SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NPS PHARMACEUTICALS, INC.
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(Name of Registrant as Specified in Its Charter)
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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 Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of 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 14a6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction computed
pursuant to exchange Act Rule 0-11. (See forth the amount on which the
filing fee is calculated and state how it was determined):
Not Applicable
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(4) Proposed maximum aggregate value of transaction:
Not Applicable
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(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
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(2) Form, Schedule or Registration Statement No.:
Not Applicable
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(3) Filing Party:
Not Applicable
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(4) Date Filed:
Not Applicable
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NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UT 84108-1256
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 30, 1996 AT 3:00 P.M. LOCAL TIME
AT THE
UNIVERSITY PARK HOTEL
500 SOUTH WAKARA WAY
SALT LAKE CITY, UTAH 84108-1256
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TO THE STOCKHOLDERS OF NPS PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NPS
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held on
Tuesday, July 30, 1996, at 3:00 p.m., local time, at the University Park Hotel,
500 South Wakara Way, Salt Lake City, Utah for the following purposes:
1. To elect seven directors to hold office until the 1997 Annual Meeting of
Stockholders.
2. To approve the action of the Board of Directors amending the Company's
1994 Equity Incentive Plan, the 1994 Non-Employee Directors Stock Option
Plan and the 1994 Employee Stock Purchase Plan.
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for its fiscal year ending December 31, 1996.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on June 14, 1996, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting of Stockholders and at any adjournment thereof.
By Order of the Board of Directors
James U. Jensen
SECRETARY
Salt Lake City, Utah
June 28, 1996
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108-1256
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of NPS Pharmaceuticals, Inc., a Delaware
corporation ("NPS" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on July 30, 1996, at 3:00 p.m., local time and at any
adjournment thereof (the "Annual Meeting" or the "Meeting"), for the purposes
set forth herein and in the accompanying Notice of Annual Meeting. The Annual
Meeting will be held at the University Park Hotel, 500 South Wakara Way, Salt
Lake City, Utah.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of the Company's common stock, par
value $.001 (the "Common Stock") beneficially owned by others. The Company may
reimburse persons representing beneficial owners of Common Stock for their costs
of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
employees for such services.
The Company intends to mail this Proxy Statement and accompanying proxy card
on or about June 28, 1996, to all stockholders entitled to vote at the Annual
Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
June 14, 1996 is the record date (the "Record Date") for determining those
stockholders of Common Stock of the Company entitled to notice of and to vote at
the Annual Meeting. On the Record Date, the Company had outstanding and entitled
to vote 11,718,208 shares of Common Stock. Stockholders will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of elections appointed for the
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. 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. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any Stockholder giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company, at the Company's principal executive office, 420
Chipeta Way, Salt Lake City, Utah 84108-1256, a written notice of revocation or
a duly executed proxy bearing a later date, or it may be revoked by attending
the Meeting and voting in person. Attendance at the Meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS FOR 1997
Monday, December 30, 1996, is the deadline for proposals of stockholders
that are intended to be presented at the Company's 1997 annual meeting of
stockholders. By that date any such proposal must be received by the Company in
order to be included in the proxy statement relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation
("Certificate of Incorporation") and the Amended and Restated Bylaws ("Bylaws")
provide that directors are to be elected at the Annual Meeting to serve for a
term of one year or until their respective successors are duly elected and
qualified or until their respective death, resignation or removal. Vacancies on
the Board may be filled by the affirmative vote of a majority of the directors
then in office, unless the Board of Directors determines by resolution that any
such vacancy shall be filled by the stockholders. A director elected by the
Board to fill a vacancy (including a vacancy created by an increase in the Board
of Directors) shall serve for the remainder of the full term of the director for
which the vacancy was created or occurred and until such director's successor is
elected and qualified.
The Board of Directors presently is composed of nine members, all of whom
were previously elected by the stockholders. Directors Jesse Treu and Doug Reed
currently serve as members of the Board and are not standing for re-election to
the Board of Directors. The Certificate of Incorporation and Bylaws of the
Company provide that the number of directors that shall constitute the whole
Board of Directors shall be fixed exclusively by the Board of Directors. The
Board has reduced the size of the Board from nine to seven members as permitted
by the Company's Certificate of Incorporation and Bylaws effective immediatly
following the 1996 Annual Meeting.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the seven nominees below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as the Board, may
propose. Each person nominated for election has agreed to serve if elected, and
the Board has no reason to believe that any nominee will be unable to serve. If
and when elected at the Annual Meeting, each of the nominees will be elected to
serve until the 1997 annual meeting and until his successor is duly elected and
qualified, or until such director's earlier death, resignation or removal.
Set forth below, in alphabetical order, is biographical information for each
person nominated to serve on the Company's Board of Directors.
NOMINEES FOR ELECTION (IN ALPHABETICAL ORDER)
SANTO J. COSTA, J.D.
Mr. Costa, 51, has served as a director since January 1995. Mr. Costa has
served as President, Chief Operating Officer and a director of Quintiles
Transnational Corporation, a publicly held global contract research
organization, since April 1994. From 1986 to 1993, he was employed by Glaxo,
Inc. where he served as Senior Vice President, Administration and General
Counsel and was a member of that company's Board of Directors. From 1977 to 1986
he was employed by Merrell Dow Pharmaceuticals (now Hoechst Marion Roussel)
where he served as U.S. Area Counsel and from 1971 to 1977 as Food & Drug
Counsel for Norwich/Eaton Pharmaceuticals. Mr. Costa received his B.S. in
Pharmacy and his J.D. from St. John's University.
JAMES G. GRONINGER
Mr. Groninger, 51, has served as a director since 1988 and as a member of
the Audit and Compensation Committees since 1994. Mr. Groninger founded in
January 1995 and is President of The Bay South Company, a Richmond,
Virginia-based provider of financial advisory and investment banking services.
From 1988 through 1994, he served as a Managing Director, Investment Banking
Division, of PaineWebber Incorporated. Currently he serves on the Board of
Directors of Designs, Inc., a specialty retailer, and Cygne Designs, Inc., a
manufacturer of apparel. Mr. Groninger received a B.S. in Industrial
Administration from Yale University and an M.B.A. from Harvard Business School.
2
HUNTER JACKSON, PH.D.
Dr. Jackson, 45, has been Chief Executive Officer and Chairman of the Board
since founding the Company in 1986. He was appointed to the additional position
of President in January 1994. Prior to founding the Company, he was an Associate
Professor in the Department of Anatomy at the University of Utah School of
Medicine. Dr. Jackson received a B.A. in English from the University of Illinois
and a Ph.D. in Psychobiology from Yale University. He received postdoctoral
training in the Department of Neurosurgery, University of Virginia Medical
School.
JAMES U. JENSEN, J.D.
Mr. Jensen, 52, has been Vice President, Corporate Development and Legal
Affairs since August 1991. He has been Secretary and a director of the Company
since 1987. From 1986 to July 1991, he was a partner in the law firm of
Woodbury, Jensen, Kesler & Swinton, P.C. (or its predecessor firm) concentrating
on technology transfer and licensing and corporate finance. Currently, he also
serves as counsel to Woodbury & Kesler, P.C. From July 1985 until October 1986,
he served as chief financial officer of Cericor, a software company, and from
1983 to July 1985, as its outside general counsel. From 1980 to 1983, he served
as General Counsel and Secretary of Dictaphone Corporation, a subsidiary of
Pitney Bowes Inc. He serves as a director of Wasatch Funds, Inc., a registered
investment company, and of Interwest Home Medical, Inc., a public home use
medical equipment distributor. Mr. Jensen received a B.A. in English/Linguistics
from the University of Utah and a J.D. and an M.B.A. from Columbia University.
DONALD E. KUHLA, PH.D.
Dr. Kuhla, 54, has been a director of the Company since 1991. Since 1994, he
has been Vice President of Plexus Ventures, Inc. ("Plexus"), a biotechnology
investment and consulting firm. From 1990 to 1994, Dr. Kuhla held senior
management positions with two venture capital backed, biotechnology start-up
companies. His early career was spent in research and development and operations
management positions with Pfizer Inc. and Rorer Group, Inc., his last position
at Rorer being Senior Vice President of Operations. Dr. Kuhla received a B.A. in
Chemistry from New York University and a Ph.D. in Organic Chemistry from Ohio
State University.
THOMAS N. PARKS, PH.D.
Dr. Parks, 45, has been a director of the Company since its founding in
1986. Dr. Parks also serves as a scientific consultant to NPS. He is currently
the George and Lorna Winder Professor of Neuroscience and Chairman of the
Department of Neurobiology and Anatomy at the University of Utah Medical School.
In 1978, Dr. Parks joined the faculty at the University of Utah Medical School
as an assistant professor. Dr. Parks received a B.S. in Biology from the
University of California at Irvine and a Ph.D. in Psychobiology from Yale
University. He was a postdoctoral fellow in Development Neurology at the
University of Virginia Medical School.
TIMOTHY J. RINK, M.D., SC.D.
Dr. Rink, 50, has been a director of the Company since 1991 and a member of
the Compensation Committee since 1994. Dr. Rink also serves as a scientific
consultant to the Company. Since February 1996, Dr. Rink has been Chairman,
Chief Executive Officer and President of Aurora Biosciences Corporation, a
biotechnology company focused on ultra high throughput drug screening. From 1990
through 1995 he was President, Chief Technical Officer and director of Amylin
Pharmaceuticals, Inc., a biotechnology company. He is also a director of
CoCensys, Inc., a publicly held biotechnology company. Dr. Rink is an adjunct
Professor of Pharmacology at the University of California at San Diego and was a
lecturer in physiology at the University of Cambridge, United Kingdom, from 1978
to 1984. From 1984 to 1990, he was Vice President of Research at SmithKline
Beecham, plc. Dr. Rink received an M.D. and an Sc.D. from the University of
Cambridge.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE
3
BOARD COMMITTEES AND MEETINGS
The Board has a standing Audit Committee and a standing Compensation
Committee. The Audit Committee's functions include: meeting with the Company's
independent auditors at least annually to review the results of the annual audit
and discuss the financial results for the year as reported in the Company's
financial statements; recommending to the Board of Directors the independent
auditors to be retained for the ensuing year; and receiving and considering the
auditors' comments as to controls, adequacy of staff and management performance
and procedures in connection with audit and financial controls. For 1995, the
Audit Committee was composed of three non-employee directors, Mr. Groninger, Dr.
