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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[ ] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
CIMA LABS 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[CIMA LOGO]
CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota 55344
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2001
TO THE STOCKHOLDERS OF CIMA LABS INC.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of CIMA
LABS INC., a Delaware corporation (the "Company"), will be held on Friday, May
11, 2001 at 2:00 p.m., local time, at the offices of the Company at 10000 Valley
View Road, Eden Prairie, Minnesota 55344, for the following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Stockholders or until their successors have been duly elected and
qualified;
2. To approve an amendment to the Company's Certificate of
Incorporation increasing the number of shares of capital stock
authorized for issuance from 25,000,000 to 65,000,000;
3. To adopt the CIMA LABS INC. 2001 Stock Incentive Plan;
4. To adopt the CIMA LABS INC. Employee Stock Purchase Plan;
5. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31,
2001; and
6. To transact such other business as may properly come before the
meeting.
The Board has fixed the close of business on Thursday, March 22, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ David A. Feste
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David A. Feste
Secretary
Eden Prairie, Minnesota
April 4, 2001
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED
PROXY IN THE POSTAGE-PAID ENVELOPE THAT IS PROVIDED. THE PROXY MAY BE REVOKED BY
YOU AT ANY TIME PRIOR TO BEING EXERCISED, AND RETURNING YOUR PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE THE
PROXY. PLEASE NOTE, HOWEVER, THAT IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR NAME AND YOU WISH TO VOTE AT THE MEETING, YOU WILL NEED TO
OBTAIN EVIDENCE OF YOUR OWNERSHIP OR A PROXY ISSUED IN YOUR NAME FROM THE
BROKER, BANK OR OTHER NOMINEE WHO IS THE STOCKHOLDER OF RECORD FOR THE SHARES
THAT YOU OWN.
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[CIMA LOGO]
CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota 55344
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of CIMA LABS INC., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on Friday, May 11, 2001, at 2:00
p.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the offices of the Company,
10000 Valley View Road, Eden Prairie, Minnesota 55344. The Company intends to
mail this Proxy Statement and accompanying Proxy card on or about April 4, 2001
to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this Proxy Statement,
the Proxy 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 Common Stock beneficially owned
by others to forward to such beneficial owners. 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
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
22, 2001 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business March 22, 2001, the Company had outstanding and entitled to
vote [____________] shares of Common Stock.
Each holder of record of Common Stock on such date 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 election 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.
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REVOCABILITY OF PROXIES
Any person 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 offices, 10000
Valley View Road, Eden Prairie, Minnesota 55344, 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
Proposals of stockholders that are intended to be presented at the
Company's 2002 Annual Meeting of Stockholders must be received by the Company
not later than December 5, 2001 in order to be included in the Proxy Statement
and Proxy relating to that Annual Meeting.
Under the Third Restated Bylaws of the Company (the "Bylaws"),
stockholder proposals to be brought before any meeting of stockholders or
nominations of persons for election as a director at any meeting of stockholders
must be made pursuant to timely notice in writing to the Secretary of the
Company. To be timely, notice by the stockholder must be delivered or received
at the Company's principal executive offices not less than 90 days before the
first anniversary of the preceding year's annual meeting, or, for the 2002
Annual Meeting of Stockholders, by February 10, 2002. If, however, the date of
the annual meeting is more than 30 days before or after such anniversary date,
notice by a stockholder shall be timely only if delivered or received not less
than 90 days before such annual meeting, or, if later, within 10 days after the
first public announcement of the date of such annual meeting. The notice must
set forth certain information concerning such proposal, such stockholder and the
nominees, as specified in the Company's Bylaws. The presiding officer of the
meeting may refuse to acknowledge any proposal or nominations not made in
compliance with the foregoing procedure.
PROPOSAL 1
ELECTION OF DIRECTORS
There are four nominees for the four Board positions authorized by
resolution of the Board in accordance with the Company's Bylaws. Each director
to be elected will hold office until the next Annual Meeting of Stockholders and
until his successor is duly elected and qualified, or until such director's
earlier death, resignation or removal. Each nominee listed below is currently a
director of the Company, each director having been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the four nominees named 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 management may propose. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve. Directors are elected by a plurality of the
votes present in person or represented by Proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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NOMINEES
The names of the nominees and certain information about them are set
forth below:
NAME AGE PRINCIPAL OCCUPATION
John M. Siebert, Ph.D. 61 President and Chief Executive Officer of the Company
Terrence W. Glarner 57 Chairman of the Board; President, West Concord Ventures, Inc.
Steven B. Ratoff 58 President and Chief Executive Officer, MacroMed, Inc.
Joseph R. Robinson, Ph.D. 62 Professor of Pharmacy, University of Wisconsin at Madison
JOHN M. SIEBERT, PH.D., has been the President and Chief Executive
Officer of the Company since September 1995 and has served as a director of the
Company since May 1992. From 1992 to 1995, Dr. Siebert was Vice President,
Technical Affairs, at Dey Laboratories, Inc., a pharmaceutical company. From
1988 to 1992, Dr. Siebert worked at Miles, Inc. Dr. Siebert has also been
employed by E.R. Squibb & Sons, Inc., G.D. Searle & Co. and the Procter & Gamble
Company.
TERRENCE W. GLARNER has served as a director of the Company since July
1990 and has served as the Chairman of the Board since April 1995. Mr. Glarner
has been President of West Concord Ventures, Inc., a venture capital firm, since
1993. He also consults with Norwest Venture Capital. Mr. Glarner was President
of North Star Ventures, Inc. from 1988 to 1993 and held various other positions
there since 1976. Mr. Glarner is a Chartered Financial Analyst. He serves as a
director of Aetrium Incorporated, Datakey, Inc., FSI International, Inc., NVE
Corporation and SpectraScience, Inc., as well as several privately-held
companies.
STEVEN B. RATOFF has served as a director of the Company since March
1995. Since February 2001, Mr. Ratoff has been President and Chief Executive
Officer of MacroMed, Inc., a privately held drug delivery company. From December
1994 to January 2001, Mr. Ratoff was Executive Vice President and Chief
Financial Officer of Brown-Forman Corporation, a consumer products company. From
1992 to 1994, Mr. Ratoff was a private investor in a number of privately-held
companies. Mr. Ratoff was Senior Vice President and Chief Financial Officer of
the Pharmaceutical Group of Bristol-Myers Squibb from 1990 to 1992. Mr. Ratoff
serves as a director of Inkine Pharmaceutical Company and MacroMed, Inc.
JOSEPH R. ROBINSON, PH.D., has served as a director of the Company since
1993. Dr. Robinson is a Professor of Pharmacy, University of Wisconsin at
Madison. Dr. Robinson is the past president of the Controlled Release Society
and of the American Association of Pharmaceutical Scientists. Dr. Robinson
serves as a director of Emisphere Technologies, Inc. and MacroMed, Inc. He also
serves on the scientific advisory boards of several companies.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 2000, the Board held eleven
meetings. All directors attended at least 75% of the meetings of the Board and
of the Committees on which they served during fiscal 2000. The Board has a
Compensation Committee and an Audit Committee. The Board does not have a
standing nominating committee. Following is a description of the functions
performed by each of the Compensation Committee and the Audit Committee.
