling price per share was
$19.00.
OPTION TERMS
Options granted under the 1993 Plan will have an exercise price per share
not less than eighty five percent (85%) of the fair market value per share of
Common Stock on the option grant date. No granted option will have a term in
excess of ten (10) years. The options will generally become exercisable in a
series of installments over the optionee's period of service with the Company.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares in which the
optionee is vested at that time. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
6
<PAGE> 10
Limited stock appreciation rights may be provided to one or more
non-employee Board members or officers of the Company as part of their
option grants. Any option with such a limited stock appreciation right may
be surrendered to the Company upon the successful completion of a hostile
tender offer for more than fifty percent (50%) of the Company's outstanding
voting stock. In return for the surrendered option, the officer will be
entitled to a cash distribution from the Company in an amount per
surrendered option share equal to the excess of (a) the highest price paid
per share of Common Stock in connection with the tender offer over (b) the
exercise price payable for such share.
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance following the optionee's death
and, during the optionee's lifetime, the option may be exercised only by such
optionee. However, the Plan Administrator may allow non-statutory options to be
transferred or assigned during the optionee's lifetime to one or more members of
the optionee's immediate family or to a trust established exclusively for one or
more such family members, to the extent such transfer or assignment is in
furtherance of the optionee's estate plan.
The shares of Common Stock acquired upon the exercise of one or more
options may be unvested and subject to repurchase by the Company, at the
original exercise price paid per share, if the optionee ceases service with the
Company prior to vesting in those shares. The Plan Administrator will have
complete discretion to establish the vesting schedule to be in effect for any
such unvested shares and, in certain circumstances, may cancel the Company's
outstanding repurchase rights with respect to those shares and thereby
accelerate the vesting of the shares.
The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the 1993 Plan and to issue replacement
options with an exercise price based on the fair market price of Common Stock at
the time of the new grant.
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the 1993 Plan which is not to be assumed by the
successor corporation will automatically accelerate in full. Any options assumed
in connection with such acquisition may, in the Plan Administrator's discretion,
be subject to immediate acceleration in the event the individual's service with
the successor entity is subsequently terminated within a specified period
following the acquisition. The Plan Administrator will have the discretionary
authority to structure one or more option grants under the 1993 Plan so that
those options will, in connection with a change in control of the Company
(whether by successful tender offer for more than fifty percent (50%) of the
outstanding voting stock or a change in the majority of the Board by one or more
contested elections for Board membership), automatically accelerate in full,
with such acceleration to occur either at the time of such change in control or
upon the subsequent termination of the individual's service.
The acceleration of vesting upon a change in the ownership or control of
the Company may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the 1993
Plan. The Plan Administrator will have complete discretion to determine the
terms of any such financial assistance. However, the maximum amount of financing
provided any individual may not exceed the cash consideration payable for the
purchased shares plus all applicable taxes. Any such financing may be subject to
forgiveness in whole or in part, at the discretion of the Plan Administrator,
over the optionee's period of service.
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<PAGE> 11
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
STOCK AWARDS
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the 1993 Plan between January 1, 1996 and May 1, 1997, together with the
weighted average exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
NAME OPTION SHARES EXERCISE PRICE
- - ----------------------------------------------------------------- ------------- --------------
<S> <C> <C>
Philippe Pouletty................................................ 35,000 $ 13.50/share
Chairman of the Board and Chief Executive Officer
David Winter..................................................... 0 --
President and Chief Operating Officer
Ralph Levy....................................................... 10,500 $ 13.50/share
Vice President, Operations
Roland Buelow.................................................... 10,500 $ 13.50/share
Vice President, Research
Robert Floc'h.................................................... 10,500 $ 13.50/share
Vice President, Pharmaceutical Development
and General Manager, SangStat Atlantique
All executive officers as a group (11 persons)................... 113,000 $ 13.50/share
All employees and consultants as a group, excluding executive
officers (19 persons).......................................... 112,700 $ 17.20/share
</TABLE>
As of May 1, 1997, options covering 1,071,127 shares of Common Stock were
outstanding under the 1993 Plan, 979,259 shares remained available for future
option grant assuming stockholder approval of the 750,000-share increase which
forms part of this Proposal, and 241,814 shares have been issued under the 1993
Plan in connection with option exercises.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1993 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law or
regulation. The Board may terminate the 1993 Plan at any time, and the 1993 Plan
will in all events terminate on October 11, 2003.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1993 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has
8
<PAGE> 12
held the shares for more than two (2) years after the option grant date and more
than one (1) year after the exercise date. If either of these two (2) holding
periods is not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options with exercise prices equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Internal Revenue Code Section 162(m).
9
<PAGE> 13
ACCOUNTING TREATMENT
Option grants with exercise prices less than the fair market value of the
shares on the grant date will result in a compensation expense to the Company's
earnings equal to the difference between the exercise price payable for the
option shares and the fair market value of those shares on the grant date. Such
expense will be accruable by the Company over the period that the option shares
are to vest. Option grants with exercise prices equal to the fair market value
of the shares at the time of grant will not result in any charge to the
Company's earnings, but the Company must disclose in the notes to the Company's
financial statements the fair value of those options granted and the pro forma
impact on the Company's annual net income and earnings per share as though the
computed fair value of such options had been treated as compensation expense. In
addition, the number of outstanding options may be a factor in determining the
Company's earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
NEW PLAN BENEFITS
As of May 1, 1997, no options have been granted to date on the basis of the
750,000-share increase to the 1993 Plan which forms part of this Proposal.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendments to the 1993 Plan. Should such
stockholder approval not be obtained, then any options granted on the basis of
the 750,000-share increase which forms part of this Proposal will terminate
without becoming exercisable for any of the shares of Common Stock subject to
those options, and no further options will be granted on the basis of such share
increase. In addition, the non-employee Board members will not become eligible
to participate in the 1993 Plan, and any unvested shares repurchased by the
Company at the option exercise price paid per share will not be added back to
the share reserve for reissuance. In the absence of such stockholder approval,
however, the 1993 Plan will continue to remain in effect, and option grants may
continue to be made pursuant to the provisions of the 1993 Plan in effect prior
to the amendments summarized in this Proposal, until the available reserve of
Common Stock as last approved by the stockholders has been issued pursuant to
option grants made under the 1993 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENTS TO THE 1993 PLAN.
10
<PAGE> 14
PROPOSAL THREE -- APPROVAL OF THE
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company's stockholders are being asked to approve the implementation of
the Company's 1996 Non-Employee Directors Stock Option Plan (the "Directors
Plan"), pursuant to which 250,000 shares of Common Stock have been reserved for
issuance. The Directors Plan is intended to serve as a special equity incentive
program for the non-employee members of the Company's Board of Directors (the
"Board"). The Directors Plan was adopted by the Board on July 24, 1996 (the
"Effective Date"), subject to stockholder approval of this Proposal at the
Annual Meeting.
The following is a summary of the principal features of the Directors Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the Directors Plan. Any stockholder of the Company who wishes to
obtain a copy of the actual plan document may do so upon written request to the
Corporate Secretary at the Company's principal executive offices in Menlo Park,
California.
SHARE RESERVE
A reserve of 250,000 shares of Common Stock has been set aside for issuance
over the ten (10)-year term of the Directors Plan. Should any options granted
under the Directors Plan terminate prior to exercise in full, the shares subject
to the unexercised portion of those options will be available for subsequent
option grants. In addition, any unvested shares issued under the Directors Plan
and subsequently repurchased by the Company at the option exercise price paid
per share pursuant to the Company's repurchase rights will be added back to the
number of shares of Common Stock reserved for issuance under the Directors Plan
and will accordingly be available for subsequent option grants. However, shares
subject to any option surrendered in accordance with the stock appreciation
right provisions of the Directors Plan will not be available for subsequent
issuance.
ELIGIBILITY
Only the non-employee members of the Board will be eligible to participate
in the Directors Plan. As of May 1, 1997, six (6) non-employee Board members
were eligible to participate.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1996 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On May 1, 1997, the closing selling price per share was
$19.00.
AUTOMATIC OPTION GRANTS
All automatic option grants under the Directors Plan will be made in strict
compliance with the express provisions of such plan. Accordingly, stockholder
approval of this Proposal will also constitute pre-approval of each option
granted pursuant to the provisions of the Directors Plan summarized below and
the subsequent exercise of that option in accordance with those provisions.
1. Each individual serving as an eligible non-employee Board member on the
Effective Date was granted on that date an option for either 14,000 shares of
Common Stock, if such individual had not previously received an option grant
from the Company in connection with his or her service on the Board, or 9,000
shares if such individual had previously received such an option grant.
2. Each individual who first becomes a non-employee Board member after the
Effective Date, whether upon appointment by the Board or election by the
stockholders, will automatically be granted, at the time of his or her initial
election or appointment to the Board, an option for 19,000 shares of Common
Stock, provided such individual has not previously been in the Company's employ.
3. On the date of each Annual Stockholders Meeting, beginning with the 1997
Annual Meeting, each individual who is to continue to serve as a non-employee
Board member will automatically be granted an
11
<PAGE> 15
option to purchase 3,000 shares of Common Stock, provided that individual has
served as a non-employee Board member for at least six (6) months. There will be
no limit on the number of such 3,000-share option grants which any one
non-employee Board member may receive over his or her period of Board service,
and non-employee Board members who have previously served in the Company's
employ will be eligible for those 3,000-share option grants.
