SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ATLANTIC PHARMACEUTICALS, INC.
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(Name of Registrant as Specified in Its Charter)
ATLANTIC PHARMACEUTICALS, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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ATLANTIC PHARMACEUTICALS, INC.
142 CYPRESS POINT ROAD
HALF MOON BAY, CALIFORNIA 94019
JUNE 20, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Atlantic Pharmaceuticals, Inc. (the "Company"), which will
be held at 9:00 A.M. New York time on Wednesday, July 24, 1996, at the law
offices of Brobeck, Phleger & Harrison LLP, 1301 Avenue of the Americas, 30th
Floor, New York, New York 10019.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) to elect a Board of four directors to serve for the ensuing
year or until their successors are elected and qualified;
(ii) to approve an amendment to the Company's 1995 Stock Option
Plan to increase the total number of shares authorized for
issuance thereunder by 300,000 shares and to increase the
number of shares subject to options granted to non-employee
directors pursuant to the automatic grant program thereunder;
and
(iii) to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December
31, 1996.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return
the enclosed proxy card in the accompanying reply envelope no later than July 8,
1996. If you hold your shares of the Company in street name and decide to attend
the Annual Meeting and vote your shares in person, please notify your broker to
obtain a ballot so that you may vote your shares. If you are a holder of record
of shares of the Company and vote by ballot at the Annual Meeting, your proxy
vote will be revoked automatically and only your vote at the Annual Meeting will
be counted. YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN
THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING AND VOTE IN PERSON.
A copy of the Company's 1995 Annual Report to Stockholders is also
enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Jon D. Lindjord
Jon D. Lindjord
President and Chief Executive Officer
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IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT, IF YOU ARE UNABLE TO ATTEND
THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
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ATLANTIC PHARMACEUTICALS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 24, 1996
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TO THE STOCKHOLDERS OF ATLANTIC PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Atlantic Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), will be held at 9:00 A.M. New York Time on Wednesday, July 24, 1996,
at the law offices of Brobeck, Phleger & Harrison LLP, 1301 Avenue of the
Americas, 30th floor, New York, New York 10019 for the following purposes:
1. To elect a Board of four Directors to serve for the ensuing
year or until their successors are elected and qualified. The
four nominees are Jon D. Lindjord; Steve H. Kanzer; John K.A.
Prendergast, Ph.D. and Lindsay A. Rosenwald, M.D.;
2. To approve an amendment to the Company's 1995 Stock Option
Plan (a) to increase the total number of shares authorized for
issuance thereunder by 300,000 shares to a total of 950,000
shares, (b) to increase the number of shares subject to an
option that a non-employee Board member is automatically
granted thereunder on the initial date of election or
appointment to the Board from 5,000 shares to 10,000 shares
and (c) commencing with this year's Annual Meeting, to
increase the number of shares subject to an option that a
continuing non-employee Board member is automatically granted
thereunder on the date of each annual meeting from 1,000
shares to 2,000 shares;
3. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December
31, 1996; and
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment or adjournments
thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for determining those stockholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournment thereof is June 17,
1996. A list of the stockholders entitled to vote at the Annual Meeting will be
available for inspection at the Company's offices, 142 Cypress Point Road, Half
Moon Bay, California 94019, for at least 10 days prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Annual Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. If you hold your shares
of the Company in street name and decide to attend the Annual Meeting and vote
your shares in person, please notify your broker to obtain a ballot so that you
may vote your shares. If you are a holder of record of shares of the Company and
vote by ballot at the Annual Meeting, your proxy vote will be revoked
automatically and only your vote at the Annual Meeting will be counted. The
prompt return of your proxy card will assist us in preparing for the Annual
Meeting.
Sincerely,
/s/ Jon D. Lindjord
Jon D. Lindjord
President and Chief Executive Officer
Half Moon Bay, California
June 20, 1996
YOUR VOTE IS VERY IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY.
WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS
POSSIBLE.
ATLANTIC PHARMACEUTICALS, INC.
142 Cypress Point Road
Half Moon Bay, California 94019
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PROXY STATEMENT
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FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 24, 1996
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS (THE "BOARD") OF ATLANTIC PHARMACEUTICALS, INC., A DELAWARE
CORPORATION (THE "COMPANY"), FOR USE AT THE 1996 ANNUAL MEETING OF STOCKHOLDERS
(THE "ANNUAL MEETING") TO BE HELD AT 9:00 A.M. NEW YORK TIME ON WEDNESDAY, JULY
24, 1996, AT THE LAW OFFICES OF BROBECK, PHLEGER & HARRISON LLP, 1301 AVENUE OF
THE AMERICAS, 30TH FLOOR, NEW YORK, NEW YORK 10019, AND AT ANY ADJOURNMENT
THEREOF.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Annual Meeting on or about
June 20, 1996.
RECORD DATE AND VOTING
Stockholders of record at the close of business on June 17, 1996 are
entitled to notice of, and to vote at, the Annual Meeting. As of the close of
business on such date, there were 2,663,880 shares of the Company's common
stock, par value $0.001 per share (the "Common Stock"), outstanding and entitled
to vote, and held by 73 stockholders of record. No shares of the Company's
preferred stock are outstanding. Each stockholder is entitled to one vote for
each share of Common Stock held by such stockholder as of the record date. If a
choice as to the matters coming before the Annual Meeting has been specified by
a stockholder on the Proxy, the shares will be voted accordingly. If no choice
is specified, the shares will be voted IN FAVOR OF the approval of the proposals
described in the Notice of Annual Meeting and in this Proxy Statement.
Abstentions and broker non-votes (i.e., the submission of a Proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the matter) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved or not.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Investor Relations in writing at
142 Cypress Point Road, Half Moon Bay, California 94019 or by telephone at (415)
726-1327. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by July 8, 1996.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING POSTAGE-PREPAID, RETURN ENVELOPE NO LATER THAN JULY 8, 1996 SO
THAT, IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke
it at any time prior to its exercise. Stockholders of record may revoke their
proxy by filing with the Secretary of the Company at its principal executive
offices at 142 Cypress Point Road, Half Moon Bay, California 94019 a duly
executed Proxy bearing a later date or by attending the Annual Meeting and
voting their shares in person. Persons who hold their shares of the Company's
stock in street name may revoke their proxy by contacting their broker to obtain
a legal ballot and filing such ballot bearing a later date with the Secretary of
the Company at its principal executive offices or by attending the Annual
Meeting and voting such legal ballot in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Annual Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. The Company does not
presently intend to solicit proxies other than by mail.
Whether or not you expect to attend the Annual Meeting in person,
please mark, date, sign and return the enclosed Proxy in the accompanying
postage prepaid, return envelope no later than July 8, 1996.
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER
31, 1995 (THE "ANNUAL REPORT") HAS BEEN MAILED CONCURRENTLY WITH THE MAILING OF
THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT TO ALL STOCKHOLDERS ENTITLED TO
NOTICE OF AND TO VOTE AT THE ANNUAL MEETING. THE ANNUAL REPORT IS NOT
INCORPORATED INTO THIS PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING
MATERIAL.
2.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
At the Annual Meeting, a Board of four directors will be elected to
serve for one year and until their successors shall have been duly elected and
qualified or until their earlier resignation or removal. The Board has selected
four nominees, all of whom are current directors of the Company. Each person
nominated for election has agreed to serve if elected, and management has no
reason to believe that any nominee will be unavailable to serve. Unless
otherwise instructed, the Proxy holders will vote the Proxies received by them
IN FAVOR OF the nominees named below. The four candidates receiving the highest
number of affirmative votes of the shares entitled to vote at the Annual Meeting
will be elected. If any nominee is unable to or declines to serve as a director,
the Proxies may be voted for a substitute nominee designated by the current
Board. As of the date of this Proxy Statement, the Board is not aware of any
nominee who is unable or will decline to serve as a director.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY
UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS, UNTIL THEIR SUCCESSORS HAVE BEEN
DULY ELECTED AND QUALIFIED OR UNTIL THEIR EARLIER RESIGNATION OR REMOVAL.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below is information regarding the nominees.