Compensation Committee
The Compensation Committee (i) determines the amount of compensation for
the Chief Executive Officer and President of the Company, (ii) reviews
recommendations of the Chief Executive Officer concerning compensation for the
other executive officers and incentive compensation, including stock options,
for the other employees of the Company, subject to ratification by the Board,
and (iii) otherwise
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administers the Company's performance compensation and stock option plans. The
Compensation Committee is currently composed of two non-employee directors,
Messrs. Glarner and Ratoff. The Compensation Committee held three meetings
during the fiscal year ended December 31, 2000.
Audit Committee
The Company's Audit Committee consists of Messrs. Glarner (Chairman),
Ratoff and Robinson. All members of the Audit Committee are "independent" as
that term is defined in the applicable listing standards of The Nasdaq Stock
Market. The Audit Committee oversees the Company's financial reporting process
by, among other things, reviewing and reassessing the Audit Committee Charter
annually, recommending and taking action to oversee the independence of the
independent accountants and selecting and appointing the independent
accountants. The Audit Committee met three times during 2000. The
responsibilities of the Audit Committee are set forth in the Audit Committee
Charter, adopted by the Company's Board of Directors on June 2, 2000, and
amended and restated on February 16, 2001. A copy of Audit Committee Charter is
included as Exhibit A to this Proxy Statement.
REPORT OF THE AUDIT COMMITTEE
The role of the Company's Audit Committee, which is composed of three
independent non-employee directors, is one of oversight of the Company's
management and the Company's outside auditors in regard to the Company's
financial reporting and the Company's controls respecting accounting and
financial reporting. In performing its oversight function, the Audit Committee
relied upon advice and information received in its discussions with the
Company's management and independent auditors.
The Audit Committee has (i) reviewed and discussed the Company's
audited financial statements for the year ended and as of December 31, 2000 with
the Company's management; (ii) discussed with the Company's independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61
regarding communication with audit committees (Codification of Statements on
Auditing Standards, AU sec. 380); (iii) received the written disclosures and the
letter from the Company's independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees);
and (iv) has discussed with the Company's independent accountants the
independent accountants' independence.
Based on the review and discussions with management and the Company's
independent auditors referred to above, the Audit Committee recommended to the
Board that the audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended and as of December 31, 2000 for
filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Terrence W. Glarner, Chairman
Steven B. Ratoff
Joseph R. Robinson
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AUDIT FEES
During the year ended December 31, 2000, the Company paid the following
fees to Ernst & Young LLP, its independent auditors:
Financial Information Systems Design
Audit Fees and Implementation Fees All Other Fees
$33,000 $0 $95,210
The Audit Committee considered whether the independent auditors' provision of
non-audit services to the Company is compatible with the auditors' independence.
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 1, 2001 by: (i) each
director; (ii) each executive officer of the Company named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock. At March 1, 2001, there were 14,489,806
shares of Common Stock issued and outstanding.
BENEFICIAL OWNERSHIP(1)
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
FMR Corp. 1,954,792(2) 13.5
82 Devonshire Street
Boston, Massachusetts 02109
Janus Capital Corporation 1,217,375(3) 8.4
100 Fillmore Street
Denver, Colorado 80206-4923
Pilgrim Baxter & Associates, Ltd. 1,145,500(4) 7.9
825 Duportail Road
Wayne, Pennsylvania 19087
Delaware Management Holdings 1,047,011(5) 7.2
2005 Market Street
Philadelphia, Pennsylvania 19103
John M. Siebert, Ph.D. 378,500(6) 2.6
John Hontz, Ph.D. 107,999(7) *
David A. Feste 21,167(8) *
Terrence W. Glarner 102,457(9) *
Steven B. Ratoff 97,855(10) *
Joseph R. Robinson, Ph.D. 64,595(11) *
All Executive Officers and Directors as a Group (6 persons) 772,573(12) 5.1
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* Less than one percent.
(1) Unless otherwise indicated in the footnotes below, this table is based
upon information supplied by officers, directors and certain principal
stockholders of the Company. Unless otherwise indicated in the footnotes
to this table and subject to community property laws where applicable,
the Company believes that each of the stockholders named in this table
has sole voting and investment power with respect to the shares indicated
as beneficially owned.
(2) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. is the beneficial owner of 1,843,660 shares as a
result of acting as investment adviser to various funds. Edward C.
Johnson 3d (Chairman of FMR Corp.) and FMR Corp. ("FMR") each has the
power to dispose of the shares beneficially owned by Fidelity, but
neither has the power to vote or direct the voting of those shares. The
power to vote or direct the voting of the shares resides with the Board
of Trustees of the funds. Fidelity Management Trust Company ("Fidelity
Management"), a wholly-owned subsidiary of FMR is the beneficial owner of
99,530 shares as a result of its serving as investment manager of the
institutional accounts. Edward C. Johnson 3d and FMR, through its control
of Fidelity Management, each has the dispositive power and the power to
vote or to direct the voting of the shares owned by the institutional
accounts. FMR voluntarily included 11,602 shares beneficially owned by
Fidelity International Limited ("FIL") as though the shares were
beneficially owned on a joint basis. However, FMR and FIL are separate
and independent corporate entities and believe they are not acting as a
"group" for purposes of Section 13(d). The number of shares indicated is
based upon information reported to the Securities and Exchange Commission
(the "SEC") in a Schedule 13G/A filed by FMR Corp., Edward C. Johnson 3d
and Abigail P. Johnson on February 13, 2001.
(3) The number of shares indicated is based upon information reported to the
SEC in a Schedule 13G filed by Janus Capital Corporation, Thomas H.
Bailey and Janus Global Life Sciences Fund on February 15, 2001.
(4) Pilgrim Baxter and Associates, Ltd. has sole voting power only with
respect to 867,800 shares. The number of shares indicated is based upon
information reported to the SEC in a Schedule 13G filed by Pilgrim Baxter
& Associates, Ltd. on February 14, 2001.
(5) Delaware Management Holdings has shared dispositive power with respect to
4,800 shares and has sole voting power only with respect to 1,039,810
shares. The number of shares indicated is based upon information reported
to the SEC in a Schedule 13G filed by Delaware Management Holdings and
Delaware Management Business Trust on February 7, 2001.
(6) Includes 309,000 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(7) Includes 101,499 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(8) Includes 15,816 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(9) Includes 97,017 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(10) Includes 90,355 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(11) Includes 64,595 shares that may be acquired within 60 days of March 1,
2001, pursuant to outstanding options.