4. Each automatic option grant will have an exercise price per share equal
to 100% of the fair market value per share of Common Stock on the option grant
date. Each option will have a maximum term of ten (10) years measured from the
option grant date, subject to earlier termination following the optionee's
cessation of Board service.
5. Each automatic option grant will be immediately exercisable for any or
all the option shares, but any unvested shares purchased by the optionee under
that grant will be subject to repurchase by the Company, at the exercise price
paid per share, upon the optionee's cessation of Board service prior to vesting
in those shares.
6. The shares subject to each option grant (other than the 14,000-share
option grants made on the Effective Date) will vest as follows: twenty-five
percent (25%) of the option shares will vest upon the optionee's completion of
one (1) year of Board service measured from the automatic grant date, and the
balance of the option shares will vest in a series of thirty-six (36) successive
equal monthly installments over the next thirty-six (36) months of Board service
thereafter. The shares subject to each of the 14,000-share option grants made on
the Effective Date will vest in two (2) successive equal annual installments
upon the optionee's completion of each year of Board service over the two
(2)-year period measured from the Effective Date.
7. The shares subject to each automatic option grant will immediately vest
upon (i) the optionee's death or permanent disability while serving as a Board
member, (ii) an acquisition of the Company by a merger involving a change in
ownership of more than fifty percent (50%) of the Company's outstanding voting
securities or by a sale of all or substantially all of the Company's assets,
(iii) the successful completion of a tender offer for more than fifty percent
(50%) of the Company's outstanding voting securities or (iv) a change in the
majority of the Board as a result of one or more contested elections for Board
membership.
8. Each automatic option will remain exercisable for a twelve (12)-month
period following the optionee's cessation of service as a Board member. In no
event, however, may the option be exercised after the expiration date of the
option term. During the applicable post-service exercise period, the option may
not be exercised for more than the number of option shares (if any) in which the
Board member is vested at the time of his or her cessation of Board service.
9. Upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting stock, each outstanding
automatic option grant may be surrendered to the Company for a cash distribution
per surrendered option share in an amount equal to the excess of (a) the highest
price per share of Common Stock paid in connection with such tender offer over
(b) the exercise price payable for such share. Stockholder approval of this
Proposal will constitute pre-approval of each option granted with such a
surrender right and the subsequent surrender of that option in accordance with
foregoing provisions. No additional approval of the Plan Administrator or the
Board will be required at the time of the actual option surrender and cash
distribution.
LIMITED TRANSFERABILITY
Options granted under the Directors Plan may be transferred or assigned
during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members, to the extent such transfer or assignment is in furtherance of
the optionee's estate plan.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of Common Stock
by reason of any merger, consolidation or reorganization of the Company or any
recapitalization, stock dividend, stock split, combina-
12
<PAGE> 16
tion of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to (i) the maximum number and/or class of securities available for
issuance under the Directors Plan, (ii) the number and/or class of securities
and exercise price per share in effect under each outstanding option under the
Directors Plan and (iii) the number and/or class of securities for which option
grants are to be made in the future to newly-elected or continuing non-employee
Board members. All adjustments to the outstanding options under the Directors
Plan will be designed to preclude the enlargement or dilution of participant
rights and benefits under those options.
AMENDMENT AND TERMINATION
The Board may amend or modify the Directors Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable laws
or regulations. The Board may terminate the Directors Plan at any time, and the
Directors Plan will in all events terminate on July 23, 2006.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Directors Plan will be non-statutory options
which are not intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Federal income tax
treatment for such options is as follows:
No taxable income is recognized by an optionee upon the grant of a
non-statutory option. The optionee will in general recognize ordinary income, in
the year in which the option is exercised, equal to the excess of the fair
market value of the purchased shares on the exercise date over the exercise
price paid for the shares.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Code to include as
ordinary income in the year of the option exercise an amount equal to the excess
of (i) the fair market value of the purchased shares on the exercise date over
(ii) the exercise price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when the
repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
NEW PLAN BENEFITS
The table below indicates the option grants which have been made through
April 30, 1997 under the Directors Plan. None of those options will become
exercisable unless the stockholders approve this Proposal.
<TABLE>
<CAPTION>
NUMBER
OF
DATE OF OPTION EXERCISE
NON-EMPLOYEE BOARD MEMBER GRANT SHARES PRICE
------------------------------------------ -------- ------ --------
<S> <C> <C> <C>
Gordon Russell(1)......................... 07/24/96 14,000 $13.50
Vincent R. Worms(1)....................... 07/02/96 14,000 $13.50
Fredric J. Feldman(2)..................... 07/24/96 9,000 $13.50
Elizabeth Greetham(2)..................... 09/25/96 19,000 $23.50
Richard Murdock(2)........................ 07/24/96 9,000 $13.50
Andrew Perlman(2)......................... 07/24/96 9,000 $13.50
</TABLE>
- - ---------------
(1) The shares subject to each option will vest in two (2) successive equal
annual installments upon the optionee's completion of each year of Board
service over the two year period measured from the grant date.
13
<PAGE> 17
(2) The shares subject to each option will vest upon the optionee's completion
of one year of Board service measured from the grant date, and the balance
of the option shares will vest in a series of thirty-six (36) successive
monthly installments upon the optionee's completion of each additional month
of Board service thereafter.
In addition, at the Annual Meeting, each individual who will continue to
serve as a non-employee Board member will receive an option grant under the
Directors Plan to purchase 3,000 shares of Common Stock. Each such option grant
will have an exercise price per share equal to the fair market value per share
of Common Stock on the grant date.
ACCOUNTING TREATMENT
Except for the option grants made to date under the Directors Plan, none of
the options to be granted under the Directors Plan will result in any direct
compensation expense to the Company's earnings because those options will have
an exercise price equal to the fair market value of the shares on the grant
date. However, the Company must disclose, in the notes to the Company's
financial statements, the fair value of all options granted under the Directors
Plan and the pro forma impact on the Company's annual net income and earnings
per share as though the computed fair value of such options had been treated as
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Because the option grants made to date under the Directors Plan are subject
to stockholder approval of this Proposal, the Company will have to recognize a
compensation expense with respect to those grants, to the extent the fair market
value of the Common Stock on the date of the Annual Meeting is greater than the
exercise price in effect for those options ($13.50 per share for a total of
55,000 option shares and $23.50 per share for 19,000 option shares). The amount
of the compensation expense will be equal to that difference multiplied by the
number of the option shares and will be amortized over the period the option
shares are to vest.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented at the Annual Meeting and entitled to vote on
this Proposal is required for approval of the Directors Plan. Should such
stockholder approval not be obtained, then the Directors Plan will not be
implemented, and all outstanding options under the Directors Plan will terminate
without ever becoming exercisable for the option shares.
The Board believes that it is in the best interests of the Company to
implement an equity incentive program which will provide the non-employee Board
members with an opportunity to acquire a substantial proprietary interest in the
Company and thereby encourage such individuals to remain in the Company's
service and more closely align their interests with those of the stockholders.
FOR THIS REASON, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE DIRECTORS PLAN.
14
<PAGE> 18
PROPOSAL FOUR -- RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Deloitte & Touche LLP,
independent public auditors for the Company during fiscal year 1996, to serve in
the same capacity for the fiscal year ending December 31, 1997, and is asking
the stockholders to ratify this appointment. The affirmative vote of a majority
of the shares represented and voting at the Annual Meeting is required to ratify
the selection of Deloitte & Touche LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
15
<PAGE> 19
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of May
1, 1997 by (i) all persons who are beneficial owners of five percent (5%) or
more of the Company's Common Stock, (ii) each director and nominee for director,
(iii) the Company's Chief Executive Officer and the four other most highly paid
executive officers as of December 31, 1996, and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws, where applicable.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE OF SHARES
(IF APPLICABLE) OF BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
- - --------------------------------------------------------------- ------------ --------------------
<S> <C> <C>
Partech International(1)....................................... 967,976 6.1%
50 California Street
Suite 3200
San Francisco, CA 94111
David Rammler(2)............................................... 753,321 4.7%
3000 Sand Hill Road
Suite 280, Bldg. 4
Menlo Park, CA 94025
Sequoia Capital(3)............................................. 722,034 4.5%
3000 Sand Hill Road
Suite 280, Bldg. 4
Menlo Park, CA 94025
Philippe Pouletty, M.D.(4)..................................... 576,153 3.6%
SangStat Medical Corporation
1505 Adams Drive
Menlo Park, California 94025
David Winter, M.D.(5).......................................... 135,700 *
Timothy J. Schroeder(6)........................................ 68,700 *
Ralph Levy(7).................................................. 75,500 *
Hana Berger Moran, Ph.D.(8).................................... 53,500 *
Roland Buelow, Ph.D.(9)........................................ 67,500 *
Henry N. Edmunds, Ph.D.(10).................................... 43,500 *
Robert Floc'h(11).............................................. 45,500 *
Gordon Russell(3).............................................. 767,277 4.8%
Fredric J. Feldman, Ph.D.(12).................................. 36,525 *
Elizabeth Greetham(13)......................................... 274,000 1.7%
Richard D. Murdock(14)......................................... 18,600 *
Andrew Perlman, M.D., Ph.D.(15)................................ 23,400 *
Vincent Worms(1)............................................... 981,976 6.2%
All directors and officers as a group (14 persons)............. 3,080,024 18.4%
</TABLE>
- - ---------------
* Does not exceed one percent.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares of
Common Stock subject to options which are currently exercisable or
convertible or which will become exercisable or convertible within sixty
(60) days after May 1, 1997 are deemed outstanding for computing the
beneficial ownership of the person holding such options but are not deemed
outstanding for computing the beneficial ownership of any other person.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
16
<PAGE> 20
(1) Includes 102,774 shares held by Parvest Europe Investment II, C.V. Includes
285,001 shares held by Parvest U.S. Growth Fund Partners, C.V. Includes
333,646 shares held by Parvest U.S. Partners II, C.V. Includes 246,555
shares held by entities which are affiliates of Partech International. Mr.