Name of Nominees Age Position(s) with the Company Director Since
- --------------- --- ---------------------------- --------------
Jon D. Lindjord 47 Director, President and Chief 1995
Executive Officer
Steve H. Kanzer 32 Director 1993
John K.A. Prendergast, Ph.D. 41 Director 1994
Lindsay A. Rosenwald, M.D. 41 Director 1993
BUSINESS EXPERIENCE OF NOMINEES
JON D. LINDJORD assumed the position of Chief Executive Officer and
President of the Company effective August 1, 1995 and was elected a director of
the Company in December 1995. Since August 1, 1995, Mr. Lindjord also has served
as Chief Executive Officer and President of each of the Company's subsidiaries,
Optex Ophthalmologics, Inc., Gemini Gene Therapies, Inc. and Channel
Therapeutics, Inc. From 1988 to 1994, Mr. Lindjord worked for G.D. Searle, a
pharmaceutical company, in a variety of positions including Vice President,
Corporate Marketing Planning; Vice President, International Marketing
Operations; and, most recently, Managing Director, Eastern Europe and Russia.
During the period from 1985 to 1988, Mr. Lindjord instituted and ran a
department at Pfizer Pharmaceuticals which increased the efficacy and efficiency
of two-way communications among the marketing, licensing and business units at
the New York City headquarters and the research and development division in
Groton, Connecticut. During 1984 to 1985, Mr. Lindjord served as Director of
Business Development, Medicinal Products at Bristol-Myers International Group, a
conglomerate. Mr. Lindjord currently serves as a director of Lutinvest
Management Company, an emerging markets growth fund. Mr. Lindjord received his
A.B. from Princeton University in 1970 and his M.B.A. from the Darden School at
the University of Virginia in 1972.
3.
STEVE H. KANZER has served as a director of the Company since its
inception. Mr. Kanzer has been a Managing Director of The Castle Group, a
venture capital and merchant banking firm, since November 1991, and a Managing
Director of Paramount Capital, Incorporated, an investment bank specializing in
the biotechnology industry, since February 1992. Mr. Kanzer is a director of
Boston Life Sciences, Inc. and several other privately held biotechnology
companies. Prior to joining The Castle Group and Paramount Capital,
Incorporated, Mr. Kanzer was an attorney with Skadden, Aarps, Slate, Meagher &
Flom in New York, New York from September 1988 to October 1991. Mr. Kanzer
received his J.D. from New York University School of Law and a B.B.A. in
Accounting from Baruch College.
JOHN K.A. PRENDERGAST, PH.D. is a co-founder of the Company, as well as
of two of its subsidiaries, Optex Ophthalmologics, Inc. and Channel
Therapeutics, Inc. Dr. Prendergast has served as a director of each of the
Company, Optex Ophthalmologics, Inc. and Channel Therapeutics, Inc. since August
1994. Dr. Prendergast has been a Managing Director of The Castle Group, a
venture capital and merchant banking firm, since January 1993. Prior to joining
The Castle Group, Dr. Prendergast worked as an investment banker in the
Corporate Finance division of the firm D.H. Blair & Co., Inc., an investment
bank, from May 1991 to September 1991. Dr. Prendergast received his M.Sc. and
Ph.D. from the University of New South Wales, Sydney, Australia and a CSS in
Administration and Management from Harvard University.
LINDSAY A. ROSENWALD, M.D. has been a member of the Board of Directors
of the Company since its inception and served as its President and Chief
Executive Officer until July 1993. Dr. Rosenwald has been Chairman and Chief
Executive Officer of The Castle Group, a venture capital and merchant banking
firm, since its inception in 1991. Since February 1992, Dr. Rosenwald also has
been the Chairman and Chief Executive Officer of Paramount Capital,
Incorporated, an investment bank specializing in the biotechnology industry. In
June 1994 Dr. Rosenwald founded Aries Financial Services, Inc., a money
management firm specializing in the health sciences industry. From 1987 to 1991,
Dr. Rosenwald was Managing Director of Corporate Finance of D.H. Blair & Co.,
Inc., an investment bank. Dr. Rosenwald is also Chairman of the Board of
Directors of Interneuron Pharmaceuticals, Inc., which he co-founded in 1988; a
director of each of the following publicly traded biotechnology companies:
Ansan, Inc., Arigen, Inc., BioCryst Pharmaceuticals, Inc., Neose Technologies,
Inc., Sparta Pharmaceuticals, Inc., Titan Pharmaceuticals, Inc. and Xenometrix,
Inc.; and a director of several other privately held pharmaceutical companies.
Dr. Rosenwald holds an M.D. from Temple University School of Medicine and a B.S.
in Finance from Pennsylvania State University.
NUMBER OF DIRECTORS; RELATIONSHIPS
The Company's Bylaws authorize the Board to fix by resolution the
number of directors serving on the Board, provided that such number is one or
more. Since December 5, 1995, the number of directors has been fixed at four.
All directors hold office until the annual meeting of stockholders following the
initial election or appointment of such director, and until their successors
have been duly elected and qualified, or until their earlier resignation or
removal. Officers are appointed to serve at the discretion of the Board.
There are no family relationships among executive officers or directors
of the Company.
BOARD MEETINGS AND COMMITTEES
The Board held one meeting during the 1995 fiscal year, and each of the
four directors participated in or attended such meeting. In addition, the Board
acted several times by unanimous written consent during the 1995 fiscal year.
The Board has an Audit Committee and a Compensation Committee, but not
a standing Nominating Committee. The Audit Committee, which is composed of
Messrs. Kanzer and Prendergast, reviews the professional services provided by
the Company's independent auditors and monitors the scope and results of the
annual audit; reviews proposed changes in the Company's financial and accounting
standards and principles; reviews the
4.
Company's policies and procedures with respect to its internal accounting,
auditing and financial controls; makes recommendations to the Board of Directors
on the engagement of the independent auditors and addresses other matters that
may come before it or as directed by the Board of Directors. The Audit Committee
held one meeting during the 1995 fiscal year, at which both Messrs. Kanzer and
Prendergast were in attendance.
The Compensation Committee, which is composed of Messrs. Kanzer and
Rosenwald, sets the compensation for certain of the Company's personnel and
administers the Company's 1995 Stock Option Plan. The Compensation Committee
held two meetings during the 1995 fiscal year, at which both Messrs. Kanzer and
Rosenwald were in attendance.
DIRECTOR COMPENSATION
Non-employee Board members are reimbursed for reasonable expenses
incurred in connection with attendance at meetings of the Board and of
Committees of the Board. Non-employee Board members are eligible to participate
in the automatic stock option grant program pursuant to the Company's 1995 Stock
Option Plan. Upon approval of Proposal Two by the stockholders at this Annual
Meeting, non-employee directors will be granted an option for 10,000 shares of
the Company's common stock upon their initial election or appointment to the
Board, and, beginning with the Annual Meeting, an option for 2,000 shares of the
Company's common stock on the date of each annual meeting of the Company for
those non-employee directors continuing to serve after such meeting. No
non-employee Board member has received any grants under the automatic option
grant program.
Each employee of the Company who is also a director of the Company does
not receive any additional compensation for his service on the Board.
5.
PROPOSAL TWO - APPROVAL OF AMENDMENTS
TO THE COMPANY'S 1995 STOCK OPTION PLAN
INTRODUCTION
The stockholders are being asked to vote on an amendment to the
Company's 1995 Stock Option Plan (the "Plan") that would (a) increase the total
number of shares authorized for issuance thereunder by 300,000 shares to a total
of 950,000 shares, (b) increase the number of shares that a non-employee Board
member is automatically granted under the Automatic Option Grant Program
thereunder on the initial date of election or appointment to the Board from
5,000 shares to 10,000 shares and to the number of shares that a continuing
non-employee Board member is automatically granted thereunder on the date of
each annual meeting beginning with this Annual Meeting from 1,000 shares to
2,000 shares. The Board adopted the amendment on June 10, 1996, subject to
stockholder approval at the Annual Meeting.
