<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------------------
DEPOTECH CORPORATION
(Exact name of Registrant as specified in its charter)
------------------
CALIFORNIA 33-0387911
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip code)
------------------
1997 SUPPLEMENTAL STOCK OPTION PLAN
(Full title of the Plan)
------------------
EDWARD L. ERICKSON
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
DEPOTECH CORPORATION
10450 SCIENCE CENTER DRIVE, SAN DIEGO, CALIFORNIA 92121
(619) 625-2424
(Telephone number, including area code, of agent for service)
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
---------- ------------- --------- --------- ------------
<S> <C> <C> <C> <C>
1997 SUPPLEMENTAL
STOCK OPTION PLAN
Common Stock,
no par value 141,000 shares $13.50 (2) $1,903,500 (2) $561.53
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1997 Supplemental Stock
Option Plan by reason of any stock dividend, stock split,
recapitalization or any other similar transaction without receipt of
consideration which results in an increase in the number of outstanding
shares of Common Stock of DepoTech Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of Common Stock of DepoTech
Corporation on December 15, 1997, as reported on the Nasdaq National
Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
DepoTech Corporation (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, filed with the SEC on March 31, 1997;
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997, September 30, 1997,
filed with the SEC on May 14, 1997, August 14, 1997, and November
14, 1997, respectively; and
(c) The Registrant's Registration Statement No. 0-26862 on Form 8-A
filed with the SEC on September 26, 1995 in which the terms, rights
and provisions applicable to the Registrant's Common Stock are
described.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") after the date of this Registration Statement and prior
to the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 317 of the California General Corporation Law provides for
the indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
(b) Article VI of the Bylaws of the Company provides that the Company
shall have power to indemnify any person who is or was an agent of the Company
as provided in Section 317 of the California General Corporation Law. The rights
to indemnity thereunder 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 the person. In addition, expenses incurred by a
director or officer
II-2
<PAGE> 3
in defending a civil or criminal action, suit or proceeding by reason of the
fact that he or she is or was a director or officer of the Company (or was
serving at the Company's request as a director or officer of another
corporation) shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Company as
authorized by the relevant section of the California General Corporation Law.
(c) Article IV of the Company's Articles of Incorporation provides that
the liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law (i)
for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) for
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders, (vi) for any act or omission occurring prior to the date when the
exculpation provision became effective and (vii) for any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the directors. The
effect of the provisions in the Articles of Incorporation is to eliminate the
rights of the Company and its shareholders (through shareholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of duty as a director, including breaches resulting from negligent
behavior in the context of transactions involving a change of control of the
Company or otherwise, except in the situations described in clauses (i) through
(vii) above. These provisions will not alter the liability of directors under
federal securities laws.
(d) Pursuant to authorization provided under the Articles of
Incorporation, the Company has entered into indemnification agreements with each
of its directors and officers. Generally, the indemnification agreements attempt
to provide the maximum protection permitted by California law as it may be
amended from time to time. Moreover, the indemnification agreements provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the Company
(except to the extent the court determines he or she is fairly and reasonably
entitled to indemnity for expenses), for settlements not approved by the Company
or for settlements and expenses if the settlement is not approved by the court.
The indemnification agreements provide for the Company to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Company copies of invoices presented to him or her for such expenses. Also, the
individual must repay such advances upon a final judicial decision that he or
she is not entitled to indemnification. The Company's Bylaws contain a provision
of similar effect relating to advancement of expenses to a director or officer,
subject to an undertaking to repay if it is ultimately determined that
indemnification is unavailable.
(e) The Registrant maintains a directors' and officers' liability
insurance policy that, subject to certain limitations, terms and conditions,
will insure the directors and officers of the Registrant against losses arising
from wrongful acts (as defined by the policy) in his or her capacity as a
director or officer.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
II-3
<PAGE> 4
Exhibit No. Exhibit
- ----------- -------
4 Instruments Defining Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 0-26862 on Form 8-A,
which is incorporated herein by reference pursuant to Item 3(d)
of this Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 1997 Supplemental Stock Option Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold upon the termination of the
Registrant's 1997 Supplemental Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnity provisions summarized in Item 6 or
otherwise, the Registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California on December 17,
1997.
DEPOTECH CORPORATION
By: /s/ Edward L. Erickson
-------------------------------------
Edward L. Erickson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of DepoTech Corporation, a
California corporation, do hereby constitute and appoint Edward L. Erickson and
Dane S. McGowan and each of them, the lawful attorneys-in-fact and agents, with
full power and authority to do any and all acts and things and to execute any
and all instruments which said attorneys and agents, or either one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulation or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement and to any and all instruments or documents filed as part
of or in conjunction with this Registration Statement or amendments or
supplements thereto, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Edward L. Erickson President, Chief Executive Officer December 17, 1997
- ----------------------------- and Director (Principal
Edward L. Erickson Executive Officer)
</TABLE>
II-5
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Dana S. McGowan Vice President and December 17, 1997
- ----------------------------- Chief Financial Officer
Dana S. McGowan (Principal Financial and
Accounting Officer)
/s/ Roger C. Davisson Director December 17, 1997
- -----------------------------
Roger C. Davisson
/s/ George W. Dunbar, Jr. Director December 17, 1997
- -----------------------------
George W. Dunbar, Jr.
/s/ Stephen B. Howell Director December 17, 1997
- -----------------------------
Stephen B. Howell
/s/ Fred A. Middleton Director December 17, 1997
- -----------------------------
Fred A. Middleton
/s/ Peter Preuss Director December 17, 1997
- -----------------------------
Peter Preuss
/s/ Pieter J. Strijkert Director December 17, 1997
- -----------------------------
Pieter J. Strijkert
</TABLE>
II-6
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
DEPOTECH CORPORATION
<PAGE> 8
EXHIBIT INDEX
Exhibit
No. Exhibit
- ------- -------
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-26862 on Form 8-A, which is
incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration
Statement.
