<PAGE> 1
As filed with the Securities and Exchange Commission on October 30, 1998
Registration No.
----------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NEOPHARM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 51-0327886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
100 CORPORATE NORTH, SUITE 215
BANNOCKBURN, ILLINOIS 60015
(847) 295-8678
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
1998 EQUITY INCENTIVE PLAN
(Full title of the plan)
JAMES M. HUSSEY
CHIEF EXECUTIVE OFFICER
NEOPHARM, INC.
100 CORPORATE NORTH, SUITE 250
BANNOCKBURN, ILLINOIS 60015
(847) 295-8678
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPY TO:
CHRISTOPHER R. MANNING
BURKE, WARREN, MACKAY & SERRITELLA, P.C.
330 N. WABASH, SUITE 2200
CHICAGO, ILLINOIS 60611
(312) 840-7000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE(2)
---------- --------- -------------- ------
<S> <C> <C> <C> <C>
Common Stock, $.0002145 par 1,500,000 $4.125(1) $6,187,500(1) $1,825.31(1)
value, per share
</TABLE>
(1) Estimated pursuant to Rule 457 of Regulation C solely for the purpose of
calculating the registration fee. The proposed maximum offering price per share
with respect to the 1,500,000 shares authorized and reserved for issuance under
the 1998 Equity Incentive Plan has been estimated to be the average of the high
and low prices reported in the American Stock Exchange on October 26, 1998.
(2) Amount of Registration Fee was calculated pursuant to Section 6(b) of the
Securities Act of 1933, which states that the fee shall be "$295 per $1 million"
of the maximum aggregate price at which such securities are proposed to be
offered. The Registration Fees are therefore calculated by multiplying the
aggregate offering or sales amount by 0.000295.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by NeoPharm, Inc. (the "Registrant" or the
"Company") with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are incorporated by reference in this registration statement:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(b) The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1998 and June 30, 1998;
(c) The description of the Registrant's common stock, par value
$.0002145 per share (the "Common Stock"), contained in the Registrant's
Registration Statement (File No. 33-90516) filed under Section 12 of
the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all of such securities then
remaining unsold, shall be deemed to be incorporated by reference in
this Registration Statement and to be a part hereof from the date of
filing of such documents, except as to any portion of any future annual
or quarterly report to stockholders or document that is not deemed
filed under such provisions. For the purposes of this Registration
Statement, any statement in a document incorporated by reference shall
be deemed to be modified or superseded to the extent that a statement
contained in this Registration Statement modifies or supersedes a
statement in such document. Any 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.
The Registrant's Certificate of Incorporation eliminates the liability of the
Registrant's directors for monetary damages for breach of fiduciary duty as
directors to the maximum extent provided by Delaware Law. The Registrant's
By-laws provide that the Registrant shall indemnify its officers, directors and
persons who are or were serving as officers or directors of another entity at
the request of the Corporation to the maximum extent permitted by Delaware Law.
Section 145 of the DGCL provides that a corporation may indemnify any person
made a party to an action (other than an action by or in the right of the
corporation) by reason of the fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action (other than an action
by or in the right of the corporation), has no reasonable cause to believe his
or her conduct was unlawful.
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ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
Number Description
- ------------------
4.1 1998 Equity Incentive Plan.
5.1 Opinion of Burke, Warren, MacKay & Serritella, P.C.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Counsel (included in the Opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on the signature page).
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;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the 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 the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of
this section do not apply if the information required to be
included in a post-effective amendment by these paragraphs is
contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the 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
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or
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<PAGE> 4
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the 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, suite 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 policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Village of Bannockburn, State of Illinois, on the 22nd day of
October, 1998.
NEOPHARM, INC.
By: /s/ James M. Hussey
-------------------------------------
James M. Hussey
President and Chief Executive Officer
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POWER OF ATTORNEY
We, the undersigned directors and officers of NeoPharm, Inc., do hereby make,
constitute and appoint James M. Hussey, Kevin Harris and Christopher R. Manning,
and each of them acting individually, our true and lawful attorneys-in-fact and
agents, with power to act without any other and with full power of substitution,
to do any and all acts and things in our name and behalf in our capacities as
directors and officers, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, or any related Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John N. Kapoor Chairman of the Board October 21, 1998
- ------------------
John N. Kapoor
/s/ James M. Hussey President, Chief Executive Officer October 21, 1998
- -------------------
James M. Hussey and Director (Principal Executive
Officer)
/s/ Kevin Harris Vice President, Chief Financial October 21 1998
- ---------------- Officer and Treasurer (Principal
Kevin Harris Financial Officer and Principal
Accounting Officer)
/s/ Erick E. Hanson Director October 21, 1998
- ---------------------
Erick E. Hanson
/s/ Anatoly Dritschilo Director October 21, 1998
- ----------------------
Anatoly Dritschilo, M.D.
/s/ Aquilur Rahman Director October 21, 1998
- ------------------
Aquilur Rahman, Ph.D.
/s/ Sander Flaum Director October 26, 1998
- ----------------
Sander Flaum
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 1998 Equity Incentive Plan.
5.1 Opinion of Burke, Warren, MacKay & Serritella, P.C.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Burke, Warren, MacKay & Serritella, P.C. (included in the Opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included on the signature page).
</TABLE>
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EX-4.1
NEOPHARM, INC.
1998 EQUITY INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
1. Purpose........................................................... 1
2. Definitions....................................................... 1
3. Scope of the Plan................................................. 5
4. Administration.................................................... 6
5. Eligibility....................................................... 9
6. Conditions to Grants.............................................. 9
(a) General Conditions........................................... 9
(b) Grant of Options and Option Price............................ 10
(c) Grant of Incentive Stock Options............................. 10
(d) Grant of Restricted Stock.................................... 11
(e) Grant of Performance Units and Performance Shares............ 13
(f) Grant of Stock Bonuses....................................... 13
7. Grantee's Agreement to Serve...................................... 13
8. Limited Transferability........................................... 14
9. Exercise.......................................................... 14
(a) Exercise of Options.......................................... 14
(b) Exercise of Performance Units................................ 15
(c) Payment of Performance Shares................................ 17
(d) Special Rules for Section 16 Persons......................... 17
(e) Full Vesting upon Change of Control.......................... 17
10. Loans and Guarantees.............................................. 18
11. Notification under Section 83(b).................................. 18
12. Mandatory Tax Withholding......................................... 18
13. Elective Share Withholding........................................ 19
14. Termination of Continuous Status as an Employee or Consultant..... 20
(a) For Cause.................................................... 20
(b) On Account of Death or Disability............................ 20
</TABLE>
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<TABLE>
<S> <C> <C>
(c) On Account of Retirement...................................... 21
(d) Any Other Reason.............................................. 21
(e) Change of Status.............................................. 22
(f) Extension of Term............................................. 22
15. Equity Incentive Plans of Foreign Subsidiaries..................... 22
16. Substituted Awards................................................. 22
17. Securities Law Matters............................................. 23
18. Code Section 162(m)................................................ 23
19. Funding............................................................ 24
20. No Employment Rights............................................... 24
21. Rights as a Stockholder............................................ 24
22. Nature of Payments................................................. 24
23. Non-uniform Determinations......................................... 25
24. Adjustments........................................................ 25
25. Amendment of the Plan.............................................. 25
26. Termination of the Plan............................................ 25
27. No Illegal Transactions............................................ 26
28. Controlling Law.................................................... 26
29. Severability....................................................... 26
</TABLE>
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INTRODUCTION. NeoPharm, Inc. , a Delaware corporation (the "Company"),
hereby establishes the NeoPharm 1998 Equity Incentive Plan (the "Plan"),
effective on the Effective Date (as defined below).