The Plan, pursuant to which 950,000 shares of Common Stock, including
those to be approved by the Company's stockholders at the Annual Meeting, have
been reserved for issuance was adopted by the Board of Directors in July 1995
and subsequently approved by the Company's stockholders. The Plan became
effective upon its adoption by the Board. A total of 950,000 shares of Common
Stock, including the 300,000 shares of Common Stock subject to approval by the
Company's stockholders at the Annual Meeting, have been reserved for issuance
under the Plan. The amendment to the Plan subject to stockholder approval under
this Proposal Two was adopted by the Board on June 10, 1996.
The principal terms and provisions of the Plan are summarized below.
The summary is not, however, intended to be a complete description of all the
terms of the Plan. A copy of the Plan will be furnished without charge to any
stockholder upon written request to the attention of the Company's corporate
secretary at 142 Cypress Point Road, Half Moon Bay, California 94019.
DESCRIPTION OF THE PLAN
Equity Incentive Programs. The Plan contains two separate equity
incentive programs: (i) a Discretionary Option Grant Program and (ii) an
Automatic Option Grant Program. The principal features of these programs are
described below. The Plan (other than the Automatic Option Grant Program) is
administered by the Compensation Committee of the Board. This committee (the
"Plan Administrator") has complete discretion (subject to the provisions of the
Plan) to authorize option grants under the Discretionary Option Grant Program.
However, all grants under the Automatic Option Grant Program will be made in
strict compliance with the provisions of that program, and no administrative
discretion will be exercised by the Plan Administrator with respect to the
grants made thereunder.
Share Reserve. A total of 950,000 shares of Common Stock (including the
300,000-share increase subject to approval under this Proposal Two) has
initially been reserved for issuance over the term of the Option Plan. The
number of shares available for issuance under the Option Plan will increase on
the first trading day of each calendar year, beginning with the 1997 calendar
year, by an amount equal to one percent of the shares of Common Stock
outstanding on December 31 of the immediately preceding calendar year. In no
event may any one participant in the Option Plan be granted stock options and
separately exercisable stock appreciation rights for more than 180,000 shares in
the aggregate per calendar year, beginning with the 1995 calendar year.
In the event any change is made to the outstanding shares of Common
Stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to the
6.
securities issuable (in the aggregate and to each participant) under the Plan
and to the securities and exercise price under each outstanding option.
Eligibility. Officers and other employees of the Company and its parent
or subsidiaries (whether now existing or subsequently established), non-employee
members of the Board (other than those serving as members of the Compensation
Committee) and the board of directors of its parent or subsidiaries and
consultants and independent advisors of the Company and its parent and
subsidiaries are eligible to participate in the Discretionary Option Grant
Program. Non-employee members of the Board (including members of the
Compensation Committee) are also eligible to participate in the Automatic Option
Grant Program.
As of May 31, 1996, four executive officers were eligible to
participate in the Plan and three non-employee Board members were eligible to
participate in the Automatic Option Grant Program. No other employees or
non-employee Board members were eligible to participate in the Plan or Automatic
Option Grant Program.
Valuation. The fair market value per share of Common Stock on any
relevant date under the Option Plan will be the average of the highest bid and
lowest asked prices per share on that date on the Nasdaq SmallCap Market.
On May 31, 1996, the fair market value per share was $8.00.
Amendment and Termination. The Board may amend or modify the Plan in
any or all respects whatsoever subject to any required stockholder approval. The
Board may terminate the Plan at any time, and the Plan will in all events
terminate on June 30, 2005.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at
an exercise price per share less than, equal to or greater than the fair market
value per share of Common Stock on the option grant date. No granted option will
have a term in excess of ten years.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company equal
in amount to the excess of (a) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (b) the aggregate exercise
price payable for such shares. Such appreciation distribution may, at the
discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
Limited stock appreciation rights may be granted to officers of the
Company as part of their option grants. Any option with such a limited stock
appreciation right in effect for at least six months may be surrendered to the
Company upon the successful completion of a hostile take-over of the Company. In
return for the surrendered option, the officer will be entitled to a cash
distribution from the Company in an amount per surrendered option share equal to
the excess of (a) the take-over price per share over (b) the exercise price
payable for such share.
7.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common Stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, as amended by the Board on
June 10, 1996 and as subject to stockholder approval at this Annual Meeting,
each individual who first becomes a non-employee Board member after the initial
public offering of the Common Stock will automatically be granted at that time
an option grant for 10,000 shares of Common Stock, provided such individual has
not previously been in the Company's employ. In addition, on the date of each
Annual Stockholders Meeting, beginning with the 1996 Annual Meeting, each
individual who is to continue to serve as a non-employee Board member after such
meeting will automatically be granted an option to purchase 2,000 shares of
Common Stock, provided such individual has served as a non-employee Board member
for at least six months. There will be no limit on the number of such
2,000-share options which any one non-employee Board member may receive over the
period of Board service. However, in no event will a non-employee Board member
be eligible to receive an option grant under the Automatic Option Grant Program
if such individual is, directly or indirectly, the holder of stock of the
Company possessing more than five percent of the voting power of all classes of
stock of the Company or is a representative of, or affiliated with such a five
percent stockholder.
Each option will have an exercise price per share equal to 100% of the
fair market value per share of Common Stock on the option grant date and a
maximum term of ten years measured from the option grant date.
Each option will be immediately exercisable for all the option shares,
but any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service.
Each initial option grant will vest (and the Company's repurchase rights will
lapse) in four equal annual installments over the optionee's period of Board
service, with the first such installment to vest upon the completion of one year
of Board service measured from the option grant date. Each annual option grant
will vest (and the Company's repurchase rights will lapse) upon the completion
of one year of Board service measured from the option grant date.
The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company by merger or asset sale or a hostile change in control of the Company
(whether by successful tender offer for more than 50% of the outstanding voting
stock or by proxy contest for the election of Board members). In addition, upon
the successful completion of a hostile take-over, each automatic option grant
which has been outstanding for at least six months may be surrendered to the
Company for a cash distribution per surrendered option share in an amount equal
to the excess of (a) the take-over price per share over (b) the exercise price
payable for such share.
GENERAL PROVISIONS
Acceleration. In the event that the Company is acquired by merger or
asset sale, each outstanding option under the Discretionary Option Grant Program
which is not to be assumed by the successor corporation or replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation will automatically accelerate in full. Any options assumed or
replaced in connection with such acquisition will be subject to immediate
acceleration in the event the individual's service is subsequently terminated
within 18 months following the acquisition. The Plan Administrator has the
discretion to provide for the acceleration of all outstanding options under the
Discretionary Grant Program upon a hostile change in control of the Company
(whether by successful tender offer for more than 50% of the outstanding voting
stock or by proxy contest for the election of Board members) or upon the
termination of the individual's service within a specified period following the
change in control.
8.
The Plan Administrator may also grant options with terms different than
those described above in connection with an acquisition or hostile change in
control of the Company.
Financial Assistance. The Plan Administrator may permit one or more
optionees to pay the exercise price of outstanding options under the Plan by
delivering a promissory note payable in installments. The Plan Administrator
will determine the terms of any such promissory note. However, the maximum
amount of financing provided any optionee may not exceed the cash consideration
payable for the issued shares plus all applicable taxes incurred in connection
with the acquisition of the shares. Any such promissory note may be subject to
forgiveness in whole or in part, at the discretion of the Plan Administrator,
over the optionee's period of service.
Special Tax Election. The Plan Administrator may provide one or more
holders of options with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options. Alternatively, the Plan Administrator may allow such individuals to
deliver previously acquired shares of Common Stock in payment of such tax
liability.
9.
STOCK AWARDS
The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table and the various indicated individuals
and groups, the number of shares of Common Stock subject to options granted
between June 30, 1995 and June 1, 1996 under the Option Plan together with the
weighted average exercise price payable per share.