(12) Includes an aggregate of 678,282 shares that may be acquired within 60
days of March 1, 2001, pursuant to outstanding options. See footnotes 6
through 11.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a
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registered class of the Company's equity securities, to file with the SEC
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
ten percent stockholders are required by SEC 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, 2000, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company is entitled to receive an
annual fee of $5,000, payable quarterly, a per meeting fee of $2,500 for each
meeting (including telephonic meetings) of the Board attended by such
non-employee director and a per meeting fee of $1,250 for each meeting of (i) a
committee of the Board not held in connection with a regular Board meeting or
(ii) an operating committee of the Company, in each case attended by such
non-employee director; provided, however, that the aggregate amount of fees paid
shall not exceed $20,000 (excluding expense reimbursement) per director per
year. The members of the Board are also eligible for reimbursement for their
reasonable expenses incurred in connection with attendance at Board meetings in
accordance with Company policy.
Pursuant to the Non-Employee Directors' Fee Option Grant Program (the
"Directors' Program"), non-employee directors may defer receipt of cash
compensation attributable solely to services as a Board member and receive
future payment of those fees in the form of stock options to acquire Common
Stock of the Company. Under the Directors' Program, the maximum number of shares
of Common Stock that may be issued pursuant to options is 60,000, which may be
unissued shares or reacquired shares, bought in the open market or otherwise.
Shares subject to options, which expire or otherwise terminate without having
been exercised in full shall again become available for issuance. Options
granted under the Directors' Program are intended not to qualify as incentive
stock options under the Internal Revenue Code of 1986, as amended (the "Code").
Non-employee directors who deferred director's fees and timely filed a
deferral election automatically were granted an option to purchase Common Stock
of the Company on the date of the Annual Meeting. In addition, each non-employee
director who has a deferral election in effect as of any annual meeting of the
Company automatically will be granted an option to purchase Common Stock of the
Company on the date of such Annual Meeting.
The number of shares of Common Stock subject to each option granted under
the Directors' Program is equal to A/(B x 66 2/3%), where A is the maximum
amount of the director's fees subject to the non-employee director's deferral
election and applied to the grant of such option under the Directors' Program;
and B is the fair market value per share of Common Stock on the last day of the
month prior to the option grant date. The exercise price of options granted
under the Directors' Program is 33 1/3% of the fair market value of the Common
Stock subject to such option on the last day of the month prior to the date such
option is granted. Options shall become exercisable in installments based on
when a director's fees would become payable in cash. The term of options granted
under the Directors' Program is the earlier of ten years from the grant date or
three years following termination of service as a director.
During the year ended December 31, 2000, the Company granted options
under the Directors' Program covering 6,051 shares to the non-employee directors
as a group at an exercise price per share of $4.96. The fair market value of
such Common Stock on the date of grant was $14.88 per share (based on
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the closing sales price reported on the Nasdaq National Market System for the
date specified in the Directors' Program). As of March 1, 2001, options to
acquire 11,474 shares at a weighted average per share price of $1.52 had been
exercised under the Directors' Program.
Each non-employee director of the Company also receives stock option
grants under the 1994 Directors' Stock Option Plan (the "Directors' Plan"). Only
directors of the Company who are not employees of the Company or a subsidiary of
the Company are eligible to receive grants of options under the Directors' Plan.
Options granted under the Directors' Plan are intended not to qualify as
incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. On the
first business day immediately following the Annual Meeting of Stockholders in
each year, each non-employee director of the Company is automatically granted
under the Directors' Plan, without further action by the Company, the Board or
the stockholders of the Company, an option to purchase 7,500 shares of Common
Stock of the Company. In addition, each new non-employee director will receive
an option to purchase 20,000 shares of Common Stock on the first business day
following the date such new director is elected to the Board. No other options
may be granted at any time under the Directors' Plan. The exercise price of
options granted under the Directors' Plan is 100% of the fair market value of
the Common Stock subject to the option on the date of the option grant.
Options granted pursuant to the initial grant to purchase of 20,000
shares of Common Stock under the Directors' Plan become exercisable as to 50% of
the option shares on the 12-month anniversary of the date of grant and the
remainder become exercisable on the 24-month anniversary of the date of grant.
Options granted on the business day following the annual meeting become fully
exercisable six months subsequent to the date of grant. The term of options
granted under the Directors' Plan is ten years. In the event of a merger of the
Company with or into another corporation or a consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure, appropriate adjustments to the Directors' Plan and the outstanding
options will be made so as not to increase or decrease the option rights
outstanding.
During the year ended December 31, 2000, the Company granted options
under the Directors' Plan covering 7,500 shares to each non-employee director of
the Company at an exercise price per share of $19.50. The fair market value of
such Common Stock on the date of grant was $19.50 per share (based on the
closing sales price reported on the Nasdaq National Market System for the date
of grant specified in the Directors' Plan). As of March 1, 2001, 105,000 options
had been exercised under the Directors' Plan.
SUMMARY OF COMPENSATION
The following table sets forth the cash and non-cash compensation for the
three (3) fiscal years ended December 31, 2000, earned by the Company's Chief
Executive Officer and each of its other executive officers whose Annual
Compensation in a fiscal year exceeded $100,000 (the "Named Executive
Officers"):
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------
------------------- SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
--------------------------- ---- --------- ----------- ---------- ------
John M. Siebert, Ph.D. 2000 271,635 171,212 100,000 11,613(3)
President and 1999 259,393 107,906 25,000 10,413(3)
Chief Executive Officer 1998 246,818 55,000 80,000 8,483(3)
John Hontz, Ph.D. 2000 190,263 95,700 100,000 4,599
Vice President, Research 1999 158,798 39,593 25,000 1,543
and 1998 150,105 46,750 125,000 5,792(4)
Development/Operations
David A. Feste (5) 2000 119,214 52,200 136,000 1,264
Vice President, Chief
Financial
Officer and Secretary
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(1) Except as otherwise noted, the bonus amounts are comprised of bonuses
earned at the discretion of the Compensation Committee pursuant to the
Company's executive bonus plan.
(2) Except as otherwise noted, represents Company matching contributions
under the Company's 401-k retirement plan and premiums paid by the
Company for group term life insurance.
(3) Includes $7,800 of car allowance paid by the Company.
(4) Includes $4,442 of relocation expenses paid by the Company.
(5) Mr. Feste joined the Company as Vice President, Chief Financial Officer
and Secretary in February 2000.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the CIMA LABS
INC. Equity Incentive Plan, as amended and restated (the "Plan"). As of December
31, 2000, options to purchase a total of 1,291,465 shares were outstanding under
the Plan and options to purchase 185,090 shares remained available for grant
thereunder.