99.1 1997 Supplemental Stock Option Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
II-7
<PAGE> 1
EXHIBIT 5
Opinion of Brobeck, Phleger & Harrison LLP
December 17, 1997
DepoTech Corporation
10450 Science Center Drive
San Diego, CA 92121
Re: DepoTech Corporation (the "Company") Registration Statement for
Registration of 141,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of 141,000 shares of Common Stock
for issuance under the Company's 1997 Supplemental Stock Option Plan. We advise
you that, in our opinion, when such shares have been issued and sold pursuant to
the applicable provisions of the Company's 1997 Supplemental Stock Option Plan,
and in accordance with the Registration Statement, such shares will be validly
issued, fully paid and non-assessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1997 Supplemental Stock Option Plan of DepoTech
Corporation of our report dated January 29, 1997, with respect to the financial
statements of DepoTech Corporation incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
December 15, 1997
<PAGE> 1
DEPOTECH CORPORATION EXHIBIT 99.1
1997 SUPPLEMENTAL STOCK OPTION PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1997 Supplemental Stock Option Plan is intended to promote the
interests of DepoTech Corporation, a California corporation, by authorizing an
additional reserve of shares of the Corporation's common stock for issuance
through long-term option grants to be made from time to time to individuals in
the employ or service of the Corporation (or any Parent or Subsidiary) who are
neither officers of the Corporation nor members of the Board and who are not
otherwise Section 16 Insiders.
B. The Plan shall become effective immediately upon adoption by the
Board on October 14, 1997.
C. This Plan shall supplement the authorized share reserve under the
Corporation's 1995 Stock Option/Stock Issuance Plan, and share issuances under
this Plan shall not reduce or otherwise affect the number of shares of the
Corporation's common stock available for issuance under the 1995 Stock
Option/Stock Issuance Plan. In addition, share issuances under the 1995 Stock
Option/Stock Issuance Plan shall not reduce or otherwise affect the number of
shares of the Corporation's common stock available for issuance under this Plan.
D. Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall have full power and discretion (subject
to the express provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for the proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the provisions of
the Plan and any outstanding option grants thereunder as it may deem necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option
thereunder.
B. The individuals serving as Plan Administrator shall serve for such
period as the Board may determine and shall be subject to removal by the Board
at any time.
C. Service as Plan Administrator shall constitute service as a Board
member, and each Board member serving as Plan Administrator shall accordingly be
entitled to full
<PAGE> 2
indemnification and reimbursement as a Board member for such service. No
individual serving as Plan Administrator shall be liable for any act or omission
made in good faith with respect to the Plan or any option granted under the
Plan.
III. ELIGIBILITY
A. The persons eligible to participate in the Plan shall be limited to
those Employees and independent consultants and advisors in the service of the
Corporation (or any Parent or Subsidiary) who are neither officers of the
Corporation nor members of the Board and who are not otherwise Section 16
Insiders at the time of the option grant.
B. The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the time or
times when such grants are to be made, the number of shares to be covered by
each such grant, the time or times when each granted option is to become
exercisable and the maximum term for which the option may remain outstanding.
All options granted under the Plan shall be Non-Statutory Options.
IV. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock reserved for issuance over the term of the Plan shall be
limited to 141,000 shares, subject to adjustment from time to time in accordance
with the provisions of this Section IV of Article One.
B. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section III
of Article Two), then the shares subject to the portion of each option not so
exercised shall be available for subsequent issuance under the Plan. Should the
exercise price of an outstanding option under the Plan be paid with shares of
Common Stock, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock
actually issued to the holder of such option.
C. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan and (ii) the number and/or class of
securities and price per share in effect under each option outstanding under the
Plan. Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
2.
<PAGE> 3
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Plan shall be authorized by action of the Plan
Administrator and shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; provided, however, that each such instrument
shall comply with the terms and conditions specified below. All such granted
options shall be Non-Statutory Options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the grant date.
2. Full payment of the exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the forms
specified below:
a. cash or check made payable to the Corporation's order,
b. shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date, or
c. through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide
irrevocable instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes
required to be withheld by the Corporation in connection
with such purchase and (b) the Corporation to deliver
the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale
transaction.
3.
<PAGE> 4
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
such option. No option shall have a maximum term in excess of ten (10) years.
During the lifetime of the Optionee, the option shall be exercisable only by the
Optionee and shall not be assignable or transferable except for a transfer of
the option effected by will or by the laws of inheritance following the
Optionee's death.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
a. Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such limited
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
b. Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
c. During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable post-Service
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any otherwise
exercisable shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding for any and all shares for which the option is
not otherwise at that time exercisable.
d. Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
4.
<PAGE> 5
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
a. extend the period of time for which the option is to
remain exercisable following Optionee's cessation of Service or death from
the limited period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
b. permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the number
of shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments for which the option would have become exercisable
had the Optionee continued in Service.
D. Shareholder Rights. An Optionee shall have none of the rights of a
shareholder with respect to any option shares until such person shall have
exercised the option and paid the exercise price for the purchased shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option outstanding
at the time but not otherwise fully exercisable shall automatically accelerate
so that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become exercisable for all of the shares of Common Stock
at the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall NOT become exercisable on such an accelerated basis if and to the extent:
(i) such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on the
shares for which the option is not otherwise at that time exercisable (the
excess of the Fair Market Value of those shares over the exercise price payable
for such shares) and provides for subsequent payout in accordance with the same
exercise/vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.
B. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
C. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation
5.
<PAGE> 6
of such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction. Appropriate adjustments to reflect such Corporate
Transaction shall also be made to (i) the number and/or class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
D. The Plan Administrator shall have full power and authority to grant
options under the Plan which will automatically accelerate in the event the
Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those options
are assumed and do not otherwise accelerate. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination.
E. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options in connection with a Change in Control so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. The accelerated option shall remain exercisable for
fully-vested shares until the expiration or sooner termination of the option
term. Alternatively, the Plan Administrator may condition such option
acceleration upon the termination of the Optionee's Service by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of the Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
F. The grant of options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected Optionees, the cancellation
of any or all outstanding options under the Plan and to grant in substitution
new options under the Plan covering the same or different numbers of shares of
Common Stock but with an exercise price per share not less than the Fair Market
Value of the Common Stock on the new grant date.
ARTICLE THREE
6.
<PAGE> 7
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee to pay the option
exercise price under the Plan by delivering a promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. Promissory notes may be authorized with or without
security or collateral. In all events, the maximum credit available to the
Optionee may not exceed the sum of (i) the aggregate option exercise price
payable for the purchased shares plus (ii) any Federal, state and local income
and employment tax liability incurred by the Optionee in connection with the
option exercise.