======================================================================================================================
OPTION TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------
WEIGHTED
NUMBER OF OPTION AVERAGE
NAME AND POSITION SHARES EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------------------------
Jon D. Lindjord
Director, President and Chief Executive Officer 240,000 $3.39
- ----------------------------------------------------------------------------------------------------------------------
Stephen R. Miller, M.D.
Vice President, Chief Medical Officer 139,959 $5.22
- ----------------------------------------------------------------------------------------------------------------------
Margaret A. Schalk
Senior Director, Project Management 116,639 $5.34
- ----------------------------------------------------------------------------------------------------------------------
Shimshon Mizrachi
Controller 50,000 $5.81
- ----------------------------------------------------------------------------------------------------------------------
H. Laurence Shaw, M.D.
Chief Executive Officer 23,557 $1.00
- ----------------------------------------------------------------------------------------------------------------------
All current executive officers as a group
(4 persons) 546,598 $4.50
- ----------------------------------------------------------------------------------------------------------------------
Steve H. Kanzer
Director 0 N/A
- ----------------------------------------------------------------------------------------------------------------------
John K.A. Prendergast, Ph.D.
Director 0 N/A
- ----------------------------------------------------------------------------------------------------------------------
Lindsay A. Rosenwald
Director 0 N/A
- ----------------------------------------------------------------------------------------------------------------------
All non-employee directors as a group
(3 persons) 0 N/A
- ----------------------------------------------------------------------------------------------------------------------
All employees, including current officers who are not executive
officers, as a group 0 N/A
(0 persons)
======================================================================================================================
NEW PLAN BENEFITS
The Company has not granted any stock options or stock appreciation
rights from the pool of 300,000 shares of Common Stock subject to stockholder
approval in this Proposal Two.
10.
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
11.
ACCOUNTING TREATMENT
Option grants with exercise prices less than the fair market value of
the shares on the grant or issue date will result in a compensation expense to
the Company's earnings equal to the difference between the exercise price and
the fair market value of the shares on the grant date. Such expense will be
accruable by the Company over the period that the option shares are to vest.
Option grants at 100% of fair market value will not result in any charge to the
Company's earnings but the Company must disclose, in pro-forma statements to the
Company's financial statements, the impact those options would have upon the
Company's reported earnings were the value of those options at the time of grant
treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
STOCKHOLDER APPROVAL
The affirmative vote of the holders of a majority of the outstanding
Common Stock present in person or represented by Proxy at the Annual Meeting and
entitled to vote on this Proposal Two is required for approval of the proposed
amendment to the Plan. If such stockholder approval is not obtained, then the
Plan will terminate once the existing share reserve available under the Plan has
been issued. In addition, if stockholder approval of this proposal is not
obtained, under the Automatic Option Grant Program, eligible non-employee Board
members will receive a 5,000 share option grant upon the initial election or
appointment to the Board and continuing non-employee Board members will receive
a 1,000-share option grant on the date of each Annual Stockholders Meeting
beginning with this Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendments to the Plan as described in this Proposal Two. The
Board believes that the amendments to the Plan are essential to the Company's
efforts in attracting and retaining the services of highly qualified individuals
who can contribute significantly to the Company's financial success.
ACCORDINGLY, THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE AMENDMENTS TO THE PLAN.
12.
PROPOSAL THREE - RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board has appointed
the firm of KPMG Peat Marwick LLP, independent auditors, to audit the financial
statements of the Company for the year ending December 31, 1996, and is asking
the stockholders to ratify this appointment.
In the event the stockholders fail to ratify the appointment, the Board
will reconsider its selection. Even if the selection is ratified, the Board in
its discretion may direct the appointment of a different independent auditing
firm at any time during the year if the Board feels that such a change would be
in the best interests of the Company and its stockholders. The affirmative vote
of the holders of a majority of the Common Stock present or represented by Proxy
at the Annual Meeting and entitled to vote is required to ratify the selection
of KPMG Peat Marwick LLP.
KPMG Peat Marwick LLP commenced its annual audit of the Company's
financial statements in December 1995. A representative of KPMG Peat Marwick LLP
is expected to be present at the Annual Meeting to respond to appropriate
questions, and will be given the opportunity to make a statement if he or she so
desires.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1996.
13.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Certain information about the Company's executive officers is set forth
below (information concerning the Company's directors is contained in Proposal
One above):
Name Age Position
----- --- --------
Stephen R. Miller, M.D. 38 Vice President and Chief Medical Officer
Margaret A. Schalk 38 Senior Director, Project Management
Shimshon Mizrachi 43 Controller
STEPHEN R. MILLER, M.D. assumed the position of Vice President and
Chief Medical Officer effective September 19, 1995. Since September 19, 1995,
Dr. Miller also has served as Vice President and Chief Medical Officer of each
of the Company's subsidiaries, Optex Ophthalmologics, Inc., Gemini Gene
Therapies, Inc. and Channel Therapeutics, Inc. From December 1985 to September
1995, Dr. Miller served in a variety of positions of increasing responsibility
in the research and development and the marketing divisions of G.D. Searle, a
pharmaceutical company, including Senior Director, Technology Planning; Senior
Director, International Marketing Operations; Director, Cardiovascular
Marketing; and Associate Director, Clinical Research and Development. Dr. Miller
is board certified in Internal Medicine and has been an Instructor of Clinical
Medicine at the Chicago Medical School since 1985.
MARGARET A. SCHALK assumed the position of Senior Director, Project
Management effective September 19, 1995. Since September 19, 1995, Ms. Schalk
also has served as Senior Director, Project Management of each of the Company's
subsidiaries, Optex Ophthalmologics, Inc., Gemini Gene Therapies, Inc. and
Channel Therapeutics, Inc. From 1987 to September 1995, Ms. Schalk held
positions of increasing responsibility in the areas of project management, drug
development and marketing at G.D. Searle, a pharmaceutical company, including
Senior Product Manager, International Marketing Operations; Director of Project
Management, Corporate Medical and Scientific Affairs; and Associate Director,
Drug Development, Corporate Medical and Scientific Affairs.
SHIMSHON MIZRACHI assumed the position of Controller effective November
15, 1995. Since November 15, 1995, Mr. Mizrachi also has served as Controller of
each of the Company's subsidiaries, Optex Ophthalmologics, Inc., Gemini Gene
Therapies, Inc. and Channel Therapeutics, Inc. From April 1994 to November 1995,
Mr. Mizrachi served in a management position for the Caldor Corp., a regional
retail company. From 1987 to April 1994 Mr. Mizrachi held management positions
of increasing responsibility for MidIsland Department Stores, a regional retail
company. Mr. Mizrachi is a Certified Public Accountant and received his MBA from
Adelphi University.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned, for services
rendered in all capacities to the Company, for the last fiscal year by the
Company's Chief Executive Officer, the two other highest paid executive officers
serving as such at the end of 1995 whose compensation for that fiscal year was
in excess of $100,000, and the Company's former Chief Executive Officer who
resigned as of July 31, 1995. The individuals named in the table will be
hereinafter referred to as the "Named Officers." No other executive officer of
the Company received compensation in excess of $100,000 during fiscal year 1995.
Other than Dr. Shaw, who resigned as the Company's Chief Executive Officer, no
other executive officer who would otherwise have been included in such table on
the basis of 1995 salary and bonus resigned or terminated employment during the
year.
14.
SUMMARY COMPENSATION TABLE
====================================================================================================================================
Long-Term
Compen-
Annual Compensation sation
-------------------------------------------------------------------------
Awards
-------------------
Other Securities All Other
Annual Underlying Compen-
Compen- Options/SARs sation($)
Name and Principal Position Year(1) Salary ($)(2) Bonus ($) sation($) (#)
- ------------------------------------------------------------------------------------------------------------------------------------
Jon D. Lindjord 1995 72,717(3) -- -- 180,000 --
President and Chief
Executive Officer
Stephen R. Miller, M.D. 1995 40,278(4) -- -- 39,959 --
Vice President,
Chief Medical Officer
Margaret A. Schalk 1995 27,777(5) -- 1,420(6) 26,639 --
Senior Director,
Project Management
H. Laurence Shaw, M.D. 1995 125,819(9) -- -- 23,557 45,000(10)
Chief Executive Officer
====================================================================================================================================
(1) The Company was not a reporting company pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") at any time during 1994 and 1993. Therefore, the
Summary Compensation Table will include 1995 data only.