1. PURPOSE.
The purpose of the Plan is to advance the interest of the Company by
encouraging and enabling the acquisition of a larger personal financial interest
in the Company by those employees and consultants upon whose judgment and
efforts the Company is largely dependent on the successful conduct of its
operations. An additional purpose of the Plan is to provide a means by which
employees and consultants of the Company and its Subsidiaries can acquire and
maintain Stock ownership, thereby strengthening their commitment to the success
of the Company and their desire to remain associated with the Company and its
Subsidiaries. It is anticipated that the acquisition of such financial interest
and Stock ownership will stimulate the efforts of such employees and consultants
on behalf of the Company, strengthen their desire to continue in the service of
the Company and encourage shareholder and entrepreneurial perspectives through
Stock ownership.
2. DEFINITIONS.
As used in the Plan, terms defined parenthetically immediately after their
use shall have the respective meanings provided by such definitions and the
terms set forth below shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Award" means Options, shares of Restricted Stock, performance units,
performance shares, or stock bonuses granted under the Plan.
(c) "Award Agreement" has the meaning specified in Section 4(b)(vi).
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means conviction of the Grantee of a felony which is, in the
opinion of the Administrator, likely to result in injury of a material nature to
the Company or a Subsidiary; the material violation by the Grantee of written
policies of the Company or a Subsidiary; the gross and habitual negligence by
the Grantee in the performance of the Grantee's duties to the Company or its
Subsidiaries; or the willful and intentional action or omission to act in
connection with the Grantee's duties to the Company or a Subsidiary resulting,
in the opinion of the Administrator, in injury of a material nature to the
Company or a Subsidiary.
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(f) "Change of Control" means any of the following:
(i) the acquisition or holding by any person, entity or "group"
within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act (other
than by the Company or any of its Subsidiaries or any employee benefit plan
of the Company or its subsidiaries) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 30% or more of
either the then-outstanding Stock or the combined voting power of the
Company's then-outstanding voting securities entitled to vote generally in
the election of directors ("Voting Power"); except that no such person,
entity or group shall be deemed to own beneficially: (A) any securities
held by the Company or a Subsidiary or any employee benefit plan (or any
related trust) of the Company or a Subsidiary; (B) any securities acquired
pursuant to a benefit plan of the Company or a Subsidiary; (C) any
securities issuable pursuant to an option, warrant or right owned by such
person, entity or group as of the close of business on the business day
immediately preceding the Effective Date; (D) any security that would
otherwise be beneficially owned by such person, entity or group as of the
close of business on the business day immediately preceding the Effective
Date; and (E) any securities issued in connection with a stock split, stock
dividend or similar recapitalization or reorganization with respect to
shares covered by the foregoing exceptions; or
(ii) individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided that any individual who becomes a director
after the Effective Date whose election or nomination for election by the
Company's stockholders was approved by at least a majority of the incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such
terms are used in Rule 14a-11 under the 1934 Act)) shall be deemed to be
members of the Incumbent Board; or
(iii) approval by the stockholders of the Company of (A) a merger,
reorganization or consolidation with respect to which persons who were the
respective beneficial owners of the Stock and Voting Power of the Company
immediately before such merger, reorganization or consolidation do not,
immediately thereafter, beneficially own, directly or indirectly, more than
60%, respectively, of the then-outstanding common shares and the Voting
Power of the corporation resulting from such merger, reorganization or
consolidation, (B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the assets of the
Company; provided, however, that for the purposes of this Section the votes
of all Section 16 Persons shall be disregarded in determining whether
stockholder approval has been obtained.
Notwithstanding the foregoing, a Change of Control shall be deemed not to have
occurred with respect to any Section 16 Person if such Section 16 Person is, by
agreement (written or otherwise),
<PAGE> 6
a participant on such Section 16 Person's own behalf in a transaction which
causes the Change of Control to occur.
(g) "Change of Control Value" means the Fair Market Value of a share of
Stock on the date of a Change of Control.
(h) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
(i) "Committee" means a committee of the Board appointed pursuant to
Section 4(a).
(j) "Company" has the meaning set forth in the introductory paragraph.
(k) "Consultant" means any person who is engaged by the Company or any
Subsidiary to render consulting or advisory services and is compensated for such
services and any director of the Company whether compensated for such services
or not.
(l) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated by the
Company or Subsidiary. Continuous Status as an Employee or Consultant shall not
be considered interrupted in the case of: (i) any leave of absence approved by
the Company, including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options, no such leave
may exceed ninety (90) days, unless re-employment upon the expiration of such
leave is guaranteed by contract (including certain Company policies) or statute;
provided, further, that on the ninety-first (91st) day of any such leave (where
re-employment is not guaranteed by contract or statute) the Grantee's Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option, or (ii)
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
(m) "Disability" means, for purposes of the exercise of an Incentive Stock
Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or physical
condition which, in the opinion of the Administrator renders a Grantee unable or
incompetent to carry out the job responsibilities which such Grantee held or the
tasks to which such Grantee was assigned at the time the disability was
incurred. and which is expected to be permanent or for an indefinite duration
exceeding one year.
(n) "Effective Date" means the date of adopting of this Plan by the Board,
provided, that if the shareholders do not approve the Plan, there shall be no
Effective Date.;
(o) "Employee" means any person, including officers and directors, employed
by the Company or any Subsidiary.
(p) "Fair Market Value" means, as of any applicable date:
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(i) if the Common Stock is listed for trading on the American Stock
Exchange, the closing price, regular way, of the security as reported on
the American Stock Exchange Composite Tape, or if no such reported sale of
the security shall have occurred on such date, on the next preceding date
on which there was such a reported sale, or
(ii) if the security is not so listed, but is listed on another
national securities exchange or authorized for quotation on the National
Association of Securities Dealers Inc.'s NASDAQ National Market
("NASDAQ/NMS"), the closing price, regular way, of the security on such
exchange or NASDAQ/NMS, as the case may be, or if no such reported sale of
the security shall have occurred on such date, on the next preceding date
on which there was such a reported sale, or
(iii) if the security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the average
of the closing bid and asked prices as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported, or
(iv) if the security is not listed for trading on a national
securities exchange or is not authorized for quotation on NASDAQ/NMS or
NASDAQ, the fair market value of the security as determined in good faith
by the Board.
(q) "Grant Date" means the date on which an Award shall be duly granted, as
determined in accordance with Section 6(a)(i).
(r) "Grantee" means an individual who has been granted an Award.
(s) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(t) "including" or "includes" means "including, without limitation," or
"includes, without limitation", respectively.
(u) "Measuring Period" has the meaning specified in Section 6(e)(i)(B).
(v) "Minimum Consideration" means $.0002145 per share of Stock or such
other amount that is from time to time considered to be capital for purposes of
Section 154 of the Delaware General Corporation Law.
(w) " 1934 Act" means the Securities Exchange Act of 1934. References to a
particular section of, or rule under, the 1934 Act shall include references to
successor provisions.
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(x) "Nonstatutory Stock Option" means an Option which does not or is not
intended to qualify as an Incentive Stock Option.
(y) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(z) "Option" means a stock option granted pursuant to the Plan.
(aa) "Option Price" means the per share purchase price of Stock subject to
an Option.
(bb) "Performance Percentage" has the meaning specified in Section
6(e)(i)(C).
(cc) "Plan" has the meaning set forth in the introductory paragraph.
(dd) "Retirement" means a termination of employment with the Company and
its Subsidiaries other than for Cause at any time after attaining age 65.
(ee) "Restricted Stock" means shares of Stock acquired pursuant to a grant
of a Stock Purchase Right under Section 6(d) below.
(ff) "SEC" means the Securities and Exchange Commission.
(gg) "Section 16 Person" means a person, whether or not a Grantee, who is
subject to potential liability under Section 16(b) of the 1934 Act with respect
to transactions involving equity securities of the Company.
(hh) "Stock" means the common stock, $.0002145 par value, of the Company.
