<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _______
Commission File Number: 0-24274
LA JOLLA PHARMACEUTICAL COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 33-0361285
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6455 NANCY RIDGE DRIVE 92121
SAN DIEGO, CA (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (858) 452-6600
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of the Registrant's common stock, $.01 par value,
outstanding at June 30, 1999 was 20,159,559.
<PAGE> 2
LA JOLLA PHARMACEUTICAL COMPANY
FORM 10-Q
QUARTERLY REPORT
INDEX
<TABLE>
<S> <C>
COVER PAGE ...................................................................................... 1
INDEX ........................................................................................... 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of June 30, 1999 (Unaudited) and December 31, 1998 .................... 3
Statements of Operations (Unaudited) for the three months and six months ended
June 30, 1999 and 1998 ................................................................... 4
Statements of Cash Flows (Unaudited) for the six months ended June 30, 1999 and 1998 ..... 5
Notes to Financial Statements (Unaudited) ................................................ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................................... 7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ....................... 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ................................................................ *
ITEM 2. Changes in Securities ............................................................ *
ITEM 3. Defaults upon Senior Securities .................................................. *
ITEM 4. Submission of Matters to a Vote of Security Holders .............................. 12
ITEM 5. Other information ................................................................ *
ITEM 6. Exhibits and Reports on Form 8-K ................................................. 13
SIGNATURE ....................................................................................... 14
</TABLE>
* No information provided due to inapplicability of item.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LA JOLLA PHARMACEUTICAL COMPANY
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,486 $ 11,176
Short-term investments 11,355 12,174
Other current assets 625 517
-------- --------
Total current assets 18,466 23,867
Property and equipment, net 556 659
Patent costs and other assets, net 1,448 1,289
-------- --------
Total assets $ 20,470 $ 25,815
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 228 $ 1,254
Accrued expenses 451 575
Accrued payroll and related expenses 642 355
Deferred revenue - related party 1,640 1,769
Current portion of obligations under capital leases 105 3
-------- --------
Total current liabilities 3,066 3,956
Noncurrent portion of obligations under capital leases 62 --
Commitments
Stockholders' equity:
Common stock 201 201
Additional paid-in capital 84,320 84,276
Accumulated deficit (67,179) (62,618)
-------- --------
Total stockholders' equity 17,342 21,859
-------- --------
Total liabilities and stockholders' equity $ 20,470 $ 25,815
======== ========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
3
<PAGE> 4
LA JOLLA PHARMACEUTICAL COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue from collaborative agreement -
related party $ 1,455 $ 2,263 $ 3,114 $ 4,166
Expenses:
Research and development 3,232 3,721 6,407 7,245
General and administrative 881 933 1,703 1,651
-------- -------- -------- --------
Total expenses 4,113 4,654 8,110 8,896
-------- -------- -------- --------
Loss from operations (2,658) (2,391) (4,996) (4,730)
Interest expense (4) (2) (13) (5)
Interest income 196 299 448 650
-------- -------- -------- --------
Net loss and comprehensive net loss $ (2,466) $ (2,094) $ (4,561) $ (4,085)
======== ======== ======== ========
Basic and diluted net loss per share $ (.12) $ (.12) $ (.23) $ (.22)
======== ======== ======== ========
Shares used in computing basic and diluted net
loss per share 20,111 18,169 20,110 18,165
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
LA JOLLA PHARMACEUTICAL COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (4,561) $ (4,085)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization 174 202
Deferred compensation amortization -- 17
Loss on disposal of property and equipment 23 --
Change in operating assets and liabilities:
Receivable - related party -- --
Other current assets (108) 151
Accounts payable and accrued expenses (1,150) (1,238)
Accrued payroll and related expenses 287 63
Deferred revenue - related party (129) 630
-------- --------
Net cash used for operating activities (5,464) (4,260)
INVESTING ACTIVITIES
Decrease in short-term investments 819 8,077
Proceeds from the sale of property and equipment 20 --
Deletions to property and equipment 139 96
Increase in patent costs and other assets (184) (172)
-------- --------
Net cash provided by investing activities 794 8,001
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 44 72
Payments on obligations under capital leases (64) (104)
-------- --------
Net cash used for financing activities (20) (32)
Net (decrease) increase in cash and cash equivalents (4,690) 3,709
Cash and cash equivalents at beginning of period 11,176 11,999
-------- --------
Cash and cash equivalents at end of period $ 6,486 $ 15,708
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 13 $ 5
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred for property
and equipment $ 228 $ --
======== ========
Adjustment to deferred compensation for terminations $ -- $ 8
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
LA JOLLA PHARMACEUTICAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of La Jolla Pharmaceutical
Company (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 1999 are not necessarily indicative of the
results that may be expected for other quarters or the year ended December 31,
1999. For more complete financial information, these financial statements, and
the notes thereto, should be read in conjunction with the audited financial
statements for the year ended December 31, 1998 included in the Company's Form
10-K filed with the Securities and Exchange Commission.
2. ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and disclosures made in
the accompanying notes to the financial statements. Actual results could differ
from those estimates.
6
<PAGE> 7
LA JOLLA PHARMACEUTICAL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
As announced on May 12, 1999, in a planned interim analysis of the
Phase II/III clinical trial of LJP 394 in lupus patients being conducted by
Abbott Laboratories ("Abbott") and the Company, the independent Data Monitoring
Committee reported efficacy as defined by the primary chosen endpoint, time to
renal flare, was less than expected. No major safety concerns were observed, and
patients receiving the experimental drug seemed to have a reduction in
circulating antibodies to double-stranded DNA that are associated with lupus
nephritis.
Following discussion with the Food and Drug Administration, the two
companies elected to stop enrollment and to stop treatment of the more than 200
enrolled patients until the data can be validated and analyzed. This analysis is
expected to be completed in the third or fourth quarter of this year. A Phase II
dose-ranging study of LJP 394 involving 75 lupus patients was recently completed
and the data from this study is also currently being analyzed.
Abbott and the Company are committed to understanding the effects of
LJP 394 on endpoints from this study before deciding on how to proceed with any
further development.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including without
limitation, those dealing with the Company's relationship with Abbott, Abbott's
financing of development expenses, the analysis of the data from the clinical
trials, as well as the Company's drug candidates and drug development plans and
other matters described in terms of the Company's plans and expectations. The
forward-looking statements involve risks and uncertainties and a number of
factors, both foreseen and unforeseen, could cause actual results to differ
materially from those anticipated. Abbott's continuing support obligations are
subject to certain conditions. The Company's relationship with Abbott could be
terminated by either party for various reasons. The analysis of the data from
the Company's Phase II/III clinical trial of LJP 394 may have negative or
inconclusive results. If clinical trials of LJP 394 continue, they may continue
to have negative or inconclusive results. Further, delays in continued testing
of LJP 394, the Company's lead product candidate, and/or termination of
development would result in delays or an inability to market the compound.
Tolerance, or the specific inactivation of pathogenic B cells, is a new
technology that has not been proven, and the development of LJP 394 involves
many risks and uncertainties, including, without limitation, whether LJP 394 can
provide a meaningful clinical benefit. Any positive results observed to date may
not be indicative of future results. The Company's other potential drug
candidates are at earlier stages of development and involve comparable risks.
Additional risk factors include the uncertainty of obtaining required
regulatory approvals, successfully marketing products, receiving future revenue
from product sales or other sources such as collaborative relationships, future
profitability, the need for additional financing, the Company's dependence on
patents and other proprietary rights, the Company's limited manufacturing
capabilities and the Company's lack of marketing experience. Readers are
cautioned not to place undue reliance upon forward-looking statements, which
speak only as of the date hereof, and the Company undertakes no obligation to
update forward-looking statements to reflect events or circumstances occurring
after the date hereof. Interested parties are urged to review the risks
described below and in other reports and registration statements of the Company
filed with the Securities and Exchange Commission from time to time.
7
<PAGE> 8
LA JOLLA PHARMACEUTICAL COMPANY
OVERVIEW
Since its inception in May 1989, the Company has devoted substantially
all of its resources to the research and development of technology and potential
drugs to treat antibody-mediated diseases. The Company has never generated any
revenue from product sales and has relied upon private and public investors,
revenues from collaborative agreements, equipment lease financings and interest
income on invested cash balances for its working capital. The Company has been
unprofitable since inception and expects to incur substantial additional
expenses and operating losses for at least the next several years as it
increases its research and development expenditures on additional drug
candidates, possibly increases its manufacturing scale-up activities including
the possible production of LJP 394 for any clinical trials after its review of
the analysis of the Phase II/III clinical trial data, and increases general and
administrative expenditures to support increased research and development and
possible manufacturing scale-up activities. The Company's activities to date are
not as broad in depth or scope as the activities it must undertake in the future
and the Company's historical operations and the financial information reported
below are not indicative of its future operating results or financial condition.
The Company expects that losses will fluctuate from quarter to quarter
as a result of differences in the timing of expenses incurred and potential
revenues from collaborative arrangements. Some of these fluctuations may be
significant. As of June 30, 1999, the Company's accumulated deficit was
approximately $67.2 million.
The Company's business is subject to significant risks including, but
not limited to, the risks inherent in its research and development efforts,
including clinical trials, uncertainties associated with both obtaining and
enforcing its patents and with the patent rights of others, the lengthy,
expensive and uncertain process of seeking regulatory approvals, uncertainties
regarding government reforms and of product pricing and reimbursement levels,
technological change and competition, manufacturing uncertainties and dependence
on its collaborative relationship with Abbott, a related party (as a 16.7%
stockholder of the Company). Even if the Company's product candidates appear
promising at an early stage of development, they may not reach the market for
numerous reasons. Such reasons include the possibilities that the products will
be ineffective or unsafe during clinical trials, will fail to receive necessary
regulatory approvals, will be difficult to manufacture on a large scale, will be
uneconomical to market or will be precluded from commercialization by
proprietary rights of third parties. All of the Company's product development
efforts are based upon technologies and therapeutic approaches that are
unproven. There can be no assurance that further development of LJP 394 will
occur or that LJP 394 will prove to be safe or effective. Furthermore, the
clinical trials of LJP 394 may be viewed as a test of the Company's entire
Tolerance Technology approach. If these clinical trials are determined to have
been unsuccessful, depending on the reason for the lack of success, the
applicability of the Company's Tolerance Technology to other antibody-mediated
diseases will be highly uncertain.