(2) Includes amounts deferred under the Company's Retirement Income Plan
(Internal Revenue Code Section 401(k)).
(3) Mr. Lindjord's annual compensation is $175,000. The Summary
Compensation Table sets forth compensation paid to Mr. Lindjord by the
Company commencing August 1, 1995, when he first became Chief Executive
Officer of the Company.
(4) Dr. Miller's annual compensation is $145,000. The Summary Compensation
Table sets forth compensation paid to Dr. Miller by the Company
commencing September 21, 1995, when he first became employed by the
Company.
(5) Ms. Schalk's annual compensation is $100,000. The Summary Compensation
Table sets forth compensation paid to Ms. Schalk commencing September
21, 1995, when she first became employed by the Company.
(6) Represents the reimbursement by the Company of certain moving expenses
incurred by Ms. Schalk in relocating to Half Moon Bay, California.
(7) Mr. Mizrachi's annual compensation is $90,000. The Summary Compensation
Table sets forth compensation paid to Mr. Mizrachi commencing November
15, 1995, when he first became employed by the Company.
(8) Represents the reimbursement by the Company of certain moving expenses
incurred by Mr. Mizrachi in relocating to Half Moon Bay, California.
(9) Dr. Shaw resigned from his position as Chief Executive Officer as of
July 31, 1995. The Summary Compensation Table sets forth compensation
paid to Dr. Shaw by the Company through July 31, 1995.
(10) Represents amounts received as severance pay.
15.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options under the Plan to the Named Officers during the 1995 fiscal year. Except
as described in footnote (1) below, no stock appreciation rights were granted
during the 1995 fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
================================================================================================================================
Individual Grants
- --------------------------------------------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Options/ Granted to Employees Exercise Price Expiration
Name SARs Granted(#)(1) in Fiscal Year ($/Share)(2) Date
- --------------------------------------------------------------------------------------------------------------------------------
Jon D. Lindjord 110,000 40.7 3.75 7/30/02
70,000 25.9 .75 7/30/02
Stephen R. Miller, M.D. 39,959 14.8 3.75 9/20/05
Margaret A. Schalk 26,639 9.9 3.75 9/20/05
H. Laurence Shaw, M.D. 23,557 8.7 1.00 8/31/00
================================================================================================================================
(1) Each option has a maximum term of 10 years, subject to earlier
termination in the event of the optionee's cessation of service with
the Company. The grant dates for each option are as follows: for Mr.
Lindjord, August 1, 1995; for Mr. Miller and Ms. Schalk, December 19,
1995; and for Mr. Shaw, August 31, 1995. Each option becomes
exercisable in four equal annual installments upon completion of each
year of service measured from the grant date. However, the option
granted to Mr. Shaw was immediately exercisable for all the shares on
the date of grant. Each option will become immediately exercisable in
full upon an acquisition of the Company by merger or asset sale, unless
the option is assumed by the successor entity. Each option includes a
limited stock appreciation right pursuant to which the optionee may
surrender the option, to the extent exercisable for vested shares, upon
the successful completion of a hostile tender for securities possessing
more than 50% of the combined voting power of the Company's outstanding
voting securities. In return for the surrendered option, the optionee
will receive a cash distribution per surrendered option share equal to
the excess of (i) the highest price paid per share of the Company's
common stock in such hostile tender offer over (ii) the exercise price
payable per share under the cancelled option.
(2) The exercise price may be paid in cash or in shares of Common Stock
(valued at fair market value on the exercise date) or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares and the federal and state income tax liability incurred by the
optionee in connection with such exercise. The optionee may be
permitted, subject to the approval of the Plan Administrator, to apply
a portion of the shares purchased under the option (or to deliver
existing shares of common stock) in satisfaction of such tax liability.
16.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year (as of December 31,
1995). No stock appreciation rights were exercised during such fiscal year, and,
except for the limited rights described in footnote (1) to the preceding table,
no stock appreciation rights were outstanding at the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
====================================================================================================================================
Value Value of Unexercised In-the-Money
Realized Options at FY-End (Market price of
(Market price No. of Securities Underlying shares at FY-End less exercise price)
Shares at exercise Unexercised Options at FY-End (#) ($)(1)
Acquired on date less --------------------------------------------------------------------------
Exercise (#) exercise
Name price) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
Jon D. Lindjord -- -- -- 180,000 -- 525,000
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen R. Miller, -- -- -- 39,959 -- 69,928
M.D.
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret A. Schalk -- -- -- 26,639 -- 46,618
- ------------------------------------------------------------------------------------------------------------------------------------
H. Laurence Shaw, -- -- 23,557 -- 106,007 --
M.D.
====================================================================================================================================
(1) Based on the fair market value of the Company's Common Stock on
December 29, 1995 of $5.50 per share, the closing selling price per
share on that date on the Nasdaq SmallCap Market.
(2) Equal to the closing selling price of the purchased shares on the
option exercise date less the exercise price paid for such shares.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Effective January 1, 1995, the Company entered into a Consulting
Agreement with John K.A. Prendergast, M.D., a director of the Company. Dr.
Prendergast advises the Company on the marketability of its technologies and
provides referrals for potential partnering arrangements with the Company.
Pursuant to such Consulting Agreement, Dr. Prendergast receives a consulting fee
of $2,500 per month. The Agreement is for a term of one year, is renewable at
the discretion of both parties and may be terminated upon 10 days' notice by
either party. As of January 1, 1996, the parties extended such agreement for an
additional one year period.
The Company entered into a severance agreement dated as of August 31,
1995 with Dr. H. Laurence Shaw, the Company's former Chief Executive Officer and
President, pursuant to which the Company made a one time payment of $45,000 to
Dr. Shaw and granted Dr. Shaw certain options for common stock of the Company
and of each of the subsidiaries of the Company.
Effective August 1, 1995, Mr. Lindjord became Chief Executive Officer
and President of the Company and each of the subsidiaries of the Company
pursuant to a Letter Agreement, dated July 7, 1995. Pursuant to such Agreement,
the Company agreed to pay Mr. Lindjord an annual salary of $175,000 payable
semi-monthly, in addition to a $25,000 discretionary bonus payable at the end of
Mr. Lindjord's first year of employment with the Company.
17.
In the event that the Company terminates Mr. Lindjord's employment without
cause, the Company is obligated to continue to pay his salary for one year,
subject to Mr. Lindjord's duty to mitigate damages by seeking alternative
employment. Further, pursuant to such Agreement and under the Company's 1995
Stock Option Plan, the Company has issued to Mr. Lindjord options to purchase
180,000 shares of Common Stock exercisable at a weighted average price of $2.58
per share. Furthermore, Mr. Lindjord and his dependents will be eligible to
receive paid medical and long-term disability insurance and such other health
benefits as the Company makes available to its other senior officers and
directors.
Effective September 21, 1995, Dr. Miller became Vice President, Chief
Medical Officer of the Company and of each of the Company's subsidiaries
pursuant to a Letter Agreement, dated September 21, 1995. Pursuant to such
Agreement, the Company agreed to pay Dr. Miller an annual salary of $145,000 and
to reimburse Dr. Miller for up to $8,000 of expenses incurred by him to relocate
to Half Moon Bay, California. In the event that the Company terminates Dr.
Miller's employment without cause, the Company is obligated to continue to pay
his salary for nine months, subject to Dr. Miller's duty to mitigate damages by
seeking alternative employment. In addition, the Company issued Dr. Miller under
the Company's 1995 Stock Option Plan an option to purchase 39,959 shares of the
Company's Common Stock at an exercise price of $3.75 per share. Finally, Dr.