(ii) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 6(d) below.
(jj) "Subsidiary" means, for purposes of grants of Incentive Stock Options,
a corporation as defined in Section 424(f) of the Code (with the Company being
treated as the employer corporation for purposes of this definition) and, for
all other purposes, a corporation with respect to which the Company owns,
directly or indirectly, 25% or more of the then-outstanding common shares.
(kk) "10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company.
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<PAGE> 9
3. SCOPE OF THE PLAN.
(a) Subject to Section 24, an aggregate of 2,000,000 shares of Stock are
hereby made available and are reserved for delivery on account of the grant and
exercise of Awards (including Restricted Stock) and the payment of benefits in
connection with Awards under the Plan. Such shares may be treasury shares or
newly-issued shares, as may be determined from time to time by the Board or the
Administrator.
(b) Subject to Section 3(a) (as to the maximum number of shares of Stock
available for delivery in connection with Awards), up to an aggregate of 250,000
shares of Restricted Stock and bonus shares of Stock may be granted under the
Plan.
(c) If and to the extent an Award shall expire or terminate for any reason
without having been exercised in full or shall be forfeited, without, in either
case, the Grantee having enjoyed any of the benefits of stock ownership (other
than dividends that are likewise forfeited or voting rights), the shares of
Stock (including Restricted Stock) associated with such Award shall become
available for other Awards. To the extent that the benefit in connection with an
Award is paid in cash, there shall be deducted from the share limit provided in
Section 3(a) a number of shares equal to the amount of the cash paid divided by
the Fair Market Value of a share of Stock on the date of such payment.
4. ADMINISTRATION.
(a) (i) Administrative With Respect to Directors and Officers. With respect
to Awards to Officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 promulgated under the Exchange Act of any
successor thereto ("Rule 16b-3") with respect to a plan intended to qualify
thereunder as a discretionary plan, or (B) a Committee designated by the
Board to administer the Plan, which Committee shall be constituted in such
a manner as to permit the Plan to comply with Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors,
non-director Officers, Consultants and Employees who are neither directors
nor Officers.
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<PAGE> 10
(iii) Administration With Respect to Consultants and Other Employees.
With respect to Awards to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee
shall be constituted in such a manner as to satisfy the legal requirements
relating to the administration of incentive stock option plan, if any, of
Delaware corporate and securities laws, of the Code, and of any applicable
stock exchange (the "Applicable Laws"). Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed
by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefore, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Subject to the provisions of the Plan and, in the case of a
Committee, the specific duties delegated by the Board to such Committee, and
subject to the approval of any relevant authorities, including the approval, if
required, of any stock exchange upon which the Stock is listed, the
Administrator shall have full and final authority and sole discretion, as
follows:
(i) to grant Awards and determine the Grant Date and term thereof;
(ii) to determine (A) when and to whom Awards may be granted, (B) the
terms and conditions applicable to each Award, including the Option Price
of an Option, whether an Option shall qualify as an Incentive Stock Option
and the benefit payable under any performance unit or performance share,
and (C) whether or not specific Awards shall be identified with other
specific Awards, and if so whether they shall be exercisable cumulatively
with, or alternatively to, such other specific Awards;
(iii) to determine the amount, if any, that a Grantee shall pay for
shares of Restricted Stock, whether to permit or require the payment of
cash dividends thereon to be deferred and the terms related thereto, when
Restricted Stock (including Restricted Stock acquired upon the exercise of
an Option) shall be forfeited and whether such shares shall be held in
escrow;
(iv) to interpret the Plan and to make all determinations necessary or
advisable for the administration of the Plan;
(v) to prescribe, amend, and rescind rules relating to the Plan,
including rules with respect to the exercisability and nonforfeitability of
Awards upon the termination of employment of a Grantee;
(vi) to determine the terms and provisions and any restrictions or
conditions (including specifying such performance criteria, Measuring
Period, and Performance Percentages as the Administrator deems appropriate
and imposing restrictions with respect
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to stock acquired upon exercise of an Option, which restrictions may
continue beyond the Grantee's termination of employment) of the written
agreements by which all Awards shall be evidenced ("Award Agreements")
which need not be identical and, with the consent of the Grantee, to modify
any such Award Agreement at any time;
(vii) to cancel, with the consent of the Grantee, outstanding Awards
and to grant new Awards in substitution therefor;
(viii) to authorize foreign Subsidiaries to adopt plans as provided in
Section 15;
(ix) to accelerate the exercisability (including exercisability
within a period of less than one year after the Grant Date) of, and to
accelerate or waive any or all of the restrictions and conditions
applicable to, any Award or any group of Awards for any reason and at any
time, including in connection with a termination of employment (other than
for Cause);
(x) subject to Section 6(a)(ii) and 6(c)(ii), to extend the time
during which any Award or group of Awards may be exercised;
(xi) to make such adjustments or modifications to Awards of Grantees
working outside the United States as are necessary and advisable to fulfill
the purposes of the Plan;
(xii) to amend Award Agreements with the consent of the Grantee;
provided that the consent of the Grantee shall not be required for any
amendment which (A) does not adversely affect the rights of the Grantee, or
(B) is necessary or advisable (as determined by the Administrator) to carry
out the purpose of the Award as a result of any new or change in existing
applicable law, regulation, ruling or judicial decision; provided that any
such change shall be applicable only to Awards which have not been
exercised;
(xiii) to take any action at any time before the exercise of an Option
(whether or not an Incentive Stock Option), without the consent of the
Grantee, to prevent such Option from being treated as an Incentive Stock
Option;
(xiv) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Administrator may, before or concurrently with the grant thereof, deem
appropriate, including requiring simultaneous exercise or related
identified Awards, and limiting the percentage of Awards which may from
time to time be exercised by a Grantee;
(xv) to certify in writing before the payment of any performance
based Awards (except for a payment that is attributable solely to the
increase in the price of the Stock of the Company) that the underlying
performance goals and any other material terms have been satisfied;
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<PAGE> 12
(xvi) to permit an Employee or Consultant to elect, prior to earning
compensation, to acquire Options pursuant to Section 6(b) of the Plan in
lieu of receiving such compensation, determine the terms and conditions of
such Options and determine the value of such Options on the Grant Date in
accordance with Section 6(b) of the Plan:
(xvii) to specify the manner of designating a beneficiary to exercise
Awards after the Grantee's death or transferring an Option (other than an
Incentive Stock Option), stock appreciation right, performance unit or
performance share to a revocable inter vivos trust;
(xviii) to approve the manner of payment and determine the terms
related thereto by a Grantee in connection with an Award, including use of
Restricted Stock to pay the Option Price, deferral of the payment or
guarantee of the payment by the Company pursuant to Section 10 and elective
share withholding pursuant to Section 13;
(xix) to prohibit a Grantee from making an election under Section
83(b) of the Code in accordance with Section 11;
(xx) to require a written investment representation by a Grantee as
provided in Section 17;
(xxi) to make equitable adjustment of Awards as provided in Section
24;
(xxii) to take any other action with respect to any matters relating
to the Plan for which it is responsible.
The determination of the Committee on all matters relating to the Plan or any
Award Agreement shall be conclusive and final. No member of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Award.
5. ELIGIBILITY. Awards may be granted to Employees and Consultants with
the restriction, however, that any Option which is to be an Incentive Stock
Option may only be granted to an Employee. In selecting the individuals to whom
Awards may be granted, as well as in determining the number of shares of Stock
subject to, and the other terms and conditions applicable to, each Award, the
Administrator shall take into consideration such factors as it deems relevant
in promoting the purposes of the Plan.
6. CONDITIONS TO GRANTS.
(a) GENERAL CONDITIONS.
(i) The Grant Date of an Award shall be the date on which the
Administrator grants the Award or such later date as specified in advance
by the Administrator.