B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN
The Board has complete and exclusive power and authority to amend or
modify the Plan in any or all respects whatsoever. However, no such amendment or
modification shall adversely affect rights and obligations with respect to stock
options at the time outstanding under the Plan, unless the affected Optionees
consent to such amendment.
III. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of stock options under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income tax and employment tax
withholding requirements.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan shall become effective immediately upon approval by the
Board at the October 14, 1997 Board meeting and shall not be subject to
shareholder approval.
B. The Plan shall terminate upon the earliest of (i) October 13, 2007,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of options under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. If the date of termination is determined under clause (i) above,
then all option grants outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing those grants.
V. USE OF PROCEEDS
7.
<PAGE> 8
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the
Plan, and the issuance of Common Stock upon the exercise of the stock options
granted hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.
8.
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
- the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's
shareholders which the Board does not recommend such shareholders to
accept, or
- a change in the composition of the Board over a period of
twenty four (24) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
- a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction; or
- the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
A-1.
<PAGE> 10
F. CORPORATION shall mean DepoTech Corporation, a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of DepoTech Corporation which shall by appropriate action
adopt the Plan.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
- If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
- If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
K. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his
or her duties and responsibilities or the level of management to which he
or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits
A-2.
<PAGE> 11
and target bonus under any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
L. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by the Optionee of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by the
Optionee adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).
M. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
N. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
O. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
P. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
Q. PLAN shall mean the Corporation's 1997 Supplemental Stock Option
Plan, as set forth in this document.
R. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
S. PLAN EFFECTIVE DATE shall mean October 14, 1997, the date on which
the Plan was adopted by the Board.
U. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit restrictions of Section 16 of the
Securities Exchange Act of 1934, as amended.
A-3.
<PAGE> 12
V. SERVICE shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by any person in the capacity of an Employee or an
independent consultant or advisor, except to the extent otherwise specifically
provided in the applicable stock option agreement.
W. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
X. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-4.
<PAGE> 1
DEPOTECH CORPORATION EXHIBIT 99.2
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of DepoTech Corporation (the "Corporation"):
OPTIONEE: _________________________________________________
GRANT DATE: _______________________________________________
VESTING COMMENCEMENT DATE: ________________________________
EXERCISE PRICE: $___________________________ per share
NUMBER OF OPTION SHARES: ___________________ shares
EXPIRATION DATE: __________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
EXERCISE SCHEDULE: The Option shall become exercisable for twenty-five
percent (25%) of the Option Shares upon Optionee's completion of one (1)
year of Service measured from the Vesting Commencement Date and shall
become exercisable for the balance of the Option Shares in thirty-six (36)
successive equal monthly installments upon Optionee's completion of each
additional month of Service over the thirty-six (36) month period measured
from the first anniversary of the Vesting Commencement Date. In no event
shall the Option become exercisable for any additional Option Shares after
Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the DepoTech Corporation 1997 Supplemental Stock
Option Plan (the "Plan"). Optionee further agrees to be bound by the terms of
the Plan and the terms of the Option as set forth in the Supplemental Stock
Option Agreement (the "Option Agreement") attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official prospectus
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
available upon request made to the Corporate Secretary at the Corporation's
principal offices.
No Employment or Service Contract. Nothing in this Notice or in the
attached Option Agreement or in the Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
<PAGE> 2
Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Option Agreement.
____________________, 199__
Date
DEPOTECH CORPORATION
By: __________________________________
Title: __________________________________
_________________________________________
OPTIONEE
Address: ________________________________
_________________________________________
ATTACHMENTS
EXHIBIT A - SUPPLEMENTAL STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2.
<PAGE> 3
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE> 4
DEPOTECH CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of providing
additional incentive to selected Employees, consultants and other independent
advisors to continue in the Service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
the Optionee's lifetime, only by the Optionee.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a thirty (30)-day period
(commencing with the date of such cessation of Service) during which to
exercise this option, but in no event shall this option be exercisable at
any time after the Expiration Date.
<PAGE> 5
(b) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or
in accordance with the laws of inheritance shall have the right to
exercise this option. Such right shall lapse, and this option shall cease
to be outstanding, upon the earlier of (A) the expiration of the twelve
(12)- month period measured from the date of Optionee's death or (B) the
Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of six (6) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares for which the option is exercisable at
the time of Optionee's cessation of Service. Upon the expiration of such
limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any otherwise
exercisable Option Shares for which the option has not been exercised. To
the extent this option is not exercisable for one or more Option Shares at
the time of Optionee's cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) In the event of a Corporate Transaction, this option, to
the extent outstanding at such time but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. However, this
option shall not become exercisable on such an accelerated basis if and to the
extent: (i) this option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation (or parent thereof) or (ii) this option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on the
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of such Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the same exercise/vesting schedule in effect for those Option
Shares pursuant to the option exercise schedule set forth in the Grant Notice.
2.
<PAGE> 6
(b) Immediately following the Corporate Transaction, this option,
to the extent not previously exercised, shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) in connection with the Corporate Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude any dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
3.
<PAGE> 7
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions (I) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the Corporation
to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
4.
<PAGE> 8
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a promissory note. The terms of
any such promissory note (including the interest rate, the requirements for
collateral and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5.
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify DepoTech Corporation (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 1997 Supplemental Stock Option Plan on _______________________ ,
199__.
Concurrently with the delivery of this Exercise Notice to the Corporation,
I shall hereby pay to the Corporation the Exercise Price for the Purchased
Shares in accordance with the provisions of my agreement with the Corporation
(or other documents) evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker-dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price.
____________________, 199__
Date
_________________________________________
Optionee
Address:_________________________________
_________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _________________________________________
Address to which certificate
is to be sent, if different
from address above: _________________________________________
_________________________________________
Social Security Number: _________________________________________
Employee Number: _________________________________________
6.
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Supplemental Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean DepoTech Corporation, a California
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall determined in accordance with the following provisions:
A-1.
<PAGE> 11
- If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
- If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
Q. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
A-2.
<PAGE> 12
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
U. PLAN shall mean the Corporation's 1997 Supplemental Stock Option
Plan.
V. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
W. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee or a
consultant or independent advisor.
X. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Y. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE> 13
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
<PAGE> 14
EMPLOYEES & CONSULTANTS
DEPOTECH CORPORATION
---------------------------------------
1997 SUPPLEMENTAL STOCK OPTION PLAN
PLAN SUMMARY AND PROSPECTUS
---------------------------------------
The date of this Prospectus is October 31, 1997
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
INFORMATION ON THE 1997 SUPPLEMENTAL OPTION PLAN................................................................ 1
QUESTIONS AND ANSWERS ABOUT THE PLAN............................................................................ 1
GENERAL PLAN PROVISIONS................................................................................... 1
3. What is the basic structure of the Plan?........................................................ 1
4. When did the Plan become effective?............................................................. 1
5. Who administers the Plan?....................................................................... 1
6. Who is eligible to participate in the Plan?..................................................... 2
7. How many shares of Common Stock may be issued under the Plan?................................... 2
8. What happens if there is a change in the Corporation's capital structure?....................... 2
9. Can the Plan be amended or terminated?.......................................................... 2
GRANT OF OPTIONS.......................................................................................... 3
10. How are options granted under the Plan?......................................................... 3
11. What type of options may be granted under the Plan?............................................. 3
12. How is the exercise price determined?........................................................... 3
13. How is the fair market value of the Common Stock determined?.................................... 3
14. Can the Corporation cancel my option and grant me a new option?................................. 3
15. Can I assign or transfer my option?............................................................. 3
16. When do I acquire the rights of a shareholder?.................................................. 3
EXERCISE OF OPTIONS....................................................................................... 4
17. When may I exercise my option?.................................................................. 4
18. When will my option terminate?.................................................................. 4
19. How do I exercise my option?.................................................................... 4
20. How do I pay the exercise price?................................................................ 4
EARLY TERMINATION OF OPTIONS.............................................................................. 4
21. What happens to my options if my service terminates?............................................ 4
22. What happens to my options if I am discharged for Misconduct?................................... 5
23. What happens to my options if I die or become disabled?......................................... 5
24. What happens to my options if the Corporation is acquired or merged?............................ 5
25. What happens to my options that are assumed upon a Corporate Transaction?....................... 6
26. What happens to my options if there is a change in control of the
Corporation?.................................................................................... 6
DISPOSITION OF OPTION SHARES.............................................................................. 7
27. When can I sell my shares?...................................................................... 7
MISCELLANEOUS ........................................................................................... 7
28. Do I have the right to remain in the Corporation's service until my options under
the Plan become exercisable? ................................................................... 7
29. Are there any circumstances which would cause me to lose my rights with
respect to an option?........................................................................... 7
30. Does the Plan restrict the authority of the Corporation to grant or assume options
outside of the Plan?............................................................................ 7
31. Does the grant of an option under the Plan affect my eligibility to participate in
other plans of the Corporation?................................................................. 8
32. What is a parent corporation?................................................................... 8
33. What is a subsidiary corporation?............................................................... 8
34. Is the Plan subject to ERISA?................................................................... 8
</TABLE>
i.
<PAGE> 16
<TABLE>
<S> <C> <C>
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES............................................................... 8
NON-STATUTORY OPTIONS..................................................................................... 8
T1. Will the grant of a Non-Statutory Option result in Federal income tax liability
to me?.......................................................................................... 8
T2. Will the exercise of a Non-Statutory Option result in Federal income tax liability
to me?.......................................................................................... 8
T3. Will I recognize additional income when I sell shares acquired under a Non-
Statutory Option?............................................................................... 9
T4. What are the consequences of paying the exercise price of a Non-Statutory
Option in the form of shares of Common Stock previously acquired upon the
exercise of employee options or through open-market purchases?.................................. 9
T5. What are the Federal tax consequences to the Corporation?....................................... 9
FEDERAL TAX RATES......................................................................................... 9
T6. What are the applicable Federal tax rates?...................................................... 9
CORPORATE INFORMATION AND ANNUAL PLAN INFORMATION............................................................... 10
</TABLE>
ii.
<PAGE> 17
THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
INFORMATION ON THE
1997 SUPPLEMENTAL OPTION PLAN
DepoTech Corporation, a California corporation (the "Corporation"),
is offering shares of its common stock (the "Common Stock") to eligible
individuals in the Corporation's service pursuant to option grants made under
the DepoTech Corporation 1997 Supplemental Stock Option Plan (the "Plan"). The
purpose of the Plan is to offer the individuals in the employ of the Corporation
who are neither officers of the Corporation nor members of the Corporation's
Board of Directors (the "Board") a continuing opportunity to acquire an
ownership interest in the Corporation as an incentive for such persons to remain
in the Corporation's service. Unless the context indicates otherwise, all
references to the Corporation in this Plan Summary and Prospectus include
DepoTech Corporation and its parent and subsidiary corporations, whether now
existing or subsequently established.
QUESTIONS AND ANSWERS ABOUT THE PLAN
This Plan Summary and Prospectus sets forth in question and answer
format the principal terms of the option grants which may be made from time to
time under the Plan to eligible individuals.
GENERAL PLAN PROVISIONS
1. WHAT IS THE BASIC STRUCTURE OF THE PLAN?
The Plan is an equity program under which eligible individuals will
be granted options which will provide them with the right to purchase shares of
Common Stock at a fixed price per share over their period of service with the
Corporation.
2. WHEN DID THE PLAN BECOME EFFECTIVE?
The Plan became effective on October 14, 1997 (the "Effective Date")
upon adoption by the Board.
3. WHO ADMINISTERS THE PLAN?
The Plan will be administered by the Compensation Committee of the
Board. Such committee is comprised of two (2) or more non-employee Board members
appointed by the Board, and each member will serve for so long as the Board
deems appropriate and may be removed by the Board at any time. The Compensation
Committee in its capacity as administrator of the Plan will be referred to in
this document as the "Plan Administrator."
The Plan Administrator will have full authority to determine the
persons who are to be granted options under the Plan, the time or times when
such option grants are to be made, the number of shares to be subject to each
such grant, the time or times when each option is to become exercisable and the
maximum period for which the option is to remain outstanding.
4. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Employees, consultants and other independent advisors in the
Corporation's service who are neither officers of the Corporation nor members of
the Board are eligible to participate in the Plan. However, the actual persons
to whom option grants are to be made under such program will be determined by
the Plan Administrator in its sole discretion.
<PAGE> 18
5. HOW MANY SHARES OF COMMON STOCK MAY BE ISSUED UNDER THE PLAN?
The maximum number of shares of Common Stock issuable over the term
of the Plan may not exceed 141,000 shares, subject to adjustment for certain
changes in the Corporation's capital structure. The Common Stock will be made
available either from authorized but unissued shares of Common Stock or from
shares of Common Stock reacquired by the Corporation, including shares
repurchased on the open market.
Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full, the shares of Common Stock
subject to the portion of each such option not so exercised will be available
for subsequent issuance under the Plan.
There are no limitations on the number of shares of Common Stock for
which an eligible individual may be granted options over the term of the Plan.
6. WHAT HAPPENS IF THERE IS A CHANGE IN THE CORPORATION'S CAPITAL
STRUCTURE?
In the event of a Recapitalization, appropriate adjustments will
automatically be made to (i) the maximum number and/or class of securities
issuable under the Plan and (ii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option. The
adjustments to such outstanding options will preclude the dilution or
enlargement of the rights and benefits available under those options.
For purposes of the Plan, a RECAPITALIZATION is any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration.
7. CAN THE PLAN BE AMENDED OR TERMINATED?
Yes. The Board has exclusive authority to amend or modify the Plan
in any and all respects. However, no amendment or modification may, without the
holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding options under the Plan.
The Plan will terminate upon the earliest to occur of (i) October
13, 2007, (ii) the date on which all shares available for issuance under the
Plan have been issued or (iii) the termination of all outstanding options in
connection with a Corporate Transaction (see the "Early Termination of Options"
section below). Should the Plan terminate on October 13, 2007, then all options
outstanding under the Plan at that time will continue to have force and effect
in accordance with the provisions of the agreements evidencing those options.
GRANT OF OPTIONS
8. HOW ARE OPTIONS GRANTED UNDER THE PLAN?
The Plan Administrator will have complete discretion (subject to the
limitations of the Plan) to determine when and to whom options will be granted
and the terms of each such option grant. The grant will be evidenced by one or
more documents (collectively, the "Option Agreement") executed by the
Corporation and the optionee.
9. WHAT TYPE OF OPTIONS MAY BE GRANTED UNDER THE PLAN?
All options granted under the Plan will be non-statutory options
("Non-Statutory Options") which do not qualify as incentive stock options under
Section 422 of the Internal Revenue Code (the "Code").
2.
<PAGE> 19
10. HOW IS THE EXERCISE PRICE DETERMINED?
The exercise price of an option will be determined by the Plan
Administrator. However, the exercise price of an option will not be less than
one hundred percent (100%) of the fair market value of the Common Stock on the
grant date.
11. HOW IS THE FAIR MARKET VALUE OF THE COMMON STOCK DETERMINED?
The fair market value per share of Common Stock on any relevant date
under the Plan will be the closing selling price per share on that date as
reported on the Nasdaq National Market. If the Common Stock is not traded on
that day, the fair market value will be the closing selling price per share on
the last preceding date for which such quotation exists. Stock prices are
reported daily in most major newspapers.
12. CAN THE CORPORATION CANCEL MY OPTION AND GRANT ME A NEW OPTION?
Yes. The Plan Administrator has the authority to cancel outstanding
options and to issue new options in replacement, but your consent will be
required in connection with your participation in any such cancellation/regrant
program. The new options can cover the same or a different number of shares of
Common Stock and will have an exercise price per share based upon the fair
market value of the Common Stock on the new grant date. In addition, it is
likely that the new options will have a vesting schedule based on the new grant
date, without any credit provided for the period the cancelled options were
outstanding.
13. CAN I ASSIGN OR TRANSFER MY OPTION?
No. Your option generally cannot be assigned or transferred, except
by the provisions of your will or the laws of inheritance following your death.
However, your option may be assigned in whole or in part pursuant to a court
order issued in connection with marital dissolution or separation proceedings.
14. WHEN DO I ACQUIRE THE RIGHTS OF A SHAREHOLDER?
You will not have any shareholder rights with respect to the option
shares. You will not acquire shareholder rights until you exercise the option,
pay the exercise price and become a holder of record of the purchased shares.
EXERCISE OF OPTIONS
15. WHEN MAY I EXERCISE MY OPTION?
Your option will become exercisable in a series of installments over
the period that you remain in the Corporation's service. The exercise schedule
applicable to your option will be determined by the Plan Administrator at the
time of grant and will be set forth in the Option Agreement. You may exercise
your option at any time for the shares for which your option is exercisable,
provided you do so before the option terminates.
16. WHEN WILL MY OPTION TERMINATE?
No option granted under the Plan may have a term in excess of ten
(10) years. The actual expiration date of your option will be set forth in the
Option Agreement. Your option may, however, terminate prior to its designated
expiration date in the event of your termination of service or upon the
occurrence of certain other events. See the "Early Termination of Options"
section below.
17. HOW DO I EXERCISE MY OPTION?
3.
<PAGE> 20
To exercise your option, you must provide the Corporation with
written notice of the exercise in which you indicate the number of shares to be
purchased under your option. The notice must be accompanied by payment of the
exercise price for the purchased shares, together with appropriate proof that
the person exercising the option (if other than yourself) has the right to
effect such exercise. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about such
tax withholding, see the "Questions and Answers on Federal Tax Consequences"
section below.
18. HOW DO I PAY THE EXERCISE PRICE?
The exercise price may be paid in cash or check payable to the
Corporation or in shares of Common Stock. Any such shares will be valued at fair
market value on the exercise date and must have been held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes (generally a six (6)-month period).
Cashless exercises are also permitted. To use this procedure, you
must provide irrevocable instructions to a Corporation-designated brokerage firm
to effect the immediate sale of the shares of Common Stock purchased under your
option and to pay over to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable withholding taxes.
Concurrently with such instructions, you must also direct the Corporation to
deliver the certificates for the purchased shares to the brokerage firm in order
to complete the sale.