Miller and his dependents will be eligible to receive paid medical and long-term
disability insurance and such other health benefits as the Company makes
available to its other senior officers and directors.
Effective September 21, 1995, Ms. Schalk became Senior Director,
Project Management of the Company and of each of the Company's subsidiaries
pursuant to a Letter Agreement, dated September 21, 1995. Pursuant to such
Agreement, the Company agreed to pay Ms. Schalk an annual salary of $100,000 and
to reimburse Ms. Schalk for up to $8,000 of expenses incurred by her to relocate
to Half Moon Bay, California. In the event that the Company terminates Ms.
Schalk's employment without cause, the Company is obligated to continue to pay
her salary for nine months, subject to Ms. Schalk's duty to mitigate damages by
seeking alternative employment. In addition, the Company issued Ms. Schalk under
the 1995 Stock Option Plan an option to purchase 26,639 shares of the Company's
Common Stock at an exercise price of $3.75 per share. Finally, Ms. Schalk and
her dependents will be eligible to receive paid medical and long-term disability
insurance and such other health benefits as the Company makes available to its
other senior officers and directors.
Effective November 15, 1995, Mr. Mizrachi became Controller of the
Company and of each of the Company's subsidiaries pursuant to a Letter
Agreement, dated November 6, 1995. Pursuant to such Agreement, the Company
agreed to pay Mr. Mizrachi an annual salary of $90,000 and to reimburse Mr.
Mizrachi for up to $8,000 of expenses incurred by him to relocate to Half Moon
Bay, California. In the event that the Company terminates Mr. Mizrachi's
employment without cause, the Company is obligated to continue to pay his salary
for six months, subject to Mr. Mizrachi's duty to mitigate damages by seeking
alternative employment. Finally, Mr. Mizrachi and his dependents will be
eligible to receive paid medical and long-term disability insurance and such
other health benefits as the Company makes available to its other senior
officers and directors.
The Compensation Committee has the discretion under the Plan to
accelerate options granted in the Named Officers in connection with a change in
control of the Company or upon the subsequent termination of the officer's
employment following the change and control.
CHANGE OF CONTROL TRANSACTIONS
In December 1995, the Company completed an initial public offering of
1,872,750 of its Units, with each Unit consisting of one share of the Company's
Common Stock and one redeemable Warrant exercisable for one share of the
Company's Common Stock. The net proceeds of the initial public offering were
$6,050,400.
18.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Restated Certificate of Incorporation and Bylaws provide
for indemnification of directors, officers and other agents of the Company. Each
of the current directors and certain officers of the Company have entered into
separate indemnification agreements with the Company.
Prior to a private financing consummated in September 1995, the
Company's operations had been financed primarily through loans provided by
Lindsay A. Rosenwald, M.D., a director and principal stockholder of the Company,
and VentureTek, L.P. ("VentureTek"), a principal stockholder and affiliate of
Dr. Rosenwald (the "Stockholder Loans"). On December 31, 1995, Stockholder Loans
aggregating $2,442,304 in principal and interest were converted into an
aggregate of 785,234 shares of the Company's Common Stock. The Company granted
to Dr. Rosenwald and VentureTek unlimited "piggyback" registration rights and
rights exercisable twice each year for registration on Form S-2 of such shares
of Common Stock, as well as any shares hereafter acquired by such stockholders.
The registration rights are subject to certain limitations and conditions,
including the right of the underwriter to restrict the number of shares offered
in a registration. In addition, the shares of Common Stock are subject to
certain lockup restrictions.
In addition to the Stockholder Loans described above, VentureTek, L.P.
made a loan to the Company in July 1995 in an aggregate principal amount of
$125,000, bearing interest at the rate of 10% annually. This loan, as well as
$115,011 accrued interest, were repaid on January 15, 1996 from the proceeds of
the Company's initial public offering.
On June 4, 1996, the Company entered into a letter agreement with
Paramount Capital Incorporated ("Paramount"), which is controlled by Dr.
Rosenwald, pursuant to which Paramount agreed to render financial advisory
services to the Company. Pursuant to the letter agreement, the Company will
compensate Paramount for such services by paying Paramount $5,000 per month and
a retainer payable in warrants to purchase 25,000 shares of the Company's Common
Stock at an exercise price of $10.00. The Company has agreed to pay Paramount
additional consideration upon the occurrence of certain events.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions, including loans,
between Atlantic and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board of
Directors, and will be on terms no less favorable to Atlantic than could be
obtained from unaffiliated third parties.
19.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who are the beneficial owners of more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership of the Common Stock with the United States Securities and
Exchange Commission (the "Commission"). Officers, directors and greater than 10%
stockholders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and the written representations that no other reports were required, the
Company believes that, during the period from January 1, 1995 to December 31,
1995, all officers, directors and beneficial owners of more than 10% of the
Company's Common Stock complied with all Section 16(a) requirements.
20.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
June 1, 1996 by (i) all persons who are beneficial owners of five percent or
more of the Company's Common Stock, (ii) each director and nominee, (iii) the
Named Officers in the Summary Compensation Table above and (iv) all current
directors and executive officers as a group. The number of shares beneficially
owned by each director or executive officer is determined under rules of the
Commission and the information is not necessarily indicative of beneficial
ownership for any other purpose. Shares of the Company's Common Stock subject to
convertible securities that are currently exercisable or convertible or that
will become exercisable or convertible within 60 days are deemed to be
beneficially owned by the person holding such convertible security for computing
the percentage ownership of such person, but are not treated as outstanding for
computing the percentage of any other person. Except as otherwise indicated, the
Company believes that the beneficial owners of the Company's Common Stock listed
below, based upon such information furnished by such owners, have sole
investment power with respect to such shares, subject to community property laws
where applicable.
Number Percent of Total
Name and Address of Shares Shares Outstanding(1)
---------------- --------- ---------------------
VentureTek, L.P.(2)..................................... 438,493 17.96%
39 Broadway
New York, NY 10006
Lindsay A. Rosenwald, M.D.(3)........................... 350,458 14.36%
375 Park Avenue, Suite 1501
New York, NY 10152
Steve H. Kanzer......................................... 121 *
John K.A. Prendergast, Ph.D.(4)......................... 156 *
Jon D. Lindjord......................................... --- *
Stephen R. Miller, M.D.................................. --- *
Margaret A. Schalk...................................... --- *
H. Laurence Shaw, M.D.(5)............................... 23,682 *
All current executive officers and directors
as a group (8 persons)............................... 350,830 14.37%
- -----------------------------
* Less than 1.0%
(1) Percentage of beneficial ownership is calculated assuming 2,663,880
shares of Common Stock were outstanding on June 1, 1996. Beneficial
ownership is determined in accordance with the rules of the Commission
and includes voting and investment power with respect to shares of
Common Stock.
(2) The general partner of VentureTek, L.P. is Mr. C. David Selingut. Mr.
Selingut may be considered a beneficial owner of the shares owned by
VentureTek, L.P. by virtue of his authority as general partner to vote
and/or dispose of such shares. VentureTek, L.P. is a limited
partnership, the limited partners of which include Dr. Rosenwald's
wife, children, sisters of Dr. Rosenwald's wife and their husbands and
children. Dr. Rosenwald disclaims beneficial ownership of such shares.
21.
(3) Includes 570 shares owned by Dr. Rosenwald's wife and trusts in favor
of his minor children. Dr. Rosenwald disclaims beneficial ownership of
such shares. Does not include 86 shares collectively owned by Dr.
Rosenwald's mother and two brothers, of which Dr. Rosenwald disclaims
beneficial ownership. Includes 380 shares owned by two companies of
which Dr. Rosenwald is the sole stockholder.
(4) Includes 53 shares of Common Stock held in trust for the benefit of the
children of Dr. Prendergast. Dr. Prendergast disclaims beneficial
ownership of such shares.