The following tables show, for the year ended December 31, 2000, certain
information regarding options granted to, exercised by, and held at December 31,
2000, by the Named Executive Officers:
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OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------- ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EMPLOYEES OPTION TERM(4)
OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION -------------------------
NAME GRANTED(#)(1) YEAR(2) PER SHARE($)(3) DATE 5% 10%
- ----------------------------------------------------------------------------------------------------------------------
John M. Siebert 100,000(5) 20.1% 20.2500 6/29/2010 $1,273,512 $3,227,328
John Hontz 100,000(6) 20.1 24.5000 8/22/2010 1,525,069 3,864,825
David A. Feste 50,000(7) 10.5 18.6875 2/28/2010 587,623 1,489,153
David A. Feste 86,000(8) 18.0 15.0000 5/16/2010 811,274 2,055,928
- --------------------------
(1) All options are granted under the Plan.
(2) Based on options to purchase 477,333 shares of the Company's Common Stock
granted in 2000.
(3) All options were granted at the fair market value at the date of grant.
(4) Reflects the value of the stock option on the date of grant assuming (i)
for the 5% column, a five-percent annual rate of appreciation in the
Company's Common Stock over the ten-year term of the option, and (ii) for
the 10% column, a ten-percent annual rate of appreciation in the
Company's Common Stock over the ten-year term of the option, in each case
without any discounting to net present value and before income taxes
associated with the exercise. The 5% and 10% assumed rates of
appreciation are based on the rules of the SEC and do not represent the
Company's estimate or projection of the future Common Stock price. The
amounts in this table may not necessarily be achieved.
(5) The option vests in three equal annual installments beginning on December
31, 2002.
(6) The option vests in four equal annual installments beginning on September
1, 2001.
(7) The option vests in four equal annual installments beginning on February
28, 2001.
(8) The option shall fully vest on April 24, 2005, subject to accelerated
vesting in installments of 33 1/3% upon the achievement of each of the
following corporate goals beginning on the date of release of earnings
indicating: four consecutive quarters annualized to break even, provided
that the fourth of such quarters occurs on or before June 30, 2001; an
annual net profit of $5 million, provided that the end of the fiscal year
in which such net profit occurs is on or before December 31, 2001; or an
annual net profit of $10 million, provided that the end of the fiscal
year in which such net profit occurs is on or before December 31, 2002.
One third of the option vested on September 19, 2000, due to the
achievement of the break even goal.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
NUMBER OF UNEXERCISED OPTIONS HELD AT
SHARES HELD AT DECEMBER 31, DECEMBER 31, 2000
ACQUIRED ON VALUE 2000 (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE) (2)
- ----------------------------------------------------------------------------------------------------------------
John M. Siebert 51,500 $2,351,063 321,000/140,000 $19,330,286/$6,908,820
John Hontz 49,000 2,168,750 101,499/171,501 6,004,521/4,832,819
David A. Feste 20,000 640,000 8,667/107,333 433,896/5,189,037
- --------------------------
(1) Amount actually realized with respect to the sale in the Company's public
offering on November 7, 2000 of shares acquired through the exercise of
options and with respect to all other shares, the market value on the
date of exercise of shares covered by options exercised, less the option
exercise price.
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(2) Based on the fair market value of the Company's Common Stock at December
31, 2000 of $65.063 per share minus the exercise price of the options.
EMPLOYMENT AGREEMENT
Dr. Siebert has entered into an employment agreement (the "Agreement")
with the Company whereby the Company agreed to employ Dr. Siebert as President
and Chief Executive Officer of the Company until January 1, 2004. Under the
terms of the Agreement, Dr. Siebert's annual base salary was set at $305,000 as
of January 1, 2001. Dr. Siebert receives annual salary increases of 5% per year
on January 1st for each year of the Agreement. In addition, the Agreement
provides that Dr. Siebert will be paid a cash incentive bonus of up to 70% of
his salary upon the Company's achievement of certain objectives. In the case of
a change of control of the Company, Dr. Siebert will receive twelve months of
compensation or the remainder of his compensation under the Agreement, whichever
is longer (less amounts received in a subsequent job during such period), and a
minimum cash bonus of $150,000 per year for each year remaining under the
Agreement for which he has not already received a bonus. Pursuant to the
Agreement, the Company pays Dr. Siebert a car allowance of $650 per month. The
Agreement contains standard provisions regarding the protection of confidential
information, a one-year covenant not to compete and a covenant not to recruit.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of two non-employee directors: Messrs. Glarner and Ratoff.
The Committee is responsible for setting and administering the
compensation policies, annual executive officer compensation, making
recommendations on potential bonus and stock option plans, granting bonuses and
recommending to the Board of Directors grants of stock options to executive
officers.
COMPENSATION PHILOSOPHY
The goals of the Company's compensation program are to align
compensation with business objectives and performance and to ensure the
compensation program is sufficient to attract, motivate and retain executives of
outstanding ability, potential and drive commensurate with the size and
innovative development requirements of the Company. Key elements of this
philosophy are:
- The Company pays competitively with comparable pharmaceutical
companies with which the Company competes for talent. To ensure
that pay is competitive, the Company compares its pay practices
with these companies and sets its pay parameters based in part on
this review.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to
generate rewards that bring total compensation to competitive
levels.
- The Company provides significant equity-based incentives for
executives to ensure that they are motivated over the long-term to
respond to the Company's business challenges.
The Committee endeavors to balance Company needs and values with the
employees' needs and believes that it is important that the Committee maintain
this relationship.
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BASE SALARY
The base salaries of the executive officers are determined initially on
the basis of one or more salary surveys conducted by third parties as well as
surveys of pharmaceutical companies both nationally and more specifically in the
Midwest, obtained from public information such as filings with the Securities
and Exchange Commission and surveys conducted by technical analysts at financial
institutions. Based upon such surveys, the executive officers' salaries are set
within the ranges of the surveys targeted at the median. The exact level of base
salary is determined after the Committee considers the experience and capability
of the executive officer, the level of responsibility, and the needs of the
Company.
PERFORMANCE COMPENSATION
Corporate and individual goals are used to establish the basis for annual
performance compensation awards. During the first quarter of each year, the
President and Chief Executive Officer establishes corporate and individual
objectives and assigns relative weights to each of such goals. At the end of the
year, results are compared to such objectives, which are then used to develop
final bonus and stock option recommendations to the Committee for the executive
officers. Recommended awards are reviewed by the Committee generally in the last
quarter of the plan year based on these corporate and individual performance
objectives, and must be approved by the Committee prior to being granted or, in
the case of stock options, recommended to the Board of Directors by the
Committee and subsequently approved by the Board of Directors.