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(ii) The term of each Award (subject to Section 6(c)(ii) with respect
to Incentive Stock Options) shall be a period of not more than 10 years
from the Grant Date, and shall be subject to earlier termination as herein
provided.
(iii) A Grantee may, if otherwise eligible, be granted additional
Awards in any combination.
(iv) To the extent not set forth in the Plan, the terms and
conditions of each Award shall be set forth in an Award Agreement.
(b) GRANT OF OPTIONS AND OPTION PRICE. No later than the Grant Date of any
Option, the Administrator shall determine the Option Price of such Option;
provided, however, that the Administrator may elect to determine the Option
Price as of the date the Grantee is hired or promoted (or similar event), if the
Grant Date occurs not more than 90 days after the date of hiring, promotion or
other event. The Option Price of an Option (other than an Incentive Stock
Option) shall not be less than (85% of the Fair Market Value of the Stock on the
Grant Date. The Award Agreement may provide that the Option shall be exercisable
for Restricted Stock.
The Administrator may, in its discretion, permit an Employee or Consultant
eligible to receive Awards under Section 5 of the Plan to elect, prior to
earning compensation, to be granted an Option or Options under the Plan in lieu
of receiving such compensation. Subject to the express terms of the Plan, such
Options shall have such terms and conditions as the Administrator in its
discretion specifies; provided that, in the judgment of the Administrator, the
value of such options on the Grant Date equals the amount of compensation
foregone by such Employee or Consultant; and provided, further, that except to
the extent such condition may be waived by the securities law counsel to the
Company, a Section 16 Person must irrevocably elect to forego such compensation
and acquire such Option at least six months prior to the Grant Date of such
Option.
(c) GRANT OF INCENTIVE STOCK OPTIONS. At the time of the grant of any
Option, the Administrator may designate that such Option shall be made subject
to additional restrictions to permit it to qualify as an "Incentive Stock
Option" under the requirements of Section 422 of the Code. Any Option designated
as an Incentive Stock Option:
(i) shall have an Option Price of not less than 100% of the Fair
Market Value of the Stock on the Grant Date except, however, that the
Option Price shall not be less than 110% of the Fair Market Value of the
Stock on the Grant Date if granted to a 10% Owner.
(ii) shall be for a period of not more than 10 years from the Grant
Date, or, in the case of an Incentive Stock Option granted to a 10% Owner,
5 years from the Grant Date, and, in either case, shall be subject to
earlier termination as provided herein or in the applicable Award
Agreement;
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<PAGE> 14
(iii) shall not have an aggregate Fair Market Value (determined for
each Incentive Stock Option at its Grant Date) of Stock with respect to
which Incentive Stock Options are exercisable for the first time by such
Grantee during any calendar year (under the Plan and any other employee
stock option plan of the Grantee's employer or any parent or Subsidiary
thereof ("Other Plans")), determined in accordance with the provisions of
Section 422 of the Code, which exceeds $100,000 (the "$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of Stock (determined
on the Grant Date) with respect to the portion of such grant which is
exercisable for the first time during any calendar year ("Current Grant")
and all Incentive Stock Options previously granted under the Plan and any
Other Plans which are exercisable for the first time during a calendar year
("Prior Grants") would exceed the $100,000 Limit, be exercisable as
follows:
(A) the portion of the Current Grant which would, when added to
any Prior Grants, be exercisable with respect to Stock which would
have an aggregate Fair Market Value (determined as of the respective
Grant Date for such options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable for the
first time by the Grantee in the first subsequent calendar year or
years in which it could be exercisable for the first time by the
Grantee when added to all Prior Grants without exceeding the $100,000
Limit; and
(B) if, viewed as of the date of the Current Grant, any portion
of a Current Grant could not be exercised under the preceding
provisions of this Section 6(c)(iv) during any calendar year
commencing with the calendar year in which it is first exercisable
through and including the last calendar year in which it may by its
terms be exercised, such portion of the Current Grant shall not be an
Incentive Stock Option, but shall be exercisable as a Nonstatutory
Stock Option at such date or dates as are provided in the Current
Grant;
(v) shall be granted within 10 years from the earlier of the date the
Plan is adopted or the date the Plan is approved by the stockholders of the
Company;
(vi) shall require the Grantee to notify the Administrator of any
disposition of any Stock issued pursuant to the exercise of the Incentive
Stock Option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions), within ten (10) days
of such disposition;
(vii) shall by its terms not be assignable or transferable other than
by will or the laws of descent and distribution and may be exercised,
during the Grantee's lifetime, only by the Grantee; provided, however, that
the Grantee may, to the extent provided in the Plan in any manner specified
by the Administrator, designate in writing a beneficiary to exercise his
Incentive Stock Option after the Grantee's death; and
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<PAGE> 15
Notwithstanding the foregoing and Section 4(c)(vi), the Administrator may,
without the consent of the Grantee, at any time before the exercise of an Option
(whether or not an Incentive Stock Option), take any action necessary to prevent
such option from being treated as an Incentive Stock Option. Any Option not
specifically identified as an Incentive Stock Option, or failing to qualify as
an Incentive Stock Option, shall be a Nonstatutory Stock Option.
(d) GRANT OF RESTRICTED STOCK.
(i) The Administrator may grant shares of Restricted Stock to any
individual eligible under Section 5 to receive Awards.
(ii) The Administrator shall determine the amount, if any, that a
Grantee shall pay for shares of Restricted Stock, subject to the following
sentence. Except with respect to shares of Restricted Stock that are
treasury shares, for which no payment need be required, the Administrator
shall require the Grantee to pay at least the Minimum Consideration for
each share of Restricted Stock granted to such Grantee. Such payment shall
be made in full by the Grantee before the delivery of the shares and in any
event no later than 10 days after the Grant Date for such shares. In the
discretion of the Administrator, and to the extent permitted by law,
payment may also be made in accordance with Section 10.
(iii) The Administrator may, but need not, provide that all or any
portion of a Grantee's Award of Restricted Stock, or Restricted Stock
acquired upon exercise of an Option, shall be forfeited:
(A) except as otherwise specified in the Award Agreement, upon
the Grantee's termination of Continuous Status as an Employee or
Consultant for reasons other than death, Disability or any other
reason specified in the Award Agreement within a specified time period
after the Grant Date, or
(B) if the Company or the Grantee does not achieve specified
performance goals (if any) within a specified time period after the
Grant Date and before the Grantee's termination of Continuous Status
as an Employee or Consultant, or
(C) upon failure to satisfy such other restrictions as the
Administrator may specify in the Award Agreement; provided that,
subject to Section 4(c)(ix), in no case shall such Award become
nonforfeitable before the first anniversary of the Grant Date.
(iv) If a share of Restricted Stock is forfeited, then if the Grantee
was required to pay for such share or acquired such Restricted Stock upon
the exercise of an Option, the Grantee shall be deemed to have resold such
share of Restricted Stock to the Company at a price equal to the lesser of
(A) the amount paid or, if the Restricted Stock was acquired on exercise of
an Option, the Option Price paid by the Grantee for such share of
Restricted
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<PAGE> 16
Stock, or (B) the Fair Market Value of a share of Stock on the date of such
forfeiture. The Company shall pay to the Grantee the required amount as
soon as is administratively practical. Such share of Restricted Stock shall
cease to be outstanding, and shall no longer confer on the Grantee thereof
any rights as a stockholder of the Company, from and after the later of the
date the event causing the forfeiture occurred or the date of the Company's
tender of the payment specified above, whether or not such tender is
accepted by the Grantee.
(v) The Administrator may provide that any share of Restricted Stock
shall be held (together with a stock power executed in blank by the
Grantee) in escrow by the Secretary of the Company until such shares become
nonforfeitable or are forfeited. Any share of Restricted Stock shall bear
an appropriate legend specifying that such share is non-transferable and
subject to the restrictions set forth in the Plan and the Award Agreement.