Worms, a director of the Company, is a general partner of Parvest Europe
Investment II, C.V., Parvest U.S. Growth Fund Partners, C.V. and Parvest
U.S. Partners II, C.V. and either a general partner or a director of the
affiliates referenced in the preceding sentence, and may be deemed to share
voting and investment power with respect to such shares. Mr. Worms
disclaims beneficial ownership of such shares, except to the extent of his
interest in such shares arising from his interests in the referenced
entities above. The shares beneficially owned by Mr. Worms include options
to purchase 14,000 shares granted under the 1996 Non-Employee Directors
Stock Option Plan (the "Directors Plan") in July 1996, subject to
stockholder approval.
(2) Includes 8,000 shares Common Stock held by Christine Rammler, Mr. Rammler's
wife. Includes options to purchase 12,000 shares granted to David Rammler
under the 1993 Stock Option Plan (the "Option Plan").
(3) Includes 663,434 shares held by Sequoia Capital Growth Fund. Includes
42,347 shares held by Sequoia Technology Partners III. Includes 323 shares
held by Sequoia XX. Includes 12,470 shares held by Sequoia XXI. Includes
2,894 shares held by Sequoia XXII. Includes 566 shares held by Sequoia
XXIII. Mr. Russell, a director of the Company, is a general partner of
Sequoia Capital, and may be deemed to share voting and investment power
with respect to such shares. Mr. Russell disclaims beneficial ownership of
such shares, except to the extent of his interest in such shares arising
from his interests in the entities referred to above. The shares
beneficially owned by Mr. Russell include 45,243 shares owned by Mr.
Russell and options to purchase 14,000 shares granted under the Directors
Plan in July 1996, subject to stockholder approval.
(4) Includes options to purchase 301,160 shares of Common Stock.
(5) Includes options to purchase 125,000 shares granted under the Option Plan.
(6) Represents options to purchase 64,700 shares granted under the Option Plan.
(7) Includes options to purchase 62,120 shares granted under the Option Plan.
(8) Represents options to purchase 53,500 shares granted under the Option Plan.
(9) Includes options to purchase 49,500 shares granted under the Option Plan.
(10) Represents options to purchase 19,479 shares granted under the Option Plan.
(11) Represents options to purchase 20,000 shares granted under the Company's
1993 Stock Option Plan (France) and options to purchase 25,500 shares
granted under the Option Plan.
(12) Represents 13,125 shares held by the Feldman family trust, options to
purchase 14,400 shares granted under the Option Plan, and options to
purchase 9,000 shares granted under the Directors Plan in July 1996,
subject to stockholder approval.
(13) Includes 255,000 shares held by Weiss, Peck & Greer Investments. Ms.
Greetham, a Director of the Company, handles all healthcare investments for
the institutional, Mutual and High Individual Net Worth Accounts at Weiss,
Peck & Greer Investments, and may be deemed to have share voting and
investment power in such shares arising from her interest in the entity
above. Ms. Greetham disclaims beneficial ownership of such shares, except
to the extent of her interest in the entity referred to above. The shares
beneficially owned by Ms. Greetham include options to purchase 19,000
shares granted under the Directors Plan in September 1996, subject to
stockholder approval.
(14) Represents options to purchase 9,600 shares granted under the Option Plan
and options to purchase 9,000 shares granted under the Directors Plan in
July 1996, subject to stockholder approval.
(15) Represents options to purchase 14,400 shares granted under the Option Plan
and options to purchase 9,000 shares granted under the Directors Plan in
July 1996, subject to stockholder approval.
17
<PAGE> 21
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company serving as such as of
the end of the last fiscal year whose salary and bonus for such year was in
excess of $100,000, for services rendered in all capacities to the Company and
its subsidiaries for the 1996, 1995 and 1994 fiscal years. Such individuals will
be hereafter referred to as the Named Executive Officers. No other executive
officer who would have otherwise been includable in such table on the basis of
salary and bonus earned for the 1996 fiscal year resigned or terminated
employment during that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($)(1)
- - -------------------------------- ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Philippe Pouletty,.............. 1996 250,000 110,000 35,000 11,470
President and 1995 200,000 75,000 110,000 9,618
Chief Executive Officer 1994 160,000 64,000 -- 10,342
David Winter,................... 1996 170,000 31,620 -- 11,244
President and 1995 146,243(2) 0 125,000 7,582
Chief Operating Officer
Ralph Levy, Vice................ 1996 142,708 29,255 10,500 8,243
President, 1995 120,479 26,205 15,000 7,447
Operations 1994 107,854 23,708 -- 8,939
Roland Buelow,.................. 1996 129,167 21,313 10,500 7,766
Vice President, 1995 120,000 29,625 25,000 6,415
Research 1994 111,000 23,310 -- 7,826
Robert Floc'h,.................. 1996 117,286 14,000 10,500 9,266
Vice President, 1995 123,468 23,680 15,000 9,898
Pharmaceutical 1994 103,828 19,727 -- 6,113
Development and General
Manager, SangStat Atlantique
</TABLE>
- - ---------------
(1) Represents the special health insurance premiums paid on behalf of such
individuals.
(2) David Winter joined the Company on February 20, 1995 as President and Chief
Operating Officer. The stated salary is for the period February 20, 1995
through December 31, 1995.
18
<PAGE> 22
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in 1996. No stock
appreciation rights were granted during 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF PERCENTAGE OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR(2) PRICE(3) DATE 5% 10%
- - -------------------------------- ---------- -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Philippe Pouletty............... 35,000 14.4 $13.50 7/23/06 $297,153 $753,043
David Winter.................... -- -- -- -- -- --
Ralph Levy...................... 10,500 4.3 13.50 7/23/06 89,146 225,913
Roland Buelow................... 10,500 4.3 13.50 7/23/06 89,146 225,913
Robert Floc'h................... 10,500 4.3 13.50 7/23/06 89,146 225,913
</TABLE>
- - ---------------
(1) The shares subject to each option will vest in four successive equal annual
installments over the optionee's continued service with the Company measured
from the July 24, 1996 grant date. However, the option shares will
immediately vest in the event the Company is acquired by merger or asset
sale, unless the Company's repurchase rights with respect to those unvested
shares are assigned to the successor company.
(2) Based on options for an aggregate of 243,700 shares granted in 1996,
including options granted to the Named Executive Officers.
(3) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date, or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by lending the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income or employment tax liability incurred by the optionee in connection
with such exercise. The optionee may be permitted, subject to the approval
of the Plan Administrator, to apply a portion of the shares purchased under
the option (or to deliver existing shares of Common Stock) in satisfaction
of such tax liability.
(4) Potential realizable value is based on the assumption that the price per
share of Common Stock appreciates at the assumed 5% and 10% annual rates of
appreciation (compounded annually) over the option term. There is no
assurance that those assumed annual rates of stock price appreciation will
actually be realized.
19
<PAGE> 23
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1996 with respect to the
Named Executive Officers. Except as set forth below, no options or stock
appreciation rights were exercised by any such individual during such year, and
no stock appreciation rights were outstanding on December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE- MONEY OPTIONS AT
VALUE REALIZED UNDERLYING UNEXERCISED OPTIONS FY-END (MARKET PRICE OF
(MARKET PRICE AT FISCAL SHARES AT FY-END ($26.50)
SHARES AT EXERCISE YEAR-END(#) LESS EXERCISE PRICE)
ACQUIRED ON LESS EXERCISE ------------------------------ ---------------------------
NAME EXERCISE(#) PRICE) EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------------- ----------- -------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philippe Pouletty...... 5,600 $122,747 301,160 -- $ 6,262,644 --
David Winter........... -- -- 125,000 -- 2,609,375 --
Ralph Levy............. 500 13,863 62,620 -- 1,414,447 --
Roland Buelow.......... -- -- 49,500 -- 1,014,225 --
Robert Floc'h.......... -- -- 45,500 -- 952,400 --
</TABLE>
- - ---------------
(1) The options are immediately exercisable for all the option shares, but any
shares purchased under those options will be subject to repurchase by the
Company, at the exercise price paid per share, upon the optionee's cessation
of service prior to vesting in those shares. As of December 31, 1996, Dr.