Reed and Dr. Treu. For 1996, members of the Audit Committee are Mr. Groninger,
Dr. Kuhla, and Dr. Treu who shall serve until conclusion of the Annual Meeting.
The Audit Committee met once during the fiscal year ended December 31, 1995.
The Compensation Committee's functions include: establishing, reviewing and
overseeing salaries, incentive compensation and other forms of compensation paid
to officers and employees of the Company; administering the Company's incentive
compensation and benefit plans, including the 1994 Employee Stock Purchase Plan,
the 1994 Equity Incentive Plan and the 1987 Stock Option Plan; and performing
such other functions regarding compensation as the Board of Directors may
delegate. For 1995, the Compensation Committee was composed of four non-employee
directors, Mr. Groninger, Dr. Reed, Dr. Rink and Dr. Treu. For 1996, the members
of the Compensation Committee are Mr. Groninger, Dr. Rink, Mr. Costa and Dr.
Treu who shall serve until conclusion of the Annual Meeting. The Compensation
Committee met once during the fiscal year ended December 31, 1995.
The Board of Directors has no standing Nominating Committee or any committee
performing the functions of such committee.
During the fiscal year ended December 31, 1995, the Board of Directors held
nine meetings. All Board members, except for Santo J. Costa, attended 75 percent
or more of the aggregate of the meetings held by the Board and by the respective
committees on which such Board member served during the period for which he was
a director or committee member, respectively.
PROPOSAL 2
APPROVAL OF THE AMENDMENTS TO THE 1994 EQUITY INCENTIVE PLAN,
THE 1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN AND
THE 1994 EMPLOYEE STOCK PURCHASE PLAN
In May 1996, the Board approved an amendment, subject to stockholder
approval, to the Company's 1994 Equity Incentive Plan (the "1994 Plan"), the
1994 Non-Employee Directors' Stock Option Plan (the "Directors' Plan") and the
1994 Employee Stock Purchase Plan (the "Purchase Plan") to enhance the
flexibility of the Board in granting stock awards and to ensure that adequate
shares are available for option granting and issuance under each of the
respective Plans. The amendment increases by 760,000 the number of shares
authorized for issuance under the 1994 Plan from a total of 942,503 shares to
1,702,503 shares; by 70,000 the number of shares authorized for issuance under
the Directors' Plan from a total of 90,000 shares to 160,000 shares; and by
70,000 the number of shares authorized for issuance under the Purchase Plan from
a total of 90,000 shares to 160,000 shares.
Stockholders are requested in this Proposal 2 to approve the amendment to
the 1994 Plan, the Directors' Plan and the Purchase Plan. The affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Meeting will be required to
approve the amendment. The amendment of the respective Plans shall be voted on
as one proposal.
4
SUMMARIES OF THE PRINCIPAL FEATURES OF EACH OF THE PLANS ARE PROVIDED BELOW,
BUT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXT OF EACH OF THE
PLANS THAT WERE FILED ELECTRONICALLY WITH THIS PROXY STATEMENT WITH THE
SECURITIES AND EXCHANGE COMMISSION, SUCH TEXT IS NOT INCLUDED IN THE PRINTED
VERSION OF THIS PROXY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
1994 EQUITY INCENTIVE PLAN
GENERAL
In January 1994, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1994 Equity Incentive Plan (the "1994
Plan"). There were 442,503 shares of the Company's Common Stock originally
authorized for issuance under the 1994 Plan. At the Company's Annual
Stockholders Meeting, held May 31, 1995, the Stockholders approved an amendment
to the 1994 Plan increasing the number of shares of Common Stock authorized for
issuance under the Plan to 942,503 shares.
As of March 31, 1996, stock awards (incentive stock options and other
awards) covering an aggregate of 642,600 shares of the Company's Common Stock
(net of canceled or expired awards) had been granted under the 1994 Plan, and
only 299,903 shares (plus any shares that might in the future be returned to the
1994 Plan as a result of cancellations or expiration of awards) remained
available for future grant under the 1994 Plan. During 1995, under the 1994
Plan, the Company granted to all current executive officers as a group awards to
receive 145,000 shares at an average exercise price of $8.25 per share, and to
all employees (excluding executive officers) as a group awards to receive
208,000 shares at an average exercise price of $6.90 per share. No award was
granted to any person in the group of all current directors who are not
officers.
The 1994 Plan provides for the grant or issuance of incentive stock options
("ISOs") to employees (including executive officers) and nonstatutory stock
options ("NSOs"), restricted stock purchase awards, stock bonuses, reload
options, and stock appreciation rights to consultants, employees, officers and
directors. ISOs granted under the 1994 Plan are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). NSOs granted under the 1994 Plan
are intended not to qualify as ISOs under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of the various awards
included in the 1994 Plan.
PURPOSE
The 1994 Plan was adopted to provide a means by which selected officers,
employees, directors and consultants to the Company and its affiliates could be
given an opportunity to receive stock in the Company, to assist in retaining the
services of employees holding key positions, to secure and retain the services
of persons capable of filling such positions and to provide incentives for such
persons to exert maximum efforts for the success of the Company.
ADMINISTRATION
The 1994 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1994 Plan and, subject to the
provisions of the 1994 Plan, to determine the persons to whom and the dates on
which awards will be granted, what type of awards will be granted, the number of
shares to be subject to each award, the time or times during the term of each
award within which all or a portion of such award may be exercised, the exercise
price, the type of consideration and other terms of the awards. The Board of
Directors is authorized to delegate administration of the 1994 Plan to a
committee composed of not fewer than two members of the Board. The Board has
delegated administration of the 1994 Plan to the Compensation Committee of the
Board. As used herein with respect to the 1994 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
5
ELIGIBILITY
ISOs and stock appreciation rights appurtenant thereto may be granted under
the 1994 Plan only to employees (including officers) of the Company and its
affiliates. Consultants and directors are eligible to receive awards other than
ISOs and stock appreciation rights appurtenant thereto under the 1994 Plan.
No option may be granted under the 1994 Plan to any person who, at the time
of the grant, owns (or is deemed to own) stock possessing more than 10 percent
of the total combined voting power of the Company or any affiliate of the
Company, unless the option exercise price is at least 110 percent of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For ISOs
granted under the 1994 Plan, the aggregate fair market value, determined at the
time of grant, of the shares of Common Stock with respect to which such ISOs are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its affiliates) may not exceed $100,000.
STOCK SUBJECT TO THE 1994 PLAN
If awards granted under the 1994 Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such awards again
becomes available for issuance under the 1994 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1994 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of ISOs under the 1994 Plan may
not be less than the fair market value of the Common Stock subject to the option
on the date of the option grant, and in some cases (see "Eligibility" above),
may not be less than 110 percent of such fair market value. The exercise price
of NSOs under the 1994 Plan shall be the price established by the Board.
The Board has the authority to offer holders of options the opportunity to
replace outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options. The Board also has the authority to include as
part of an option agreement a provision entitling the optionee to a further
option in the event that the optionee exercises his or her option by
surrendering other shares of Common Stock as payment of the exercise price.
The exercise price of options granted under the 1994 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (c) in any other form of
legal consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the 1994 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the 1994 Plan typically become exercisable
at the rate of 28 percent of the shares subject to the option 1 year after the
date of grant and 3 percent of the shares become exercisable each month
thereafter. Shares covered by options granted in the future under the 1994 Plan
may be subject to different vesting terms. To the extent provided by the terms
of an option, an optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
TERM. The maximum term of options under the 1994 Plan is ten years, except
that in certain cases (see "Eligibility") the maximum term is five years. ISOs
under the 1994 Plan terminate 3 months after the optionee ceases to be employed
by the Company or any affiliate of the Company, unless (a) the termination of
employment is due to such person's permanent and total disability (as defined in
the Code), in which case the option may, but need not, provide that it may be
exercised at
6
any time within 1 year of such termination; (b) the optionee dies while employed
by the Company or any affiliate of the Company, or within 3 months after
termination of such employment, in which case the option may, but need not,
provide that it may be exercised (to the extent the option was exercisable at
the time of the optionee's death) within 18 months of the optionee's death by
the person or persons to whom the rights to such option pass by will or by the
laws of descent and distribution; or (c) the option by its terms specifically
provides otherwise. Individual options by their terms may provide for exercise
within a longer period of time following termination of employment or the
consulting relationship. The option term may also be extended in the event that
exercise of the option within these periods is prohibited for specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
PURCHASE PRICE; PAYMENT. The purchase price under each stock purchase
agreement will be determined by the Board. The purchase price of stock pursuant
to a stock purchase agreement must be paid either: (i) in cash at the time of
the purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the person to whom the Common Stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board in its discretion. Eligible participants may be awarded stock pursuant to
a stock bonus agreement in consideration of past services actually rendered to
the Company or for its benefit.
REPURCHASE. Shares of the Common Stock sold or awarded under the 1994 Plan
may, but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee or ceases to serve as a director of or
consultant to the Company or an affiliate of the Company, the Company may
repurchase or otherwise reacquire any or all of the shares of the Common Stock
held by that person that have not vested as of the date of termination under the
terms of the stock bonus or restricted stock purchase agreement between the
Company and such person.