STOCK OPTIONS
The President and Chief Executive Officer makes recommendations to the
Committee regarding grants of stock options to the executive officers based on
performance against individual and corporate objectives as well as surveys
conducted by technical analysts at financial institutions based on public
knowledge of other small companies. The Committee reviews these recommendations
and performance against corporate objectives, as well as such surveys, and
recommends to the Board of Directors grants of stock options to the executive
officers. Such recommendation of grants may vary from the recommendation of the
President and Chief Executive Officer as the Committee determines based on their
knowledge and experience as well as other factors they deem relevant. The
Committee views grants of stock options as incentives for performance and, as a
result, current holdings are considered in recommending grants of additional
stock options.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Dr. Siebert's salary, potential bonus and stock option grants are set
forth in an employment agreement between the Company and Dr. Siebert, which was
negotiated on behalf of the Board of Directors by Mr. Glarner at the direction
of the Committee with due regard to Dr. Siebert's knowledge, experience,
competitive salary information and market conditions at the time. The Employment
Agreement is in the first year of its three-year term. Pursuant to the
Employment Agreement, Dr. Siebert's salary and bonus for 2000 were $271,635 and
$171,212, respectively. Bonuses and stock option grants in future years will be
at the discretion of the Committee, provided that Dr. Siebert meets certain
minimums established by the Committee in the case of bonuses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, comprised of independent, outside directors,
is responsible for establishing and administering the Company's policies
involving the compensation of executive officers. No employee of the Company
serves on the Committee. During fiscal 2000 the members of the
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Committee were Terrence W. Glarner (Chairman) and Steven B. Ratoff. The
Committee members have no interlocking relationships as defined by the
Securities and Exchange Commission.
From the members of the Compensation Committee of CIMA LABS INC.
Terrence W. Glarner
Steven B. Ratoff
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PERFORMANCE GRAPH
The following stock performance graph compares the cumulative total
stockholder return on the Company's Common Stock ("CIMA") with the Russell 2000
Index (the "Russell 2000"), the Total Return Index for NASDAQ Pharmaceutical
Stocks (the "NASDAQ Pharmaceuticals") and the Total Return Index for the NASDAQ
Stock Market (the "NASDAQ Stock Market") for the five years ending December 31,
2000. Cumulative total stockholder return includes stock price appreciation and
reinvested dividends, if any. No dividends have ever been paid on the Company's
Common Stock, but some of the companies included in the calculation of the
Russell 2000, the NASDAQ Pharmaceuticals and the NASDAQ Stock Market have paid
dividends, which are assumed reinvested for purposes of calculating these
indices. The Company determined that the NASDAQ Stock Market index, which is a
broader index than the Russell 2000 index, is a better comparative equity market
index, given the Company's size and position in the marketplace. As a result,
the Company decided to change its broad equity market index from the Russell
2000 to the NASDAQ Stock Market.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
CIMA, THE RUSSELL 2000 INDEX, THE NASDAQ PHARMACEUTICALS INDEX
AND THE NASDAQ STOCK MARKET
[GRAPHIC OMITTED - information from the omitted chart is presented in the
table below]
12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- -----
CIMA........................... $100.00 $102.08 $ 70.83 $ 43.75 $217.72 $ 1,084.38
Russell 2000................... $100.00 $114.77 $138.51 $133.20 $159.29 $ 152.42
NASDAQ Pharmaceuticals......... $100.00 $100.31 $103.66 $131.95 $248.01 $ 308.49
NASDAQ Stock Market............ $100.00 $123.04 $150.69 $212.51 $394.92 $ 237.62
- ---------------------------
* Assumes that the value of the investment in CIMA and each index was $100
on December 31, 1995 and that all dividends, if any, were reinvested.
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PROPOSAL 2
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
INCREASING AUTHORIZED SHARES
The Board is seeking the approval of the stockholders to amend the
Company's Fifth Restated Certificate of Incorporation to increase the number of
authorized shares of the Common Stock from 20,000,000 to 60,000,000 shares, a
proposed increase of 40,000,000 shares. The Company's Fifth Restated Certificate
of Incorporation at present authorizes the issuance of 25,000,000 shares of
capital stock, comprised of 20,000,000 shares of Common Stock and 5,000,000
shares of one or more classes or series of preferred stock. For the reasons set
forth below, the Board believes the Company's Fifth Restated Certificate of
Incorporation should be amended to authorize the issuance of up to 65,000,000
shares of capital stock. The text of the proposed amendment is set forth in
Exhibit B to this Proxy Statement.
The Board believes that amending the Fifth Restated Certificate of
Incorporation to permit the Board to issue up to 65,000,000 shares of capital
stock, comprised of 60,000,000 shares of Common Stock and 5,000,000 shares of
one or more classes or series of preferred stock, will provide the Company with
flexibility. The Company could issue additional shares of capital stock for
corporate purposes, such as to effect future stock splits, to reserve additional
shares for issuance under stock option and employee stock purchase plans, to
make acquisitions, to structure mergers through the use of stock and for future
financing requirements. The Board has no current plans to issue any shares to
make an acquisition or structure a merger at the present time and it is not
currently considering the issuance of capital stock for any financing purposes.
The Board has condsidered stock splits in the past and may consider such splits
in the future.
EFFECT ON STOCKHOLDERS
Holders of the Common Stock have no preemptive, subscription or
conversion rights and are entitled to dividends on a pro rata basis when and if
declared by the Board of Directors. Authorization of the additional shares of
the Common Stock will have no effect on the rights of the existing holders of
the Common Stock. Their rights will remain unchanged, unless and until such
shares are issued, in which event the only effect would be a dilution of the
voting rights of existing holders as a result of the increased number of
outstanding shares of the Common Stock. However, this result could occur even if
Proposal 2 was not adopted by the stockholders at the Meeting or, even if
adopted, was not implemented because of the currently existing reserve for
issuances of shares of the Common Stock.
Although the issuance of additional shares of the Common Stock would
theoretically increase the amount necessary to pay dividends, the Board does not
anticipate that dividends on the Common Stock will be paid in the foreseeable
future.
The Board recognizes that, when a public company has a substantial
number of authorized and unreserved shares of the Common Stock, this condition
could create concern among existing stockholders that their stock interests
could be substantially diluted when such additional shares are issued. Sometimes
such concerns may even have a depressive effect on the market price for the
Common Stock. The Board believes that the addition of 40,000,000 authorized
shares should not have such an adverse effect, especially in view of certain of
the intended uses of such shares as discussed above, all of which the Board
believes will be beneficial to the Company and its stockholders.
In voting on this Proposal 2, stockholders should be aware that the
Board may use the additional shares to enter into a transaction which other
stockholders do not believe would be in their best interests. One example of
this is for the Board to authorize the issuance of shares to a third person or
persons in an
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attempt to defeat an acquisition proposal by another party whom the Board
opposes but these stockholders favor. The Board, in proposing this Amendment to
the Fifth Restated Certificate of Incorporation to increase the authorized
number of shares, has no such current intention.
The number of the additional shares which may be issued and the extent
of dilution of voting rights cannot be predicted because the Board does not know
the number of shares, if any, of the outstanding options that will be exercised.
In addition, the Board does not know the number of shares, whether of the Common
Stock or securities convertible or exercisable into shares of the Common Stock,
that may be issued in the future for the purposes described above.