EARLY TERMINATION OF OPTIONS
19. WHAT HAPPENS TO MY OPTIONS IF MY SERVICE TERMINATES?
After your termination of service, you will have a limited period of
time in which to exercise your outstanding options for any shares of Common
Stock for which those options are exercisable on the date your service
terminates. The length of this period will be set forth in your Option Agreement
and will generally not exceed thirty (30) days. However, your option will in all
events terminate on the specified expiration date of the option term. To the
extent your options are not exercisable for one or more option shares at the
time of your termination of service, your options will immediately terminate and
cease to be outstanding with respect to those shares.
Unless your Option Agreement specifically provides otherwise, you
will be deemed to continue in service for so long as you render services on a
periodic basis to the Corporation, whether as (i) an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, or (ii) a consultant or other
independent advisor.
The Plan Administrator has the discretion to extend the period
during which you may exercise one or more of your options following your
termination of service and/or to permit such options to be exercised not only
with respect to the number of shares of Common Stock for which your options are
at that time exercisable but also with respect to one or more additional
installments for which your options would have become exercisable had you
continued in service. You will be notified in writing in the event the Plan
Administrator decides to provide you with any of these additional benefits.
20. WHAT HAPPENS TO MY OPTIONS IF I AM DISCHARGED FOR MISCONDUCT?
Should you be discharged from service for Misconduct, all of your
outstanding options will immediately terminate. For purposes of the Plan,
MISCONDUCT includes (i) any act of fraud, embezzlement or dishonesty, (ii) any
unauthorized use or disclosure of confidential information or trade secrets of
the Corporation or (iii) any other intentional misconduct adversely affecting
the business or affairs of the Corporation in a material
4.
<PAGE> 21
manner. However, the foregoing list is not inclusive of all the acts or
omissions which may be considered as grounds for dismissal or discharge of any
individual in the Corporation's service.
21. WHAT HAPPENS TO MY OPTIONS IF I DIE OR BECOME DISABLED?
If you die while any of your options are outstanding, the personal
representative of your estate or the person or persons to whom the options are
transferred by the provisions of your will or the laws of inheritance following
your death may exercise each of those options for any or all shares of Common
Stock for which the option was exercisable on the date your service with the
Corporation terminated, less any shares you may have subsequently purchased
prior to your death. The right to exercise each such option will lapse upon the
earlier of (i) the expiration of the option term or (ii) the first anniversary
of the date of your death.
If your service terminates because you become permanently disabled,
you will normally have a period of six (6) months from such termination date
during which to exercise your options for any or all of the shares of Common
Stock for which those options were exercisable at the time of your termination.
In no event, however, may you exercise any option after the expiration of the
option term. For purposes of the Plan, you will be deemed to be permanently
disabled if you are unable to perform any substantial gainful activity by reason
of any medically determinable physical or mental impairment expected to result
in death or to be of continuous duration of twelve (12) consecutive months or
more.
22. WHAT HAPPENS TO MY OPTIONS IF THE CORPORATION IS ACQUIRED OR MERGED?
In the event of a Corporate Transaction, all outstanding options
under the Plan will automatically accelerate so that each such option will,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully vested
shares. However, an outstanding option will NOT become exercisable on such an
accelerated basis, if and to the extent: (i) the option is assumed by the
successor corporation, (ii) such option is replaced with a cash incentive
program which preserves the option spread existing at the time of the Corporate
Transaction on any shares for which the option is not otherwise at that time
exercisable and provides for subsequent payout in accordance with the same
exercise/vesting schedule applicable to those option shares or (iii) such
acceleration of the option is subject to other limitations imposed by the Plan
Administrator in the Option Agreement.
All outstanding options under the Plan will, to the extent not
assumed by the successor corporation (or its parent corporation), terminate and
cease to be outstanding immediately following the completion of the Corporate
Transaction.
A CORPORATE TRANSACTION will be deemed to occur upon (i) a merger in
which securities possessing more than 50% of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
merger or (ii) a sale, transfer or other disposition of all or substantially all
the assets of the Corporation in liquidation or dissolution of the Corporation.
23. WHAT HAPPENS TO MY OPTIONS THAT ARE ASSUMED UPON A CORPORATE
TRANSACTION?
Each option under the Plan which is assumed by the successor
corporation (or its parent corporation) will, immediately after the Corporate
Transaction, be appropriately adjusted to apply to the number and class of
securities which would have been issued to the optionee in consummation of the
Corporate Transaction had the option been exercised immediately prior to the
Corporate Transaction. Appropriate adjustments will also be made to the exercise
price payable per share, provided the aggregate exercise price for the option
shares will remain the same.
5.
<PAGE> 22
The Plan Administrator may grant options which automatically
accelerate in the event the optionee's service terminates through an Involuntary
Termination effected within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction if such
options do not otherwise accelerate at that time. Any option so accelerated will
remain exercisable until the earlier of (i) the expiration of the option term or
(ii) the end of the one-year period measured from the date of the Involuntary
Termination. You should review your Option Agreement to determine whether the
option you hold will in fact accelerate upon such an Involuntary Termination.
AN INVOLUNTARY TERMINATION will be deemed to occur upon (i) the
optionee's involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct or (ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her duties and level of responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus under any
corporate performance-based bonus or incentive programs) by more than 15% or (C)
a relocation of such individual's place of employment by more than 50 miles,
provided and only if such change, reduction or relocation is effected by the
Corporation without the optionee's consent.
24. WHAT HAPPENS TO MY OPTIONS IF THERE IS A CHANGE IN CONTROL OF THE
CORPORATION?
The Plan Administrator may provide for the automatic acceleration of
one or more outstanding options under the Plan upon the occurrence of a Change
in Control so that each such option will, immediately prior to the effective
date of such Change in Control, become exercisable for all the shares of Common
Stock at the time subject to that option and may be exercised for any or all of
those shares as fully vested shares. Any option so accelerated will remain
exercisable for fully vested shares until the expiration or sooner termination
of the option term.
Alternatively, the Plan Administrator may condition such
acceleration upon the termination of the optionee's service through an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of the Change in Control, so that each such
option will, immediately upon such termination, become exercisable for all the
shares of Common Stock at the time subject to that option and may be exercised
for any or all of those shares as fully vested shares. Any option accelerated in
connection with such an Involuntary Termination will remain exercisable for
fully vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one-year period measured from the date of the
Involuntary Termination. You should review your Option Agreement to determine
whether the option you hold will accelerate upon a Change in Control or upon
your Involuntary Termination following the Change in Control.