TERMS OF STOCK APPRECIATION RIGHTS
The Board may grant stock appreciation rights to employees or directors of,
or consultants to, the Company or its affiliates. However, stock appreciation
rights appurtenant to ISOs may be granted to employees only. The 1994 Plan
authorizes three types of stock appreciation rights.
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights are tied
to an underlying option and require the holder to elect whether to exercise the
underlying option or to surrender the option for an appreciation distribution
equal to the market price of the vested shares purchasable under the surrendered
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable under exercise of tandem stock appreciation rights must be
made in cash.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The holder receives an appreciation
distribution equal to the market price of the vested shares purchased under the
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of concurrent stock appreciation rights must
be made in cash.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights are granted independently of any option and entitle the holder to receive
upon exercise an appreciation distribution equal to the market price of a number
of shares equal to the number of share equivalents to which the holder is vested
under the independent stock appreciation right less than fair market value of
such number of shares of stock on the date of grant of the independent stock
appreciation rights. Appreciation distributions payable upon exercise of
independent stock appreciation rights may, at the Board's discretion, be made in
cash, in shares of the Common Stock or a combination thereof.
7
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1994 Plan or subject to
any award granted under the 1994 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1994 Plan and awards
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such 1994 Plan and the class, number of
shares and price per share of stock subject to such outstanding awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1994 Plan provides that, in the event of a dissolution or liquidation of
the Company, specified type of merger or other corporate reorganization, at the
discretion of the Board and to the extent permitted by law, any surviving
corporation will be required to either assume awards outstanding under the 1994
Plan or substitute similar awards for those outstanding under such plan, or such
outstanding awards will continue in full force and effect, or the time during
which such awards become vested or be exercised will be accelerated and the
awards terminated if not exercised during such time. The acceleration of an
award in the event of an acquisition or similar corporate event may be viewed as
an anti-takeover provision, which may have the effect of discouraging a proposal
to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1994 Plan without stockholder
approval or ratification at any time. Unless sooner terminated, the 1994 Plan
will terminate in January 2004.
The Board may amend the 1994 Plan at any time or from time to time. However,
no amendment will be effective unless approved by the stockholders of the
Company within twelve months before or after its adoption by the Board if the
amendment would (a) modify the requirements as to eligibility for participation
(to the extent such modification requires stockholder approval in order for the
Plan to satisfy Section 422 of the Code, if applicable, or Rule 16b-3 ("Rule
16b-3") of the Securities Act of 1934, as amended (the "Exchange Act")); (b)
increase the number of shares reserved for issuance upon exercise of options; or
(c) change any other provision of the plan in any way if such modification
requires stockholder approval in order to comply with Rule 16b-3 or satisfy the
requirements of Section 422 of the Code. The Board may submit any other
amendment to the 1994 Plan for stockholder approval, including, but not limited
to, amendments intended to satisfy the requirements of Section 162(m) of the
Code regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1994 Plan, an ISO may not be transferred by the optionee otherwise
than by will or by the laws of descent and distribution and, during the lifetime
of an optionee, an option may be exercised only by the optionee. An NSO or an
independent stock appreciation right may not be transferred except by will or by
the laws of descent and distribution or pursuant to a "qualified domestic
relations order." No rights under a stock bonus or restricted stock purchase
agreement are transferable except where required by law or expressly authorized
by the terms of the applicable stock bonus or restricted stock purchase
agreement. A tandem stock appreciation right or concurrent stock appreciation
right may be transferred only by the method(s) applicable to the underlying
option. In addition, any shares subject to repurchase by the Company under an
early exercise stock purchase agreement may be subject to restrictions on
transfer which the Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. ISOs under the 1994 Plan are intended to extend to
the optionee the favorable federal income tax treatment accorded ISOs under the
Code.
8
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an ISO. However, the exercise
of an ISO may increase the optionee's alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an ISO for at least
two years from the date on which the option is granted and at least one year
from the date on which the shares are transferred to the optionee upon exercise
of the option, any gain or loss on a disposition of such stock will be long-term
capital gain or loss. Generally, if the optionee disposes of the stock before
the expiration of either of these holding periods (a "disqualifying
disposition"), at the time of disposition, the optionee will realize taxable
ordinary income equal to the lesser of (a) the excess of the stock's fair market
value on
the date of exercise over the exercise price, or (b) the optionee's actual gain,
if any, on the purchase and sale. The optionee's additional gain, or any loss,
upon the disqualifying disposition will be a capital gain or loss, which will be
long-term or short-term depending on whether the stock was held for more than
one year. Capital gains currently are generally subject to lower tax rates than
ordinary income. The maximum long-term capital gains rate for federal income tax
purposes is currently 28 percent while the maximum ordinary income rate is
effectively 39.6 percent at the present time. Slightly different rules may apply
to optionees who acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. NSOs granted under the 1994 Plan generally have
the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a NSO. Upon exercise of an NSO, the optionee normally will
recognize taxable ordinary income equal to the excess of the stock's fair market
value on the date of exercise over the option exercise price. Generally, with
respect to employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionees who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
RESTRICTED STOCK AND STOCK BONUSES. Restricted stock and stock bonuses
granted under the 1994 Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award, the
recipient normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value over the purchase price, if any. However, to the
extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
recipient elects to be taxed on receipt of the stock. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, Section 162(m) of the Code and the
satisfaction of a reporting obligation, the Company will generally be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the recipient. Upon disposition of the stock, the recipient will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock, if any, plus any amount recognized as
ordinary income upon acquisition (or vesting) of the stock. Such gain or loss
will be long or short-term depending on
9
whether the stock was held for more than one year from the date ordinary income
is measured. Slightly different rules may apply to persons who acquire stock
subject to forfeiture under Section 16(b) of the Exchange Act.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation right
the fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the recipient in the year
of such exercise. Generally, with respect to employees, the Company is required
to withhold from the payment made on exercise of the stock appreciation right or
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a reporting obligation, the Company will be
entitled to a business expense deduction equal to the taxable ordinary income
recognized by the recipient.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards under the 1994 Plan, when combined with all
other types of compensation received by a covered employee from the Company, may
cause this limitation to be exceeded in any particular year.
Certain kinds of compensation including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Section 162(m) of the
Code, compensation attributable to stock options and stock appreciation rights
will qualify as performance-based compensation, provided that: (i) the stock
award plan contains a per-employee limitation on the number of shares for which
stock options and stock appreciation rights may be granted during a specified
period; (ii) the per-employee limitation is approved by the stockholders; (iii)
the award is granted by a compensation committee comprised solely of "outside
directors"; and (iv) the exercise price of the award is no less than the fair
market value of the stock on the date of the grant. Restricted stock and stock
bonuses qualify as performance-based compensation under these proposed Treasury
regulations only if: (i) the award is granted by a compensation committee
comprised solely of "outside directors"; (ii) the award is granted (or
exercisable) only upon the achievement of an objective performance goal
established in writing by the compensation committee while the outcome is
substantially uncertain; (iii) the compensation committee certifies in writing
prior to the granting (or exercisability) of the award that the performance goal
has been satisfied; and (iv) prior to granting (or exercisability) of the award,
stockholders have approved the material terms of the award (including the class
of employees eligible for such award), the business criteria on which the
performance goal is based, and the maximum amount (or formula used to calculate
the amount) payable upon attainment of the performance goal.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In January 1994, the Board adopted, and the stockholders subsequently
approved, the 1994 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). There were a total of 90,000 shares of Common Stock has been reserved
for issuance under the Directors' Plan. As of March 31, 1996, options to
purchase a total of 54,000 shares of Common Stock had been granted to
Non-Employee Directors under the Directors' Plan at exercise prices from $3.00
to $8.25 per share, and a weighted average exercise price of $5.04 per share. As
of that date, no options had been exercised under the Directors' Plan.
Under the Directors' Plan, non-employee directors of the Company are
eligible to receive options. Options granted under the Directors' Plan are
non-discretionary and do not qualify as Incentive Stock Options ("ISOs") under
the Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to the
terms of the Directors' Plan, each person who is elected for the first time to
be a director of the Company and who is not otherwise employed by the Company or
an affiliate of the Company (a "Non-
10
Employee Director") will automatically be granted an option to purchase 15,000
shares of Common Stock (subject to adjustment as provided in the Directors'
Plan) upon the date of his or her election to the Board. On December 1 of each
year, beginning in 1994, each person who is then a Non-Employee Director and has
been a Non-Employee Director for at least three months will automatically be
granted an option to purchase 3,000 shares of Common Stock (subject to
adjustment as provided in the Directors' Plan) pursuant to the Directors' Plan.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date such option was granted. Options granted
under the Directors' Plan vest at a rate of 28% of the shares subject to the
option one year after date of grant and 3% of the shares become exercisable each
month thereafter, provided that the optionee has, during the entire period prior
to such vesting date, continuously served as a Non-Employee Director. If the
optionee's service as a Non-Employee Director terminates for any reason other
than death, the option will remain exercisable for 12 months after the date of
termination, or until the option's expiration date, if earlier. If the optionee
dies, the option will remain exercisable for 18 months following the date of
death or until the expiration date of the option, whichever is earlier. The
exercise price of options granted under the Directors' Plan is 100% of the fair
market value of the Common Stock on the date of grant. Options granted under the
Directors' Plan are generally non-transferable. Unless otherwise terminated by
the Board, the Directors' Plan automatically terminates in January 2004.
Prior to the adoption of the Directors' Plan, the Company granted options to
directors under the 1987 Stock Option Plan.