VOTING REQUIREMENT
The affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock shall be necessary to authorize the Amendment to the
Company's Fifth Restated Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL 3
APPROVAL OF 2001 STOCK INCENTIVE PLAN
INTRODUCTION
The Company's Board of Directors authorized the adoption of the CIMA
LABS INC. 2001 Stock Incentive Plan (the "2001 Plan") effective as of March 5,
2001, subject to the approval of the 2001 Plan by the stockholders of the
Company no later than March 31, 2002. A copy of the 2001 Plan is attached as
Exhibit C to this Proxy Statement, and this discussion is qualified in its
entirety by reference to the full text of the 2001 Plan.
The Board of Directors believes that stock-based compensation programs
are key elements in achieving the Company's continued financial and operational
success. The Company's compensation programs have been designed to motivate key
personnel to produce a superior stockholder return.
The 2001 Plan does not replace the Company's Equity Incentive Plan,
under which approximately 1,334 shares of Common Stock of the Company remained
available for awards as of March 1, 2001, or the Company's 1994 Directors' Stock
Option Plan, under which approximately 42,500 shares of Common Stock of the
Company remained available for awards as of March 1, 2001, or the Company's
Non-Employee Directors' Fee Option Grant Program, under which approximately
1,559 shares of Common Stock of the Company remained available for awards as of
March 1, 2001. Notwithstanding approval of the 2001 Plan by the stockholders,
additional awards may be made under those plans. Grants and awards heretofore or
hereafter made under such plans will be governed by such plans.
The 2001 Plan has been designed to meet the requirements of Section
162(m) of the Code, regarding deductibility of executive compensation. The basic
features of the 2001 Plan are summarized below.
PURPOSE
The purpose of the 2001 Plan is to motivate key personnel to produce a
superior return to the stockholders of the Company by offering such individuals
an opportunity to realize stock appreciation, by
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facilitating stock ownership, and by rewarding them for achieving a high level
of corporate performance. The 2001 Plan is also intended to facilitate
recruiting and retaining key personnel of outstanding ability.
ADMINISTRATION
The 2001 Plan will be administered by a committee (the "Plan
Committee") of two or more directors who are "non-employee directors" within the
meaning of Rule 16b-3 ("Exchange Act Rule 16b-3") under the Securities Exchange
Act of 1934 (the "Exchange Act"). The Company currently expects that the
Compensation Committee of the Board of Directors will be the committee that
administers the 2001 Plan, all of whose members are both "non-employee
directors" for purposes of Exchange Act Rule 16b-3 and "outside directors" for
purposes of Section 162(m) of the Code. The Plan Committee will have the
exclusive power to make awards under the 2001 Plan, to determine when and to
whom awards will be granted, and to fix the form, amount, and other terms and
conditions of each award, subject to the provisions of the 2001 Plan. The Plan
Committee will have the authority to interpret the 2001 Plan and any award or
agreement made under the 2001 Plan, to establish, amend, waive, and rescind any
rules and regulations relating to the administration of the 2001 Plan, to
determine the terms and provisions of any agreements entered into under the 2001
Plan (not inconsistent with the 2001 Plan), and to make all other determinations
necessary or advisable for the administration of the 2001 Plan. The Plan
Committee may delegate all or part of its responsibilities under the 2001 Plan
to persons who are not "non-employee directors" within the meaning of Exchange
Act Rule 16b-3 for purposes of determining and administering awards solely to
employees who are not then subject to the reporting requirements of Section 16
of the Exchange Act.
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates will be eligible to
receive awards under the 2001 Plan at the discretion of the Plan Committee.
Awards other than incentive stock options (see "Types of Awards" below) also may
be awarded by the Plan Committee to individuals who are not employees but who
provide services to the Company or its affiliates in the capacity of an
independent contractor. The Company currently has approximately 140 full-time
employees.
As of the effective date of the 2001 Plan, the total number of shares
of Common Stock of the Company available for distribution under the 2001 Plan
was 1,500,000 (subject to adjustment for future stock splits, stock dividends,
and similar changes in the capitalization of the Company). No participant may
receive any combination of options and stock appreciation rights relating to
more than 500,000 shares in the aggregate in any year under the 2001 Plan. No
participant may receive performance shares relating to more than 500,000 shares
pursuant to awards in any year under the 2001 Plan. No more than 25% of all
shares subject to the 2001 Plan may be granted in the aggregate pursuant to
restricted stock (if vesting is based on a period of time without regard to the
attainment of specified performance conditions) and other stock-based awards (as
defined in "Types of Awards" below).
The 2001 Plan provides that all awards are to be evidenced by written
agreements containing the terms and conditions of the awards. Such agreements
are subject to amendment, including unilateral amendment by the Company (with
the approval of the Plan Committee), provided that no amendment that is deemed
by the Plan Committee to be materially adverse to the participant may be made
unilaterally unless it is required by law or is otherwise provided in an
agreement. Any shares of Common Stock of the Company subject to an award under
the 2001 Plan which are not used because the award expires without all shares
subject thereto having been issued or because the terms and conditions of the
award are not met may again be used for an award under the 2001 Plan. Any shares
that are the subject of awards which are subsequently forfeited to the Company
pursuant to the restrictions applicable to such award also may again be used for
an award under the 2001 Plan. Moreover, if a participant exercises a stock
appreciation right, any shares covered by the stock appreciation right in excess
of the number of shares issued (or, in the case of a settlement in cash or any
other form of property, in excess of the number of shares equal in value to the
amount of such settlement, based on the fair market value, as defined in the
2001 Plan, of such shares on the date of such exercise) may again be used for an
award under the 2001
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Plan. If, in accordance with the 2001 Plan, a participant uses shares to pay a
purchase or exercise price, including an option exercise price, or to satisfy
tax withholdings, such shares may again be used for an award under the 2001
Plan.
TYPES OF AWARDS
The types of awards that may be granted under the 2001 Plan include
incentive and nonqualified stock options, stock appreciation rights, restricted
stock, performance shares, and other stock-based awards (awards of, or based on,
stock other than options, stock appreciation rights, restricted stock or
performance shares). Subject to certain restrictions applicable to incentive
stock options, awards will be exercisable by the recipients at such times as are
determined by the Plan Committee.
In addition to the general characteristics of all of the awards
described in this Proxy Statement, the basic characteristics of awards that may
be granted under the 2001 Plan are as follows:
Incentive and Nonqualified Stock Options. Both incentive and
nonqualified stock options may be granted to recipients at such exercise prices
as the Plan Committee may determine but not less than 100% of their fair market
value (as defined in the 2001 Plan) as of the date the option is granted. Stock
options may be granted and exercised at such times as the Plan Committee may
determine, except that, unless applicable federal tax laws are modified, (a) no
incentive stock options may be granted more than ten years after the effective
date of the 2001 Plan, (b) an incentive stock option shall not be exercisable
more than ten years after the date of grant; and (c) the aggregate fair market
value of the shares of Common Stock of the Company with respect to which
incentive stock options may first become exercisable in any calendar year for
any employee may not exceed $100,000 under the 2001 Plan or any other plan of
the Company. Additional restrictions apply to an incentive stock option granted
to an individual who beneficially owns more than 10% of the combined voting
power of all classes of stock of the Company.