If any shares of Restricted Stock become nonforfeitable, the Company shall
cause certificates for such shares to be issued or reissued without such
legend.
(e) GRANT OF PERFORMANCE UNITS AND PERFORMANCE SHARES.
(i) Before the grant of any performance unit or performance share,
the Administrator shall:
(A) determine objective performance goals and the amount of
compensation under the goals applicable to such grant;
(B) designate a period, of not less than one year nor more than
seven years, for the measurement of the extent to which performance
goals are attained, which period may begin prior to the Grant Date
(the "Measuring Period"); and
(C) assign a "Performance Percentage" to each level of attainment
of performance goals during the Measuring Period, with the percentage
applicable to minimum attainment being zero percent (0%) and the
percentage applicable to maximum attainment to be determined by the
Administrator from time to time.
(ii) If a Grantee is promoted, demoted or transferred to a different
business unit of the Company during a Measuring Period, then, to the extent
the Administrator determines the performance goals or Measuring Period are
no longer appropriate, the Administrator may adjust, change or eliminate
the performance goals or the applicable Measuring Period as it deems
appropriate in order to make them appropriate and comparable to the initial
performance goals or Measuring Period.
(iii) When granted, performance units and performance shares may, but
need not. be identified with shares of Stock subject to a specific option
or specific shares of Restricted Stock of the Grantee granted under the
Plan in a number equal to or different from the number of the performance
units or performance shares so granted. If performance units or
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<PAGE> 17
performance shares are identified with shares of Stock subject to an Option
or shares of Restricted Stock, then unless otherwise provided in the
applicable Award Agreement, the Grantee's associated performance units
shall terminate upon (A) the expiration, termination, forfeiture or
cancellation of such Option on shares of Restricted Stock, (B) the exercise
of such Option or (C) the date such shares of Restricted Stock become
nonforfeitable.
(f) GRANT OF STOCK BONUSES. The Administrator may grant shares of Stock as
a bonus to any individual eligible under Section 5 to receive Awards in such
amount and subject to such terms and conditions as the Administrator, in its
sole discretion, shall determine..
7. GRANTEE'S AGREEMENT TO SERVE. Each Grantee who is granted an Award
shall, by executing such Grantee's Award Agreement, agree that such Grantee will
remain in the employ of, or available as a consultant to, the Company or any of
its Subsidiaries for at least one year after the Grant Date. No obligation of
the Company or any of its Subsidiaries as to the length of any Grantee's
employment or consulting relationship shall be implied by the terms of the Plan,
any grant of an Award hereunder or any Award Agreement. The Company and its
Subsidiaries reserve the same rights to terminate employment of any Grantee as
existed before the Effective Date.
8. LIMITED TRANSFERABILITY. Each Award (other than Restricted Stock and
stock bonuses) granted hereunder shall not be assignable or transferable other
than by will or the laws of descent and distribution and may be exercised,
during the Grantee's lifetime, only by the Grantee; provided, however, that the
Administrator may, in its discretion, authorize all or a portion of the Options
(other than Incentive Stock Options) granted to a Grantee to be on terms which
permit transfer by such Grantee to:
(a) the spouse, children or grandchildren of the Grantee ("Immediate Family
Members");
(b) a trust or trusts for the exclusive benefit of such Immediate Family
Members, or;
(c) a partnership in which such Immediate Family Members are the only
partners, provided that:
(i) there may be no consideration for any such transfer;
(ii) the Award Agreement pursuant to which such Options are granted
expressly provides for transferability in a manner consistent
with this Section 8; and
(iii) subsequent transfers of transferred Options shall be prohibited
except those in accordance with Section 14(b). Following
transfer, any such Options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Section 14(b) hereof the
term "Grantee" shall be deemed to refer to the transferee. The
provisions of this Plan relating to the period of exercisability
and expiration
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of the Option shall continue to be applied with respect to the
original Optionee, and the Options shall be exercisable by the
transferee only to the extent, and for the periods, set forth in
this Plan as to the original Grantee.
9. EXERCISE.
(a) EXERCISE OF OPTIONS. Subject to Section 4(b)(ix) and such terms and
conditions as the Administrator may impose, each option shall become exercisable
with respect to 25% of the shares subject thereto on each of the first four
annual anniversaries of the Grant Date of such Option unless the Administrator
provides otherwise in the Award Agreement.
Each Option shall be exercised by delivery to the Company of written notice
of intent to purchase a specific number of shares of Stock subject to the
Option. The Option Price at any shares of Stock or shares of Restricted Stock as
to which an Option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, be made in any one or any
combination of the following:
(i) cash;
(ii) check;
(iii) surrender of other shares of Stock which (i) in the case of
shares of Stock acquired upon exercise of an Option, have been owned by the
Grantee for more than six (6) months on the date of surrender, and (ii)
have a Fair Market Value on the date of surrender equal to the Option Price
of the exercised Option shares;
(iv) with the approval of the Administrator, shares of Restricted
Stock held by the Grantee for at least 6 months prior to exercise of the
Option, each valued at the Fair Market Value of a share of Stock on the
date of exercise;
(v) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery
to the Company of the sale or loan proceeds required to pay the exercise
price; or
(vi) any combination of the foregoing methods of payment
In the discretion of the Administrator and to the extent permitted by law,
payment may also be made in accordance with Section 10.
If Restricted Stock ("Tendered Restricted Stock") is used to pay the Option
Price for Stock subject to an Option, then the Administrator may, but need not,
specify that (i) all the shares of Stock acquired on exercise of the Option
shall be subject to the same restrictions as the Tendered
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Restricted Stock, determined as of the date of exercise of the Option, or (ii) a
number of shares of Stock acquired on exercise of the Option equal to the number
to shares of Tendered Restricted Stock shall, unless the Administrator provides
otherwise, be subject to the same restrictions as the Tendered Restricted Stock,
determined as of the date of exercise of the Option.
(b) EXERCISE OF PERFORMANCE UNITS.
(i) Subject to Section 4(b)(ix) and such terms and conditions as the
Administrator may impose, if, with respect to any performance unit, the
minimum performance goals have been achieved during the applicable
Measuring Period, then such performance unit shall be exercisable
commencing on the later of (A) the first anniversary of the Grant Date or
(B) the first day after the end of the applicable Measuring Period.
Performance units shall be exercised by delivery to the Company of written
notice of intent to exercise a specific number of performance units;
provided, however, that performance units not identified with shares of
Stock subject to an Option or shares of Restricted Stock shall be deemed
exercised on the date on which they first become exercisable. Unless
otherwise provided in the applicable Award Agreement, the exercise of
performance units which are identified with shares of Stock subject to an
Option or shares of Restricted Stock shall result in the cancellation or
forfeiture of such shares of Stock subject to Option or shares at
Restricted Stock, as the case may be, to the extent of such exercise.
(ii) The benefit for each performance unit exercised shall be an
amount equal to the product of:
(A) the Unit Value (as defined below) multiplied by
(B) the Performance Percentage attained during the Measuring
Period for such performance unit.
(iii) The Unit Value shall be, as specified by the Committee.
(A) a dollar amount, or
(B) an amount equal to the Fair Market Value of a share of Stock
on the Grant Date.
(iv) The benefit upon the exercise of a performance unit shall be
payable as soon as is administratively practicable after the later of (A)
the date the Grantee exercises or is deemed to exercise such performance
unit, or (B) the date (or dates in the event to installment payments) as
provided in the applicable Award Agreement. Such benefit shall be payable
in cash, except that the Administrator may provide in the Award Agreement
that benefits, with respect to any particular exercise, may be paid wholly
or partly in Stock.