1994 EMPLOYEE STOCK PURCHASE PLAN
In January 1994, the Board adopted the Employee Stock Purchase Plan (the
"Purchase Plan"), which was subsequently approved by the stockholders in
February 1994. As of March 31, 1996, a total of 51,362 shares of Common Stock
had been purchased under the Purchase Plan at prices from $2.76 to $5.42 per
Share with a weighted average price of $3.20 per share. During 1995, under the
Purchase Plan, executive officers as a group purchased 532 shares at an average
purchase price of $2.76 per share and all employees (excluding executive
officers) as a group purchased 39,239 shares at an average exercise price of
$2.76 per share.
The Purchase Plan provides a means by which employees may purchase Common
Stock of the Company through payroll deductions. The Purchase Plan is
implemented by offerings of rights to eligible employees. Generally, each
offering is of 24 months' duration with purchases occurring every six months.
Common Stock is purchased for accounts of employees participating in the
Purchase Plan at a price per share equal to the lower of (i) 85% of the fair
market value of a share of Common Stock on the date of commencement of
participation in the offering, or (ii) 85% of the fair market value of a share
of Common Stock on the date of purchase. Generally, all employees, including
executive officers, who work at least 20 hours per week and are customarily
employed by the Company or an affiliate of the Company for at least five months
per calendar year may participate in the Purchase Plan and may authorize payroll
deductions of up to 15% of their base compensation for the purchase of Common
Stock under the Purchase Plan. A total of 90,000 shares of Common Stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan will terminate
in January 2004.
11
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as the
Company's independent auditors for the fiscal year ending December 31, 1996, and
has further directed that management submit the selection of independent public
auditors for ratification by the stockholders at the Annual Meeting. KPMG has
audited the Company's financial statements since the Company's inception in
1986. Representatives of KPMG are expected to be present at the Annual Meeting,
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion may direct
the appointment of a different independent accounting firm at any time if the
Board determines that such a change would be in the best interests of the
Company and its Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1996 by: (i) all those known by
the Company to be beneficial owners of more than 5 percent of the Company's
Common Stock; (ii) each director and nominee for director; (iii) each of the
executive officers named in the Summary Compensation Table; and (iv) all
executive officers and directors of the Company as a group.
AMOUNT OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNERSHIP (2) TOTAL (2)
- ----------------------------------------------------------------------------- ------------- -----------
S. R. One, Limited (3) ...................................................... 1,797,091 21.95
Bay Colony Executive Park
565 East Swedesford Road, Suite 315
Wayne, PA 08542
Amgen Inc. .................................................................. 1,000,000 12.21
1840 DeHavilland Drive
Thousand Oaks, CA 91320-1789
State of Wisconsin Investment Board ......................................... 645,000 7.88
P.O. Box 7842
Madison, WI 53707
Biotechnology Investments Limited (4) ....................................... 635,938 7.77
P.O. Box 58
St. Julian's Court
St. Peter Port, Guernsey, Channel Islands
Domain Partners II, L.P. (5) ................................................ 575,938 7.03
One Palmer Square
Princeton, NJ 08542
Doug Reed, M.D. (6).......................................................... 1,798,891 21.97
Jesse I. Treu, Ph.D. (7)..................................................... 584,798 7.14
Hunter Jackson, Ph.D. (8).................................................... 509,528 6.22
Thomas N. Parks, Ph.D. (9)................................................... 355,090 4.34
James G. Groninger (10)...................................................... 171,852 2.10
Edward F. Nemeth, Ph.D. (11)................................................. 121,856 1.49
James U. Jensen, J.D. (12)................................................... 111,369 1.36
Robert K. Merrell (13)....................................................... 67,807 *
Thomas B. Marriott (14)...................................................... 51,138 *
Donald E. Kuhla, Ph.D. (15).................................................. 36,840 *
Timothy J. Rink, M.D., Sc.D. (16)............................................ 36,640 *
Santo J. Costa, J.D. (17).................................................... 7,650 *
All directors and executive officers (12 persons)
as a group (18)............................................................ 3,853,459 44.75
- ------------------------
* Less than 1 percent.
(1) Except as set forth herein, the address of the persons set forth above is
the address of the Company appearing elsewhere in this Proxy Statement.
(2) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "Commission"). Beneficial ownership is
determined in accordance with the rules of the Commission and generally
includes voting or investment power with respect to securities. Except as
indicated by
13
footnotes and subject to community property laws, where applicable, the
persons named above have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them. Beneficial
ownership also includes shares of stock subject to options and warrants
exercisable or convertible within 60 days.
(3) Includes 5,790 shares subject to options exercisable within 60 days of
March 31, 1996 by Dr. Reed. On March 31, 1996, Dr. Reed was a Vice President
of S.R. One. Upon exercise, such shares will be transferred to and held by
S.R. One. On March 31, 1996, Dr. Reed shared voting and investment power
with the other officers of S.R. One. Those officers are: Peter A. Sears,
President, Brenda D. Gavin, Vice President, Donald F. Parman, Vice President
and Secretary, and William J. Shulby, Treasurer. Dr. Reed disclaims
beneficial ownership of the shares held by S.R. One, except to the extent of
his pro rata interest therein. On April 15, 1996, Dr. Reed became a
full-time employee and Vice President, Business Development, of the Company.
As of that date, he is no longer affiliated with S.R. One. See footnote (6).
(4) Excludes 2,790 shares subject to options exercisable within 60 days of
March 31, 1996 by Dr. Treu, a general partner of Domain Associates, which is
the United States venture capital advisor to BIL pursuant to a contractual
arrangement. Domain Associates has no voting or investment power over shares
owned by BIL. BIL disclaims beneficial ownership of the shares issuable to
Dr. Treu upon exercise of options. BIL is a publicly held, Guernsey, Channel
Islands corporation whose shares are traded on the London Stock Exchange.
The directors of BIL who share voting and investment power with respect to
the shares held by BIL are as follows: Lord Armstrong of Ilminster, GCB, CVO
(Chairman); Dr. John Bradfield, CBE (Deputy Chairman); Simon Chandler, FCA;
William Lane, QC; Air Chief Marshal Sir Peter Le Cheminant, GBE, KCB, DFC;
Alan Le Page, FCIB; Geoffrey Robinson, ASCA; and Robert Sinclair, FCA. See
footnotes (6) and (9).
(5) Excludes (i) 2,790 shares subject to options exercisable within 60 days of
March 31, 1996 by Dr. Treu, a general partner of One Palmer Square
Associates II, L.P. ("Palmer Square II"), which is the general partner of
Domain Partners II, L.P. ("Domain II") and (ii) 1,250 shares beneficially
owned by Palmer Square II. Domain II disclaims beneficial ownership of the
shares issuable to Dr. Treu upon exercise of options and of the shares held
by Palmer Square II. Dr. Treu shares voting and investment power with the
other general partners of Palmer Square II, James C. Blair, Richard S.
Schneider and Brian H. Dovey, with respect to the shares held by Domain II.
See footnotes (4) and (8).
(6) Includes 1,791,301 shares beneficially owned by S.R. One. On March 31,
1996. Dr. Reed was a Vice President of S.R. One. Also includes 5,790 shares
subject to options exercisable within 60 days of March 31, 1996. Upon
exercise, such shares will be transferred to, and be held by, S.R. One. On
March 31, 1996, Dr. Reed shared voting and investment power with the other
officers of S.R. One. Dr. Reed disclaims beneficial ownership of the shares
held by S.R. One. On April 15, 1996, Dr. Reed became a full-time employee
and Vice President, Business Development, of the Company. As of that date,
he is no longer affiliated with S.R. One. See footnote (3).
(7) Includes 575,938 shares beneficially owned by Domain II and 1,250 shares
beneficially owned by Palmer Square II. Dr. Treu is a general partner of
Palmer Square II, which is the general partner of Domain II. See footnote
(5) above. Does not include the shares beneficially owned by BIL. Dr. Treu
is a general partner of Domain Associates, which is the United States
venture capital advisor to BIL pursuant to a contractual arrangement. Domain
Associates has no voting or investment power over the shares owned by BIL.
See footnote (4) above. Also includes 2,790 shares subject to options
exercisable within 60 days of March 31, 1996. Dr. Treu's address is the
address of Domain II above.
(8) Includes 75,000 shares held in a trust and 2 shares held by Dr. Jackson's
children, of which he disclaims beneficial ownership. Also includes 106,350
shares subject to options exercisable within 60 days of March 31, 1996.
14
(9) Includes 5,790 shares subject to options exercisable within 60 days of
March 31, 1996.
(10) Includes 63,450 shares held by Mr. Groninger's children, of which he
disclaims beneficial ownership. Also includes 16,290 shares subject to
options exercisable within 60 days of March 31, 1996.
(11) Includes 87,900 shares subject to options exercisable within 60 days of
March 31, 1996.
(12) Includes 31,250 shares held by a trust. Also includes 30,950 shares subject
to options exercisable within 60 days of March 31, 1996.
(13) Includes 64,307 shares subject to options exercisable within 60 days of
March 31, 1996.
(14) Includes 41,297 shares subject to options exercisable within 60 days of
March 31, 1996.
(15) Includes 20,040 shares subject to options exercisable within 60 days of
March 31, 1996.
(16) Includes 35,040 shares subject to options exercisable within 60 days of
March 31, 1996.
(17) Includes 6,450 shares subject to options exercisable within 60 days of
March 31, 1996.
(18) Includes an aggregate of 422,994 shares subject to options exercisable
within 60 days of March 31, 1996. See footnotes (6) through (17) above.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and executive officers, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
10 percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1995, the
Company is in compliance with all Section 16(a) filing requirements applicable
to its officers, directors and greater than 10 percent beneficial owners.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board or any Committee thereof. Directors may be reimbursed for
certain expenses in connection with attendance at Board and Committee meetings.