Pouletty is vested in 269,806 of his options shares, Dr. Winter is vested in
57,292 shares, Mr. Levy is vested in 39,308 shares, Dr. Buelow is vested in
16,313 shares and Dr. Floc'h is vested in 21,438 shares.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE IN
CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements with
the Company, and their employment with the Company may be terminated at any time
at the discretion of the Board of Directors. However, the Compensation Committee
of the Board of Directors has authority as Plan Administrator of the Company's
Stock Option Plan to provide for the accelerated vesting of the shares of Common
Stock subject to outstanding options held by the Chief Executive Officer and the
Company's other executive officers, whether granted under that plan or any
predecessor plan, in the event their employment were to be terminated (whether
involuntarily or through a forced resignation) following: (i) an acquisition of
the Company by merger or asset sale, or (ii) a hostile takeover of the Company
effected through a successful tender offer for more than 50% of the Company's
outstanding Common Stock or through a change in the majority of the Board as a
result of one or more contested elections for Board membership.
20
<PAGE> 24
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") sets
the compensation of the Chief Executive Officer and the Company's other
executive officers, reviews the design, administration, and effectiveness of
compensation programs for other key executives, and approves stock option grants
for all executive officers. The Committee, serving under a charter adopted by
the Board of Directors, is composed entirely of outside directors who have never
served as officers of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company operates in the extremely competitive and rapidly changing
biotechnology industry. The Committee believes that the compensation programs
for executive officers of the Company should be designed to attract, motivate,
and retain talented executives responsible for the success of the Company and
should be determined within a competitive framework and based on the achievement
of corporate objectives and individual performance. Within this overall
philosophy, the Committee's objectives are to:
- Offer a total compensation program that takes into consideration the
compensation practices of a specifically identified peer group of
companies (the "Peer Companies") located in the same geographic area and
of small to medium market capitalization with which the Company competes
for executive talent.
- Provide annual variable incentive awards that take into account the
Company's performance relative to corporate objectives and the
performance of the Peer Companies and that are also based on the
attainment of personal goals.
- Align the financial interests of executive officers with those of
shareholders by providing significant equity-based, long-term incentives.
COMPENSATION COMPONENTS AND PROCESS
Each executive officer's compensation package is comprised of three
elements: (i) base salary that is competitive with the compensation levels in
effect at the Peer Companies and is based on the Committee's assessment of the
individual's performance, (ii) annual variable performance awards payable in
cash and tied to the Company's attainment of corporate objectives and the
officer's achievement of personal goals and (iii) long-term stock-based
incentive awards designed to strengthen the mutuality of interests between the
executive officers and the Company's stockholders. As an officer's level of
responsibility and accountability within the Company increases over time, a
greater portion of his or her total compensation is intended to be dependent
upon Company and personal performance and stock price appreciation rather than
upon base salary.
FACTORS
The principal factors taken into account in establishing each executive
officer's compensation package for the 1996 fiscal year are summarized below.
The Committee may, however, apply entirely different factors for future fiscal
years.
BASE SALARY. The Committee determines the base salary levels for the
executive officers on the basis of the individual's performance, internal
comparability considerations and the base salary levels in effect for comparable
positions at the Peer Companies. The base salary level for executive officers is
currently at or below the median level determined for such individuals on the
basis of the external salary data compiled for the Peer Companies. The number of
companies taken into account as Peer Companies is less than the number of
companies included in the BioCentury 100 Stock Index and the Hambrecht & Quist
Biotechnology Index which are used in the Performance Graph appearing later in
this Proxy Statement for comparative stockholder return purposes. However, the
Committee believes this smaller group of Peer Companies gives a more accurate
indication of the market for executive services in which the Company competes.
21
<PAGE> 25
Salaries are reviewed on an annual basis, and adjustments to each executive
officer's base salary are based upon individual performance and increases in
salary levels at the Peer Companies.
ANNUAL INCENTIVE COMPENSATION. An annual bonus may be earned by each
executive officer based upon the achievement of personal and Company performance
goals. Such goals are established at the commencement of each calendar year and
may vary from year to year. Since the Company is in the development stage, the
use of traditional performance milestones (such as profit levels and return on
equity) as the basis for such incentive compensation was not considered
appropriate. Instead, the incentive awards for the 1996 fiscal year were tied to
the achievement of pre-defined personal and corporate performance targets. The
Company performance goals for 1996 (for which 50% of the individual's target
bonus could be earned) were (i) procurement of additional capital, (ii)
licensing a therapeutic product, (iii) completing specified R&D goals, (iv)
achievement of specified sales levels (10%) and (v) achievement of certain
organizational goals. Personal goals are related to the functional
responsibility of each executive officer and his or her department. The
Committee and the Board jointly determine whether or not each Company
performance goal has been achieved. The Committee determines whether the Chief
Executive Officer has achieved his personal performance goals, and the Chief
Executive Officer similarly reviews the performance goals achieved by other
executive officers and reports his recommendations to the Committee. For fiscal
year 1996 the bonuses as a percent of salary was 44% for the Chief Executive
Officer and ranged from 27% to 9% for the other officers.
LONG-TERM, EQUITY-BASED INCENTIVE AWARDS. The goal of the Company's
long-term equity-based incentive awards is to align the interests of executive
officers with those of the stockholders and to provide each executive officer
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. The Committee determines the size of
long-term, equity-based incentives according to each executive's position within
the Company and sets a level it considers appropriate to create a meaningful
opportunity for stock ownership. In addition, the Committee takes into account
an individual's recent performance, his or her potential for future
responsibility and promotion, comparable awards made to individuals in similar
positions with the Peer Companies, and the number of unvested options held by
each individual at the time of the new grant. The relative weight given to each
of these factors varies among individuals at the Committee's discretion.
During fiscal 1996, the Committee made option grants to Messrs. Pouletty,
Levy, Buelow and Floc'h under the Company's Stock Option Plan. Each grant allows
the officer to acquire shares of the Company's common stock at a fixed price per
share (the market price on the grant date) over a specified period of time.
Specifically, the shares subject to each option vest in periodic installments
over a four-year period, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return only
if the officer remains with the Company and then only if the market price
appreciates over the option term.
CEO COMPENSATION
Dr. Pouletty's base salary is established through an evaluation of his
performance and the salary levels in effect for similarly situated chief
executive officers at the Peer Companies. In setting Dr. Pouletty's base salary,
it is the Committee's intent to provide him with a level of stability and
certainty each year and not have this particular component of compensation
affected to any significant degree by Company performance factors.
Dr. Pouletty's 1996 fiscal year incentive compensation did not include any
dollar guarantees. His actual bonus award of $110,000 was based on the
achievement of the Company's performance goals described above and Dr.
Pouletty's individual performance during fiscal year 1996. The option grant made
to Dr. Pouletty for 35,000 shares was in recognition of his performance and was
intended to provide him with a continuing incentive to remain with Company and
contribute the Company's success. The options will be of value to Dr. Pouletty
only if the market price of Company's common stock appreciates over the option
term.
22
<PAGE> 26
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
As a result of Section 162(m) of the Code, which was enacted into law in
1993, the Company will not be allowed a Federal income tax deduction for
compensation paid to certain officers, to the extent that compensation exceeds
one (1) million dollars per officer in any one year. This limitation will apply
to all compensation which is not considered to be performance based.
Compensation which does qualify as performance-based compensation will not have
to be taken into account for purposes of this limitation. The Company previously
obtained stockholder approval for certain amendments to the Stock Option Plan
which were designed to assure that any compensation deemed paid in connection
with the exercise of stock options granted under that plan would qualify as
performance-based compensation.
The cash compensation paid to the Company's executive officers during
fiscal 1996 did not exceed the one (1) million dollar limit per officer, nor is
the cash compensation to be paid to the Company's executive officers for the
1997 fiscal year expected to reach that level. Because it is very unlikely that
the cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the one (1) million dollar limitation, the
Committee has decided not to take any action at this time to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the one (1) million dollar
level.
COMPENSATION COMMITTEE
Elizabeth Greetham,
Fredric Feldman,
Richard Murdock
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are as named above in the Compensation Committee Report. No member of
the Committee was at any time during the 1996 fiscal year or at any other time
an officer or employee of the Company.
No executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.
23
<PAGE> 27
COMPARISON OF STOCKHOLDER RETURN(1)
The graph depicted below reflects a comparison of the cumulative total
return (change in stock price plus reinvestment dividends) of the Company's
Common Stock with the cumulative total returns of the Nasdaq Stock Market Index,
the BioCentury 100 Stock Index and the Hambrecht & Quist Biotechnology Index.(2)
The BioCentury 100 Stock Index has been included this year because of its
greater focus on companies in an early stage of development and with market
capitalization similar to SangStat Medical Corporation. The graph covers the
period from December 14, 1993, the date the Company's initial public offering
commenced, through the fiscal year ended December 31, 1996 as well as the first
four months of the Company's 1997 fiscal year.
The graph assumes that $100 was invested on December 14, 1993 in the
Company's Common Stock and in each index and that all dividends were reinvested.
No cash dividends have been declared on the Company's Common Stock.