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Notwithstanding the foregoing, if the Administrator in its discretion
determines that the exercise of performance units would preclude the use of
pooling of interests accounting following a sale of the Company which is
reasonably likely to occur and that such preclusion of pooling would have a
material adverse effect on the sale of the Company, the Administrator, in
its discretion, may either unilaterally bar the exercise of performance
units by canceling the performance units prior to the Change of Control or
cause the Company to pay the performance units rights benefit in Stock if
it determines that such payment would not cause the transaction to be
ineligible for pooling. If the Award Agreement provides that the benefit
may be paid wholly in Stock unless the Administrator specifies at the time
of exercise that the benefit shall be paid partly or wholly in cash, the
number of shares of Stock payable in lieu of cash shall be determined by
valuing the Stock at its Fair Market Value on the date such benefit is to
be paid.
(c) PAYMENT OF PERFORMANCE SHARES. Subject to Section 4(b)(ix), and such
terms and conditions as the Administrator may impose, if, with respect to any
performance share, the minimum performance goals have been achieved during the
applicable Measuring Period, then the Company shall pay to the Grantee of such
Award shares of Stock equal in number to the product of the number of
performance shares specified in the applicable Award Agreement multiplied by the
Performance Percentage achieved during such Measuring Period, except to the
extent that the Administrator in its discretion determines that cash be paid in
lieu of some or all of such shares of Stock. The amount of cash payable in lieu
of a share of Stock shall be determined by valuing such share at its Fair Market
Value on the business day next preceding the date such cash is to be paid.
Payments pursuant to this Section 9(c) shall be made as soon as administratively
practical after the end of the applicable Measuring Period. Any performance
shares with respect to which the performance goals have not been achieved by the
end of the applicable Measuring Period shall expire.
(d) SPECIAL RULES FOR SECTION 16 PERSONS. No Option, performance unit, or
performance share (if the benefit payable with respect to such performance unit
or performance share is to be determined by reference to the Fair Market Value
of the Stock on the date the performance unit or performance share is exercised)
shall be exercisable by a Section 16 Person during the first six months after
its Grant Date, except as exempted from Section 16 of the 1934 Act under Rule
16a-2(d) under the 1934 Act or as may from time to time be permitted by the
Administrator.
(e) FULL VESTING UPON CHANGE OF CONTROL. In the event of a Change of
Control. all unvested Awards shall become immediately vested and exercisable;
provided that the benefit payable with respect to any performance unit or
performance share with respect to which the Measuring Period has not ended as of
the date or such Change of Control shall be equal to the product of the Unit
Value multiplied successively by each of the following:
(1) a fraction, the numerator of which is the number of months
(including as a whole month any partial month) that have elapsed since the
beginning of such Measuring Period until the date of such Change of Control
and the denominator of which is the number of months (including as a whole
month any partial month) in the Measuring Period; and
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<PAGE> 21
(2) a percentage equal to the greater of the target percentage, if
any, specified in the applicable Award Agreement or the maximum percentage,
if any, that would be earned under the terms of the applicable Award
Agreement assuming that the rate at which the performance goals have been
achieved as of the date of such Change of Control would continue until the
end of the Measuring Period.
10. LOANS AND GUARANTEES. The Administrator may:
(a) allow a Grantee to defer payment to the Company of all or any
portion of (i) the Option Price of an Option, (ii) the purchase price of a
share of Restricted Stock, or (iii) any taxes associated with a benefit
hereunder which is not a cash benefit at the time such benefit is so
taxable, or
(b) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price,
purchase price, or any related taxes.
Any such payment deferral or guarantee by the Company pursuant to this Section
10 shall be on such terms and conditions as the Administrator may determine,
provided, that the interest rate applicable to any such payment deferral shall
not be more favorable to the Grantee than the terms applicable to funds borrowed
by the Company from time to time. Notwithstanding the foregoing, a Grantee shall
not be entitled to defer the payment of such Option Price, purchase price or any
related taxes unless the Grantee (i) enters into a binding obligation to pay the
deferred amount and (ii) except with respect to treasury shares, pays upon
exercise of an Option or grant of shares of Restricted Stock, as the case may
be, an amount equal to or greater than the Minimum Consideration therefor. If
the Administrator has permitted a payment deferral or caused the Company to
guarantee a loan pursuant to this Section 10, then the Administrator may require
the immediate payment of such deferred amount or the immediate release of such
guarantee upon the Grantee's termination of employment or if the Grantee sells
or otherwise transfers the Grantee's shares of Stock purchased pursuant to such
deferral or guarantee. The Administrator may at any time in its discretion
forgive the repayment of any or all of the principal of or interest on any such
deferred payment obligation.
11. NOTIFICATION UNDER SECTION 83(b). The Administrator may, on the Grant
Date or any later date, prohibit a Grantee from making the election described
below. If the Administrator has not prohibited such Grantee from making such
election, and the Grantee, in connection with the exercise of any Option, or the
grant of any share of Restricted Stock, makes the election permitted under
Section 83(b) of the Code (i.e., an election to include in such Grantee's gross
income in the year of transfer the amounts specified in Section 83(b) of the
Code), such Grantee shall notify the Company of such election within 10 days of
filing notice of the election with the internal Revenue Service, in addition to
any filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
12. MANDATORY TAX WITHHOLDING.
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(a) Whenever under the Plan, cash or shares of Stock are to be delivered
upon exercise or payment of an Award or upon a share of Restricted Stock
becoming nonforfeitable, or any other event with respect to rights and benefits
hereunder, the Company shall be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal, state,
and local tax withholding requirements related thereto, (ii) the withholding of
such sums from compensation otherwise due to the Grantee or from any shares of
Stock due to the Grantee under the Plan or (iii) any combination of the
foregoing.
(b) If any disqualifying disposition described in Section 6(c)(vi) is made
with respect to shares of Stock acquired under an Incentive Stock Option granted
pursuant to the Plan or any election described in Section 11 is made, then the
person making such disqualifying disposition or election shall remit to the
Company an amount sufficient to satisfy all federal, state, and local tax
withholding requirements thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Company shall have the right to withhold such
sums from compensation otherwise due to the Grantee or from any shares of Stock
due to the Grantee under the Plan.
(c) In making any Award the Committee may elect to pay, as a cash bonus,
the amount of the tax owed by the Grantee up to a maximum of thirty (30%)
percent of the Fair Market Value of the Award.
13. ELECTIVE SHARE WITHHOLDING.
(a) Subject to Section 13(b), a Grantee may elect the withholding ("Share
Withholding") by the Company of a portion of the shares of Stock otherwise
deliverable to such Grantee upon the exercise or payment of an Award or upon a
share of Restricted Stock becoming nonforfeitable (each a "Taxable Event")
having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required federal, state,
or local tax withholding liability attributable to the Taxable Event; or
(ii) with the Administrator's prior approval, a greater amount, not to
exceed the estimated total amount of such Grantee's tax liability with
respect to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be subject to the
following restrictions:
(i) any Grantee's election shall be subject to the Administrator's
right to revoke such election of Share Withholding by such Grantee at any
time before the Grantee's election if the Administrator has reserved the
right to do so in the Award Agreement:
(ii) if the Grantee is a Section 16 Person, such Grantee's election
shall be subject to the disapproval of the Administrator at any time,
whether or not the Administrator has reserved the right to do so;
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(iii) the Grantee's election must be made before the date (the "Tax
Date") on which the amount of tax to be withheld is determined;
(iv) the Grantee's election shall be irrevocable;
(v) a Section 16 Person may not elect Share Withholding within six
months after the grant of the related Option (except if the Grantee dies or
incurs a Disability before the end of the six-month period); and
(vi) except to the extent such condition may be waived by the
securities law counsel to the Company, a Section 16 Person must elect Share
Withholding either six months before the Tax Date or during the 10-business
day period beginning on the third business day after the release of the
Company's quarterly or annual summary statement of sales and earnings.
14. TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT. Except
as otherwise provided by the Administrator in the Award Agreement or otherwise:
(a) For Cause. If a Grantee has a termination of Continuous Status as an
Employee or Consultant for Cause,
(i) the Grantee's shares of Restricted Stock that are forfeitable
shall thereupon be forfeited, subject to the provisions of Section 6(d)(iv)
regarding repayment of certain amounts to the Grantee; and
(ii) any unexercised Option, performance unit or performance share
shall thereupon terminate.
(b) On Account of Death or Disability. If a Grantee has a termination of
Continuous Status as an Employee or Consultant on account of the Grantee's death
or Disability, then, except as otherwise provided in the Award Agreement,
(i) the Grantee's shares of Restricted Stock that were forfeitable
shall thereupon become nonforfeitable;
(ii) any unexercised Option, whether or not exercisable on the date of
such termination of Continuous Status as an Employee or Consultant on
account of death or Disability may be exercised, in whole or in part, at
any time within twelve (12) months after such termination of Continuous
Status as an Employee or Consultant by the Grantee, or after the Grantee's
death, by (A) his personal representative or by the person to whom the
Option is transferred by will or the applicable laws of descent and
distribution, (B) the Grantee's beneficiary designated in accordance with
Sections 6(c)(vii) or 8, or (C) the then-acting trustee of the trust
described in Section 8; and
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(iii) any unexercised performance unit or performance share may be
exercised in whole or in part, at any time within 180 days after such
termination of Continuous Status as an Employee or Consultant on account of
death or Disability by the Grantee or, after the Grantee's death, by (A)
his personal representative or by the person to whom the performance unit
or performance share is transferred by will or the applicable laws of
descent and distribution, (B) the Grantee's beneficiary designated in
accordance with Section 8, or (C) the then-serving trustee or the trust
described in Section 8; provided that the benefit payable with respect to
any performance unit or performance share with respect to which the
Measuring Period has not ended as of the date of such termination of
Continuous Status as an Employee or Consultant on account of death or
Disability shall be equal to the product of the Unit Value multiplied
successively by each or the following:
(1) a fraction, the numerator of which is the number of months
(including as a whole month any partial month) that have elapsed since
the beginning of such Measuring Period until the date of such
termination of Continuous Status as an Employee or Consultant and the
denominator of which is the number of months (including as a whole
month any partial month) in the Measuring Period; and
(2) a percentage determined in the discretion of the Committee
that would be earned under the terms of the applicable Award Agreement
assuming that the rate at which the performance goals have been
achieved as of the date of such termination of Continuous Status as an
Employee or Consultant would continue until the end of the Measuring
Period, or, if the Administrator elects to compute the benefit after
the end of the Measuring Period, the Performance Percentage, as
determined by the Administrator, attained during the Measuring Period
for the performance unit or performance share.
(c) On Account of Retirement. If a Grantee has a termination of Continuous
Status as an Employee or Consultant on account of Retirement, any unexercised
Option to the extent then exercisable, may be exercised, in whole or in part, at
any time within 90 days after such Retirement. The nonforfeitability and
exercisability of the Grantee's Restricted Stock, performance units and
performance shares shall be determined under Section 14(d).
(d) Any Other Reason. If a Grantee has a termination of Continuous Status
as an Employee or Consultant for a reason other than for Cause, death,
Disability, or Retirement,
(i) the Grantee's shares of Restricted Stock, to the extent
forfeitable on the date of the Grantee's termination of Continuous Status
as an Employee or Consultant shall be forfeited on such date;
(ii) any unexercised Option to the extent exercisable on the date of
the Grantee's termination of Continuous Status as an Employee or
Consultant, may be exercised in whole or in part, not later than the 90th
day following the Grantee's termination of Continuous
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Status as an Employee or Consultant; provided, however, that (A) if such
90th day is not a business day, such option may be exercised not later than
the first business day following such 90th day and (B) if the Grantee has
entered into an agreement with the Company not to sell any shares of Stock
(or the capital stock of a successor to the Company) for a specified period
following the consummation of a business combination between the Company
and another corporation or entity (the "Specified Period"), such Option may
be exercised in whole or in part until the later of such 90th day following
the termination of the Grantee's Continous Status as an Employee or
Consultant or 10 business days following the expiration of the Specified
Period; and
(iii) the Grantee's performance units and performance shares shall
become non-forfeitable and may be exercised in whole or in part, but only
if and to the extent determined by the Committee.
(e) Change of Status. Notwithstanding the foregoing, in the event of a
Grantee's change of status from Employee to Consultant (or from Consultant to
Employee), there shall not be a termination of the individual's Award's
provided, however, any Incentive Stock Option granted to an Employee shall
automatically convert to a Nonstatutory Stock Option on the 91st day following
such change of status.
(f) Extension of Term. In the event of termination of the Grantee's
Continous Status as an Employee or Consultant other than for Cause, the term of
any Award (whether or not exercisable on the date of the Grantee's termination
of Continuous Status as an Employee or Consultant) which by its terms would
otherwise expire after the Grantee's termination of Continous Status as an
Employee or Consultant but prior to the end of the period following the
Grantee's termination of Continuous Status as an Employee or Consultant
described in Sections 14(b), (c) and (d) above for exercise of Awards may, in
the discretion of the Administrator, be extended so as to permit any unexercised
portion thereof to be exercised at any time within such period. The
Administrator may further extend the period of exercisability to permit any
unexercised portion thereof to be exercised with a specified period provided by
the Administrator. However, in no event may the term of any Award expire more
than 10 years after the Grant Date of such Award.
15. EQUITY INCENTIVE PLANS OF FOREIGN SUBSIDIARIES. The Administrator may
authorize any foreign Subsidiary, if any, to adopt a plan for granting Awards
("Foreign Equity Incentive Plan"). All awards granted under such Foreign Equity
Incentive Plans shall be treated as grants under the Plan. Such Foreign Equity
Incentive Plans shall have such terms and provisions as the Administrator
permits not inconsistent with the provisions of the Plan and which may be more
restrictive than those contained in the Plan. Awards granted under such Foreign
Equity Incentive Plans shall be governed by the terms of the Plan except to the
extent that the provisions of the Foreign Equity Incentive Plans are more
restrictive than the terms of the Plan, in which case such teens of the Foreign
Equity Incentive Plans shall control.
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16. SUBSTITUTED AWARDS. If the Administrator cancels any Award (granted
under this Plan or any plan of any entity acquired by the Company or any of its
Subsidiaries), and a new Award is substituted therefor, then the Administrator
may determine the terms and conditions of such new Award; provided that (a) the
Option Price of any new option shall not be less than 85% of the Fair Market
Value of a share of Stock on the date of grant of the new Award; and (b) no
Award shall be canceled without the consent of the Grantee if the terms and
conditions of the new Award to be substituted are not at least as favorable as
the terms and conditions of the Award to be cancelled (and the Grant Date of the
new Award shall be the date on which such new Award is granted).
17. SECURITIES LAW MATTERS.
(a) If the Administrator deems it necessary to comply with the Securities
Act of 1933, the Administrator may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Administrator determines that the exercise or nonforfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision of (i)
federal or state securities laws or (ii) the listing requirements of any
national securities exchange or national market system on which are listed any
of the Company's equity securities, then the Administrator may postpone any such
exercise, nonforfeitability or delivery, as the case may be, but the Company
shall use its best efforts to cause such exercise, nonforfeitability or delivery
to comply with all such provisions at the earliest practicable date.
18. CODE SECTION 162(m).
(a) The number of shares for which Options may be granted to any Grantee in
any calendar year shall not exceed 100,000; provided, however, that such limit
shall not include Options granted at the time of initial hire of any Grantee.