8
<PAGE> 9
LA JOLLA PHARMACEUTICAL COMPANY
RESULTS OF OPERATIONS
The Company earned $1.5 million and $3.1 million in revenue from its
collaborative agreement with Abbott in the three and six months ended June 30,
1999, respectively, and earned $2.3 million and $4.2 million in revenue for the
same periods in 1998. The decrease in revenue is due to a decrease in Abbott
funded development expenses as a result of stopping the Company's Phase II/III
clinical trial for its lupus drug candidate, LJP 394. Payments received in
advance under the collaborative agreement with Abbott are recorded as deferred
revenue until earned. Total revenue payments of approximately $2.9 million were
received in advance under the collaborative agreement with Abbott during the
first six months of 1999, of which approximately $0.8 million was received in
the three months ended June 30, 1999. As of June 30, 1999, deferred revenue was
approximately $1.6 million. The receipt of payments and the recognition of
revenue from the collaborative agreement with Abbott have historically varied
significantly from quarter to quarter and from year to year depending on the
level of research effort expended. There can be no assurance that the Company
will receive any further payments from Abbott or realize any further revenue
from the Abbott arrangement or any other collaborative arrangement.
Research and development expenses decreased to $3.2 million for the
second quarter of 1999 from $3.7 million for the same period in 1998. For the
six months ended June 30, 1999, research and development expense decreased to
$6.4 million from $7.2 million for the same period in 1998. The decrease was due
primarily to the decrease in expenses as a result of stopping the Company's
Phase II/III clinical trial for LJP 394. Depending on the results of the data
analysis from the clinical trial of LJP 394, the Company's research and
development expenses may increase significantly in the future as efforts to
develop additional drug candidates are intensified, products potentially
progress into and through clinical trials, and manufacturing scale-up activities
are possibly increased.
General and administrative expenses decreased to $881,000 for the
second quarter of 1999 from $933,000 for the same period in 1998. For the six
months ended June 30, 1999 and 1998, general and administrative expense was $1.7
million. General and administrative expenses may increase in the future in order
to support increased research and development and, possibly, manufacturing
scale-up activities.
Interest income decreased to $196,000 for the second quarter of 1999
from $299,000 for the same period in 1998. For the six months ended June 30,
1999, interest income decreased to $448,000 from $650,000 for the same period in
1998. The decrease was due to lower investment balances. Interest expense
increased to $4,000 for the second quarter of 1999 from $2,000 for the same
period in 1998. For the six months ended June 30, 1999, interest expense
increased to $13,000 from $5,000 for the same period in 1998. The increase was
the result of increases in the Company's capital lease obligations as compared
to the same period in 1998.
9
<PAGE> 10
LA JOLLA PHARMACEUTICAL COMPANY
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had incurred a cumulative net loss
since inception of approximately $67.2 million, and had financed its operations
through private and public offerings of its securities, payments from
collaborative agreements, capital and operating lease transactions, and interest
income on its invested cash balances. As of June 30, 1999, the Company had
raised $83.7 million in net proceeds since inception from sales of equity
securities.
At June 30, 1999, the Company had $17.8 million in cash, cash
equivalents and short-term investments, as compared to $23.4 million at December
31, 1998. The Company's working capital at June 30, 1999 was $15.4 million, as
compared to $19.9 million at December 31, 1998. The decrease in cash, cash
equivalents and short-term investments resulted from the continued use of the
Company's cash toward operating activities, patent expenditures and the purchase
of property and equipment. The decrease in working capital is primarily due to
the use of cash for net operating expenses and the addition of property and
equipment under capital leases in the first six months of 1999. The Company
invests its cash in corporate and United States government-backed debt
instruments.
As of June 30, 1999, the Company had acquired an aggregate of $4.1
million in property and equipment, of which approximately $228,000 of total
property and equipment costs are financed under capital lease obligations. In
addition, the Company leases its office and laboratory facilities and certain
property and equipment under operating leases. The Company has no material
commitments for the acquisition of property and equipment. However the Company
anticipates increasing its investment in property and equipment in connection
with the enhancement of its research and development and, possibly, its
manufacturing facilities and capabilities.
The Company intends to use its financial resources to fund its research
and development efforts, to fund its possible manufacturing scale-up activities
and for working capital and other general corporate purposes. The amounts
actually expended for each purpose may vary significantly depending upon
numerous factors, including the results of clinical trials, the analysis of the
Phase II/III clinical trial data, the timing of any regulatory applications and
approvals, and technological developments. Expenditures will also depend upon
the establishment and progression of collaborative arrangements and contract
research as well as the availability of other financings. There can be no
assurance that these funds will be available on acceptable terms, if at all.
The Company anticipates that its existing capital and interest earned
thereon will be sufficient to fund the Company's operations as currently planned
into 2000. The Company's future capital requirements will depend on many
factors, including continued scientific progress in its research and development
programs, the size and complexity of these programs, the scope and results of
clinical trials, the analysis of data from the Phase II/III clinical trial, the
time and costs involved in applying for any regulatory approvals, the costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims, competing technological and market developments, the ability of the
Company to maintain its collaborative arrangement with Abbott and to establish
and maintain additional collaborative relationships, and the cost of possible
manufacturing scale-up and effective commercialization activities and
arrangements. The Company expects to incur significant net operating losses each
year for at least the next several years as it continues its research and
development efforts and incurs general and administrative expenses to support
its research and development programs. It is possible that the Company's cash
requirements will exceed current projections and that the Company will therefore
need additional financing sooner than currently expected.
The Company has no current means of generating cash flow from
operations. Unless the Company's lead drug candidate, LJP 394, has been proven
safe and effective, has received regulatory approval and has been successfully
commercialized, it will not generate revenues, if at all. This process, if
completed, could likely take several years. The Company's other drug candidates
are much less
10
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developed than LJP 394. There can be no assurance that the Company's product
development efforts with respect to any drug candidate will be successfully
completed, that required regulatory approvals will be obtained, or that any
product, if introduced, will be successfully marketed or achieve commercial
acceptance. Accordingly, the Company must continue to rely upon outside sources
of financing to meet its capital needs for the foreseeable future.
There can be no assurance that the Company will receive any further
funding from Abbott. The Company anticipates increasing expenditures on the
development of other drug candidates and, over time, the Company's consumption
of cash will necessitate additional sources of financing. Furthermore, the
Company has no internal sources of liquidity, and termination of the Abbott
arrangement would have a serious adverse effect on the Company's ability to
generate sufficient cash to meet its needs.
The Company will continue to seek capital through any appropriate
means, including issuance of its securities and establishment of additional
collaborative arrangements. However, there can be no assurance that additional
financing will be available on acceptable terms and the Company's negotiating
position in its capital-raising efforts may worsen as it continues to use its
existing resources. Payments under the Company's collaborative agreement with
Abbott are uncertain and there is no assurance that the Company will be able to
enter into further collaborative relationships.
IMPACT OF YEAR 2000
The "Year 2000 Issue" is the result of computer programs written using
two digits rather than four to define the applicable year. As a result, these
computer programs may not properly recognize calendar dates beginning in the
year 2000. This problem may cause systems to fail or miscalculate causing
disruptions of operations, including a temporary inability to process
transactions or engage in similar normal business activities.
Based on recent assessments, the Company believes that it has an
effective program in place to resolve the Year 2000 Issue in a timely manner and
that its total internal Year 2000 Issue costs for information technology and
non-information technology systems will be less than $90,000 and will primarily
be incurred in 1999. The Company's year 2000 conversion requirements are
expected to be achieved through routine upgrades to its hardware and software
programs and these upgrades are expected to be completed by the third quarter of
1999. These costs and the expected completion date are based on management's
best estimates; therefore, there can be no assurance that these estimates will
be achieved and actual results could differ materially from those anticipated.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Company has completed the assessment phase for almost 100% of the
systems that could be significantly affected by the Year 2000 Issue and has
determined that the majority of the systems assessed do not require remediation
to be year 2000 compliant. Approximately 85% of the systems requiring
remediation are now year 2000 compliant. In addition, the Company has initiated
communications with most of its significant suppliers to determine the extent to
which the Company's systems are vulnerable to those third parties' failure to
remediate their own Year 2000 Issues. There can be no assurance that the systems
of other companies on which the Company's systems rely will be timely converted
and will not have an adverse effect on the Company's systems.
The Company currently has no contingency plans in place in the event it
does not complete all phases of the year 2000 program. The Company plans to
evaluate the status of completion in the third quarter of 1999 and determine
whether such a plan is necessary.
11
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company invests its excess cash in interest-bearing
investment-grade securities that it holds for the duration of the term of the
respective instrument. The Company does not utilize derivative financial
instruments, derivative commodity instruments or other market-risk-sensitive
instruments, positions or transactions in any material fashion. Accordingly, the
Company believes that, while the investment-grade securities it holds are
subject to changes in the financial standing of the issuer of such securities,
the Company is not subject to any material risks arising from changes in
interest rates, foreign currency exchange rates, commodity prices or other
market changes that affect market-risk-sensitive instruments.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on May 13, 1999. All of the
Company's directors nominated for election as stated in the Company's Proxy
Statement were elected as follows:
<TABLE>
<CAPTION>
DIRECTOR NOMINEE TERM VOTES IN FAVOR VOTES WITHHELD
- ---------------- ---- -------------- --------------
<S> <C> <C> <C>
Thomas H. Adams, Ph.D. One year 18,269,083 900,572
William E. Engbers Three years 18,270,083 899,572
Steven B. Engle One year 18,269,003 900,652
Robert A. Fildes, Ph.D. Two years 18,270,083 899,572
W. Leigh Thompson, M.D., Ph.D. Three years 18,270,083 899,572
</TABLE>
All of the Company's proposals as stated in the Company's Proxy
Statement were approved as follows:
<TABLE>
<CAPTION>
PROPOSAL DESCRIPTION VOTES IN FAVOR VOTES AGAINST ABSTAINING
- -------------------- -------------- ------------- ----------
<S> <C> <C> <C>
Amendment to the 1994 Stock Incentive Plan to
increase by 750,000 the number of shares of the
Company's Common Stock available under the
Plan 16,809,418 2,291,119 69,118
Amendment to the 1994 Stock Incentive Plan to
make non-employee directors eligible to receive
additional types of awards under the Plan 15,798,278 3,335,922 35,455
Amendment to the Restated Certificate of
Incorporation to increase the number of
authorized shares of the Company's
Common Stock to 100,000,000 17,691,448 1,429,464 48,743
Amendments to the Restated Certificate of
Incorporation and Amended and Restated
Bylaws to implement classified board provisions 10,902,660 3,553,424 72,267
Amendment to the Restated Certificate of
Incorporation to prohibit stockholder action
by written consent 11,529,377 2,899,366 99,608
</TABLE>
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Intentionally omitted
3.2 Amended and Restated Bylaws of the Company(2)
3.3 Amended and Restated Certificate of Incorporation of the
Company(2)
4.0 Rights Agreement dated as of December 3, 1998 between the
Company and American Stock Transfer & Trust Company(1)
4.1 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company(2)
10.19 La Jolla Pharmaceutical Company 1994 Stock Incentive Plan(2)*
27 Financial Data Schedule(2)
</TABLE>
- ----------
* This exhibit is a management contract or compensatory plan or arrangement.