(5) Includes 23,557 shares of Common Stock underlying immediately
exercisable options which were granted to Dr. Shaw upon consummation of
the Company's initial public offering. Dr. Shaw resigned his position
as the Company's President and Chief Executive Officer, effective
August 1, 1995.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the present rules of the Commission, the deadline for
stockholders to submit proposals to be considered for inclusion in the Company's
Proxy Statement for the next year's Annual Meeting of Stockholders is expected
to be January 20, 1997. Such proposals may be included in next year's Proxy
Statement if they comply with certain rules and regulations promulgated by the
Commission.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 1995 has been mailed concurrently with this Proxy Statement
to all stockholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Commission.
Stockholders may obtain a copy of this report, without charge, by writing to
Investor Relations, Atlantic Pharmaceuticals, Inc., 142 Cypress Point Road, Half
Moon Bay, California 94019.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
THE BOARD OF DIRECTORS
Dated: June 20, 1996
22.
ATLANTIC PHARMACEUTICALS, INC.
1995 STOCK OPTION PLAN
as amended and restated June 9, 1996
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the
interests of Atlantic Pharmaceuticals, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity
programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock,
and
(ii) the Automatic Option Grant Program under which
Eligible Directors shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Four shall apply to all
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant Program with respect to
Section 16 Insiders. No non-employee Board member shall be eligible to serve on
the Primary Committee if such individual has, during the twelve (12)-month
period immediately preceding the date of his or her appointment to the Committee
or (if shorter) the period commencing with the
Section 12(g) Registration Date and ending with the date of his or her
appointment to the Primary Committee, received an option grant or direct stock
issuance under the Plan or any other stock option, stock appreciation, stock
bonus or other stock plan of the Corporation (or any Parent or Subsidiary),
other than pursuant to the Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant Program
with respect to all other persons eligible to participate in that program may,
at the Board's discretion, be vested in the Primary Committee or a Secondary
Committee, or the Board may retain the power to administer those programs with
respect to all such persons. The members of the Secondary Committee may be Board
members who are Employees eligible to receive discretionary option grants or
direct stock issuances under the Plan or any other stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any Parent
or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and to make such
determinations under, and issue such interpretations of, the provisions of such
program and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant Program under its
jurisdiction or any option thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.
F. Administration of the Automatic Option Grant Program shall
be self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
2.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
Program are as follows:
(i) Employees,
(ii) non-employee members of the Board (other than those
serving as members of the Primary Committee) or the board of directors
of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary)
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, with respect to the option grants under
the Discretionary Option Grant Program, which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable and the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding.
C. The individuals eligible to participate in the Automatic
Option Grant Program shall be (i) those individuals who first become
non-employee Board members after the Automatic Option Grant Program Effective
Date, whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members after one or more Annual Stockholders Meetings held after the
Automatic Option Grant Program Effective Date, including those individuals
serving as non-employee Board members on the Automatic Option Grant Program
Effective Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an initial option grant under the Automatic Option Grant Program at the
time he or she first becomes a non-employee Board member, but such individual
shall be eligible to receive periodic option grants under the Automatic Option
Grant Program upon his or her continued service as a non-employee Board member
following one or more Annual Stockholders Meetings. However, in no event shall a
non-employee Board member be eligible to receive option grants under the
Automatic Option Grant Program if such individual is a 5% Stockholder or is a
representative of, or affiliated with, a 5% Stockholder.
3.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall initially not exceed
950,000 shares.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 1997 calendar
year, by an amount equal to one percent (1%) of the shares of Common Stock
outstanding on December 31 of the immediately preceding calendar year. No
Incentive Options may be granted on the basis of the additional shares of Common
Stock resulting from such annual increases.
C. No one person participating in the Plan may receive options
and separately exercisable stock appreciation rights for more than 100,000
shares of Common Stock in the aggregate per calendar year, beginning with the
1995 calendar year; provided, however, that for the calendar year in which such
person first commences Service, the limit shall be increased to 200,000 shares.
D. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii) the
options are cancelled in accordance with the cancellation-regrant provisions of
Article Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced by
the gross number of shares for which the option is exercised, and not by the net
number of shares of Common Stock issued to the holder of such option.
E. 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 maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which the share reserve is to increase automatically each year, (iii) the number
and/or class of securities for which any one person may be granted options and
separately exercisable stock appreciation rights per calendar year, (iv) the
number and/or class of securities for which automatic option grants are to be
made subsequently per
4.
Eligible Director under the Automatic Option Grant Program and (v) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive, absent manifest error.
5.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator and may be less than, equal to or greater than the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. After the Section 12(g) Registration
Date, the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
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 by
reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
6.
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 the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
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:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such 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.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be exercised subsequently
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.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
(iv) 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.
(v) In the event of an Involuntary Termination
following a Corporate Transaction,the provisions of Section III of this
Article Two shall govern the period for which the outstanding options
are to remain exercisable following the Optionee's cessation of Service
and shall supersede any provisions to the contrary in this section.
7.
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:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the 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
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested 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 in which the
Optionee would have vested under the option had the Optionee continued
in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. First Refusal Rights. Until the Section 12(g) Registration
Date, the Corporation shall have the right of first refusal with respect to any
proposed sale or other disposition by the Optionee (or any successor in interest
by reason of purchase, gift or other transfer) of any shares of Common Stock
issued under the Plan. Such right of first refusal shall be exercisable in
accordance with the terms and conditions established by the Plan Administrator
and set forth in the agreement evidencing such right.
G. Limited Transferability of Options. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during the Optionee's lifetime in accordance
with the terms of a Qualified Domestic Relations Order. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest in
the option pursuant to such Qualified Domestic Relations
8.
Order. The terms applicable to the assigned portion shall be the same as those
in effect for the option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully 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 so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor
9.
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive, absent manifest error.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. 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).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted options and
separately exercisable stock appreciation rights under the Plan per calendar
year.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. 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.
10.
F. The Plan Administrator shall have the discretion to grant
options with terms different from those described in this Section III in
connection with a Corporate Transaction.
G. 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 (i) provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
I. The grant of options under the Discretionary Option Grant
Program 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.
IV. 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 option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program and to grant in substitution new options covering the same
or different number of shares of Common Stock but with an exercise price per
share based on the Fair Market Value per share of Common Stock on the new option
grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
11.
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be
made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem
appropriate.
(iii) If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the later of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
vested shares of Common Stock. In return for the surrendered option,
the Optionee shall receive a cash distribution from the Corporation in
an amount equal to the excess of (a) the Take-Over Price of the shares
of Common Stock which are at the time vested under each surrendered
option (or surrendered portion thereof) over (b) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
12.
(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution.
(iv) The balance of the option (if any) shall continue in full
force and effect in accordance with the documents evidencing such
option.
13.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified
below:
1. Each Eligible Director who is first elected or appointed as a
non-employee Board member after the Automatic Option Grant Program Effective
Date shall automatically be granted, on the date of such initial election or
appointment (as the case may be), a Non-Statutory Option to purchase 10,000
shares of Common Stock.
2. On the date of each Annual Stockholders Meeting held after the
Automatic Option Grant Program Effective Date, each individual who is to
continue to serve as an Eligible Director after such meeting, shall
automatically be granted, whether or not such individual is standing for
re-election as a Board member at that Annual Meeting, a Non-Statutory Option to
purchase an additional 2,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months. There
shall be no limit on the number of such 2,000-share option grants any one
Eligible Director may receive over his or her period of Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of three
14.
(3) successive and equal annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to vest
upon the Optionee's completion of one (1) year of Board service measured from
the option grant date. Each annual grant shall vest, and the Corporation's
repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
E. EFFECT OF TERMINATION OF BOARD SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or any portion of
those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Board service for any reason other than death or Permanent
Disability, terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested shares.
15.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each automatic option held by him or her for a period of at least six (6)
months. The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall
be required in connection with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant
Program 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.
16.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
17.
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee to pay the
option exercise price under the Discretionary Option Grant Program 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. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or stock appreciation rights under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options under the Plan (other than the options
granted under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or
more
18.
shares of Common Stock previously acquired by such holder (other than
in connection with the option exercise triggering the Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant Program shall became
effective on the Plan Effective Date and options may be granted under the
Discretionary Option Grant Program at any time after the Plan Effective Date.