The purchase price payable upon exercise of options may be paid in
cash, or, if the Plan Committee permits, by reducing the number of shares
delivered to the participant or by delivering stock already owned by the
participant (where the fair market value of the shares withheld or delivered on
the date of exercise is equal to the option price of the stock being purchased),
or in a combination of cash and such stock, unless otherwise provided in the
related agreement. The participants may simultaneously exercise options and sell
the stock purchased upon such exercise pursuant to brokerage or similar
relationships and use the sale proceeds to pay the purchase price. The agreement
relating to any option may provide for the issuance of "reload" options pursuant
to which, subject to the terms and conditions established by the Plan Committee
and any applicable requirements of Exchange Act Rule 16b-3 or any other
applicable law, the participant will, either automatically or subject to
subsequent Plan Committee approval, be granted a new option when the payment of
the exercise price of the original option, or the payment of tax withholdings,
is made through the delivery to the Company of shares held by such participant.
The reload option will be a fully vested option to purchase the number of shares
provided as consideration for the exercise price and in payment of taxes in
connection with the exercise of the original option, will have a per share
exercise price equal to the fair market value of a share as of the date of
exercise of the original option, and will otherwise have terms and conditions as
contained in the original option.
Stock Appreciation Rights and Performance Shares. The value of a stock
appreciation right granted to a recipient is determined by the appreciation in
Common Stock of the Company, subject to any limitations upon the amount or
percentage of total appreciation that the Plan Committee may determine at the
time the right is granted. The recipient receives all or a portion of the amount
by which the fair market value of a specified number of shares, as of the date
the stock appreciation right is exercised, exceeds a price specified by the Plan
Committee at the time the right is granted. The price specified by the Plan
Committee must be at least 100% of the fair market value of the specified number
of shares of Common Stock of the Company to which the right relates determined
as of the date the stock appreciation right is granted. A stock appreciation
right may be granted in connection with a previously or contemporaneously
granted option, or independent of any option.
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Performance shares entitle the recipient to payment in amounts
determined by the Plan Committee based upon the achievement of specified
performance targets during a specified term. With respect to recipients who are
"covered employees" under Section 162(m) of the Code, such performance targets
will consist of one or any combination of two or more of gross revenues, license
revenues, earnings or earnings per share before income tax (profit before
taxes), net earnings or net earnings per share (profits after taxes), operating
income, total stockholder return, return on equity, pre-tax and pre-interest
expense return on average invested capital, which may be expressed on a current
value basis, or sales growth, and any such targets may relate to one or any
combination of two or more of corporate, group, unit, division, affiliate, or
individual performance. The value in dollars is determined when the award is
earned based on the fair market value of a share on the last day of the
performance period.
Payments with respect to stock appreciation rights and performance
shares may be paid in cash, shares of Common Stock of the Company or a
combination of cash and shares as determined by the Plan Committee.
Restricted Stock and Other Stock-Based Awards. Common Stock of the
Company granted to recipients may contain such restrictions as the Plan
Committee may determine, including provisions requiring forfeiture and imposing
restrictions upon stock transfer. Awards of restricted stock may, in the
discretion of the Plan Committee, provide the participant with dividends and
voting rights prior to vesting. No award of restricted stock may vest earlier
than one year from the date of grant, except in the circumstances provided in
the applicable agreement. The Plan Committee may also from time to time grant
awards of unrestricted stock or other stock-based awards such as awards
denominated in stock units, securities convertible into stock, and phantom
securities.
TRANSFERABILITY
During the lifetime of a participant to whom an award is granted, only
such participant (or such participant's legal representative or, if so provided
in the applicable agreement in the case of a nonqualified stock option, a
permitted transferee as hereafter described) may exercise an option or stock
appreciation right or receive payment with respect to performance shares or any
other award. No award of restricted stock (prior to the expiration of the
restrictions), options, stock appreciation rights, performance shares, or other
award (other than an award of stock without restrictions) may be sold, assigned,
transferred, exchanged, or otherwise encumbered, and any attempt to do so will
not be effective, except that an agreement may provide that (a) an award may be
transferable to a successor in the event of a participant's death and (b) a
nonqualified stock option may be transferable to any member of a participant's
"immediate family" (as such term is defined in Rule 16a-1(e) under the Exchange
Act) or to a trust whose beneficiaries are members of such participant's
"immediate family" or partnerships in which such family members are the only
partners, provided that the participant receives no consideration for the
transfer and such transferred nonqualified stock option will remain subject to
the same terms and conditions as were applicable to such option immediately
prior to its transfer.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS
The Plan Committee may accelerate vesting requirements, performance
periods, and the expiration of the applicable term or restrictions, and adjust
performance targets and payments, upon such terms and conditions as are set
forth in the participant's agreement, or otherwise in the Plan Committee's
discretion, which may include, without limitation, acceleration resulting from a
"change in control" or a "fundamental change" (as those terms are defined in the
2001 Plan), or the participant's death, disability, or retirement.
DURATION, ADJUSTMENTS, MODIFICATIONS, TERMINATIONS
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The 2001 Plan will remain in effect until all stock subject to it is
distributed or all awards have expired or lapsed, whichever occurs later, or the
2001 Plan is terminated as described below.
In the event of a "fundamental change," recapitalization, stock
dividend, stock split, or other relevant change, the Plan Committee has the
discretion to adjust the number and type of shares available for awards or the
number and type of shares and amount of cash subject to outstanding awards, the
option exercise price of outstanding options, and outstanding awards of
performance shares and payments with regard thereto. Adjustments in performance
targets and payments on performance shares are also permitted upon the
occurrence of such events as may be specified in the related agreements, which
may include a "change in control."
The 2001 Plan also gives the Board the right to amend, modify,
terminate or suspend the 2001 Plan, except that amendments to the 2001 Plan are
subject to stockholder approval if needed to comply with Exchange Act Rule
16b-3, the incentive stock option provisions of the Code, their successor
provisions, or any other applicable law or regulation.
Under the 2001 Plan, the Plan Committee may cancel outstanding options
and stock appreciation rights generally in exchange for cash payments to the
recipients in the event of a "fundamental change" (defined as certain
dissolutions, liquidations, mergers, consolidations, statutory share exchanges,
or other similar events involving the Company).
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the
2001 Plan generally will result in the following tax events for United States
citizens under current United States federal income tax laws.