(1) Previously filed with the Company's Registration Statement on Form 8-A (No.
000-24274) as filed with the Securities and Exchange Commission on
December 4, 1998.
(2) Filed herein.
(b) REPORTS ON FORM 8-K
During the quarter ended June 30, 1999, the Company filed a Current
Report on Form 8-K dated May 26, 1999 reporting the extension by one year of the
life of the Company's warrants and an underwriter option to purchase shares of
the Company's common stock and warrants.
13
<PAGE> 14
LA JOLLA PHARMACEUTICAL COMPANY
SIGNATURE
JUNE 30, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
La Jolla Pharmaceutical Company
Date: August 12, 1999 By: /s/ Wood C. Erwin
-------------------------------------
Wood C. Erwin
Vice President Finance
Chief Financial Officer
Signed both on behalf of the
Registrant and as
Principal Accounting Officer.
14
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LA JOLLA PHARMACEUTICAL COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C>
3.2 Amended and Restated Bylaws of the Company
3.3 Amended and Restated Certificate of Incorporation of the
Company
4.1 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company
10.19 La Jolla Pharmaceutical Company 1994 Stock Incentive Plan
27 Financial Data Schedule
</TABLE>
15
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
FOR THE REGULATION OF
LA JOLLA PHARMACEUTICAL COMPANY,
a Delaware Corporation
ARTICLE I
Principal Executive Office
Section 1.01 Registered Office. The registered office of La Jolla
Pharmaceutical Company (the "Corporation") in the State of Delaware shall be at
306 South State Street, City of Dover, County of Kent 19901, and the name of the
registered agent in charge thereof shall be United States Corporation Company.
Section 1.02 Principal Office. The principal executive office of the
Corporation shall be 6455 Nancy Ridge Drive, San Diego, California 92121.
ARTICLE II
Meeting of Shareholders
Section 2.01 Annual Meetings The annual meeting of shareholders shall be
held between 30 and 150 days following the end of the fiscal year of the
Corporation at such time and on such date as the board of directors shall
determine. At each annual meeting, directors shall be elected and any other
proper business may be transacted.
Section 2.02 Special Meetings. A special meeting of the stockholders for
the transaction of any proper business may be called at any time only by the
board of directors, the chairman of the board (if there is such an officer) or
the president and may be held at such time and place and on such date as is
determined by the person calling the meeting, within the limits fixed by law.
Section 2.03 Place of Meetings. Each annual or special meeting of
shareholders shall be held a such location as may be determined by the board of
directors, or if no such determination is made, at such place as may be
determined by the chief executive officer, or by any other officer authorized by
the board of directors or the chief executive officer to make such
determination. If no location is so determined, any annual or special meeting
shall be held at the principal executive office of the Corporation.
Section 2.04 Notice of Meetings. Notice of each annual or special meeting
of shareholders shall contain such information, and shall be given to such
persons at such time, and in such manner, as the board of directors shall
determine, or if no such determination is made, as the chief executive officer,
or any other officer so authorized by the board of directors or the chief
executive officer, shall determine, subject to the requirements of applicable
law.
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Section 2.05 Conduct of Meetings Subject to the requirements of applicable
law, all annual and special meetings of shareholders shall be conducted in
accordance with such rules and procedures as the board of directors may
determine and, as to matters not governed by such rules and procedures, as the
chairman of such meeting shall determine. The chairman of any annual or special
meeting of shareholders shall be designated by the board of directors and, in
the absence of any such designation, shall be the chief executive officer of the
Corporation.
Section 2.06 Advance Notice of Stockholder Proposals and Stockholder
Nominations.
(a) At any meeting of the stockholders, only such business may be
conducted, and only such proposals may be acted upon, as have been brought
before the meeting (i) by or at the direction of the board of directors, or (ii)
by any stockholder of the Corporation entitled to vote on such business who
complies with the notice procedures set forth in this Section 2.06(a). For
business to be properly brought before any meeting of the stockholders by a
stockholder, the stockholder must have given notice thereof in writing which is
received by the Secretary of the Corporation not less than ninety (90) days nor
more than one hundred twenty (120) days in advance of such meeting, regardless
of any postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if less than ninety-five (95) days' notice or prior
public disclosure of the date of the scheduled meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the seventh day following the earlier of the date
of the first public announcement of the date of such meeting and the date on
which such notice of the scheduled meeting was mailed. A stockholder's notice to
the Secretary must set forth as to each matter the stockholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business and any stockholders known by such
stockholder to be supporting such proposal, (iii) the class and number of shares
of the Corporation that are beneficially owned by the stockholder and by any
other stockholder known by such stockholder to be supporting such matter on the
date of such stockholder notice, and (iv) any material interest of the
stockholder in such business. In addition, the stockholder making such proposal
shall promptly provide any other information reasonably requested by the
Corporation. Notwithstanding anything in these Bylaws to the contrary, no
business may be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in this Section 2.06(a). The presiding
officer of the meeting shall determine and declare at the meeting whether the
stockholder proposal was made in accordance with the terms of this Section
2.06(a). If the presiding officer determines that a stockholder proposal was not
made in accordance with the terms of this Section 2.06(a), he or she shall so
declare at the meeting and any such proposal will not be acted upon at the
meeting. This provision will not prevent the consideration and approval or
disapproval at the meeting of reports of officers, directors and committees of
the board of directors, but, in connection with such reports, no new business
may be acted upon at such meeting unless stated, filed and received as herein
provided.
(b) Nominations for the election of directors may be made by the
board of directors, any nominating committee or person appointed by the board of
directors, or by any stockholder entitled to vote in the election of directors;
provided, however, that, subject to the
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rights, if any, of the holders of shares of Preferred Stock then outstanding, a
stockholder may nominate a person for election as a director at a meeting only
if written notice of such stockholder's intent to make such nomination has been
received by the Secretary of the Corporation not less than ninety (90) days nor
more than one hundred twenty (120) days in advance of such meeting regardless of
any postponements, deferrals or adjournments of that meeting to a later date;
provided, further, that if less than ninety-five (95) days' notice or prior
public disclosure of the date of the scheduled meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the seventh day following the earlier of the date
of the first public announcement of the date of such meeting and the date on
which such notice of the scheduled meeting was mailed. Each such notice must set
forth: (i) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (ii) the class and
number of shares of the Corporation's stock which are beneficially owned by the
stockholder and a representation that such stockholder intends to appear in
person or by proxy at the meeting and nominate the person or persons specified
in the notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (iv) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
board of directors; and (v) the consent of each nominee to serve as a director
of the Corporation if so elected. In addition, the stockholder making such
nomination shall promptly provide any other information reasonably requested by
the Corporation. No person will be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.06(b). The presiding officer of the meeting shall determine and
declare at the meeting whether the nomination was made in accordance with the
terms of this Section 2.06(b). If the presiding officer determines that a
nomination was not made in accordance with the terms of this Section 2.06(b), he
or she shall so declare at the meeting and any such defective nomination will be
disregarded. No stockholder may nominate any person for election as a director
to any Class for which such stockholder is not entitled to vote.
(c) Nothing herein is intended or will be construed to limit
requirements imposed by applicable laws or regulations upon stockholder
proposals, opposition thereto by the Corporation, or inclusion thereof in the
Corporation's proxy materials.
ARTICLE III
Directors
Section 3.01 Number of Directors and Term of Office. Unless otherwise provided
in the Corporation's certificate of incorporation, the total number of directors
of the Corporation shall be not less than five (5) nor more than nine (9), with
the actual total number of directors set from time to time exclusively by
resolution of the Board of Directors. The Board of Directors shall consist of
six members until changed by such a resolution. There shall be three classes of
directors (each, a "Class"), known as Class 1, Class 2 and Class 3. The initial
Class 1, Class 2
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and Class 3 directors shall serve in office as follows: Class 1 shall retire at
the first annual meeting of stockholders following the filing of the
Corporation's Amended and Restated Certificate of Incorporation (the "Effective
Date"), Class 2 shall retire at the second annual meeting of stockholders
following the Effective Date, and Class 3 shall retire at the third annual
meeting of stockholders following the Effective Date. This annual sequence shall
be repeated thereafter. Each director in a Class shall be eligible for
re-election if nominated, and such director's seat shall be open for election of
a director, at the annual meeting of stockholders of the Corporation at which
such Class shall retire, to hold office for three years or until his successor
is elected or appointed.
Any additional directors elected or appointed shall be elected or
appointed to such Class as will ensure that the number of directors in each
Class remains as nearly equal as possible, and if all Classes have an equal
number of directors or if one Class has one director more than the other two
Classes, then any additional directors elected or appointed shall be elected or
appointed to the Class that does not have more directors than any other Class
and is subject to election at an ensuing annual meeting before any other such
Class.
Vacancies due to resignation, death, increases in the number of directors,
or any other cause shall be filled only by the Board of Directors (unless there
are no directors, in which case vacancies will be filled by the stockholders) in
accordance with the rule that each Class of directors shall be as nearly equal
in number of directors as possible. Notwithstanding such rule, in the event of
any change in the authorized number of directors each director then continuing
to serve as such will nevertheless continue as a director of the Class of which
he or she is a member, until the expiration of his or her current term or his
earlier death, resignation or removal. If any newly created directorship or
vacancy on the Board of Directors, consistent with the rule that the three
Classes shall be as nearly equal in number of directors as possible, may be
allocated to one or two or more Classes, then the Board of Directors shall
allocate it to that of the available Classes whose term of office is due to
expire at the earliest date following such allocation. When the Board of
Directors fills a vacancy, the director chosen to fill that vacancy shall be of
the same Class as the director he or she succeeds and shall hold office until
such director's successor shall have been elected and qualified or until such
director shall resign or shall have been removed. No reduction of the authorized
number of directors shall have the effect of removing any director prior to the
expiration of such director's term of office.
Section 3.02 Meetings of the Board. Each regular and special meeting of
the board shall be held at a location determined as follows: The board of
directors may designate any place, within or without the State of Delaware, for
the holding of any meeting. If no such designation is made, (i) any meeting
called by a majority of the directors shall be held at such location, within the
county of the Corporation's principal executive office, as the directors calling
the meeting shall designate; and (ii) any other meeting shall be held at such
location, within the county of the Corporation's principal executive office, as
the chief executive officer may designate, or in the absence of such
designation, at the Corporation's principal executive office. Subject to the
requirements of applicable law, all regular and special meetings of the board of
directors shall be conducted in accordance with such rules and procedures as the
board of directors may approve and, as to matters not governed by such rules and
procedures, as the
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chairman of such meeting shall determine. The chairman of any regular or special
meeting shall be designated by the directors and, in the absence of any such
designation, shall be the chief executive officer of the Corporation.