(GRAPH-CRC)
<TABLE>
<CAPTION>
Sangstat Nasdaq BioCentury Hambrecht & Quist
Medical Stock Market 100 Stock Biotechnology
Corporation Index Index Index
----------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
12/14/93 $ 100 $ 100 $ 100 $ 100
12/31/93 100 103 99 103
03/31/94 109 98 85 84
06/30/94 84 94 73 85
09/30/94 102 102 78 102
12/31/94 66 100 70 98
03/31/95 91 110 73 102
06/31/95 73 125 84 115
09/30/95 109 140 102 139
12/31/95 148 142 126 167
03/31/96 230 149 132 160
06/30/96 243 161 131 149
09/30/96 364 167 116 159
12/31/96 379 175 115 154
03/31/97 388 165 111 148
</TABLE>
- - ---------------
(1) The performance graph and all of the material in the Compensation Committee
Report is not deemed filed with the Securities and Exchange Commission, and
is not incorporated by reference to any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such filing.
(2) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
24
<PAGE> 28
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and any persons holding more than ten percent of
the Company's Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Directors, executive
officers and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely upon a review of copies of reports
furnished to the Company and written representations that no other reports were
required during the fiscal year ended December 31, 1996, the Company's officers,
directors and greater than ten percent (10%) stockholders complied with all
other Section 16(a) filing requirements.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1996 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the SEC. Stockholders
may obtain a copy of these reports, without charge, by writing to Dr. Edmunds,
Vice President and Chief Financial Officer, at the Company's executive offices
at 1505 Adams Drive, Menlo Park, California 94025.
THE BOARD OF DIRECTORS OF
SANGSTAT MEDICAL CORPORATION
Dated: May 27, 1997
25
<PAGE> 29
SANGSTAT MEDICAL CORPORATION
1993 STOCK OPTION PLAN
(Restated and Amended through April 3, 1997)
I . PURPOSE OF THE PLAN
A. This 1993 Stock Option Plan ("Plan") is intended to
promote the interests of SangStat Medical Corporation, a California corporation
(the "Corporation"), by providing (i) employees (including officers) of the
Corporation (or any Parent or Subsidiary) who are responsible for the
management, growth and financial success of the Corporation (or any Parent or
Subsidiary), (ii) non-employee members of the Board or the board of directors
of any Parent or Subsidiary and (iii) consultants and other independent
contractors who provide valuable services to the Corporation (or any Parent or
Subsidiary) with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or any Parent
or Subsidiary).
B. The Plan became effective on December 7, 1993, the
date on which the shares of the Corporation's Common Stock were first
registered under Section 12(g) of the Securities Exchange Act of 1934. Such
date is hereby designated as the Effective Date of the Plan.
C. This Plan shall serve as the successor to the
Corporation's 1990 Stock Option Plan (the "Predecessor Plan"). No further
option grants or stock issuances shall be made under the Predecessor Plan from
and after the Effective Date of this Plan. All options outstanding under the
Predecessor Plan on the Effective Date have been incorporated into this Plan
and shall accordingly be treated as outstanding options under this Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the express terms and conditions of the instrument evidencing such
grant, and no provision of this Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of the Corporation's Common Stock
thereunder.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be
in effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
<PAGE> 30
a. any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's shareholders; or
b. there is a change in the composition of the
Board over a period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Plan.
COMMON STOCK: shares of the Corporation's common stock.
CORPORATE TRANSACTION: any of the following
shareholder-approved transactions to which the Corporation is a party:
a. a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State in which the
Corporation is incorporated,
b. the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation
is the surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from those who held such securities immediately
prior to such merger.
2.
<PAGE> 31
EMPLOYEE: an individual who performs services while in the
employ of the Corporation or any Parent or Subsidiary, subject to the control
and direction of the employer entity not only as to the work to be performed
but also as to the manner and method of performance.
FAIR MARKET VALUE: the fair market value per share of Common
Stock determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed
or admitted to trading on any national stock exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share on the date in question, as such price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
b. If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair
Market Value shall be the closing selling price per share on the date
in question on the exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Common Stock on such exchange on the date
in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such
quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.
1934 ACT: the Securities Exchange Act of 1934, as amended
from time to time.
OPTIONEE: any person to whom an option is granted under the
Plan.
PARENT: any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock
3.
<PAGE> 32
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
PLAN ADMINISTRATOR: the Committee in its capacity as the
administrator of the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
SERVICE: the performance of services on a periodic basis to
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant or
advisor, except to the extent otherwise specifically provided in the applicable
stock option agreement.
SUBSIDIARY: each corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
such corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an incentive stock option
under the Federal tax laws, the Take-Over Price shall not exceed the clause (a)
price per share.
III . ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Committee.
Members of the Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Committee as Plan Administrator shall have full
power and authority (subject to the express provisions of the Plan) to
establish rules and regulations for the proper administration of the Plan and
to make such determinations under, and issue such interpretations of, the
provisions of the Plan and any outstanding option grants thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be
final and binding on all parties who have an interest in the Plan or any
outstanding option thereunder.
4.
<PAGE> 33
IV. OPTION GRANTS
A. The persons eligible to participate in the Plan are
as follows:
(i) officers and other employees of the
Corporation (or any Parent or Subsidiary) who render services which
contribute to the management, growth and financial success of the
Corporation (or any Parent or Subsidiary);
(ii) non-employee members of the Board or
the board of directors of any Parent or Subsidiary, and
(iii) those consultants or other
independent contractors who provide valuable services to the
Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to
determine, with respect to the option grants made under the Plan, which
eligible individuals are to receive option grants, the number of shares to be
covered by each such grant, the status of the granted option as either an
incentive stock option ("Incentive Option") which satisfies the requirements of
Code Section 422 or a non-statutory option not intended to meet such
requirements, the time or times at which each granted option is to become
exercisable and the maximum term for which the option may remain outstanding.
V . STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for
issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 2,292,200 shares, subject to adjustment
from time to time in accordance with the provisions of this Section V. Such
authorized share reserve reflects the 4-for- 5 reverse stock split of the
Common Stock effected on November 29, 1993 and is comprised of (i) the number
of shares which remained available for issuance under the Predecessor Plan as
of the Effective Date, including the shares subject to the outstanding options
incorporated into this Plan and any other shares which would have been
available for future option grant under the Predecessor Plan as last approved
by the shareholders (estimated to be 502,200 shares in the aggregate on a
post-split basis), (ii) the increase of 200,000 shares authorized by the Board
and approved by the Corporation's shareholders in November 1993, (iii) the
additional increase of 340,000 shares authorized by the Board on March 30, 1995
and approved by the Corporation's shareholders at the 1995 Annual Shareholders
Meeting, (iv) the additional increase of 500,000 shares authorized by the Board
on April 26, 1996 and approved by the Corporation's shareholders at the 1996
Annual Shareholders Meeting and (v) the additional
5.
<PAGE> 34
increase of 750,000 shares authorized by the Board on April 3, 1997, subject to
the approval of the Corporation's shareholders at the 1997 Annual Shareholders
Meeting. To the extent one or more outstanding options under the Predecessor
Plan which have been incorporated into this Plan are subsequently exercised,
the number of shares issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. In no event may the maximum number of shares of
Common Stock for which any one individual participating in the Plan may be
granted stock options and separately exercisable stock appreciation rights
exceed 700,000 shares in the aggregate over the remaining term of the Plan.
For purposes of this limitation, no stock options or stock appreciation rights
granted prior to January 1, 1995 shall be taken into account. Such limitation
shall be subject to periodic adjustment in accordance with the provisions of
this Section V.
C. Should one or more outstanding options under this
Plan (including outstanding options under the Predecessor Plan incorporated
into this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section IX), of then the shares subject to the portion of each
option not so exercised shall be available for subsequent option grants under
the Plan. Any unvested shares issued under the Plan and subsequently
repurchased by the Corporation, at the option exercise price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, any shares subject to any
option or portion thereof surrendered in accordance with Section X shall reduce
on a share-for-share basis the number of shares of Common Stock available for
subsequent option grants under the Plan. In addition, should the option price
of an outstanding option under the Plan (including any option incorporated from
the Predecessor Plan) be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation
in satisfaction of the withholding taxes incurred in connection with the
exercise of an outstanding stock option under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
actually issued.
D. Should any change be made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, then appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
maximum number and/or class of securities for which any one individual
participating in the Plan may be granted options and separately exercisable
stock appreciation rights after December 31, 1994, (iii) the number and/or
class of securities and price per share in effect
6.
<PAGE> 35
under each option outstanding under the Plan and (iv) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
VI. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not Employees of the Corporation or any Parent or Subsidiary may only
be granted non-statutory options. Each granted option shall be evidenced by
one or more instruments in the form approved by the Plan Administrator;
provided, however, that each such instrument shall comply with the terms and
conditions specified below. Each instrument evidencing an Incentive Option
shall, in addition, be subject to the applicable provisions of Section VII.
A. Option Price.
(1) The option price per share shall be fixed by
the Plan Administrator in accordance with the following provisions:
(i) The option price per share of the
Common Stock subject to an Incentive Option shall in no event
be less than one hundred percent (100%) of the Fair Market
Value of such Common Stock on the grant date.
(ii) The option price per share of the
Common Stock subject to a non-statutory stock option shall in
no event be less than eighty-five percent (85%) of the Fair
Market Value of such Common Stock on the grant date.
(2) The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Section XI and
the instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
- full payment in shares of Common Stock held
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date (as such term is defined
below);
- full payment in cash or check drawn to the
Corporation's order;
7.