Directors are eligible to receive stock options and stock bonuses under the
stock plans described below.
DIRECTORS' PLAN
As of December 31, 1995, options to purchase a total of 54,000 shares of
Common Stock had been granted under the Directors' Plan at exercise prices from
$3.00 to $8.25 per share, and a weighted average exercise price of $5.04 per
share. As of that date, no options had been exercised under the Directors' Plan.
Prior to the adoption of the Directors' Plan, the Company granted options to
directors under the 1987 Stock Option Plan. For a discussion of the terms and
provisions of the Directors' Plan, see Proposal 2 above.
In December 1994, the Board adopted the Non-Employee Directors' Stock Bonus
Program under the 1994 Equity Incentive Plan (the "Stock Bonus Program"). Under
the Stock Bonus Program, Non-Employee Directors are eligible to receive grants
of shares of Common Stock for attendance at Board and Committee meetings. The
Stock Bonus Program provides each Non-Employee Director of the Company with a
non-discretionary award of 200 shares of Common Stock for each Board and/or
15
Committee meeting attended by such Non-Employee Director. In January 1996, the
Company awarded a total of 12,400 shares to Non-Employee Directors under the
Stock Bonus Program for meetings attended in 1995.
The right to receive stock awards under the Stock Bonus Program is generally
non-transferable. The stock awards are made at the end of each calendar year.
Non-Employee Directors entitled to stock bonus awards shall not possess any
rights of a stockholder of the Company until such shares are delivered to the
Non-Employee Director. Unless otherwise terminated by the Board, the Stock Bonus
Program terminates in January 2004.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1995,
December 31, 1994 and December 31, 1993, certain compensation awarded or paid
to, or earned by, the Company's Chief Executive Officer and its other four most
highly compensated executive officers (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
CASH COMPENSATION LONG-TERM
COMPENSATION AWARDS
-------------------- -------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) STOCK OPTIONS GRANTED (#)
- ------------------------------------------------------------------- --------- --------- -------------------------
Hunter Jackson, Ph.D. ............................................ 1995 189,033 45,000
Chief Executive Officer, President and 1994 180,000 45,000
Chairman of the Board 1993 145,511 75,000
James U. Jensen, J.D. ............................................ 1995 147,072 25,000
Vice President, Corporate Development 1994 140,000 15,000
and Legal Affairs and Secretary 1993 125,000 18,000
Thomas B. Marriott, Ph.D. ........................................ 1995 157,629 25,000
Vice President, Development Research 1994 150,000 30,000
1993 86,923 63,000
Robert K. Merrell ................................................. 1995 110,422 20,000
Vice President, Finance, Chief Financial 1994 105,000 15,000
Officer and Treasurer 1993 93,000 15,000
Edward F. Nemeth, Ph.D. ........................................... 1995 136,603 30,000
Vice President, Research 1994 130,000 30,000
1993 98,000 45,000
16
The following table sets forth each grant of options to purchase Common
Stock made during the year ended December 31, 1995 to each of the Named
Executive Officers. Grants of options to each of the Named Executive Officers
were made under the 1994 Plan. For a discussion of the terms and provisions of
the 1994 Plan, see Proposal 2 above.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES % OF TOTAL EXERCISE OR APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED BASE PRICE TERM ($)(4)
OPTIONS TO EMPLOYEES IN PER SHARE EXPIRATION ------------------------
NAME GRANTED (#)(1) FISCAL YEAR (2) ($/SH) DATE (3) 5% 10%
- ------------------------------- -------------- --------------- ----------- ---------- ----------- -----------
Hunter Jackson................. 45,000 12.03% $ 8.25 12/14/05 $ 233,477 $ 591,677
James U. Jensen................ 25,000 6.68 8.25 12/14/05 129,710 328,709
Thomas B. Marriott............. 25,000 6.68 8.25 12/14/05 129,710 328,709
Robert K. Merrell.............. 20,000 5.35 8.25 12/14/05 103,768 262,968
Edward F. Nemeth............... 30,000 8.02 8.25 12/14/05 155,651 394,451
- ------------------------
(1) Options granted under the 1994 Plan become exercisable at the rate of 28% of
the shares subject to the option one year after the date of grant and 3% of
the shares subject to the option each month thereafter.
(2) Based on an aggregate of 374,000 options granted under the 1994 Plan to
employees of the Company, including the Named Executive Officers.
(3) These options have a 10-year term, subject to earlier termination upon
death, disability or termination of employment.
(4) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years). It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. No gain to the optionee is possible unless the stock price increases
over the option term, which will benefit all stockholders.
17
The following table sets forth information with respect to (i) the exercise
of stock options by the Named Executive Officers during the fiscal year ended
December 31, 1995; (ii) the number of unexercised options held by the Named
Executive Officers as of December 31, 1995; and (iii) the value as of December
31, 1995 of unexercised in-the-money options.
OPTION EXERCISES IN 1995 AND YEAR-END VALUE TABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS (#) OPTIONS ($)(2)
SHARES ACQUIRED REALIZED ----------------------- ------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------- ------------- ----------------------- ------------------------
Hunter Jackson............... 67,800 $ 494,478 107,600/102,400 $1,681,850/1,247,950
James U. Jensen.............. 64,400 157,477 28,700/41,800 449,225/470,400
Thomas B. Marriott........... 3,000 16,155 47,400/67,600 748,470/871,950
Robert K. Merrell............ 18,643 113,758 69,057/35,800 1,119,779/410,510
Edward F. Nemeth............. 30,000 88,650 83,400/66,600 1,320,150/806,550
- ------------------------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise (the closing sales price reported on the
Nasdaq National Market on such date) minus the exercise price, and does not
necessarily indicate that the optionee sold such stock.
(2) Represents the difference between the option exercise price and the closing
price of the Company's Common Stock as reported on the Nasdaq National
Market on December 31, 1995 ($17.25) times the corresponding number of
shares.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of its executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Kuhla, a director of the Company, is a Vice President of Plexus, a
consulting firm, which assisted the Company with its effort to establish a
collaboration for Norcalcin-TM- in Europe. See "Compensation Committee
Interlocks and Insider Participation."
James U. Jensen is currently "of counsel" to the law firm of Woodbury &
Kesler, P.C. which provided legal services to the Company during the last fiscal
year. The dollar amount of fees paid to that law firm did not exceed five
percent of the law firm's gross revenues for its last full fiscal year.
S.R. One, an affiliate of SmithKline Beecham Corporation, is a stockholder
of the Company and has entered into various stockholder agreements with the
Company. See "Compensation Committee Interlocks and Insider Participation."
In May 1994, BIL and Domain Partners II, L.P. purchased 50,000 and 180,000
shares of Common Stock, respectively. Dr. Treu, a director of the Company since
1992, is a general partner of Domain Associates which is the U.S. venture
capital advisor to BIL pursuant to a contractual arrangement. Dr. Treu is a
general partner of One Palmer Square Associates II, L.P., which is the general
partner of Domain Partners II, L.P.
18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Groninger, Dr. Reed, Dr. Rink and Dr. Treu served on the Compensation
Committee for fiscal year 1995. No officer or employee of the Company sits on
the Compensation Committee. No member of the Compensation Committee has at any
time been an officer or employee of the Company.
Dr. Treu, a director of the Company since 1992, is a general partner of
Domain Associates, which is the United States venture capital advisor to
Biotechnology Investments Limited ("BIL") pursuant to a contractual arrangement,
and a general partner of One Palmer Square Associates II, L.P., which is the
general partner of Domain Partners II, L.P. In the Company's initial public
offering in May 1994, Domain Partners II, L.P. and BIL purchased 180,000 and
50,000 shares of Common Stock respectively.
Dr. Reed, a director of the Company since 1992, was, during 1995, a Vice
President of S.R. One. In November 1993, the Company entered into a three-year
collaborative research and license agreement with SmithKline Beecham Corporation
("SmithKline Beecham") to collaborate on the discovery, development and
marketing of drugs to treat osteoporosis and other bone metabolism disorders
(the "SmithKline Beecham Agreement"). In 1992, S.R. One, an affiliate of
SmithKline Beecham, purchased $2.0 million of the Company's Preferred Stock. In
November 1993, at the time NPS entered into the SmithKline Agreement, S.R. One
purchased an additional $7.0 million of Preferred Stock, and it acquired
$495,000 of Common Stock (90,000 shares) in the Company's initial public
offering. The 869,049 shares of Preferred Stock purchased by S.R. One converted
into 1,701,301 shares of Common Stock upon the closing of the Company's initial
public offering in May 1994. SmithKline Beecham has paid license fees of $6.0
million to the Company under the SmithKline Agreement and may be required to
make additional payments upon the occurrence of certain milestones (of which
$3.0 million was paid to NPS in January 1996). In addition, SmithKline Beecham
is scheduled to fund all clinical development under the SmithKline Agreement,
has dedicated a scientific team to the program, and since July 1, 1995 has
supported the Company's research efforts in osteoporosis and will continue to do
so through the scheduled expiration of the research term in October 1996, if not
previously terminated. SmithKline Beecham is required to pay NPS royalties on
sales of any products for treating osteoporosis and other bone metabolism
disorders developed under the SmithKline Agreement.
Dr. Kuhla, a director of the Company since 1991, is Vice President of
Plexus. The Company had a consulting agreement with Plexus through December 31,
1995, whereunder Plexus assisted the Company with its effort to establish a
collaboration for the treatment of hyperparathyroidism in Europe using Company
technology. During the years ended December 31, 1994 and 1995, the Company paid
fees to Plexus totaling $34,000 and $84,500, respectively. Plexus will earn an
additional fee as payments are received from Amgen. Under the agreement the
maximum additional fee is $500,000, but the Company and Plexus have agreed to
negotiate in good faith for an increase in the maximum because of the
non-European territory licensed to Amgen, of this amount, $400,000 was paid to
Plexus in April 1996.