Section 3.03 Qualifications of Directors.
No person shall be qualified to be elected to, or appointed to fill a
vacancy on, the board of the Corporation during the pendency of a Business
Combination transaction, as defined herein, if such person is, or (in the case
of a person described in clause (i), (ii) or (iii) below) was within the two
years preceding the date of such election or appointment: (i) an officer,
director, employee or affiliate (as defined in Rule 144 under the Securities Act
of 1933, as amended) of a party to such transaction (an "Interested Party") or
of any affiliate of an Interested Party; (ii) an agent subject to the direction
of an Interested Party; (iii) a consultant or advisor to an Interested Party;
(iv) a person having a material financial interest in the transaction (other
than through the ownership of stock or securities of the Corporation); or (v) a
person having any business, financial, or familial relationship with any person
referred to in clauses (i)-(iv) above that would reasonably be expected to
affect such person's judgment in a manner adverse to this Corporation. A person
shall not be disqualified from election or appointment to the board by reason of
this Section 3.03 solely because such person is a director or officer of this
Corporation who receives normal and customary compensation as such and/or is a
stockholder or affiliate of this Corporation.
For the purpose of this Section 3.03, a Business Combination shall mean
any of the following: (i) a merger or consolidation of this Corporation with
another corporation, or a sale of all or substantially all of the business and
assets of this Corporation; or (ii) an acquisition (including by tender offer or
any other means) by any person (including any two or more persons comprising a
group, within the meaning of Rule 13d-5 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), of beneficial ownership, within the
meaning of Rule 13d-3 under the Exchange Act, of 15% or more of the outstanding
common stock of this Corporation.
A Business Combination shall be deemed pending for purposes of this
Section 3.03 commencing on the date any offer or proposal for such transaction
shall be made and until such time as the proposed transaction is abandoned or
until such time as: (i) the party proposing such transaction shall have acquired
beneficial ownership, as defined above, of 50% or more of this Corporation's
outstanding voting stock; and (ii) 10 business days shall have elapsed
thereafter. A business day shall mean any day other than a Saturday, a Sunday or
a day on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
ARTICLE IV
Indemnification
Section 4.01 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party
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to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that the person had reasonable cause to believe
that such person's conduct was unlawful.
Section 4.02 Actions, Etc. by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 4.03 Determination of Right of Indemnification. Any
indemnification under Section 4.01 or 4.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Section 4.01 and 4.02. Such determination shall
be made (i) by the Board by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
Section 4.04 Indemnification Against Expenses of Successful Party
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the
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Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 4.01 or 4.02, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4.05 Prepaid Expenses. Expenses incurred by an officer or director
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board deems appropriate.
Section 4.06 Other Rights and Remedies. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
Section 4.07 Continuation of Indemnification and Advancement of Expenses
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 4.08 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Article.
Section 4.09 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would if such person had served the
resulting or surviving corporation in the same capacity.
Section 4.10 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans;
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references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
ARTICLE V
Officers
Section 5.01 Officers. The Corporation shall have a chairman of the board,
a chief executive officer, a chief financial officer, a secretary, and such
other officers as may be designated by the board. Officers shall have such
powers and duties as may be specified by, or in accordance with, resolutions of
the board of directors. In the absence of any contrary determination by the
board of directors, the chief executive officer shall, subject to the power and
authority of the board of directors, have general supervision, direction, and
control of the officers, employees, business, and affairs of the Corporation.
Section 5.02 Limited Authority of Officers. No officer of the Corporation
shall have any power or authority outside the normal day-to-day business of the
Corporation to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable in connection with any transaction unless so
authorized by the board of directors.
ARTICLE VI
Waiver of Annual Reports
(a) In the event the Corporation becomes subject to the provisions of
Section 1501 of the California Corporations Code ("Code") by reason of the
applicability of Section 2115 of the Code, then so long as the Corporation has
less than 100 holders of record of its shares (determined as provided in Section
605 of the Code), no annual report to shareholders shall be required, and the
requirement to the contrary of Section 1501 of the Code is hereby expressly
waived.
(b) If the Corporation is not subject to Section 2115 of the Code, Section
8.05(a) above shall not require or be interpreted to require the Corporation to
provide an annual report to shareholders under any circumstances, and the
Corporation shall not be under any such obligation unless the same is required
by any applicable provision of the General Corporation Law of Delaware or any
applicable federal laws.
ARTICLE VII
Amendments
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New bylaws may be adopted or these bylaws may be amended or repealed by
the shareholders or, except for Section 3.01, by the directors.
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EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LA JOLLA PHARMACEUTICAL COMPANY
1. The undersigned, Steven B. Engle, certifies that he is the Chief
Executive Officer of LA JOLLA PHARMACEUTICAL COMPANY, a Delaware corporation
(the "CORPORATION"), and does further certify that:
2. The name of the Corporation is La Jolla Pharmaceutical Company, the
name under which it was originally incorporated.
3. The original Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of Delaware on May 2, 1989.
4. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware.
5. The text of the Restated Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety as follows:
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is La Jolla Pharmaceutical Company.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington 19805, County of New
Castle. The name of the registered agent of the Corporation at such address is
United States Corporation Company.
ARTICLE III
PURPOSE
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the Delaware
Corporations Code.
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ARTICLE IV
AUTHORIZED CAPITAL STOCK
The Corporation is authorized to issue two classes of stock designated
"Common Stock" and "Preferred Stock." The number of shares of Common Stock that
the Corporation is authorized to issue is 100,000,000; the number of shares of
Preferred Stock that the Corporation is authorized to issue is 8,000,000. The
Board is hereby authorized to issue the shares of Preferred Stock in one or more
series, to fix the number of shares of any such series of Preferred Stock, to
determine the designation of any such series, and to fix the rights,
preferences, and privileges and the qualifications, limitations or restrictions
of the series of Preferred Stock to the full extent permitted under the Delaware
General Corporation Law. The authority of the Board with respect to any series
of Preferred Stock shall include, without limitation, the power to fix or alter
the dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions, if any), the redemption
price or prices, and the liquidation preferences and the number of shares
constituting any such additional series and the designation thereof, or any of
them; and to increase or decrease the number of authorized shares of any series
subsequent to the issue of that series, but not below the number of shares of
such series then outstanding. In case the authorized number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series. All shares of the Common Stock and
the Preferred Stock shall have a par value of $.01 per share.
ARTICLE V
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law, a
director of this corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the Bylaws of this corporation; provided, however, that after the
initial adoption of the Bylaws, the Board of Directors may not repeal, alter,
amend, or rescind Section 3.01 thereof which shall establish the manner in which
the number of directors is set.
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ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
ARTICLE VIII
NUMBER OF DIRECTORS AND TERM OF OFFICE
The total number of directors of the Corporation shall be not less than
five (5) nor more than nine (9), with the actual total number of directors set
from time to time exclusively by resolution of the Board of Directors. The Board
of Directors shall initially consist of six members until changed by such a
resolution. There shall be three classes of directors (each, a "Class"), known
as Class 1, Class 2 and Class 3. The initial Class 1, Class 2 and Class 3
directors shall serve in office as follows: Class 1 shall retire at the first
annual meeting of stockholders following the filing of the Corporation's Amended
and Restated Certificate of Incorporation (the "Effective Date"), Class 2 shall
retire at the second annual meeting of stockholders following the Effective
Date, and Class 3 shall retire at the third annual meeting of stockholders
following the Effective Date. This annual sequence shall be repeated thereafter.
Each director in a Class shall be eligible for re-election if nominated, and
such director's seat shall be open for election of a director, at the annual
meeting of stockholders of the Corporation at which such Class shall retire, to
hold office for three years or until his successor is elected or appointed.
Any additional directors elected or appointed shall be elected or
appointed to such Class as will ensure that the number of directors in each
Class remains as nearly equal as possible, and if all Classes have an equal
number of directors or if one Class has one director more than the other two
Classes, then any additional directors elected or appointed shall be elected or
appointed to the Class that does not have more directors than any other Class
and is subject to election at an ensuing annual meeting before any other such
Class.
Vacancies due to resignation, death, increases in the number of directors,
or any other cause shall be filled only by the Board of Directors (unless there
are no directors, in which case vacancies will be filled by the stockholders) in
accordance with the rule that each Class of directors shall be as nearly equal
in number of directors as possible. Notwithstanding such rule, in the event of
any change in the authorized number of directors each director then continuing
to serve as such will nevertheless continue as a director of the Class of which
he or she is a member, until the expiration of his or her current term or his
earlier death, resignation or removal. If any newly created directorship or
vacancy on the Board of Directors, consistent with the rule that the three
Classes shall be as nearly equal in number of directors as possible, may be
allocated to one or two or more Classes, then the Board of Directors shall
allocate it to that of the available Classes whose term of office is due to
expire at the earliest date following such allocation. When the Board of
Directors fills a vacancy, the director chosen to fill that vacancy shall be of
the same Class as the director he or she succeeds and shall hold office until
such
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director's successor shall have been elected and qualified or until such
director shall resign or shall have been removed. No reduction of the authorized
number of directors shall have the effect of removing any director prior to the
expiration of such director's term of office.
ARTICLE IX
STOCKHOLDER ACTION BY WRITTEN CONSENT
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by a consent in writing by any such holders.
ARTICLE X
CORPORATE POWER
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
on stockholders herein are granted subject to this reservation; provided,
however, that any amendment of Article VIII or of this Article X will require an
affirmative vote of the holders of seventy-five percent (75%) or more of the
total voting power of all outstanding shares of voting stock of the Corporation.
IN WITNESS WHEREOF, the undersigned Corporation has executed this Amended
and Restated Certificate of Incorporation as of May 21, 1999.
LA JOLLA PHARMACEUTICAL COMPANY
By: /s/ Steven B. Engle
--------------------------------------
Steven B. Engle,
Chief Executive Officer
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
LA JOLLA PHARMACEUTICAL COMPANY
The undersigned, Steven B. Engle, the President of LA JOLLA PHARMACEUTICAL
COMPANY, a Delaware corporation (the "CORPORATION"), does hereby certify that:
1. Pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and Section 151(g) of the
Delaware General Corporation Law, on May 21, 1999, the Board of Directors
adopted the following resolutions fixing the relative rights, preferences and
limitations of the Series A Junior Participating Preferred Stock, par value
$0.01, as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors hereby designates the powers,
preferences and relative, participating, optional and other rights of the
Corporation's Series A Junior Participating Preferred Stock, and the
qualifications, limitations and restrictions thereof as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "SERIES A JUNIOR PARTICIPATING PREFERRED STOCK" and the
number of shares constituting such series shall be 100,000. Such number of
shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series A Junior Participating Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Junior Participating Preferred
Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 15th day of January, April,
July and October of each year (each a "QUARTERLY DIVIDEND PAYMENT DATE"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of
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(a) $0.25 or (b) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the common
stock, par value $0.01 per share, of the Corporation (the "COMMON STOCK")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock. In the event the Corporation shall at any
time after November 19, 1998 (the "RIGHTS DECLARATION DATE") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (a)
above as a condition to declaration of a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event that no dividend or distribution shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date, a dividend of $0.25 per share on the Series A
Junior Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on
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such shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each case the number of votes per
share to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, holders of Series
A Junior Participating Preferred Stock shall have no special voting rights
and the holders of shares of Series A Junior Participating Preferred Stock
and the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.