A CHANGE IN CONTROL will be deemed to occur in the event (i) any
person (or related group of persons) directly or indirectly acquires beneficial
ownership of securities possessing more than 50% of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept or (ii) there is a change in the
composition of the Board over a period of 24 consecutive months or less such
that a majority of the Board ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by the
Board.
DISPOSITION OF OPTION SHARES
25. WHEN CAN I SELL MY SHARES?
6.
<PAGE> 23
You may sell your shares of Common Stock at any time.
MISCELLANEOUS
26. DO I HAVE THE RIGHT TO REMAIN IN THE CORPORATION'S SERVICE UNTIL MY
OPTIONS UNDER THE PLAN BECOME EXERCISABLE?
No. Nothing in the Plan or in any option grant under the Plan is
intended to provide any person with the right to remain in the Corporation's
service for any specific period, and both you and the Corporation will each have
the right to terminate your service at any time and for any reason, with or
without cause.
27. ARE THERE ANY CIRCUMSTANCES WHICH WOULD CAUSE ME TO LOSE MY RIGHTS
WITH RESPECT TO AN OPTION?
Yes. The grant of options under the Plan and the issuance of Common
Stock under those options are subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan and the securities issuable thereunder. It is possible that the
Corporation could be prevented from granting options or from issuing shares of
Common Stock under the Plan in the event one or more required approvals or
permits were not obtained.
28. DOES THE PLAN RESTRICT THE AUTHORITY OF THE CORPORATION TO GRANT OR
ASSUME OPTIONS OUTSIDE OF THE PLAN?
No. The Plan does not limit the authority of the Corporation to
grant options outside of the Plan or to grant options to, or assume the options
of, any person in connection with the acquisition of the business and assets of
any firm, corporation or other business entity.
7.
<PAGE> 24
29. DOES THE GRANT OF AN OPTION UNDER THE PLAN AFFECT MY ELIGIBILITY TO
PARTICIPATE IN OTHER PLANS OF THE CORPORATION?
No. Option grants made under the Plan do not in any way affect,
limit or restrict your eligibility to participate in any other stock plan or
other compensation or benefit plan or program maintained by the Corporation.
30. WHAT IS A PARENT CORPORATION?
A corporation is a parent corporation if such corporation owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of the Corporation's outstanding securities.
31. WHAT IS A SUBSIDIARY CORPORATION?
A corporation is a subsidiary corporation if the Corporation owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of the outstanding securities of that corporation.
32. IS THE PLAN SUBJECT TO ERISA?
The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) or Section 401(a) of the Code.
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES
The following is a general description of the Federal income tax
consequences of option grants under the Plan. State and local tax treatment,
which is not discussed below, may vary from such Federal income tax treatment.
You should consult with your own tax advisor as to the tax consequences of your
particular transactions under the Plan.
NON-STATUTORY OPTIONS
T1. WILL THE GRANT OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME
TAX LIABILITY TO ME?
No.
T2. WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME
TAX LIABILITY TO ME?
You will recognize ordinary income in the year in which the
Non-Statutory Option is exercised in an amount equal to the excess of (i) the
fair market value of the purchased shares on the exercise date over (ii) the
exercise price paid for those shares. This income will be reported by the
Corporation on your W-2 wage statement for the year of exercise (or on a Form
1099 if you are not an employee), and you will be required to satisfy the tax
withholding requirements applicable to this income.
8.
<PAGE> 25
T3. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED UNDER
A NON-STATUTORY OPTION?
Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their acquisition. A
capital loss will result to the extent the amount realized upon the sale is less
than such fair market value. The gain or loss will be long-term if the shares
are held for more than one year prior to the disposition. (Please see Question
T6 below for the tax rates applicable to capital gain.) The holding period
normally starts at the time the Non-Statutory Option is exercised.
T4. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A
NON-STATUTORY OPTION IN THE FORM OF SHARES OF COMMON STOCK
PREVIOUSLY ACQUIRED UPON THE EXERCISE OF EMPLOYEE OPTIONS OR THROUGH
OPEN-MARKET PURCHASES?
You will not recognize any taxable income to the extent the shares
of Common Stock received upon the exercise of the Non-Statutory Option equal in
number the shares of Common Stock delivered in payment of the exercise price.
For Federal income tax purposes, these newly-acquired shares will have the same
basis and capital gain holding period as the delivered shares.
The additional shares of Common Stock received upon the exercise of
the Non-Statutory Option will have to be reported as ordinary income for the
year of exercise in an amount equal to their fair market value on the exercise
date. These additional shares will have a tax basis equal to such fair market
value and a capital gain holding period measured (in general) from the exercise
date.
T5. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?
The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the exercise of
the Non-Statutory Option. The deduction will, in general, be allowed for the
taxable year of the Corporation in which you recognize such ordinary income.
FEDERAL TAX RATES
T6. WHAT ARE THE APPLICABLE FEDERAL TAX RATES?
Effective for the 1997 calendar year, the maximum federal tax rate
on ordinary income in excess of $271,050 ($135,525 for a married taxpayer filing
a separate return) is 39.6%. The applicable $271,050 or $135,525 threshold is
subject to cost-of-living adjustments in taxable years beginning after December
31, 1997. Certain limitations are imposed upon a taxpayer's itemized deductions,
and the personal exemptions claimed by the taxpayer are subject to phase-out.
These limitations may result in the taxation of ordinary income at an effective
top marginal rate in excess of 39.6%.
Short-term capital gains are subject to the same tax rates as
ordinary income. The following table summarizes the long-term capital gains tax
rates applicable to the sale or disposition of capital assets after July 28,
1997:
<TABLE>
<CAPTION>
Holding Period Capital Gains Tax Rate
-------------- ----------------------
<S> <C>
More than 1 year but not more than 18 months 28% (15% for individuals not subject to the 28% tax
rate on their ordinary income)
More than 18 months 20% (10% for individuals not subject to the 28% tax
rate on their ordinary income)
</TABLE>
9.
<PAGE> 26
Beginning in 2001, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
not subject to the 28% tax rate on their ordinary income will be subject to tax
at a rate of 8%.