<PAGE> 36
- full payment in a combination of shares of
Common Stock held for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date and cash or check
drawn to the Corporation's order; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall provide
irrevocable instructions (I) to a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with such purchase and (II) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
For purposes of this subparagraph (2), the Exercise Date shall
be the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted
under the Plan shall be exercisable at such time or times and during such
period as is determined by the Plan Administrator and set forth in the
instrument evidencing the grant. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date.
C. Termination of Service.
(1) The following provisions shall govern the
exercise period applicable to any outstanding options held by the Optionee at
the time of cessation of Service or death.
- Should an Optionee cease Service for any
reason (including death or Permanent Disability) while holding one or
more outstanding options under this Plan, then none of those options
shall (except to the extent otherwise provided pursuant to
subparagraph C.(3) below) remain exercisable for more than a
thirty-six (36)-month period (or such shorter period determined by the
Plan Administrator and set forth in the instrument evidencing the
grant) measured from the date of such cessation of Service.
8.
<PAGE> 37
- Any option held by the Optionee under this
Plan and exercisable in whole or in part on the date of his or her
death may be subsequently exercised by the personal representative of
the Optionee's estate or by the person or persons to whom the option
is transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution. Such exercise, however, must
occur prior to the earlier of (i) the third anniversary of the date of
the Optionee's death (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) or
(ii) the specified expiration date of the option term. Upon the
occurrence of the earlier event, the option shall terminate and cease
to be outstanding.
- During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of shares (if any) in which the Optionee is vested at the
time of cessation of Service. Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified
expiration date of the option term, each such option shall terminate
and cease to be outstanding with respect to any vested shares for
which it has not otherwise been exercised. However, each outstanding
option shall immediately terminate and cease to be outstanding, at the
time of the Optionee's cessation of Service, with respect to any
shares for which it is not otherwise at that time exercisable or in
which Optionee is not otherwise at that time vested.
- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.
- Should (i) the Optionee's Service be
terminated for misconduct (including, but not limited to, any act of
dishonesty, willful misconduct, fraud or embezzlement) or (ii) the
Optionee make any unauthorized use or disclosure of confidential
information or trade secrets of the Corporation or any Parent or
Subsidiary, then in any such event all outstanding options held by the
Optionee under this Plan shall terminate immediately and cease to be
outstanding.
(2) The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to permit one or more options held by the
Optionee under this Plan to be exercised, during the limited post-Service
exercise period applicable under subparagraph (1) above, not only with respect
to the number of vested shares of Common Stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments of vested shares for which the
option would otherwise have become exercisable had such cessation of Service
not occurred.
9.
<PAGE> 38
(3) The Plan Administrator shall also have full power and
authority to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period in effect under subparagraph (1) above to such greater period of
time as the Plan Administrator shall deem appropriate. In no event, however,
shall such option be exercisable after the specified expiration date of the
option term.
D. Shareholder Rights. An Optionee shall have no
shareholder rights with respect to any shares covered by the option until such
individual shall have exercised the option and paid the option price for the
purchased shares.
E. Repurchase Rights. The shares of Common Stock
acquired upon the exercise of any option granted under this Plan may be subject
to repurchase by the Corporation in accordance with the following provisions:
(a) The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of Common
Stock under this Plan. Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the right to
repurchase any or all of those unvested shares at the option price
paid per share. The terms and conditions upon which such repurchase
right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth
in the instrument evidencing such repurchase right.
(b) All of the Corporation's outstanding
repurchase rights under this Plan shall automatically terminate, and
all shares subject to such terminated rights shall immediately vest in
full, upon the occurrence of a Corporate Transaction, except to the
extent: (i) any such repurchase right is expressly assigned to the
successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
(c) The Plan Administrator shall have the
discretionary authority, exercisable either before or after the
Optionee's cessation of Service, to cancel the Corporation's
outstanding repurchase rights with respect to one or more shares
purchased or purchasable by the Optionee under this Plan and thereby
accelerate the vesting of such shares in whole or in part at any time.
F. Limited Transferability of Options. During the
lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution
10.
<PAGE> 39
following the Optionee's death. However, Non-Statutory Options may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. Should the Optionee die while holding a Non-Statutory
Option, that option shall be transferred in accordance with the Optionee's will
or by the laws of descent and distribution.
VII. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Plan. Incentive Options may only
be granted to individuals who are Employees of the Corporation. Options which
are specifically designated as "non-statutory" options when issued under the
Plan shall not be subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee after December 31, 1986
under this Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as incentive stock options under the Federal tax
laws shall be applied on the basis of the order in which such options are
granted. Should the number of shares of Common Stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then that option may
nevertheless be exercised in that calendar year for the excess number of shares
as a non-statutory option under the Federal tax laws.
B. 10% Shareholder. If any individual to whom an
Incentive Option is granted is the owner of stock (as determined under Section
424(d) of the Code) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation or any Parent or
Subsidiary, then the option price per share shall not be less than one hundred
and ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date, and the option term shall not exceed five (5) years, measured
from the grant date.
Except as modified by the preceding provisions of this Section
VII, the provisions of the Plan shall apply to all Incentive Options granted
hereunder.
11.
<PAGE> 40
VIII. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each
option which is at the time outstanding under this Plan shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as fully
vested shares. However, an outstanding option under this Plan shall NOT so
accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option, or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator
at the time of the option grant. The determination of option comparability
under clause (i) above shall be made by the Plan Administrator, and its
determination shall be final, binding and conclusive.
B. Upon the consummation of the Corporate Transaction,
all outstanding options under this Plan shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
C. Each outstanding option under this Plan which is
assumed in connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the option holder, in consummation
of such Corporate Transaction, had such person exercised the option immediately
prior to such Corporate Transaction. Appropriate adjustments shall also be
made to the option price payable per share, provided the aggregate option price
payable for such securities shall remain the same. In addition, the class and
number of securities available for issuance under the Plan on both an aggregate
and per participant basis following the consummation of the Corporate
Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in whole or in part should the Optionee's Service subsequently terminate within
a designated period following the effective date of any Corporate Transaction
in which those options are assumed or replaced and do not otherwise accelerate.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such termination of Service shall immediately terminate
in whole or in part, and the shares subject to those terminated rights shall
accordingly vest.
12.
<PAGE> 41
E. The Plan Administrator shall have full power and
authority to grant options under the Plan which will automatically accelerate
in whole or in part should the Optionee's Service subsequently terminate within
a designated period following the effective date of any Change in Control. In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such termination of Service shall immediately terminate
in whole or in part, and the shares subject to those terminated rights shall
accordingly vest.
F. Any options accelerated in connection with the Change
in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The grant of options under this Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
H. Any Incentive Options accelerated under this Section
VIII in connection with a Corporate Transaction or Change in Control shall
remain exercisable as incentive stock options under the Federal tax laws only
to the extent the applicable dollar limitation of Section VII is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated option shall
be exercisable as a non-statutory option under the Federal tax laws.
IX. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Plan (including
outstanding options under the Predecessor Plan incorporated into this Plan) and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an option price per share
not less than (i) eighty-five percent (85%) of the Fair Market Value of the
Common Stock on the new grant or (ii) one hundred percent (100%) of such Fair
Market Value in the case of an Incentive Option.
X . STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section V, one or more Optionees may be granted the right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to surrender all or part of an unexercised option under this Plan in
exchange for a distribution from the Corporation in an amount equal to the
excess of (i) the Fair Market Value (on the option surrender date) of the
shares of Common Stock in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
13.
<PAGE> 42
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution to which the Optionee shall accordingly
become entitled under this Section V may be made in shares of Common Stock
valued at Fair Market Value on the option surrender date, in cash, or partly in
shares and partly in cash, as the Plan Administrator deems appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option
grant.
D. One or more officers of the Corporation subject to
the short-swing profit restrictions of the Federal securities laws may, in the
Plan Administrator's sole discretion, be granted limited stock appreciation
rights in tandem with their outstanding options under the Plan. Upon the
occurrence of a Hostile Take-Over, the officer will have a thirty (30)-day
period in which he or she may surrender any outstanding options with such a
limited stock appreciation right to the Corporation, to the extent such options
are at the time exercisable for fully-vested shares of Common Stock. The
officer shall in return be entitled to a cash distribution from the Corporation
in an amount equal to the excess of (i) the Take-Over Price of the vested
shares of Common Stock at the time subject to each surrendered option over (ii)
the aggregate option price payable for such vested shares. The cash
distribution payable upon such option surrender shall be made within five (5)
days following the date the option is surrendered to the Corporation. The Plan
Administrator shall pre-approve, at the time the limited stock appreciation
right is granted, the subsequent exercise of that right in accordance with the
terms of the grant and the provisions of this Section X.D. No additional
approval of the Plan Administrator or the Board shall be required at the time
of the actual option surrender and cash distribution. Any unsurrendered
portion of the option shall continue to remain outstanding and become
exercisable in accordance with the terms of the instrument evidencing such
grant.
E. The shares of Common Stock subject to any option
surrendered for an appreciation distribution pursuant to this Section V shall
NOT be available for subsequent option grant under the Plan.