4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends on, make any other distribution
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating
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Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding
up) to the Series A Junior Participating Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Junior Participating Preferred Stock, or any shares
of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except (i) in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Participating Preferred
Stock, or (ii) in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(a) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as
Series A Junior Participating Preferred Stock or as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board
of Directors, subject to the conditions and restrictions on issuance set
forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares
of Series A Junior Participating
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Preferred Stock shall have received $1,000 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "SERIES A LIQUIDATION
PREFERENCE"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "COMMON ADJUSTMENT") equal to the quotient
obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000
(as appropriately adjusted as set forth in subparagraph (c) below to
reflect such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock) (such number in clause (ii), the
"ADJUSTMENT NUMBER"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Series A Junior Participating Preferred Stock
and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of remaining assets to be distributed in
the ratio of the Adjustment Number to one (1) with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if
any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably
to the holders of such parity shares in proportion to their respective
liquidation preferences. In the event that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common
Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the
shares of Series A Junior Participating Preferred Stock shall at the same
time be similarly
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exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of
Series A Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
9. RANKING. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's preferred stock, if
any, as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
10. AMENDMENT. If there is any Series A Junior Participating
Preferred Stock outstanding, the Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any
manner which would materially alter or change the powers, preferences or
special rights of the Series A Junior Participating Preferred Stock so as
to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock
may be issued in fractions of a share, which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series A Junior Participating Preferred
Stock.
RESOLVED FURTHER, that the Chief Executive Officer, the President or
any Vice President and the Secretary or any Assistant Secretary of the
Corporation be, and they hereby are, authorized and directed to prepare
and file a Certificate of Designation, Preferences and Rights in
accordance with the foregoing resolution and the provisions of Delaware
law and to take such actions as they may deem necessary or appropriate to
carry out the intent of the foregoing resolution."
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IN WITNESS WHEREOF, this Certificate of Designation is executed on May 21,
1999.
LA JOLLA PHARMACEUTICAL COMPANY,
a Delaware corporation
By: /s/ Steven B. Engle
--------------------------------------
Steven B. Engle
Chairman of the Board,
President, and Chief
Executive Officer
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EXHIBIT 10.19
LA JOLLA PHARMACEUTICAL COMPANY
1994 STOCK INCENTIVE PLAN
ARTICLE I
GENERAL PROVISIONS
1.01 PURPOSE OF THE PLAN.
La Jolla Pharmaceutical Company (the "COMPANY"), by action of its
Board of Directors and with the consent of its stockholders, has adopted this La
Jolla Pharmaceutical Company Stock Incentive Plan (the "PLAN") effective as of
June 10, 1994 to advance the interests of the Company and its stockholders by
(a) providing Eligible Persons with financial incentives to promote the success
of the Company's business objectives, and to increase their proprietary interest
in the success of the Company, and (b) giving the Company a means to attract and
retain directors of appropriate experience and stature.
1.02 DEFINITIONS.
Terms used herein and not otherwise defined shall have the meanings
set forth below:
(a) "AWARD" means an Incentive Award or a Nonemployee Director's
Option.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
Where the context so requires, a reference to a particular Code section shall
also refer to any successor provision of the Code to such section.
(d) "COMMISSION" means the Securities and Exchange Commission.
(e) "COMMITTEE" means the committee appointed by the Board to
administer the Plan. The Committee shall be composed entirely of members who
meet the requirements of Section 1.04(a).
(f) "COMMON STOCK" means the common stock of the Company, $0.01 par
value.
(g) "DIVIDEND EQUIVALENT" means a right granted by the Company under
Section 2.07 to a holder of a Stock Option, Stock Appreciation Right, or other
Incentive Award denominated in shares of Common Stock to receive from the
Company during the Applicable Dividend Period (as defined in Section 2.07)
payments equivalent to the amount of dividends payable to holders of the number
of shares of Common Stock underlying such Stock Option, Stock Appreciation
Right, or other Incentive Award.
<PAGE> 2
(h) "ELIGIBLE PERSON" means any director, officer or key employee,
consultant, or advisor of the Company (as determined by the Committee) including
Nonemployee Directors and members of the Committee.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended. Where the context so requires, a reference to a particular section of
the Exchange Act or rule thereunder shall also refer to any successor provision
to such section or rule.
(j) "FAIR MARKET VALUE" of capital stock of the Company shall be
determined with reference to the closing price of such stock on the day in
question (or, if such day is not a trading day in the U.S. securities markets,
on the nearest preceding trading day), as reported with respect to the principal
market or trading system on which such stock is then traded; or, if no such
closing prices are reported, the mean between the high bid and low asked prices
that day on the principal market or national quotation system on which such
shares are then quoted; provided, however, that when appropriate, the Committee
in determining Fair Market Value of capital stock of the Company may take into
account such other factors as may be deemed appropriate under the circumstances.
Notwithstanding the foregoing, the Fair Market Value of capital stock for
purposes of grants of Incentive Stock Options shall be determined in compliance
with applicable provisions of the Code. The Fair Market Value of rights or
property other than capital stock of the Company means the fair market value
thereof as determined by the Committee on the basis of such factors as it may
deem appropriate.
(k) "INCENTIVE AWARD" means any Stock Option, Restricted Stock,
Stock Appreciation Right, Stock Payment, Performance Award or Dividend
Equivalent granted or sold to an Eligible Person under this Plan, but not a
Nonemployee Director's Option.
(l) "INCENTIVE STOCK OPTION" means a Stock Option that qualifies as
an incentive stock option under Section 422 (or any successor section) of the
Code and the regulations thereunder.
(m) "JUST CAUSE DISMISSAL" shall mean a termination of a Recipient's
employment for any of the following reasons: (i) the Recipient violates any
reasonable rule or regulation of the Board or the Recipient's superiors or the
Chief Executive Officer or President of the Company that results in damage to
the Company or which, after written notice to do so, the Recipient fails to
correct within a reasonable time; (ii) any willful misconduct or gross
negligence by the Recipient in the responsibilities assigned to him or her;
(iii) any willful failure to perform his or her job as required to meet Company
objectives; (iv) any wrongful conduct of a Recipient which has an adverse impact
on the Company or which constitutes a misappropriation of Company assets; (v)
the Recipient's performing services for any other person or entity which
competes with the Company while he or she is employed by the Company, without
the written approval of the Chief Executive Officer or President of the Company;
or (vi) any other conduct that the Board or Committee determines constitutes
Just Cause for Dismissal.
(n) "NONEMPLOYEE DIRECTOR" means a director of the Company who
qualifies as a "Nonemployee Director" under Rule 16b-3 under the Exchange Act.
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(o) "NONEMPLOYEE DIRECTOR'S OPTION" means a Stock Option granted to
a Nonemployee Director pursuant to Article III of the Plan.
(p) "NONQUALIFIED STOCK OPTION" means a Stock Option other than an
Incentive Stock Option.
(q) "OPTION" or "STOCK OPTION" means a right to purchase stock of
the Company granted under this Plan, and can be an Incentive Stock Option or a
Nonqualified Stock Option.
(r) "PAYMENT EVENT" means the event or events giving rise to the
right to payment of a Performance Award.
(s) "PERFORMANCE AWARD" means an award, payable in cash, Common
Stock or a combination thereof, which vests and becomes payable over a period of
time upon attainment of performance criteria established in connection with the
grant of the award.
(t) "PERFORMANCE-BASED COMPENSATION" means performance-based
compensation as described in Section 162(m) of the Code and the regulations
thereunder. If the amount of compensation an Eligible Person will receive under
any Incentive Award is not based solely on an increase in the value of Common
Stock after the date of grant or award, the Committee, in order to qualify an
Incentive Award as performance-based compensation under Section 162(m) of the
Code and the regulations thereunder, can condition the grant, award, vesting, or
exercisability of such an award on the attainment of a preestablished, objective
performance goal. For this purpose, a preestablished, objective performance goal
may include one or more of the following performance criteria: (i) cash flow,
(ii) earnings per share (including earnings before interest, taxes, and
amortization), (iii) return on equity, (iv) total stockholder return, (v) return
on capital, (vi) return on assets or net assets, (vii) income or net income,
(viii) operating margin, (ix) return on operating revenue, (x) attainment of
stated goals related to the Company's research and development or clinical
trials programs, (xi) attainment of stated goals related to the Company's
capitalization, costs, financial condition, or results of operations, and (xii)
any other similar performance criteria contemplated by the regulations under
Section 162(m).
(u) "PERMANENT DISABILITY" shall mean that the Recipient becomes
physically or mentally incapacitated or disabled so that he or she is unable to
perform substantially the same services as he or she performed prior to
incurring such incapacity or disability (the Company, at its option and expense,
being entitled to retain a physician to confirm the existence of such incapacity
or disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three consecutive months or six months in any twelve-month period or
such other period(s) as may be determined by the Committee with respect to any
Option.
(v) "PURCHASE PRICE" means the purchase price (if any) to be paid by
a Recipient for Restricted Stock as determined by the Committee (which price
shall be at least equal to the minimum price required under applicable laws and
regulations for the issuance of
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Common Stock which is nontransferable and subject to a substantial risk of
forfeiture until specific conditions are met).
(w) "RECIPIENT" means a person who has received an Award hereunder.
(x) "RESTRICTED STOCK" means Common Stock that is the subject of an
award made under Section 2.04 and which is nontransferable and subject to a
substantial risk of forfeiture until specific conditions are met as set forth in
this Plan and in any statement evidencing the grant of such Incentive Award.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(z) "STOCK APPRECIATION RIGHT" or "SAR" means a right granted under
Section 2.05 to receive a payment that is measured with reference to the amount
by which the Fair Market Value of a specified number of shares of Common Stock
appreciates from a specified date, such as the date of grant of the SAR, to the
date of exercise.
(aa) "STOCK PAYMENT" means a payment in shares of the Company's
Common Stock to replace all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Recipient.
1.03 COMMON STOCK SUBJECT TO THE PLAN.
(a) Number of Shares. Subject to Section 1.05(b), the maximum number
of shares of Common Stock that may be issued pursuant to Awards under the Plan
shall be 2,500,000.
(b) Source of Shares. The Common Stock to be issued under this Plan
will be made available, at the discretion of the Board or the Committee, either
from authorized but unissued shares of Common Stock or from previously issued
shares of Common Stock reacquired by the Company, including shares purchased on
the open market.