Mr. Groninger is a brother-in-law of Dr. Jackson, the Company's Chief
Executive Officer, President and Chairman of the Board.
19
REPORT OF THE COMPENSATION COMMITTEE(1)
The Company's executive compensation policies and programs seek to achieve
two fundamental goals: (i) to increase stockholder value by linking a portion of
executive officer compensation to the Company's progress toward its long term
goal of commercializing pharmaceutical products, and (ii) to reward executive
officers with pay incentives adequate to retain them in the future in the face
of considerable competition for executive talent within the pharmaceutical
technology industry.
To ensure clear and centralized focus on all aspects of executive
compensation, the Compensation Committee was formed by the Board of Directors in
January 1994. For 1995, the Compensation Committee was composed of Mr.
Groninger, Dr. Reed, Dr. Rink and Dr. Treu. The Compensation Committee is
authorized by the Board of Directors, among other things, to establish and
review annually the general compensation policies applicable to the Company's
executive officers generally (including the relationship of Company performance
to executive compensation) and the bases for the Chief Executive Officer's
compensation in particular. In addition, the Compensation Committee is also
authorized to review and approve the level of compensation paid to the Chief
Executive Officer and the Company's other executive officers during each fiscal
year. Finally, the Compensation Committee administers the Company's incentive
compensation and benefit plans, including the 1994 Employee Stock Purchase Plan,
the 1994 Equity Incentive Plan and the 1987 Stock Option Plan.
Compensation for each of the Company's executive officers consists of a base
salary and long-term incentive compensation in the form of stock option grants.
The Compensation Committee evaluated the performance and sets the base salary
payable to the Chief Executive Officer and the Company's other executive
officers for the 1995 fiscal year and determined the appropriate number of stock
options granted during the 1995 fiscal year. In general, the performance factors
utilized by the Compensation Committee to evaluate the grant of stock options to
Company executive officers during the 1995 fiscal year were subjective and
include, but were not limited to, the following: progress in clinical trials,
regulatory matters and capitalization of the Company; the planning of
appropriate collaborative arrangements with pharmaceutical and biotechnology
companies; the securing of working capital; the officer's overall individual
performance in his or her position and relative contribution during the year;
and the Board of Directors' desire to retain the executive officer in face of
considerable competition for executive talent within the industry. The
Compensation Committee has reviewed outside surveys of executive officer
compensation and benefits in the biopharmaceutical industry. The base salaries
and long-term incentive compensation in the form of stock options were set in
the low to mid-range of the surveys reviewed. The Compensation Committee may
modify the foregoing criteria or select other performance factors with respect
to other executive bonus awards during a given fiscal year.
Based on its evaluation of these factors, the Compensation Committee
believes that the Company's executive officers are committed to achieving
positive long-term performance and enhanced stockholder value, and that the
compensation policies and programs discussed in this report have motivated the
Company's executive officers to work toward these goals.
In order to determine the appropriate salary increase and stock option grant
for the Chief Executive Officer, the Compensation Committee considered
specifically the following factors: Dr. Jackson's leading role in the signing of
a Collaborative Research and License Agreement with Kirin Brewery Company and a
Binding Letter of Intent with Amgen Inc., each related to the Company's
hyperparathyroidism program; managing the Company's relationships with key
strategic partners including SmithKline Beecham, and the Company's progress in
research and development in
- ------------------------
(1) The material in this report is not "soliciting material, " is not deemed
filed with the Commission and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language contained in
such filing.
20
collaboration with that strategic partner; Dr. Jackson's continued management
responsibilities as President and Chief Executive Officer of a public company
with over 70 employees; and Dr. Jackson's overall performance as President and
Chief Executive Officer.
No member of the Compensation Committee during the fiscal year 1995 was a
former or current officer or employee of the Company. No member of the
Compensation Committee during fiscal year 1996 is a former or current officer or
employee of the Company.
POLICY REGARDING DEDUCTIBILITY. The Company is required to disclose its
policy regarding qualifying executive compensation for deductibility under
Section 162(m) of the Code which provides that, for purposes of the regular
income tax and the alternative minimum tax, the otherwise allowable deduction
for compensation paid or accrued with respect to a covered employee of a
publicly-held corporation is limited to no more than $1 million per year. The
Company does not anticipate that compensation payable to any executive officer
will exceed $1 million for fiscal 1996. The Committee will continue to evaluate
the advisability of qualifying the deductibility of such compensation in the
future.
Compensation Committee for fiscal year
1995
Jesse I. Treu, Chairman
James G. Groninger
Doug Reed
Timothy J. Rink
June 1996
21
PERFORMANCE MEASUREMENT COMPARISON(1)
COMPARISON OF 19 MONTH CUMULATIVE TOTAL RETURN*
AMONG NPS PHARMACEUTICALS, INC., THE NASDAQ STOCK MARKET-
US INDEX AND THE NASDAQ PHARMACEUTICALS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
NPS PHARMACEUTICALS, INC. NASDAQ STOCK MARKET US NASDAQ PHARMACEUTICAL
05/26/94 100 100 100
5/94 102 100 101
6/94 82 96 93
7/94 77 98 96
8/94 68 104 106
9/94 73 104 104
10/94 73 106 101
11/94 55 103 101
12/94 68 103 98
1/95 59 104 104
2/95 64 109 107
3/95 59 112 106
4/95 64 116 109
5/95 55 119 110
6/95 86 128 123
7/95 118 138 133
8/95 132 141 149
9/95 145 144 153
10/95 136 143 148
11/95 143 146 155
12/95 314 146 179
*$100 INVESTED ON 05/26/94 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
- ------------------------
(1) This Section is not "soliciting material, " is not deemed filed with the
Commission and is not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before or
after the date hereof and irrespective of any general incorporation language
in any such filing.
22
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
James U. Jensen
SECRETARY
June 28, 1996
23
NPS PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Hunter Jackson and James U. Jensen
and each of them (acting jointly or, if one be present, then by that one alone),
his attorneys and proxies, with full power of substitution and revocation to
each, for and in the name, place and stead of the undersigned, to vote, and act
with respect to all shares of Common Stock, par value $.001 per share of NPS
Pharmaceuticals, Inc. (the "Company") standing in the name of the undersigned or
with respect to which the undersigned is entitled to vote and to act at the
Annual Meeting of Stockholders to be held at the University Park Hotel located
at 500 South Wakara Way, Salt Lake City, Utah on July 30, 1996 at 3:00 p.m.
local time, and at any adjournment(s) thereof, and especially to vote as
follows:
1. In the election of seven (7) directors as set forth in the Proxy Statement:
/ / FOR all nominees listed alphabetically below (except as / / WITHHOLD AUTHORITY to vote for all nominees listed below
indicated to the contrary.)
Santo J. Costa, James G. Groninger, Hunter Jackson, James U. Jensen, Donald E. Kuhla, Thomas N. Parks, Timothy J. Rink
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below)
- ------------------------------------------------------------------------------------------------------------------------------------
2. With respect to approval of the amendments to the Company's 1994 Equity
Incentive Plan, the 1994 Non-Employee Directors' Stock Option Plan and the
1994 Employee Stock Purchase Plan:
/ / FOR / / AGAINST / / ABSTAIN
3. With respect to ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the 1996 fiscal year:
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion in any other matters as may properly come before the
Meeting or any adjournment(s) hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED ABOVE. IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE ELECTION OF THE SEVEN (7)
DIRECTORS AS SET FORTH IN THE PROXY STATEMENT, IN FAVOR OF THE AMENDMENTS TO THE
COMPANY'S 1994 EQUITY INCENTIVE PLAN, THE 1994 NON-EMPLOYEE DIRECTORS' STOCK
OPTION PLAN AND THE 1994 EMPLOYEE STOCK PURCHASE PLAN AND TO RATIFY THE BOARD'S
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE 1996 FISCAL YEAR.
Dated _________________________________
_______________________________________
_______________________________________
Please sign here
Please date this proxy and sign your
name exactly as it appears hereon. When
there is more than one owner, each
should sign. When signing as an agent,
attorney, administrator, executor,
guardian, or trustee, please indicate
your title as such. If executed by a
corporation, the proxy should be signed
in the corporate name by a duly
authorized officer who should indicate
his title. Please date, sign, and mail
this proxy card in the enclosed
envelope.
NPS PHARMACEUTICALS, INC.
1994 EQUITY INCENTIVE PLAN
AMENDED BY THE STOCKHOLDERS ON MAY 31, 1995
1 PURPOSES.
1.1 The purpose of the 1994 Equity Incentive Plan (the "Plan") is to
provide a means by which employees of and consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
1.2 The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees or Directors of or Consultants to the Company,
to secure and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
1.3 The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3.3, be
either (i) Options granted pursuant to paragraph 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to paragraph 7 hereof, or (iii) stock
appreciation rights granted pursuant to paragraph 8 hereof. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2 DEFINITIONS.
2.1 "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3.3 of the Plan.
2.5 "COMPANY" means NPS Pharmaceuticals, Inc., a Delaware
corporation.
2.6 "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means
a right granted pursuant to subsection 8.2.2 of the Plan.
1
2.7 "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
2.8 "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock Options
and Stock Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or its successor.
2.9 "DIRECTOR" means a member of the Board.
2.10 "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
2.11 "DISINTERESTED PERSON" means a Director: (i) who was not during
the one year period prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by
Rule 16b-3(c)(2)(i); or (ii) who is otherwise considered to be a "disinterested
person" in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
2.12 "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.14 "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company as determined as follows:
2.14.1 If the common stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reporting in the Wall Street
Journal or such other source as the Board deems reliable;
2.14.2 If the common stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
2
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
2.14.3 In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
2.15 "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
2.16 "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted under subsection 8.2.3 of the Plan.