The Automatic Option Grant Program became effective on the Automatic Option
Grant Program Effective Date and option grants under the Automatic Option Grant
Program may be made to the Eligible Directors after such date. However, no
options granted under the Plan may be exercised until the Plan is approved by
the Corporation's stockholders. If such stockholder approval is not obtained
within twelve (12) months after the Plan Effective Date, then all options
previously granted under this Plan shall terminate and cease to be outstanding,
and no further options shall be granted and no shares shall be issued under the
Plan.
B. The Plan was amended on June 9, 1995 to (i) increase the
total number of shares of Common Stock available for issuance from 650,000
shares to 950,000 shares and (ii) to increase the number of shares of Common
Stock subject to the options granted under the Automatic Option Grant Program
upon the initial election or appointment of an Eligible Director from 5,000
shares to 10,000 and to increase the number of shares of Common Stock subject to
the annual option grants thereunder to be made on the date of each Annual
Stockholders Meeting to continuing non-employee Board members from 1,000 to
2,000 shares. The amendment is subject to stockholder at the 1996 Annual Meeting
of Stockholders.
C. The Plan shall terminate upon the earliest of (i) June 30,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options under the Plan or
(iii) the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all outstanding options shall continue
to have force and effect in accordance with the provisions of the documents
evidencing such options.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, (i) no
such amendment or modification shall adversely affect any rights and obligations
with respect to options or stock appreciation rights at the time outstanding
under the Plan unless the Optionee consents to such amendment or modification,
and (ii) any amendment made to the Automatic Option Grant Program (or any
options outstanding thereunder) shall be in compliance with the limitations of
that program. In addition, the Board shall not, without the approval of the
19.
Corporation's stockholders, (i) materially increase the maximum number of shares
issuable under the Plan, the number of shares for which options may be granted
under the Automatic Option Grant Program or the maximum number of shares for
which any one person may be granted options or separately exercisable stock
appreciation rights in the aggregate per calendar year, except for permissible
adjustments in the event of certain changes in the Corporation's capitalization,
(ii) materially modify the eligibility requirements for Plan participation or
(iii) materially increase the benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program that are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under those programs are held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess grants are made, then (i) any unexercised options granted
on the basis of such excess shares shall terminate and cease to be outstanding
and (ii) the Corporation shall promptly refund to the Optionees the exercise
price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
or stock appreciation right under the Plan and the issuance of any shares of
Common Stock upon the exercise of any option or stock appreciation right shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options and stock appreciation rights granted under it and the shares of Common
Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
20.
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.
21.
APPENDIX
The following definitions shall be in effect under the Plan:
B. AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the date on
which the Underwriting Agreement is executed and the initial public offering
price of the Common Stock is established.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
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.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
A-1.
(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.
H. CORPORATION shall mean Atlantic Pharmaceuticals, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Atlantic Pharmaceuticals, Inc. which shall by
appropriate action adopt the Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
J. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
K. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
L. 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.
M. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
N. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) 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 or any successor system. 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.
A-2.
(ii) If the Common Stock is at the time traded on the
Nasdaq SmallCap Market or the over-the-counter market, then the Fair
Market Value shall be the average of the highest bid and lowest asked
prices per share of Common Stock on the date in question on the Nasdaq
SmallCap Market or the over-the-counter market, as such prices are
reported by the National Association of Securities Dealers through its
Nasdaq system or any successor system. If there are no reported bid and
asked prices for the Common Stock on the date in question, then the
Fair Market Value shall be the average of the highest bid and lowest
asked prices on the last preceding date for which such quotations
exist.
(iii) 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.
(iv) For purposes of any option grants made on the date
the Underwriting Agreement is executed and the initial public offering
price of the Common Stock is established, the Fair Market Value shall
be deemed to be equal to the established initial offering price per
share. For purposes of option grants made prior to such date, the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
O. 5% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than five percent (5%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
P. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's
A-3.
stockholders which the Board does not recommend such stockholders to
accept, and
(ii) more than fifty percent (50%) of the securities so
acquired are accepted from persons other than Section 16 Insiders.
Q. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
R. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of
:
(i) such individual'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 level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe
benefits and participation in 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.
S. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person 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).
T. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
U. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
V. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant or Automatic Option Grant Program.
A-4.
W. 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. For purposes of the grant of Non-Statutory Options and stock
appreciation rights under the Discretionary Option Grant Program, the term
Parent shall also include any corporation, partnership, joint venture or other
business entity which, directly or indirectly, controls the management and
policies of the Corporation, whether through the ownership of voting securities,
by contract or otherwise.
X. 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.
However, solely for the purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
Y. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
Z. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Board, the Primary Committee or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
AA. PLAN EFFECTIVE DATE shall mean the date on which the Plan is
adopted by the Board.
AB. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option Grant Program with respect to Section 16 Insiders.
AC. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
AD. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant
Program with respect to eligible persons other than Section 16 Insiders.
A-5.
AE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AF. SECTION 12(G) REGISTRATION DATE shall mean the first date on which
the Common Stock is registered under Section 12(g) of the 1934 Act.
AG. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
AI. 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. For purposes of the grant of Non-Statutory Options
and stock appreciation rights under the Discretionary Option Grant Program, the
term Subsidiary shall also include any corporation, partnership, joint venture
or other business entity in which the Corporation, directly or indirectly,
controls the management and policies, whether through the ownership of voting
securities, by contract or otherwise.
AJ. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AM. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-6.
APPENDIX B
ATLANTIC PHARMACEUTICALS, INC.
PROXY
Annual Meeting of Stockholders, June 20, 1996
This Proxy is Solicited on Behalf of the Board of
Atlantic Pharmaceuticals, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held June 20, 1996 and the
Proxy Statement and appoints Jon D. Lindjord and Margaret A. Schalk, and each of
them, the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of Atlantic Pharmaceuticals, Inc. (the "Company") which
the undersigned is entitled to vote, either on his or her own behalf or on
behalf of any entity or entities, at the Annual Meeting of Stockholders of the
Company to be held at the law offices of Brobeck, Phleger & Harrison LLP, 1301
Avenue of the Americas, 30th Floor, New York, New York 10019 on Thursday, June
20, 1996 at 9:00 A.M. New York Time (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
1. To elect four directors to serve on the Board of Directors for the ensuing
year or until their respective successors are duly elected and qualified:
WITHHOLD AUTHORITY
FOR TO VOTE
John D. Lindjord ___ ___
Steve H. Kanzer ___ ___
John K.A. Prendergast, Ph.D. ___ ___
Lindsay A. Rosenwald, M.D ___ ___
2. FOR AGAINST ABSTAIN To approve an amendment to the Company's 1995 Stock
Option Plan (a) to increase the total number of shares
authorized for issuance thereunder by 300,000 shares
to a total of 950,000 shares, (b) to increase the
number of shares subject to an option that a
non-employee Board member is automatically granted
thereunder on the initial date of election or
appointment to the Board from 5,000 shares to 10,000
shares and (c) to incrase the number of shares subject
to an option that a continuing non-employee Board
member is automatically granted thereunder on the date
of each annual meeting beginning with this Annual
Meeting from 1,000 shares to 2,000 shares, and
3. FOR AGAINST ABSTAIN To ratify the Board of Director's selection of KPMG
Peat Marwick LLP to serve as the Company's independent
auditors for the year ending December 31, 1996.
The Board of Directors recommends a vote IN FAVOR OF each of the directors
listed above and a vote IN FAVOR OF the other proposals. This Proxy, when
properly executed, will be voted as specified above. If no specification is
made, this Proxy will be voted IN FAVOR OF the election of the directors listed
above and IN FAVOR OF the other proposals.
Please print the name(s) appearing on each share certificate(s) over which
you have voting authority:
___________________________________________________________________________
(Print name(s) on certificate)
Please sign your name: Date:
_____________________________________ _______________
(Authorized Signature(s))