(c) Availability of Unused Shares. Shares of Common Stock subject to
unexercised portions of any Award granted under this Plan that expire, terminate
or are cancelled, and shares of Common Stock issued pursuant to an Award under
this Plan that are reacquired by the Company pursuant to the terms of the Award
under which such shares were issued, will again become available for the grant
of further Awards under this Plan.
(d) Grant Limits. Notwithstanding any other provision of this Plan,
no Eligible Person shall be granted Awards with respect to more than 250,000
shares of Common Stock in any one calendar year; provided, however, that this
limitation shall not apply if it is not required in order for the compensation
attributable to Incentive Awards hereunder to qualify as Performance-Based
Compensation. The limitation set forth in this Section 1.03(d) shall be subject
to adjustment as provided in Section 1.05(b), but only to the extent such
adjustment would not affect the status of compensation attributable to Awards
hereunder as Performance-Based Compensation.
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1.04 ADMINISTRATION OF THE PLAN.
(a) The Committee. The Plan will be administered by the Committee,
which will consist of two or more members of the Board each of whom must be a
Nonemployee Director; provided, however, that the number of members of the
Committee may be reduced or increased from time to time by the Board. In
addition, if Awards are to be made to persons subject to Section 162(m) of the
Code and such awards are intended to constitute Performance-Based Compensation,
then each of the Committee's members must also be an "outside director," as such
term is defined in the regulations under Section 162(m) of the Code.
Notwithstanding the foregoing or any provision of the Plan to the contrary, the
Board may, in lieu of the Committee, exercise any authority granted to the
Committee pursuant to the provisions of the Plan.
(b) Authority of the Committee. The Committee has authority in its
discretion to select the Eligible Persons to whom, and the time or times at
which, Incentive Awards shall be granted or sold, the nature of each Incentive
Award, the number of shares of Common Stock or the number of rights that make up
or underlie each Incentive Award, the period for the exercise of each Incentive
Award, the performance criteria (which need not be identical) utilized to
measure the value of Performance Awards, and such other terms and conditions
applicable to each individual Incentive Award as the Committee shall determine.
The Committee may grant at any time new Incentive Awards to an Eligible Person
who has previously received Incentive Awards or other grants (including other
stock options) whether such prior Incentive Awards or such other grants are
still outstanding, have previously been exercised in whole or in part, or are
cancelled in connection with the issuance of new Incentive Awards. The Committee
may grant Incentive Awards singly or in combination or in tandem with other
Incentive Awards as it determines in its discretion. The purchase price or
initial value and any and all other terms and conditions of the Incentive Awards
may be established by the Committee without regard to existing Incentive Awards
or other grants. Further, the Committee may, with the consent of an Eligible
Person, amend in a manner not inconsistent with the Plan the terms of any
existing Incentive Award previously granted to such Eligible Person.
(c) Plan Interpretation. Subject to the express provisions of the
Plan, the Committee has the authority to interpret the Plan and any agreements
defining the rights and obligations of the Company and Recipients, to determine
the terms and conditions of Incentive Awards and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee has authority to prescribe, amend and rescind rules and regulations
relating to the Plan. All interpretations, determinations and actions by the
Committee shall be final, conclusive and binding upon all parties. Any action of
the Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote or by the unanimous written consent of its members.
(d) Special Rules Regarding Article III. Notwithstanding anything
herein to the contrary, the Committee shall have no authority or discretion as
to the selection of persons eligible to receive Nonemployee Directors' Options
granted under the Plan, the number of shares covered by Nonemployee Directors'
Options granted under the Plan, the timing of such grants, or
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the exercise price of Nonemployee Directors' Options granted under the Plan,
which matters are specifically governed by the provisions of the Plan.
(e) No Liability. No member of the Board or the Committee or any
designee thereof will be liable for any action or determination made in good
faith by the Board or the Committee with respect to the Plan or any transaction
arising under the Plan.
1.05 OTHER PROVISIONS.
(a) Documentation. Each Award granted under the Plan shall be
evidenced by an award agreement duly executed on behalf of the Company and by
the Recipient or, in the Committee's discretion, a confirming memorandum issued
by the Company to the Recipient (in either case an "AWARD DOCUMENT") evidencing
the Award and setting forth such terms and conditions applicable to the Award as
the Committee may in its discretion determine consistent with the Plan, provided
that the Committee shall exercise no discretion with respect to Nonemployee
Directors' Options, which shall reflect only the terms of the Award as set forth
in Article III and certain administrative matters dictated by the Plan. Award
Documents shall comply with and be subject to the terms and conditions of the
Plan. A copy of the Plan shall be delivered to each Award Recipient together
with the Award Document, and shall constitute a part thereof. In case of any
conflict between the Plan and any Award Document, the Plan shall control.
Various Award Documents covering the same types of Awards may but need not be
identical.
(b) Adjustment Provisions.
If (1) the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the properties of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (2) the value of the outstanding shares of Common Stock
of the Company is reduced by reason of an extraordinary cash dividend, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares subject to the Plan as provided in Section 1.03, (y) the
number and kind of shares or other securities subject to then outstanding
Awards, and (z) the price for each share or other unit of any other securities
subject to then outstanding Awards. No fractional interests will be issued under
the Plan resulting from any such adjustments.
(c) Continuation of Employment.
(i) Nothing contained in this Plan (or in Award Documents or in
any other documents related to this Plan or to Awards granted hereunder) shall
confer upon any Eligible Person or Recipient any right
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to continue in the employ of the Company or constitute any contract or agreement
of employment or engagement, or interfere in any way with the right of the
Company to reduce such person's compensation or other benefits or to terminate
the employment of such Eligible Person or Recipient, with or without cause.
Except as expressly provided in the Plan or in any statement evidencing the
grant of an Award pursuant to the Plan, the Company shall have the right to deal
with each Recipient in the same manner as if the Plan and any such statement
evidencing the grant of an Award pursuant to the Plan did not exist, including,
without limitation, with respect to all matters related to the hiring,
discharge, compensation and conditions of the employment or engagement of the
Recipient.
(ii) Any question(s) as to whether and when there has been a
termination of a Recipient's employment, the reason (if any) for such
termination, and/or the consequences thereof under the terms of the Plan or any
statement evidencing the grant of an Award pursuant to the Plan shall be
determined by the Committee and the Committee's determination thereof shall be
final and binding.
(d) Restrictions. All Awards granted under the Plan shall be subject
to the requirement that, if at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to Awards granted under the Plan upon any securities exchange or under
any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such an Award or the issuance, if any, or purchase of
shares in connection therewith, such Award may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company. Unless the shares of stock to be issued upon exercise of an Award
granted under the Plan have been effectively registered under the Securities
Act, the Company shall be under no obligation to issue any shares of stock
covered by any Award unless the person who exercises such Award, in whole or in
part, shall give a written representation and undertaking to the Company
satisfactory in form and scope to counsel to the Company and upon which, in the
opinion of such counsel, the Company may reasonably rely, that he or she is
acquiring the shares of stock issued to him or her pursuant to such exercise of
the Award for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares of stock, and
that he or she will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under the Securities
Act, or any other applicable law, and that if shares of stock are issued without
such registration, a legend to this effect may be endorsed upon the securities
so issued.
(e) Additional Conditions. Any Incentive Award may also be subject
to such other provisions (whether or not applicable to any other Award or
Recipient) as the Committee determines appropriate including, without
limitation, provisions to assist the Recipient in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Common
Stock acquired under any form of benefit, provisions giving the Company the
right to repurchase shares of Common Stock acquired under any form of benefit in
the event the Recipient elects to dispose of such shares, and provisions to
comply with federal and state securities laws and federal and state income tax
withholding requirements.
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(f) Privileges of Stock Ownership. Except as otherwise set forth
herein, a Recipient or a permitted transferee of an Award shall have no rights
as a shareholder with respect to any shares issuable or issued in connection
with the Award until the date of the receipt by the Company of all amounts
payable in connection with exercise of the Award and performance by the
Recipient of all obligations thereunder. Status as an Eligible Person shall not
be construed as a commitment that any Award will be granted under this Plan to
an Eligible Person or to Eligible Persons generally. No person shall have any
right, title or interest in any fund or in any specific asset (including shares
of capital stock) of the Company by reason of any Award granted hereunder.
Neither this Plan (or any documents related hereto) nor any action taken
pursuant hereto shall be construed to create a trust of any kind or a fiduciary
relationship between the Company and any person. To the extent that any person
acquires a right to receive an Award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.
(g) Amendment and Termination of Plan: Amendment of Incentive
Awards.
(i) The Board or the Committee may, insofar as permitted by law,
from time to time suspend or discontinue the Plan or revise or amend it in any
respect except that no such amendment shall alter or impair or diminish any
rights or obligations under any Award theretofore granted under the Plan without
the consent of the person to whom such Award was granted , and except that such
amendments shall be subject to stockholder approval to the extent (A) required
to comply with the listing requirements imposed by any exchange or trading
system upon which the Company's securities trade or applicable provisions of or
rules under the Code, or (B) the Board determines in good faith that such
amendments are material to stockholders.
(ii) The Committee may from time to time, with the consent of a
Recipient, make such modifications in the terms and conditions of an Incentive
Award as it deems advisable, including to accelerate or extend the vesting or
exercise period of any Incentive Award, provided that performance conditions to
vesting of Restricted Stock shall not be waived.
(iii) Except as otherwise provided in this Plan or in the
applicable Award Document, no amendment, suspension or termination of the Plan
will, without the consent of the Recipient, alter, terminate, impair or
adversely affect any right or obligation under any Award previously granted
under the Plan.
(h) Nonassignability. No Award granted under the Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this subsection (h), upon
dissolution of marriage pursuant to a qualified domestic relations order or, in
the discretion of the Committee and under circumstances that would not adversely
affect the interests of the Company. During the lifetime of a Recipient, an
Award granted to him or her shall be exercisable only by the Recipient (or the
Recipient's permitted transferee) or his or her guardian or legal
representative. Notwithstanding the foregoing, Incentive Stock Options (or other
Awards subject to transfer restrictions under the Code) may not be assigned or
transferred in violation of Section 422(b)(5) of the Code (or any
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<PAGE> 9
comparable or successor provision) or the Treasury Regulations thereunder, and
nothing herein is intended to allow such assignment or transfer.
(i) Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option, incentive or other compensation plans in effect
for the Company, and the Plan shall not preclude the Company from establishing
any other forms of incentive or other compensation for employees, directors, or
advisors of the Company.
(j) Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
(k) Participation By Foreign Employees. Notwithstanding anything to
the contrary herein, the Committee may, in order to fulfill the purposes of the
Plan, modify grants of Incentive Awards to Recipients who are foreign nationals
or employed outside of the United States to recognize differences in applicable
law, tax policy or local custom.