Beginning in 2006, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
subject to the 28% tax rate on their ordinary income will be taxed at a rate of
18%, provided the holding period for such property begins after December 31,
2000. However, any capital gain recognized on the sale or disposition of shares
of stock acquired pursuant to the exercise of an employee stock option under the
Plan will NOT be eligible for the 18% tax rate unless the option is granted
after December 31, 2000.
For the tax year ending December 31, 1997, itemized deductions are
reduced by 3% of the amount by which the taxpayer's adjusted gross income for
the year exceeds $121,200 ($60,600 for a married taxpayer filing a separate
return). However, the reduction may not, exceed 80% of the total itemized
deductions (excluding medical expenses, casualty and theft losses, and certain
investment interest expense) claimed by the taxpayer. The applicable $121,200 or
$60,600 threshold is subject to cost-of-living adjustments in taxable years
beginning after December 31, 1997.
In addition, the deduction for personal exemptions claimed by the
taxpayer is reduced by 2% for each $2,500 ($1,250 for a married taxpayer filing
a separate return) or fraction thereof by which the taxpayer's adjusted gross
income for the year exceeds a specified threshold amount. The applicable
thresholds for 1997 are $181,800 for married taxpayers filing joint returns (and
in certain instances, surviving spouses), $151,500 for heads of households,
$121,200 for single taxpayers and $90,900 for married taxpayers filing separate
returns. Accordingly, the deduction is completely eliminated for any taxpayer
whose adjusted gross income for the year exceeds the applicable threshold amount
by more than $122,500. The threshold amounts will be subject to cost-of-living
adjustments in taxable years beginning after December 31, 1997.
CORPORATE INFORMATION AND ANNUAL PLAN INFORMATION
DepoTech Corporation is a California corporation which maintains its
principal executive offices at 10450 Science Center Drive, San Diego, California
92121. The telephone number at the executive offices is (619) 625-2424. You may
contact the Corporation at this address or telephone number for further
information concerning the Plan and its administration.
A copy of the Corporation's Annual Report to Shareholders for the
most recent fiscal year will be furnished to each participant in the Plan, and
additional copies will be furnished without charge to each participant upon
written or oral request to the Corporate Secretary of the Corporation at its
principal executive offices or upon telephoning the Corporation at its principal
executive offices. In addition, any person receiving a copy of this Prospectus
may obtain without charge, upon written or oral request to the Corporate
Secretary, a copy of any of the documents listed below, which are hereby
incorporated by reference into this Prospectus, other than certain exhibits to
such documents:
(a) The Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 filed with the SEC on March 31, 1997;
(b) The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997,
filed with the SEC on May 14, 1997, August 14, 1997 and November 14,
1997, respectively; and
(c) The Corporation's Registration Statement No. 0-26862 on Form 8-A
filed with the SEC on September 26, 1995 pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended,
10.
<PAGE> 27
in which there is described the terms, rights and provisions
applicable to the Corporation's outstanding Common Stock.
The Corporation will also deliver to each participant in the Plan
who does not otherwise receive such materials a copy of all reports, proxy
statements and other communications distributed to the Corporation's
shareholders.
11.
<PAGE> 1
EXHIBIT 99.3
DEPOTECH CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of providing
additional incentive to selected Employees, consultants and other independent
advisors to continue in the Service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
the Optionee's lifetime, only by the Optionee.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a thirty (30)-day period
(commencing with the date of such cessation
<PAGE> 2
of Service) during which to exercise this option, but in no event shall
this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or
in accordance with the laws of inheritance shall have the right to
exercise this option. Such right shall lapse, and this option shall cease
to be outstanding, upon the earlier of (A) the expiration of the twelve
(12)- month period measured from the date of Optionee's death or (B) the
Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of six (6) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares for which the option is exercisable at
the time of Optionee's cessation of Service. Upon the expiration of such
limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any otherwise
exercisable Option Shares for which the option has not been exercised. To
the extent this option is not exercisable for one or more Option Shares at
the time of Optionee's cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) In the event of a Corporate Transaction, this option, to
the extent outstanding at such time but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. However, this
option shall not become exercisable on such an accelerated basis if and to the
extent: (i) this option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation (or parent thereof) or (ii) this option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate
2.
<PAGE> 3
Transaction on the Option Shares for which this option is not otherwise at that
time exercisable (the excess of the Fair Market Value of such Option Shares over
the aggregate Exercise Price payable for such shares) and provides for
subsequent pay-out in accordance with the same exercise/vesting schedule in
effect for those Option Shares pursuant to the option exercise schedule set
forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this
option, to the extent not previously exercised, shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) in connection with the Corporate Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude any dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have
any shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
3.
<PAGE> 4
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the
Corporation, but only to the extent authorized by the
Plan Administrator in accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for
the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall
concurrently provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and
employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in
order to complete the sale transaction.
Except to the extent the sale and remittance
procedure is utilized in connection with the option
exercise, payment of the Exercise Price must accompany
the Notice of Exercise delivered to the Corporation in
connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment
tax withholding requirements applicable to the option exercise.
4.
<PAGE> 5
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a promissory note. The terms of
any such promissory note (including the interest rate, the requirements for
collateral and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
5.
<PAGE> 6
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
6.
<PAGE> 7
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify DepoTech Corporation (the "Corporation") that I elect to
purchase _________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 1997 Supplemental Stock Option Plan on __________________, 199__.
Concurrently with the delivery of this Exercise Notice to the Corporation,
I shall hereby pay to the Corporation the Exercise Price for the Purchased
Shares in accordance with the provisions of my agreement with the Corporation
(or other documents) evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker-dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price.
____________________, 199__
Date
_________________________________________
Optionee
Address:_________________________________
_________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _________________________________________
Address to which certificate
is to be sent, if different
from address above: _________________________________________
_________________________________________
Social Security Number: _________________________________________
Employee Number: _________________________________________
7.
<PAGE> 8
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Supplemental Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean DepoTech Corporation, a California
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall determined in accordance with the following provisions:
A-1.
<PAGE> 9
- If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
- If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
Q. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
A-2.
<PAGE> 10
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
U. PLAN shall mean the Corporation's 1997 Supplemental Stock Option
Plan.
V. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
W. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee or a
consultant or independent advisor.
X. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Y. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