2.17 "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
2.18 "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
2.19 "OPTION" means a stock option granted pursuant to the Plan.
2.20 "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
2.21 "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
2.22 "PLAN" means this 1994 Equity Incentive Plan.
2.23 "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
2.24 "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.
2.25 "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.
2.26 "STOCK AWARD AGREEMENT" means a written agreement including an
Option Agreement between the Company and a holder of a Stock Award evidencing
the terms and conditions of an individual Stock Award grant. The Stock Award
Agreement is subject to the terms and conditions of the Plan.
2.27 "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted under subsection 8.2.1 of the Plan.
3
3 ADMINISTRATION.
3.1 The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3.3.
3.2 The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
3.2.1 To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a stock appreciation right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which Stock Awards shall be granted to each such person.
3.2.2 To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
3.2.3 To amend the Plan as provided in Section 14.
3.2.4 Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
3.3 The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be disinterested persons, if required and as defined by
the provisions of subsection 3.4. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant options to eligible persons who are not then subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
3.4 Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
4
4 SHARES SUBJECT TO THE PLAN.
4.1 Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Nine Hundred Forty-two Thousand Five Hundred
Three (942,503) shares of the Company's common stock. If any Stock Award shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such Stock Award shall again become
available for the Plan. Shares subject to Stock Appreciation Rights exercised
in accordance with Section 8 of the Plan shall not be available for subsequent
issuance under the Plan.
4.2 The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5 ELIGIBILITY.
5.1 Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
5.2 A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5.2 shall
not apply if the Board or Committee expressly declares that it shall not apply.
5.3 No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
6 OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
6.1 TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
6.2 PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the fair market value of the
stock subject to the Option on the date the Option
5
is granted. The exercise price of each Nonstatutory Stock Option shall be the
price established by the Board or a Committee established by the Board in
accordance with subsection 3.3.
6.3 CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) as
required in the discretion of the Board or the Committee, either at the time of
the grant or exercise of the Option, (A) by delivery to the Company of other
common stock of the Company, (B) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other common stock of the Company) with the person to whom
the Option is granted or to whom the Option is transferred pursuant to
subsection 6.4, or (C) in any other form of legal consideration that may be
acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
6.4 TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder (a
"QDRO"), and shall be exercisable during the lifetime of the person to whom the
Nonstatutory Stock Option is granted only by such person or any transferee
pursuant to a QDRO.
6.5 VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on performance
criteria) as the Board may deem appropriate. The provisions of this subsection
6.5 are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
6.6 SECURITIES LAW COMPLIANCE. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6.4, as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is
6
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
6.7 TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Board, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the case of an Incentive Stock Option, the Board shall determine
such period of time (in no event to exceed three (3) months from the date of
termination) when the Option is granted. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to the Plan.
6.8 DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option, but only
within twelve (12) months from the date of such termination (or such shorter
period specified in the Option Agreement), and only to the extent that the
Optionee was entitled to exercise it at the date of such termination (but in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement). If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to the Plan.
6.9 DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within eighteen (18) months following the
date of death (or such shorter period specified in the Option Agreement) (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
6.10 EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
6.11 WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable
7
to the participant as a result of the exercise of the Option; or (3) delivering
to the Company owned and unencumbered shares of the common stock of the Company.
6.12 RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a further
Option (a "Re-Load Option") in the event the Optionee exercises the Option
evidenced by the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such Re-
Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Re-Load Option on the date of exercise of the original Option or, in the
case of a Re-Load Option which is an Incentive Stock Option and which is granted
to a 10% stockholder (as described in subparagraph 5.3), shall have an exercise
price which is equal to one hundred ten percent (110%) of the Fair Market Value
of the stock subject to the Re-Load Option on the date of exercise of the
original Option.
Any such Re-Load Option may be an Incentive Stock Option or a Nonqualified
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option, provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subparagraph 12.4 of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subparagraph 4.1 and shall be subject to such other terms and conditions as the
Board or Committee may determine.
7 TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
7.1 PURCHASE PRICE. The purchase price under each stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
7.2 TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be assignable by any participant under the Plan,
either voluntarily or by operation of law, except where such assignment is
required by law or expressly authorized by the terms of the applicable stock
bonus or restricted stock purchase agreement.
8
7.3 CONSIDERATION. The purchase price of stock acquired pursuant to
a stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
7.4 VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
7.5 TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8 STOCK APPRECIATION RIGHTS.
8.1 The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights to
Employees or Directors of or Consultants to, the Company or its Affiliates under
the Plan. Each such right shall entitle the holder to a distribution based on
the appreciation in the fair market value per share of a designated amount of
stock.
8.2 Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
8.2.1 TANDEM STOCK APPRECIATION RIGHTS. Tandem Rights will be
granted appurtenant to an Option and will require the holder to elect between
the exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution equal to the
excess of (A) the Fair Market Value (on the date of Option surrender) of vested
shares of stock purchasable under the surrendered Option over (B) the aggregate
exercise price payable for such shares.
8.2.2 CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and will be exercised
automatically at the same time the Option is exercised for those shares. The
appreciation distribution to which the holder of such concurrent right shall be
entitled upon exercise of the underlying Option shall be in an amount equal to
the excess of (A) the aggregate fair market value (at date of exercise) of the
vested shares purchased under the underlying Option with such concurrent rights
over (B) the aggregate exercise price paid for those shares.
8.2.3 INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
may be granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of (A)
the aggregate fair market value (at the date of exercise) of a number of shares
of stock equal to the number of vested share equivalents exercised at such time
(as described in subsection 8.3.3 over (B) the aggregate fair market value of
such number of shares of stock at the date of grant.
9
8.3 The terms and conditions applicable to each Tandem Right,
Concurrent Right and Independent Right shall be as follows:
8.3.1 TANDEM RIGHTS.
8.3.1.1 Tandem Rights may be tied to either Incentive Stock
Options or Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option to which it pertains. If Tandem Rights are
granted appurtenant to an Incentive Stock Option, they shall satisfy any
applicable Treasury Regulations so as not to disqualify such Option as an
Incentive Stock Option under the Code.
8.3.1.2 The appreciation distribution payable on the
exercised Tandem Right shall be in cash in an amount equal to the excess of (I)
the fair market value (on the date of the Option surrender) of the number of
shares of stock covered by that portion of the surrendered Option in which the
optionee is vested over (II) the aggregate exercise price payable for such
vested shares.
8.3.2 CONCURRENT RIGHTS.
8.3.2.1 Concurrent Rights may be tied to any or all of the
shares of stock subject to any Incentive Stock Option or Nonstatutory Stock
Option grant made under the Plan. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains.
8.3.2.2 A Concurrent Right shall be automatically exercised
at the same time the underlying Option is exercised with respect to the
particular shares of stock to which the Concurrent Right pertains.
8.3.2.3 The appreciation distribution payable on an
exercised Concurrent Right shall be in cash in an amount equal to such portion
as shall be determined by the Board or the Committee at the time of the grant of
the excess of (I) the aggregate fair market value (on the Exercise Date) of the
vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (II) the aggregate exercise price
paid for such shares.
8.3.3 INDEPENDENT RIGHTS.
8.3.3.1 Independent Rights shall, except as specifically
set forth below, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be denominated
in share equivalents.
8.3.3.2 The appreciation distribution payable on the
exercised Independent Right shall be in an amount equal to the excess of (I) the
aggregate fair market value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent right, and with
respect to which the holder is exercising the Independent Right on such date,
over (II) the aggregate fair market value (on the date of the grant of the
Independent Right) of such number of shares of Company stock.
10
8.3.3.3 The appreciation distribution payable on the
exercised Independent Right may be paid, in the discretion of the Board or the
Committee, in cash, in shares of stock or in a combination of cash and stock.
Any shares of stock so distributed shall be valued at fair market value on the
date the Independent Right is exercised.
8.3.4 TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS
AND INDEPENDENT RIGHTS.
8.3.4.1 To exercise any outstanding Tandem, Concurrent or
Independent Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the instrument evidencing such
right.
8.3.4.2 If a Tandem, Concurrent, or Independent Right is
granted to an individual who is at the time subject to Section 16(b) of the
Exchange Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure that
the subsequent exercise of such right shall qualify for the safe-harbor
exemption from short-swing profit liability provided by Rule 16b-3 promulgated
under the Exchange Act (or any successor rule or regulation).
8.3.4.3 No limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of Tandem, Concurrent or Independent Rights.
9 CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of a 10% stockholder (as described in subparagraph 5.3), not less than one
hundred ten percent (110%) of the Fair Market Value per share of stock on the
new grant date.
10 COVENANTS OF THE COMPANY.
10.1 During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards up to the number of shares of stock authorized under the Plan.
10.2 The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful
11
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock under such Stock Awards unless
and until such authority is obtained.
11 USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12 MISCELLANEOUS.
12.1 The Board or the Committee shall have the power to accelerate the
time at which a Stock Award may first be exercised or the time during which a
Stock Award or any part thereof will vest, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.
12.2 Neither an Optionee nor any person to whom an Option is
transferred under subsection 6.4 shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Option
unless and until such person has satisfied all requirements for exercise of the
Option pursuant to its terms.
12.3 Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ of
the Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee with or without cause.
12.4 To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
13 ADJUSTMENTS UPON CHANGES IN STOCK.
13.1 If any change is made in the stock subject to the Plan, or
subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding Stock Awards will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards.
13.2 In the event of: (1) a dissolution or liquidation or sale of all
or substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; or (3) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, at the sole
12
discretion of the Board and to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under the Plan,
(ii) such Stock Awards shall continue in full force and effect, or (iii) the
time during which such Stock Awards become vested or may be exercised shall be
accelerated and any outstanding unexercised rights under any Stock Awards
terminated if not exercised prior to such event.