XI. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist
any Optionee (including an Optionee who is an officer of the Corporation) in
the exercise of one or more options granted to such Optionee under the Plan,
including the satisfaction of any Federal and state income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or (ii) permitting the Optionee
14.
<PAGE> 43
to pay the option price for the purchased Common Stock in installments over a
period of years. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be upon such terms
as the Plan Administrator specifies in the applicable option agreement or
otherwise deems appropriate under the circumstances. Loans or installment
payments may be authorized with or without security or collateral. However,
the maximum credit available to the Optionee may not exceed the option price of
the acquired shares plus any Federal and state income and employment tax
liability incurred by the Optionee in connection with the acquisition of such
shares.
B. The Plan Administrator may, in its absolute
discretion, determine that one or more loans extended under this financial
assistance program shall be subject to forgiveness by the Corporation in whole
or in part upon such terms and conditions as the Plan Administrator may deem
appropriate.
XII . AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and
authority to amend or modify the Plan (or any component thereof) in any or all
respects whatsoever. However, no such amendment or modification shall
adversely affect rights and obligations with respect to options at the time
outstanding under the Plan, unless the Optionee consents to such amendment. In
addition, certain amendments may require shareholder approval pursuant to
applicable laws or regulations.
B. Options to purchase shares of Common Stock may be
granted under the Plan which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under the Plan are held in escrow until shareholder approval is obtained
for a sufficient increase in the number of shares available for issuance under
the Plan. If such shareholder approval is not obtained within twelve (12)
months after the date the first such excess option grants are made, then (I)
any unexercised excess options shall terminate and cease to be exercisable and
(II) the Corporation shall promptly refund the purchase price paid for any
excess shares actually issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow.
XIII. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options for such shares or the vesting of such
shares under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
The Plan Administrator may, in its discretion and in
accordance with the provisions of this Section XIII and such supplemental rules
as the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of SEC Rule 16b-
15.
<PAGE> 44
3), provide any or all holders of non-statutory options or unvested shares
under the Plan with the right to use shares of the Corporation's Common Stock
in satisfaction of all or part of the Federal, state and local income and
employment tax liabilities incurred by such holders in connection with the
exercise of their options or the vesting of their shares (the "Taxes"). Such
right may be provided to any such holder in either or both of the following
formats:
(a) Stock Withholding: The holder of the non-statutory
option or unvested shares may be provided with the election to have
the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such non- statutory option or the
vesting of such shares, a portion of those shares with an aggregate
Fair Market Value equal to the percentage of the applicable Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
(b) Stock Delivery: The Plan Administrator may, in its
discretion, provide the holder of the non-statutory option or unvested
shares purchased thereunder with the election to deliver to the
Corporation, at the time the non-statutory option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by
such individual (other than in connection with the option exercise or
share vesting triggering the Taxes) with an aggregate Fair Market
Value equal to the percentage of the Taxes incurred in connection with
such option exercise or share vesting (not to exceed one hundred
percent (100%)) designated by the holder.
XIV . EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Predecessor Plan,
became effective as of the Effective Date and no further option grants or stock
issuances shall be made under the Predecessor Plan from and after such
Effective Date.
B. On March 30, 1995, the Board amended and restated the
Plan to (i) increase the number of shares issuable thereunder by 340,000 shares
and (ii) impose a limitation on the maximum number of shares for which any one
individual participating in the Plan may be granted options and separately
exercisable stock appreciation rights after December 31, 1994. The restatement
was approved by the Corporation's shareholders at the 1995 Annual Shareholders
Meeting. On April 26, 1996, the Board amended the Plan to increase the number
of shares issuable thereunder by an additional 500,000 shares, and that
increase was approved by the Corporation's shareholders at the 1996 Annual
Shareholders Meeting.
C. On April 3, 1997, the Board amended the Plan to
effect the following changes: (i) increase the maximum number of shares of
Common Stock authorized for issuance over the term of the Plan by an additional
750,000 shares, (ii) render the non-
16.
<PAGE> 45
employee Board members eligible to receive option grants under the Plan, (iii)
allow unvested shares issued under the Plan and subsequently repurchased by the
Corporation at the option exercise price paid per share to be reissued under
the Plan, (iv) remove certain restrictions on the eligibility of non-employee
Board members to serve as Plan Administrator, and (v) effect a series of
additional changes to the provisions of the Plan (including the stockholder
approval requirements, the transferability of Non-Statutory Options and the
elimination of the six (6)-month holding requirement as a condition to the
exercise of stock appreciation rights) in order to take advantage of the recent
amendments to Rule 16b-3 of the Securities and Exchange Commission which
exempts certain officer and director transactions under the Plan from the
short- swing liability provisions of the federal securities laws. The 1997
amendments are subject to shareholder approval at the 1997 Annual Meeting, and
no option grants made on the basis of the 750,000-share increase shall become
exercisable in whole or in part unless and until the amendments are approved by
the shareholders. Should such shareholder approval not be obtained, then any
options granted on the basis of the 750,000 increase shall terminate without
ever becoming exercisable for those shares, and no further option grants shall
be made on the basis of such share increase. However, option grants may
continue to be made pursuant to the provisions of the Plan as in effect
immediately prior to the 1997 amendments. All option grants and made prior to
the 1997 amendments shall remain outstanding in accordance with the terms and
conditions of the respective instruments evidencing those options, and nothing
in the 1997 amendments shall be deemed to modify or in any way affect those
outstanding options. Subject to the foregoing limitations, the Plan
Administrator may make option grants under the Plan at any time before the date
fixed herein for the termination of the Plan.
D. Each option issued and outstanding under the
Predecessor Plan immediately prior to the Effective Date shall be incorporated
into this Plan and treated as an outstanding option under this Plan, but each
such option shall continue to be governed solely by the terms and conditions of
the instrument evidencing such grant, and nothing in this Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.
E. The option/vesting acceleration provisions of Section
VIII relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more stock options which are
outstanding under the Predecessor Plan on the Effective Date but which do not
otherwise provide for such acceleration.
F. The Plan shall terminate upon the earlier of (i)
October 11, 2003 or (ii) the date on which all shares available for issuance
under the Plan shall have been issued as vested shares or cancelled pursuant to
the exercise, surrender or cash-out of the options granted under the Plan.
Upon such plan termination, all outstanding option grants shall continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grants.
17.
<PAGE> 46
XV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants under the Plan shall be used for general
corporate purposes.
XVI . REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option or stock appreciation right under the Plan and the issuance of
Common Stock upon the exercise of the stock options or stock appreciation
rights granted hereunder shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options and stock appreciation rights
granted under it, and the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall have been
compliance with all applicable requirements of Federal and State securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
XVII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or service of the Corporation (or any Parent or
Subsidiary) for any period of specific duration, and the Corporation (or any
Parent or Subsidiary) retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
XVIII . MISCELLANEOUS PROVISIONS
A. Except to the extent otherwise expressly provided in
the Plan, the right to acquire Common Stock or other assets under the Plan may
not be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise
of options and the vesting of shares shall be governed by the laws of the State
of California without resort to that State conflict-of-laws rules.
C. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
18.
<PAGE> 47
SANGSTAT MEDICAL CORPORATION
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
This 1996 Non-Employee Directors Stock Option Plan (the
"Plan") is intended to promote the interests of SangStat Medical Corporation, a
Delaware corporation (the "Corporation"), by providing the non-employee members
of the Corporation's Board of Directors with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be
in effect:
BOARD: the Corporation's Board of Directors.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's common stock.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
(a) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing fifty percent (50%) or more of the
total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders; or
(b) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less
such that a majority of the Board members ceases, by reason of one or
more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such
<PAGE> 48
period by at least a majority of the Board members described in clause
(A) who were still in office at the time such election or nomination
was approved by the Board.
CORPORATE TRANSACTION: any of the following
stockholder-approved transactions to which the Corporation is a party:
a . a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
b . the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
EFFECTIVE DATE: July 24, 1996, the date on which the Plan was
adopted by the Board.
FAIR MARKET VALUE: the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed
or admitted to trading on any national stock exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share on the date in question, as such price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
b. If the Common Stock is at the time listed or
admitted to trading on any national securities exchange, then the Fair
Market Value shall be the closing selling price per share on the date
in question on the exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Common Stock on such exchange on the date
in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such
quotation exists.
2.
<PAGE> 49
HOSTILE TAKE-OVER: the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
1934 ACT: the Securities Exchange Act of 1934, as amended.
OPTIONEE: any person to whom an option is granted under the
Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over.
III. ADMINISTRATION OF THE PLAN
The terms and conditions of each automatic option grant
(including the timing and pricing of the option grant) shall be determined by
the express terms and conditions of the Plan, and neither the Board nor any
committee of the Board shall exercise any discretionary functions with respect
to option grants made pursuant to the Plan.
IV. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be
available for issuance under the Plan and shall be drawn from either the
Corporation's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of Common Stock which may be issued
over the term of the Plan shall not exceed 250,000 shares, subject to
adjustment from time to time in accordance with the provisions of this Section
IV.
3.