(l) Effective Date And Duration of Plan. Awards may be granted under
the Plan until the tenth anniversary of the effective date of the Plan,
whereupon the Plan shall terminate. No Awards may be granted during any
suspension of this Plan or after its termination. Notwithstanding the foregoing,
each Award properly granted under the Plan shall remain in effect until such
Award has been exercised or terminated in accordance with its terms and the
terms of the Plan.
ARTICLE II
INCENTIVE AWARDS
2.01 GRANTS OF INCENTIVE AWARDS. Subject to the express provisions of this
Plan, the Committee may from time to time in its discretion select from the
class of Eligible Persons those individuals to whom Incentive Awards may be
granted pursuant to its authority as set forth in Section 1.04(b). Each
Incentive Award shall be subject to the terms and conditions of the Plan and
such other terms and conditions established by the Committee as are not
inconsistent with the purpose and provisions of the Plan. One or more Incentive
Awards may be granted to any Eligible Person.
2.02 STOCK OPTIONS.
(a) Nature of Stock Options. Stock Options may be Incentive
Stock Options or Nonqualified Stock Options.
(b) Option Price. The exercise price per share for each Option
(other than a Nonemployee Director's Option) (the "EXERCISE PRICE") shall be
determined by the Committee at the date such Option is granted and shall not be
less than the Fair Market Value of a share of Common Stock (or other securities,
as applicable) at the time of grant, except that the Exercise Price for a
Nonqualified Stock Option may reflect a discount of up to 15% of the Fair Market
Value at the time of grant if the amount of such discount is expressly in lieu
of a reasonable amount of salary or cash bonus. Notwithstanding the foregoing,
however, in no event shall the
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exercise price be less than the par value of the shares of Common Stock subject
to the Option, and the exercise price of an Incentive Stock Option shall be not
less than such amount as is necessary to enable such Option to be treated as an
"incentive stock option" within the meaning of Section 422 of the Code.
(c) Option Period and Vesting. Options (other than Nonemployee
Directors' Options) hereunder shall vest and may be exercised as determined by
the Committee, except that exercise of such Options after termination of the
Recipient's employment shall be subject to Section 2.02(g). Each Option granted
hereunder (other than a Nonemployee Directors Option) and all rights or
obligations thereunder shall expire on such date as shall be determined by the
Committee, but not later than ten years after the date the Option is granted and
shall be subject to earlier termination as herein provided. The Committee may in
its discretion at any time and from time to time after the grant of an Option
(other than a Nonemployee Director's Option) accelerate vesting of such Option
in whole or part by increasing the number of shares then purchasable, provided
that the total number of shares subject to such Option may not be increased.
(d) Exercise of Options. Except as otherwise provided herein, an
Option may become exercisable, in whole or in part, on the date or dates
specified by the Committee (or, in the case of Nonemployee Directors' Options,
the Plan) at the time the Option is granted and thereafter shall remain
exercisable until the expiration or earlier termination of the Option. No Option
shall be exercisable except in respect of whole shares, and fractional share
interests shall be disregarded. Not less than 100 shares of stock (or such other
amount as is set forth in the applicable option agreement) may be purchased at
one time unless the number purchased is the total number at the time available
for purchase under the terms of the Option. An Option shall be deemed to be
exercised when the Secretary of the Company receives written notice of such
exercise from the Recipient, together with payment of the exercise price made in
accordance with Section 2.02(e). Upon proper exercise, the Company shall deliver
to the person entitled to exercise the Option or his or her designee a
certificate or certificates for the shares of stock for which the Option is
exercised. Notwithstanding any other provision of this Plan, the Committee may
impose, by rule and in option agreements, such conditions upon the exercise of
Options (including, without limitation, conditions limiting the time of exercise
to specified periods) as may be required to satisfy applicable regulatory
requirements, including without limitation Rule 16b-3 (or any successor rule)
under the Exchange Act and any applicable section of or rule under the Internal
Revenue Code.
(e) Exercise Price. The Exercise Price shall be payable upon the
exercise of an Option by delivery of legal tender of the United States or
payment of such other consideration as the Committee may from time to time deem
acceptable in any particular instance, including without limitation delivery of
capital stock of the Company (delivered by or on behalf of the person exercising
the Option or retained by the Company from the Common Stock otherwise issuable
upon exercise and valued at Fair Market Value as of the exercise date) or
surrender of other Awards previously granted to the Recipient exercising the
Option; provided, however, that the Committee may, in the exercise of its
discretion, (i) allow exercise of an Option in a broker-assisted or similar
transaction in which the Exercise Price is not received by the Company until
immediately after exercise, and/or (ii) allow the Company to loan the Exercise
Price to the
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person entitled to exercise the Option, if the exercise will be followed by an
immediate sale of some or all of the underlying shares and a portion of the
sales proceeds is dedicated to full payment of the Exercise Price. Any shares of
Company stock or other non-cash consideration assigned and delivered to the
Company in payment or partial payment of the Exercise Price will be valued at
Fair Market Value on the exercise date. No fractional shares will be issued
pursuant to the exercise of an Option.
(f) Limitation on Exercise of Incentive Stock Options. 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 Recipient under
the Plan (or any other option plan of the Company or any of its subsidiaries or
affiliates) may for the first time become exercisable as Incentive Stock Options
under the federal tax laws during any one calendar year shall not exceed
$100,000. Any Options granted as Incentive Stock Options pursuant to the Plan in
excess of such limitation shall be treated as Nonqualified Stock Options.
(g) Termination of Employment.
(i) Termination for Cause. Except as otherwise provided in a
written agreement between the Company and the Recipient, which may be entered
into at any time before or after termination, in the event of a Just Cause
Dismissal of a Recipient all of the Recipient's unexercised Options, whether or
not vested, shall expire and become unexercisable as of the date of such Just
Cause Dismissal.
(ii) Termination other than for Cause. Subject to subsection (i)
above and subsection (iii) below, and except as otherwise provided in a written
agreement between the Company and the Recipient, which may be entered into at
any time before or after termination, in the event of a Recipient's termination
of employment for:
(A) any reason other than for Just Cause Dismissal,
death, or Permanent Disability, or normal retirement, the Recipient's
Options shall, whether or not vested, expire and become unexercisable as
of the earlier of (1) the date such Options would expire in accordance
with their terms if the Recipient remained employed or (2) three calendar
months after the date of termination in the case of Incentive Stock
Options, or six months after the date of termination, in the case of
Nonqualified Stock Options.
(B) death or Permanent Disability, the Recipient's
unexercised Options shall, whether or not vested, expire and become
unexercisable as of the earlier of (1) the date such Options would expire
in accordance with their terms if the Recipient remained employed or (2)
twelve (12) months after the date of termination.
(C) normal retirement, the Recipient's unexercised
Options shall, whether or not vested, expire and become unexercisable as
of the earlier of (A) the date such Options expire in accordance with
their terms or (B) twenty-four (24) months after the date of retirement.
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(iii) Alteration of Exercise Periods. Notwithstanding anything
to the contrary in subsections (i) or (ii) above, the Committee may in its
discretion designate such shorter or longer periods to exercise Options (other
than Nonemployee Directors' Options) following a Recipient's termination of
employment; provided, however, that any shorter periods determined by the
Committee shall be effective only if provided for in the instrument that
evidences the grant to the Recipient of such Options or if such shorter period
is agreed to in writing by the Recipient. Notwithstanding anything to the
contrary herein, Options shall be exercisable by a Recipient (or his successor
in interest) following such Recipient's termination of employment only to the
extent that installments thereof had become exercisable on or prior to the date
of such termination; provided, however, that the Committee, in its discretion,
may elect to accelerate the vesting of all or any portion of any Options that
had not become exercisable on or prior to the date of such termination.
2.03 PERFORMANCE AWARDS.
(a) Grant of Performance Award. The Committee shall determine the
performance criteria (which need not be identical and may be established on an
individual or group basis) governing Performance Awards, the terms thereof, and
the form and time of payment of Performance Awards.
(b) Payment of Award; Limitation. Upon satisfaction of the
conditions applicable to a Performance Award, payment will be made to the
Recipient in cash or in shares of Common Stock valued at Fair Market Value or a
combination of Common Stock and cash, as the Committee in its discretion may
determine. Notwithstanding any other provision of this Plan, no Eligible Person
shall be paid a Performance Award in excess of $1,000,000 in any one calendar
year; provided, however, that this limitation shall not apply if it is not
required in order for the compensation attributable to the Performance Award
hereunder to qualify as Performance-Based Compensation.
(c) Expiration of Performance Award. If any Recipient's employment
with the Company is terminated for any reason other than normal retirement,
death, or Permanent Disability prior to the time a Performance Award or any
portion thereof becomes payable, all of the Recipient's rights under the unpaid
portion of the Performance Award shall expire and terminate unless otherwise
determined by the Committee. In the event of termination of employment by reason
of death, Permanent Disability or normal retirement, the Committee, in its
discretion, may determine what portions, if any, of the Performance Award should
be paid to the Recipient.
2.04 RESTRICTED STOCK.
(a) Award of Restricted Stock. The Committee may grant awards of
Restricted Stock to Eligible Participants. The Committee shall determine the
Purchase Price (if any), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions shall lapse,
provided that the restriction period shall be at least one year for
performance-based grants and three years for non-performance-based grants.
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(b) Requirements of Restricted Stock. All shares of Restricted Stock
granted or sold pursuant to the Plan will be subject to the following
conditions:
(i) No Transfer. The shares may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, alienated or
encumbered until the restrictions are removed or expire;
(ii) Certificates. The Committee may require that the
certificates representing Restricted Stock granted or sold to a Recipient
pursuant to the Plan remain in the physical custody of an escrow holder or the
Company until all restrictions are removed or expire;
(iii) Restrictive Legends. Each certificate representing
Restricted Stock granted or sold to a Recipient pursuant to the Plan will bear
such legend or legends making reference to the restrictions imposed upon such
Restricted Stock as the Committee in its discretion deems necessary or
appropriate to enforce such restrictions; and
(iv) Other Restrictions. The Committee may impose such other
conditions on Restricted Stock as the Committee may deem advisable including,
without limitation, restrictions under the Securities Act, under the Exchange
Act, under the requirements of any stock exchange upon which such Restricted
Stock or shares of the same class are then listed and under any blue sky or
other securities laws applicable to such shares.
(c) Rights of Recipient. Subject to the provisions of Section
2.04(b) and any restrictions imposed upon the Restricted Stock, the Recipient
will have all rights of a stockholder with respect to the Restricted Stock
granted or sold to such Recipient under the Plan, including the right to vote
the shares and receive all dividends and other distributions paid or made with
respect thereto.