14 AMENDMENT OF THE PLAN.
14.1 The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
14.1.1 Increase the number of shares reserved for Stock Awards
under the Plan;
14.1.2 Modify the requirements as to eligibility for
participation in the Plan to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Sections 162(m)
and 422 of the Code; or
14.1.3 Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
14.2 It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
14.3 Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
15 TERMINATION OR SUSPENSION OF THE PLAN.
15.1 The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on midnight, January 6, 2004. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.
15.2 Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the person to whom the Stock Award was
granted.
13
16 EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercisable unless and until the
Plan has been approved by the stockholders of the Company.
14
NPS PHARMACEUTICALS, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON JANUARY 7, 1994
APPROVED BY STOCKHOLDERS EFFECTIVE FEBRUARY 17, 1994
1. PURPOSE
1.1 The purpose of the 1994 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of NPS Pharmaceuticals,
Inc. (the "Company") who is not otherwise an employee of the Company or of any
Affiliate of the Company (each such person being hereafter referred to as a
"Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
1.2 The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
1.3 The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION
2.1 The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2.2.
2.2 The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
3.1 Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Ninety Thousand (90,000) shares of
the Company's common stock. If any option granted under the Plan shall for any
reason expire or otherwise terminate without having been
1.
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
3.2 The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY
4.1 Options shall be granted only to Non-Employee Directors of the
Company.
5. NON-DISCRETIONARY GRANTS
5.1 Each person who is, after the date of approval of the Plan by the
Board (the "Adoption Date"), elected for the first time to be a Non-Employee
Director shall, upon the date of his initial election to be a Non-Employee
Director by the Board or stockholders of the Company, be granted an option to
purchase Fifteen Thousand (15,000) shares of common stock of the Company on the
terms and conditions set forth herein.
5.2 On December 1, of each year, commencing with December 1, 1994, each
person who is then a Non-Employee Director and has been a Non-Employee Director
for at least three (3) months, shall be granted an option to purchase Three
Thousand (3,000) shares of common stock of the Company on the terms and
conditions set forth herein.
6. OPTION PROVISIONS
Each option shall contain the following terms and conditions:
6.1 The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director of the Company or as an employee of or consultant to the
Company or any Affiliate of the Company, terminates for any reason or for no
reason, the option shall terminate on the earlier of the Expiration Date or the
date twelve (12) months following the date of termination of service; provided,
however, that if such termination of service is due to the optionee's death, the
option shall terminate on the earlier of the Expiration Date or eighteen
(18) months following the date of the optionee's death. In any and all
circumstances, an option may be exercised following termination of the
optionee's service as a Non-Employee Director of the Company only as to that
number of shares as to which it was exercisable on the date of termination of
such service under the provisions of subparagraph 6.5.
6.2 The exercise price of each option shall be one hundred percent (100%)
of the fair market value of the stock subject to such option on the date such
option is granted.
2.
6.3 Payment of the exercise price of each option is due in full in cash
upon any exercise; the optionee may elect to make payment of the exercise price
under one of the following alternatives:
6.3.1 Payment of the exercise price per share in cash at the time of
exercise; or
6.3.2 Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at fair market value on
the date preceding the date of exercise; or
6.3.3 Payment by a combination of the methods of payment specified in
subparagraph 6.3.1 and 6.3.2 above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
6.4 An option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code or Title I of ERISA, and shall be
exercisable during the lifetime of the person to whom the option is granted only
by such person or by his guardian or legal representative. Notwithstanding the
foregoing, the optionee may during his or her lifetime designate a person to
receive and exercise any of the options following the optionee's death.
6.5 The option shall become exercisable in installments from the date of
grant at the rates set forth below. Twenty-eight percent (28%) of the shares
shall vest on the first anniversary of the date of grant and three percent (3%)
of the remaining shares shall vest each month thereafter, provided that the
optionee has, during the entire period prior to such vesting date, continuously
served as a Non-Employee Director or as an employee of or consultant to the
Company or any Affiliate of the Company, whereupon such option shall become
fully exercisable in accordance with its terms with respect to that portion of
the shares represented by that installment.
6.6 The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6.4, as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-
3.
currently-effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii), as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then-applicable securities laws.
6.7 Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
6.8 The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that any optionee
not sell or otherwise transfer or dispose of any shares of common stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Securities Act as may be
requested by the Company or the representative of the underwriters.
7. COVENANTS OF THE COMPANY
7.1 During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
7.2 The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS
9.1 Neither an optionee nor any person to whom an option is transferred
under subparagraph 6.4 shall be deemed to be the holder of, or to have any of
the rights of a holder with
4.
respect to, any shares subject to such option unless and until such person has
satisfied all requirements for exercise of the option pursuant to its terms.
9.2 Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director with or without cause.
9.3 No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
9.4 In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK
10.1 If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
10.2 In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (3) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, the
time during which options outstanding under the Plan may be exercised shall be
accelerated and the options terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN
5.
11.1 The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the plan more than once every
six months, with respect to the provisions of the plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
11.1.1 Increase the number of shares which may be issued under the
Plan;
11.1.2 Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to comply with the requirements of Rule 16b-3); or
11.1.3 Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to comply with the requirements of
Rule 16b-3.
11.2 Rights and obligations under any option granted before any amendment
of the Plan shall not be altered or impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN
12.1 The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on midnight, January 6, 2004. No
options may be granted under the Plan while the Plan is suspended or after it is
terminated.
12.2 Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12.3 The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE
13.1 The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
13.2 No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13.1 above has been met.
6.
NPS PHARMACEUTICALS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED ON JANUARY 7, 1994
APPROVED BY STOCKHOLDERS EFFECTIVE FEBRUARY 17, 1994
1 PURPOSE.
1.1 The purpose of the Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of NPS Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph 1.2,
which are designated as provided in subparagraph 2.2, may be given an
opportunity to purchase stock of the Company.
1.2 The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
1.3 The Company, by means of the Plan, seeks to retain the services
of its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
1.4 The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2 ADMINISTRATION.
2.1 The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2.3. Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
2.2 The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
2.2.1 To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
2.2.2 To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
1
2.2.3 To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
2.2.4 To amend the Plan as provided in paragraph 13.
2.2.5 Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
2.3 The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3 SHARES SUBJECT TO THE PLAN.
3.1 Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate Ninety Thousand (90,000) shares
of the Company's common stock (the "Common Stock"). If any right granted under
the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
3.2 The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4 GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
2
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
5 ELIGIBILITY.
5.1 Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2.2, to
employees of any Affiliate of the Company. Except as provided in subparagraph
5.2, an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
5.2 The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
5.2.1 the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
5.2.2 the Purchase Period (as defined below) for such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
5.2.3 the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Purchase Period (as defined below) for such Offering, he
or she will not receive any right under that Offering.
5.3 No employee shall be eligible for the grant of any rights under
the Plan if, immediately after any such rights are granted, such employee owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Affiliate. For purposes
of this subparagraph 5.3, the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
3
5.4 An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by
Section 423(b)(8) of the Code, do not permit such employee's rights to purchase
stock of the Company or any Affiliate to accrue at a rate which exceeds twenty-
five thousand dollars ($25,000) of fair market value of such stock (determined
at the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
5.5 Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6 RIGHTS; PURCHASE PRICE.
6.1 On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in Section 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each Offering made
under this Plan, the Board or the Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such Offering. In addition, in connection with each Offering which contains
more than one Exercise Date (as defined in the Offering), the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Exercise Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
6.2 The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
6.2.1 an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Offering Date; or
6.2.2 an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Exercise Date.
4
7 PARTICIPATION; WITHDRAWAL; TERMINATION.
7.1 An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage specified by the
Board or the Committee of such employee's Earnings during the Purchase Period.
"Earnings" is defined as the total compensation paid to an employee, including
all salary, wages (including amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, and other
remuneration paid directly to the employee, but excluding profit sharing, the
cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero), increase or begin
such payroll deductions after the beginning of any Purchase Period only as
provided for in the Offering. A participant may make additional payments into
his or her account only if specifically provided for in the Offering and only if
the participant has not had the maximum amount withheld during the Purchase
Period.
7.2 At any time during a Purchase Period a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period except as provided by the Board or the Committee in the
Offering. Upon such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
7.3 Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
7.4 Rights granted under the Plan shall not be transferable, and
shall be exercisable only by the person to whom such rights are granted.
5
8 EXERCISE.
8.1 On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Exercise Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7.2, or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after said final Exercise Date, without interest. The amount,
if any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Exercise Date of an Offering shall be
distributed in full to the participant after such Exercise Date, without
interest.
8.2 No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and the Exercise Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Exercise Date shall not be delayed more than two (2) months and the Exercise
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Exercise Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the purchase period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9 COVENANTS OF THE COMPANY.
9.1 During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such rights.
9.2 The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon
6
exercise of such rights unless and until such authority is obtained.
10 USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11 RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12 ADJUSTMENTS UPON CHANGES IN STOCK.
12.1 If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
12.2 In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13 AMENDMENT OF THE PLAN.
13.1 The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
13.1.1 Increase the number of shares reserved for rights under
the Plan;
7
13.1.2 Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3")); or
13.1.3 Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to comply
with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
13.2 Rights and obligations under any rights granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan,
except with the consent of the person to whom such rights were granted or except
as necessary to comply with any laws or governmental regulation.
14 TERMINATION OR SUSPENSION OF THE PLAN.
14.1 The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on midnight, January 6, 2004. No
rights may be granted under the Plan while the Plan is suspended or after it is
terminated.
14.2 Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom such rights were granted or
except as necessary to comply with any laws or governmental regulation.
15 EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
8