<PAGE> 50
B. Should one or more outstanding options under this
Plan expire or terminate for any reason prior to exercise in full, then the
shares subject to the portion of each option not so exercised shall be
available for subsequent option grants under the Plan. Unvested shares issued
under the Plan and subsequently repurchased by the Corporation, at the option
exercise price paid per share, pursuant to the Corporation's repurchase rights
under the Plan shall be added back to the number of shares of Common Stock
reserved for issuance under the Plan and shall accordingly be available for
reissuance through one or more subsequent option grants under the Plan.
However, shares subject to any option or portion thereof surrendered in
accordance with Section VII shall reduce on a share-for-share basis the number
of shares of Common Stock available for subsequent option grants under the
Plan. In addition, should the exercise price of an outstanding option under
the Plan be paid with shares of Common Stock, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the
gross number of shares for which the option is exercised, and not by the net
number of shares of Common Stock actually issued to the holder of such option.
C. Should any change be made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, then appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
number and/or class of securities for which automatic option grants are to be
subsequently made per each newly-elected or continuing non-employee Board
member under the Plan, and (iii) the number and/or class of securities and
price per share in effect under each option outstanding under the Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Board shall be final, binding and
conclusive.
V. ELIGIBILITY
A. Eligible Optionees. The individuals eligible
to receive automatic option grants under this Plan shall be limited to (i)
those individuals who are serving as non-employee Board members on the
Effective Date, (ii) those individuals who are first elected or appointed as
non-employee Board members after the Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders, and
(iii) those individuals who continue to serve as non-employee Board members at
one or more Annual Stockholders Meetings beginning with the 1997 Annual
Meeting.
A non-employee Board member who has previously been
in the employ of the Corporation (or any of its parent or subsidiary
corporations) shall not be eligible to receive an option grant under the Plan
at the time he or she first becomes a non-employee
4.
<PAGE> 51
Board member, but shall be eligible to receive periodic option grants over his
or her continued service as a non-employee Board member. Each non-employee
Board member eligible to participate in the Plan pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of the Plan.
VI. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grants. Option grants shall be made under the Plan as
specified below:
(1) Each Eligible Director who is serving as a
non-employee Board member on the Effective Date shall automatically be granted
on that date a Non-Statutory Option to purchase EITHER (i) 9,000 shares of
Common Stock, if that individual has previously received an option grant from
the Corporation in connection with his or her service as a Board member, OR
(ii) 14,000 shares of Common Stock if that individual has not previously
received an option grant from the Corporation in connection with such Board
service.
(2) Each individual who is first elected or
appointed as a non-employee Board member after the Effective Date shall
automatically be granted, on the date of such initial election or appointment,
a Non-Statutory Option to purchase 19,000 shares of Common Stock, provided such
individual has not previously been employed by the Corporation (or any parent
or subsidiary of the Corporation).
(3) On the date of each Annual Stockholders
Meeting, beginning with the 1997 Annual Meeting, each individual who is to
continue to serve as an Eligible Director shall automatically be granted,
whether or not such individual is standing for re-election as a Board member at
that Annual Meeting, a Non-Statutory Option to purchase 3,000 shares of Common
Stock, provided such individual has served as a non-employee Board member for
at least six (6) months. There shall be no limit on the number of such
3,000-share option grants any one non-employee Board member may receive over
his or her period of Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any parent or subsidiary
of the Corporation) or who have otherwise received an option grant from the
Corporation prior to the Effective Date shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
Stockholder approval of the Plan at the 1997 Annual
Meeting shall constitute pre-approval of each option granted pursuant to the
express terms of the Plan and the subsequent exercise of that option in
accordance with such terms.
5.
<PAGE> 52
B. Exercise Price. The exercise price per share of
Common Stock subject to each automatic option grant shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on
the automatic grant date.
C. Payment.
The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the forms
specified below:
(i) cash or check made payable to the
Corporation's order;
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial-reporting purposes and valued at Fair Market
Value on the Exercise Date (as such term is defined below); or
(iii) to the extent the option is
exercised for vested shares, full payment through a broker- dealer
sale and remittance procedure pursuant to which the non-employee Board
member shall concurrently provide irrevocable instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the purchased shares and (b)
the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure
specified above is utilized in connection with the exercise of the option for
vested shares, payment of the exercise price for the purchased shares must
accompany the exercise notice. However, if the option is exercised for any
unvested shares, then the optionee must also execute and deliver to the
Corporation a stock purchase agreement for those unvested shares which provides
the Corporation with the right to repurchase, at the exercise price paid per
share, any unvested shares held by the optionee at the time of cessation of
Board service and which precludes the sale, transfer or other disposition of
any shares purchased under the option, to the extent those shares are subject
to the Corporation's repurchase right.
D. Option Term. Each automatic grant under the Plan
shall have a maximum term of ten (10) years measured from the automatic grant
date.
6.
<PAGE> 53
E. Exercise and Vesting. Each automatic grant option
shall be immediately exercisable for any or all of the option shares. However,
any shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares.
The shares subject to each automatic option grant
(other than the initial 14,000-share option grant made on the Effective Date)
shall vest as follows: twenty-five percent (25%) of the option shares shall
vest upon the Optionee's completion of one (1) year of Board service measured
from the grant date, and the balance of the option shares shall vest in a
series of thirty-six (36) successive equal monthly installments upon the
Optionee's completion of each additional month of Board service over the
thirty-six (36)-month period measured from the first anniversary of the grant
date. The shares subject to each 14,000-share option grant made on the
Effective Date shall vest in two (2) successive equal annual installments upon
the Optionee's completion of each year of Board service over the two (2)-year
period measured from the Effective Date.
F. Limited Transferability of Options. The option may
be transferred or assigned by the Optionee, in connection with the Optionee's
estate plan, to one or more members of the Optionee's immediate family or to a
trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment. Should the Optionee die while
holding the option, then the option shall be transferred in accordance with the
Optionee's will or the laws of inheritance.
G. Effect of Termination of Board Service. The
following provisions shall govern the exercise of any options held by the
Optionee at the time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of
Optionee's death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution) shall have a
twelve (12)-month period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable at the time of
the Optionee's cessation of Board service.
7.
<PAGE> 54
(iii) Should the Optionee cease to serve
as a Board member by reason of death or Permanent Disability, then all shares
at the time subject to the option shall immediately vest so that such option
may, during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of such shares as
fully-vested shares.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the expiration of
the twelve (12)-month exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service for any
reason other than death or Permanent Disability, terminate and cease to be
outstanding, with respect to any and all Option Shares in which the Optionee is
not vested at the time of such cessation of Board service.
H. Stockholder Rights. The holder of an automatic
option grant shall have none of the rights of a stockholder with respect to any
shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions
of each automatic option grant shall be as set forth in the form Non-statutory
Stock Option Agreement attached as Exhibit A.
VII. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. The shares of Common Stock subject to each option
outstanding at the time of a Corporate Transaction but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the specified effective date for the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
that option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant under the Plan shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof). In addition, all repurchase rights
outstanding at the time of the Corporate Transaction shall terminate
automatically, and the unvested shares of Common Stock subject to those
terminated rights shall immediately vest in full.
B. The shares of Common Stock subject to each option
outstanding at the time of a Change in Control of the Corporation not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the specified effective date for
8.
<PAGE> 55
the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. Each such
option shall remain exercisable for those fully- vested shares until the
expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take- Over. In addition, all repurchase
rights outstanding at the time of the Change in Control shall terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each automatic option grant held by him or her under the Plan. The
Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether
or not the Optionee is otherwise at the time vested in those shares) over (ii)
the aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to the
Corporation. Stockholder approval of the Plan shall constitute pre-approval of
the grant of each such option surrender right under the Plan and the subsequent
exercise of that right in accordance with the terms and provisions of this
Section VII.C. No additional approval or consent of the Plan Administrator or
the Board shall be required at the time of the actual option surrender and cash
distribution.
D. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall NOT be available for
subsequent option grant under this Plan.
E. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.
F. The automatic option grants outstanding under the
Plan shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
VIII. AMENDMENT OF THE PLAN AND AWARDS
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification
9.
<PAGE> 56
shall adversely affect the rights and obligations with respect to any option at
the time outstanding under the Plan unless the Optionee consents to such
amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
IX. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective immediately upon adoption
by the Board on July 24, 1996, subject to stockholder approval at the 1997
Annual Meeting. No option granted shall become exercisable unless and until the
Plan is approved by the Corporation's stockholders. If such stockholder
approval is not obtained at the 1997 Annual Meeting, then any options
previously granted shall terminate, and no further options shall be granted.
B. The Plan shall terminate upon the earlier of (i) July
23, 2006 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued as vested shares or cancelled pursuant to the
exercise or cash-out of the options granted under the Plan. If the date of
termination is determined under clause (i) above, then all option grants
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants.
X. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be
used for general corporate purposes
XIV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option under the Plan and the issuance of Common Stock upon the exercise of the
option grants made hereunder shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the options granted under it, and the Common Stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which the Common
Stock is then listed for trading.
10.
<PAGE> 57
XII. NO IMPAIRMENT OF RIGHTS
Neither the action of the Corporation in establishing the Plan
nor any provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove any individual from the Board at any time in accordance with the
provisions of applicable law.
XII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee.
B. The provisions of the Plan relating to the exercise
of options and the vesting of shares shall be governed by the laws of the State
of California, as such laws are applied to contracts entered into and performed
in such State.
C. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
11.