(d) Termination of Employment. Unless the Committee in its
discretion determines otherwise, upon a Recipient's termination of employment
for any reason, all of the Recipient's Restricted Stock remaining subject to
restrictions imposed pursuant to the Plan on the date of such termination of
employment shall be repurchased by the Company at the Purchase Price (if any).
2.05 STOCK APPRECIATION RIGHTS.
(a) Granting of Stock Appreciation Rights. The Committee may approve
the grant to Eligible Persons of Stock Appreciation Rights, related or unrelated
to Options, at any time.
(b) SARs Related to Options.
(i) A Stock Appreciation Right granted in connection with an
Option granted under this Plan will entitle the holder of the related Option,
upon exercise of the Stock Appreciation Right, to surrender such Option, or any
portion thereof to the extent unexercised, with respect to the number of shares
as to which such Stock Appreciation Right is exercised, and
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to receive payment of an amount computed pursuant to Section 2.05(b)(iii). Such
Option will, to the extent surrendered, then cease to be exercisable.
(ii) A Stock Appreciation Right granted in connection with an
Option hereunder will be exercisable at such time or times, and only to the
extent that, the related Option is exercisable, and will not be transferable
except to the extent that such related Option may be transferable.
(iii) Upon the exercise of a Stock Appreciation Right related to
an Option, the Holder will be entitled to receive payment of an amount
determined by multiplying: (i) the difference obtained by subtracting the
Exercise Price of a share of Common Stock specified in the related Option from
the Fair Market Value of a share of Common Stock on the date of exercise of such
Stock Appreciation Right (or as of such other date or as of the occurrence of
such event as may have been specified in the instrument evidencing the grant of
the Stock Appreciation Right), by (ii) the number of shares as to which such
Stock Appreciation Right is exercised.
(c) SARs Unrelated to Options. The Committee may grant Stock
Appreciation Rights unrelated to Options to Eligible Persons. Section
2.05(b)(iii) shall be used to determine the amount payable at exercise under
such Stock Appreciation Right, except that in lieu of the Option Exercise Price
specified in the related Option the initial base amount specified in the
Incentive Award shall be used.
(d) Limits. Notwithstanding the foregoing, the Committee, in its
discretion, may place a dollar limitation on the maximum amount that will be
payable upon the exercise of a Stock Appreciation Right under the Plan.
(e) Payments. Payment of the amount determined under the foregoing
provisions may be made solely in whole shares of Common Stock valued at their
Fair Market Value on the date of exercise of the Stock Appreciation Right or,
alternatively, at the sole discretion of the Committee, in cash or in a
combination of cash and shares of Common Stock as the Committee deems advisable.
The Committee has full discretion to determine the form in which payment of a
Stock Appreciation Right will be made and to consent to or disapprove the
election of a Recipient to receive cash in full or partial settlement of a Stock
Appreciation Right. If the Committee decides to make full payment in shares of
Common Stock, and the amount payable results in a fractional share, payment for
the fractional share will be made in cash.
(f) Rule 16b-3. The Committee may, at the time a Stock Appreciation
Right is granted, impose such conditions on the exercise of the Stock
Appreciation Right as may be required to satisfy the requirements of Rule 16b-3
under the Exchange Act (or any other comparable provisions in effect at the time
or times in question).
(g) Termination of Employment. Section 2.02(g) will govern the
treatment of Stock Appreciation Rights upon the termination of a Recipient's
employment with the Company.
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2.06 STOCK PAYMENTS.
The Committee may approve Stock Payments of the Company's Common
Stock to any Eligible Person for all or any portion of the compensation (other
than base salary) or other payment that would otherwise become payable by the
Company to the Eligible Person in cash.
2.07 DIVIDEND EQUIVALENTS.
The Committee may grant Dividend Equivalents to any Recipient who
has received a Stock Option, SAR, or other Incentive Award denominated in shares
of Common Stock. Such Dividend Equivalents shall be effective and shall entitle
the recipients thereof to payments during the "APPLICABLE DIVIDEND PERIOD,"
which shall be (i) the period between the date the Dividend Equivalent is
granted and the date the related Stock Option, SAR, or other Incentive Award is
exercised, terminates, or is converted to Common Stock, or (ii) such other time
as the Committee may specify in the written instrument evidencing the grant of
the Dividend Equivalent. Dividend Equivalents may be paid in cash, Common Stock,
or other Incentive Awards; the amount of Dividend Equivalents paid other than in
cash shall be determined by the Committee by application of such formula as the
Committee may deem appropriate to translate the cash value of dividends paid to
the alternative form of payment of the Dividend Equivalent. Dividend Equivalents
shall be computed as of each dividend record date and shall be payable to
recipients thereof at such time as the Committee may determine. Notwithstanding
the foregoing, if it is intended that an Incentive Award qualify as
Performance-Based Compensation and the amount of the compensation the Eligible
Person could receive under the award is based solely on an increase in value of
the underlying stock after the date of grant or award (i.e., the grant, vesting,
or exercisability of the award is not conditioned upon the attainment of a
preestablished, objective performance goal described in Section 1.02(t)), then
the payment of any Dividend Equivalents related to the award shall not be made
contingent on the exercise of the award.
ARTICLE III
NONEMPLOYEE DIRECTOR'S OPTIONS
3.01 GRANTS OF INITIAL OPTIONS.
Each Nonemployee Director shall, upon first becoming a Nonemployee
Director, receive a one-time grant of a Nonemployee Director's Option to
purchase up to 40,000 shares of the Company's Common Stock at an exercise price
per share equal to the Fair Market Value of the Company's Common Stock on the
date of grant, subject to (i) vesting as set forth in Section 3.04, and (ii)
adjustment as set forth in Section 1.05(b). Options granted under this Section
3.01 are "INITIAL OPTIONS" for purposes hereof.
3.02 GRANTS OF ADDITIONAL OPTIONS.
Each Nonemployee director shall also receive, upon each re-election
to the Company's Board of Directors, an automatic grant of a Nonemployee
Director's Option to purchase up to 5,000 shares of the Company's Common Stock
at an exercise price per share
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equal to the Fair Market Value of the Company's Common Stock on the date of
grant, subject to (i) vesting as set forth in Section 3.04, and (ii) adjustment
as set forth in Section 1.05(b). Options granted under this Section 3.02 are
"ADDITIONAL OPTIONS" for purposes hereof.
3.03 EXERCISE PRICE.
The exercise price for Nonemployee Directors' Options shall be
payable as set forth in Section 2.02(e).
3.04 VESTING AND EXERCISE.
Initial Options shall vest and become exercisable with respect to
25% of the underlying shares on the grant date and with respect to an additional
25% of the underlying shares on the dates of each of the first three annual
meetings of the Company's stockholders following the grant date, but only if on
the date of each such annual meeting, the Recipient is continuing as a director
of the Company for the ensuing year, provided, however, that if the grant date
is within six months of the ensuing annual meeting of the Company's
stockholders, then after vesting of the Option with respect to 25% of the
underlying shares on the grant date, the Option will vest with respect to an
additional 25% of the underlying shares on the dates of each of the second,
third, and fourth annual meetings of the Company's stockholders following the
grant date, but only if, on the date of each such annual meeting, the Recipient
is continuing as a director for the ensuing year. Additional Options shall vest
and become exercisable upon the earlier of (a) the first anniversary of the
grant date or (b) immediately prior to the annual meeting of stockholders of the
Company next following the grant date, if the optionee has remained a director
for the entire period from the date of grant to such earlier date.
Notwithstanding the foregoing, however, Initial Options and Additional Options
that have not vested and become exercisable at the time the optionee ceases to
be a director shall terminate.
3.05 TERM OF OPTIONS AND EFFECT OF TERMINATION.
No Nonemployee Directors' Option shall be exercisable after the
expiration of ten years from the effective date of its grant. In the event that
the Recipient of a Nonemployee Director's Option shall cease to be a director of
the Company, all Nonemployee Directors' Options granted to such Recipient shall
be exercisable, to the extent already exercisable at the date such Recipient
ceases to be a director and regardless of the reason the Recipient ceases to be
a director, for a period of five (5) years after that date (or, if sooner, until
the expiration of the option according to its terms). In the event of the death
of a Recipient of a Nonemployee Director's Option while such Recipient is a
director of the Company or within the period after termination of such status
during which he or she is permitted to exercise such Option, such Option may be
exercised by any person or persons designated by the Recipient on a Beneficiary
Designation Form adopted by the Company for such purpose or, if there is no
effective Beneficiary Designation Form on file with the Company, by the
executors or administrators of the Recipient's estate or by any person or
persons who shall have acquired the option directly from the Recipient by his or
her will or the applicable laws of descent and distribution.
16
<PAGE> 17
ARTICLE IV
RECAPITALIZATIONS AND REORGANIZATIONS
4.01 CORPORATE TRANSACTIONS.
If the Company shall be the surviving corporation in any merger or
consolidation, each outstanding Option shall pertain and apply to the securities
to which a holder of the same number of shares of Common Stock that are subject
to that Option would have been entitled. In the event of a Change in Control (as
defined below), all Nonemployee Directors' Options and any Incentive Awards
specified by the Committee or the Board shall immediately vest and become
exercisable, and all conditions thereto shall be deemed to have been met. For
purposes hereof, a "Change in Control" means the following and shall be deemed
to occur if any of the following events occur:
(i) Except as provided by subsection (iii) hereof, the
acquisition (other than from the Company) by any person, entity or
"group," within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting
securities of the Company), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of forty
percent (40%) or more of either the then outstanding shares of
Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors; or
(ii) Individuals who, as of the effective date of the Plan,
constitute the Board of Directors of the Company (the "INCUMBENT
BOARD") cease for any reason to constitute at least a majority of
the Board of Directors of the Company, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, is or was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation with any other person,
entity or corporation, other than
(A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
17
<PAGE> 18
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
another entity) more than fifty percent (50%) of the combined
voting power of the voting securities of the Company and such
other entity outstanding immediately after such merger or
consolidation, or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no person acquires forty percent (40%) or more of the
combined voting power of the Company's then outstanding voting
securities; or
(iv) Approval by the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition by the Company of all or substantially all of the Company's
assets.
Notwithstanding the preceding provisions of this Section 4.01, a Change in
Control shall not be deemed to have occurred (l) if the "person" described in
the preceding provisions of this Section 4.01 is an underwriter or underwriting
syndicate that has acquired the ownership of 50% or more of the combined voting
power of the Company's then outstanding voting securities solely in connection
with a public offering of the Company's securities, or (2) if the "person"
described in the preceding provisions of this Paragraph is an employee stock
ownership plan or other employee benefit plan maintained by the Company that is
qualified under the provisions of the Employee Retirement Income Security Act of
1974, as amended.
4.02 DETERMINATION BY THE COMMITTEE.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all of any part of its business or
assets.
18
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