(b) If the Company determines that compensation payable under the Plan is
subject to the Code Section 162(m) limitation on deduction and if the Company
determines that a particular grant should qualify as performance based
compensation so as to be exempt from the deduction limitation, the following
provisions to the extent applicable shall apply with respect to such grant:
(i) The Option Price for any Option shall equal 100% of the Fair
Market Value of the Stock on the Grant Date.
(ii) The performance units or performance shares awarded under the
Plan to any Grantee for any Measuring Period shall not have a value in
excess of the Grantee's base annual salary in effect at the time of the
grant of the Award multiplied by the number of years in the Measuring
Period. The Performance Percentage with respect to performance units and
performance shares attained during the Measuring Period for such
performance units or performance shares shall not exceed 150%. The value of
any stock bonuses awarded
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<PAGE> 27
to a Grantee for each calendar year shall not exceed the Grantee's base
annual salary in effect for such year. The value of performance shares and
stock bonuses awarded under the Plan to any Grantee for purposes of the
limitations contained in this subparagraph shall be determined by valuing
the Stock at its Fair Market Value on the date the performance shares or
stock bonuses are granted.
(iii) The performance goals and the amount of compensation under the
goals applicable to the grant of any performance unit, performance share or
stock bonus shall be set forth in a written document prior to the
commencement of the Grantee's services to which the performance goals
relate and while the outcome is still substantially uncertain. In
establishing performance goals, the Administrator may consider any
performance factor or factors it deems appropriate, including stock price,
market share, sales, earning per share, return on equity, costs, or any
other business criteria as contemplated in Section 162(m) of the Code. The
Administrator shall certify in writing prior to payment of compensation
related to any performance unit, performance share or stock bonus that the
performance goals and any other material terms were satisfied.
(iv) The Administrator with respect to any person covered by Section
162(m) shall be comprised solely of two or more outside directors as
defined for purposes of the regulations under Code Section 162(m).
19. FUNDING. Benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, benefits under the Plan.
20. NO EMPLOYMENT RIGHTS. Neither the establishment of the Plan, nor the
granting of any Award shall be construed to (a) give any Grantee the right to
remain employed by the Company or any of its Subsidiaries or to any benefits not
specifically provided by the Plan or (b) in any manner modify the right of the
Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.
21. RIGHTS AS A STOCKHOLDER. A Grantee shall not, by reason of any Award
(other than Restricted Stock) have any right as a stockholder of the Company
with respect to the shares of Stock which may be deliverable upon exercise or
payment of such Award until such shares have been delivered to him. Shares of
Restricted Stock held by a Grantee or held in escrow by the Secretary of the
Company shall confer on the Grantee all rights of a stockholder of the Company,
except as otherwise provided in the Plan. The Administrator at the time of grant
of Restricted Stock, may permit or require the payment of cash dividends thereon
to be deferred and, if the Administrator so determines, reinvested in additional
Restricted Stock to the extent shares are available under Section 3 or otherwise
reinvested. Stock dividends and deferred cash dividends issued with respect to
Restricted Stock shall be subject to the same restrictions and other terms as
apply to the shares with respect to which such dividends are issued. The
Administrator may provide for crediting to and payment of interest on deferred
cash dividends.
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22. NATURE OF PAYMENTS. Any and all grants, payments of cash, or deliveries
of shares of Stock hereunder shall constitute special incentive payments to the
Grantee and shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of defining any pension,
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries or (b) any agreement between the Company or
any Subsidiary, on the one hand, and the Grantee, on the other hand, except as
such plan or agreement shall otherwise expressly provide.
23. NON-UNIFORM DETERMINATIONS. The Administrator's determinations under
the Plan need not be uniform and may be made by the Administrator selectively
among persons who receive, or are eligible to receive, Awards (whether or not
such persons are similarly situated). Without limiting the generality of the
foregoing, the Administrator shall be entitled, among other things, to make
non-uniform and selective determinations, to enter into non-uniform and
selective Award Agreements as to (a) the identity of the Grantees, (b) the terms
and provisions of Awards, and (c) the treatment, under Section 14, of
terminations of Continuous Status as an Employee or Consultant. Notwithstanding
the foregoing; the Administrator's interpretation of Plan provisions shall be
uniform as to similarly situated Grantees.
24. ADJUSTMENTS. The Administrator shall make equitable adjustment of:
(a) the numbers of shares of Stock, shares of Restricted Stock, and bonus
stock, and the numbers of performance units, and performance shares available
under Sections 3(a), 3(b) and 18(a);
(b) the number of shares of Stock, shares of Restricted Stock, performance
units, or performance shares covered by an Award;
(c) the Option Price of all outstanding Options; and
(d) the Fair Market Value of Stock to be used to determine the amount of
the benefit payable upon exercise of performance units, or performance shares to
reflect a stock dividend, stock split, reverse stock split, share combination,
recapitalization, merger, consolidation, acquisition of property or shares,
asset spin-off, split-off, reorganization, stock rights offering, liquidation or
similar event, of or by the Company. Notwithstanding the foregoing, upon the
approval by the stockholders of the Company of a plan of liquidation for the
Company, any unexercised Options, performance units, and performance shares
theretofore granted shall thereupon become exercisable, and any shares of
Restricted Stock that have not become nonforfeitable shall become
nonforfeitable.
25. AMENDMENT OF THE PLAN. The Board may from time to time in its
discretion amend or modify the Plan without the approval of the stockholders of
the Company, except as such stockholder approval may be required (a) to permit
the grant of Awards under, and transactions in Stock pursuant to, the Plan to be
exempt from potential liability under Section 16(b) of the 1934 Act or (b) under
the listing requirements of any national securities exchange or national market
system on which are listed any of the Company's equity securities.
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26. TERMINATION OF THE PLAN. The Plan shall terminate on the tenth (10th)
anniversary of the Effective Date or at such earlier time as the Board may
determine. Any termination. whether in whole or in part, shall not affect any
Award then outstanding under the Plan.
27. NO ILLEGAL TRANSACTIONS. The Plan and all Awards granted pursuant to it
are subject to all laws and regulations of any governmental authority which may
be applicable thereto; and notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any Stock or pay any
benefits to a Grantee if such exercise, delivery, receipt or payment would
constitute a violation by the Grantee or the Company of any such law or
regulation.
28. CONTROLLING LAW. The law of Illinois, except its law with respect to
choice of law, shall be controlling in all matters relating to the Plan.
29. SEVERABILITY. If all or any part of the Plan is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared to
be unlawful or invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
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Executed this 23rd day of July, 1998.
NEOPHARM, INC.
By: /s/ James M. Hussey
--------------------------
Title: CEO/President
-----------------------
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EXHIBIT 5.1
-----------
[BURKE, WARREN, MACKAY & SERRITELLA, P.C. LETTERHEAD]
October 29, 1998
NeoPharm, Inc.
100 Corporate North
Suite 250
Bannockburn, Illinois 60015
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-8 to be filed by you with the Securities & Exchange Commission on or about
October 30, 1998 (the "Registration Statement") in connection with your
registration under the Securities Act of 1933 of 1,500,000 shares of your common
stock (the "Shares") under the Company's 1998 Equity Incentive Plan (the
"Plan"). As your counsel in connection with this transaction, we have examined
the proceedings taken and are familiar with the proceedings proposed to be taken
by you in connection with the issuance and sale of the Shares pursuant to the
Plan.
It is our opinion that, when issued and sold in the manner described in
the Plan and pursuant to the agreements which accompany each grant or purchase
under the Plan, the Shares will be legally and validly issued, fully paid and
non-assessable.
We hereby consent to the use of this Opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Burke, Warren, MacKay & Serritella, P.C.
BURKE, WARREN, MacKAY & SERRITELLA, P.C.
<PAGE> 1
[ARTHUR ANDERSEN LLP LETTERHEAD]
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 2, 1998,
incorporated by reference in Neopharm, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997, as amended, and to all references to our Firm
included in this registration statement.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 30, 1998