Incentive Stock Options. A recipient will realize no taxable income,
and the Company will not be entitled to any related deduction, at the time an
incentive stock option is granted under the 2001 Plan. If certain statutory
employment and holding period conditions are satisfied before the recipient
disposes of shares acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option, and the Company
will not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by a recipient will be a capital gain or loss, long-term
or short-term, based upon how long the shares are held. The Company will not be
entitled to a deduction with respect to a disposition of the shares by a
recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon
the exercise of an incentive stock option are disposed of by such recipient
before the expiration of the statutory holding periods (a "disqualifying
disposition"), such recipient will be considered to have realized as
compensation, taxable as ordinary income in the year of disposition, an amount,
not exceeding the gain realized on such disposition, equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise of the option. The Company will be entitled to a deduction at the
same time and in the same amount as the recipient is deemed to have realized
ordinary income. Any gain realized on the disposition in excess of the amount
treated as compensation or any loss realized on the disposition will constitute
capital gain or loss, respectively. If the recipient pays the option price with
shares that were originally acquired pursuant to the exercise of an incentive
stock option and the statutory holding periods for such shares have not been
met, the recipient will be treated as having made a disqualifying disposition of
such shares, and the tax consequence of such disqualifying disposition will be
as described above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated as
if it were a nonqualified stock option, the tax consequences of which are
discussed below.
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Nonqualified Stock Options. A recipient will realize no taxable income,
and the Company will not be entitled to any related deduction, at the time a
nonqualified stock option is granted under the 2001 Plan. At the time of
exercise of a nonqualified stock option, the recipient will realize ordinary
income, and the Company will be entitled to a deduction, equal to the excess of
the fair market value of the stock on the date of exercise over the option
price. Upon disposition of the shares, any additional gain or loss realized by
the recipient will be taxed as a capital gain or loss, long-term or short-term,
based upon how long the shares are held.
Stock Appreciation Rights and Performance Shares. Generally: (a) the
recipient will not realize income upon the grant of a stock appreciation right
or performance share award; (b) the recipient will realize ordinary income, and
the Company will be entitled to a corresponding deduction, in the year cash,
shares of Common Stock, or a combination of cash and shares are delivered to the
recipient upon exercise of a stock appreciation right or in payment of the
performance share award; and (c) the amount of such ordinary income and
deduction will be the amount of cash received plus the fair market value of the
shares of Common Stock received on the date of issuance. The federal income tax
consequences of a disposition of unrestricted shares received by the recipient
upon exercise of a stock appreciation right or in payment of a performance share
award are the same as described below with respect to a disposition of
unrestricted shares.
Restricted and Unrestricted Stock. Unless the recipient files an
election to be taxed under Section 83(b) of the Code: (a) the recipient will not
realize income upon the grant of restricted stock; (b) the recipient will
realize ordinary income, and the Company will be entitled to a corresponding
deduction, when the restrictions have been removed or expire; and (c) the amount
of such ordinary income and deduction will be the fair market value of the
restricted stock on the date the restrictions are removed or expire. If the
recipient files an election to be taxed under Section 83(b) of the Code, the tax
consequences to the recipient and the Company will be determined as of the date
of the grant of the restricted stock rather than as of the date of the removal
or expiration of the restrictions.
With respect to awards of unrestricted stock: (a) the recipient will
realize ordinary income, and the Company will be entitled to a corresponding
deduction, upon the grant of the unrestricted stock and (b) the amount of such
ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair market
value of such shares on the date the recipient realizes ordinary income will be
treated as a capital gain or loss, long-term or short-term, based upon how long
the shares are held.
WITHHOLDING
The 2001 Plan permits the Company to withhold from awards an amount
sufficient to cover any required withholding taxes. In lieu of cash, the Plan
Committee may permit a participant to cover withholding obligations through a
reduction in the number of shares to be delivered to such participant or by
delivery of shares already owned by the participant.
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NEW PLAN BENEFITS
Each of the Named Executive Officers and Directors who will receive
benefits that are determinable under the 2001 Plan following approval by the
stockholders are listed below.
CIMA LABS INC. 2001 STOCK INCENTIVE PLAN
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
----------------- ---------------- ---------------
David A. Feste Unknown Option for 75,000 shares
Executive Group Unknown Option for 75,000 shares
Non-Executive Director Group N/A 0
Non-Executive Officer Employee Group N/A 0
The closing price of the Company's Common Stock on the Nasdaq National Market on
March 22, 2001 was $____ per share.
REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION
The Company intends to file a Registration Statement covering the 2001
Plan with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended.
VOTING REQUIREMENT
The affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting shall be necessary to adopt and approve
the 2001 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
PROPOSAL 4
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
The Company's Board of Directors has authorized the adoption of the
CIMA LABS INC. Employee Stock Purchase Plan (the "Purchase Plan") subject to the
approval of the Purchase Plan by the stockholders of the Company. If approved by
the stockholders, the Purchase Plan will become effective on the date the
stockholders approved the Purchase Plan. A copy of the Purchase Plan is attached
as Exhibit D to this Proxy Statement, and this discussion is qualified in its
entirety by reference to the full text of the Purchase Plan.
PURPOSE
The purpose of the Purchase Plan is to provide the employees of the
Company and any Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. "Designated
Subsidiary" means any subsidiary of the Company that has been designated by the
Board from time to time in its sole discretion as eligible to participate in the
Purchase Plan.
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ADMINISTRATION
The Purchase Plan will be administered by the Board or a committee of
members of the Board appointed by the Board. The Board or its committee shall
have full and exclusive discretionary authority to construe, interpret and apply
the terms of the Purchase Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Purchase Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
ELIGIBILITY AND NUMBER OF SHARES
Any person whose customary employment with the Company or any
Designated Subsidiary is at least twenty hours per week and more than five
months in any calendar year (including officers and any directors who are also
employees) who is employed by Company or any Designated Subsidiary on the first
day of any Offering Period will be eligible to participate in the Purchase Plan
for such Offering Period. "Offering Period" means a period of approximately
three months commencing and terminating on such dates as the Board or its
committee administering the Purchase Plan may determine.
No employee may participate in the Purchase Plan if, after giving
effect to such participation, such employee would own capital stock of the
Company, and/or hold outstanding options to purchase such stock possessing five
percent or more of the total combined voting power or value of all classes of
capital stock of the Company. No employee may participate in the Purchase Plan
to the extent that his or her participation under all employee stock purchase
plans of the Company and its subsidiaries accrues at a rate that exceeds
twenty-five thousand dollars worth of stock (determined at the fair market value
of the shares at the time the right to acquire the shares accrues) for each
calendar year.
As of March 1, 2001, the Company had approximately 140 employees who
would be eligible to participate in the Purchase Plan.
Subject to adjustment upon changes in capitalization of the Company
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of shares of Common Stock effected without receipt of consideration
by the Company, the maximum number of shares of the Company's Common Stock that
will be made available for sale under the Purchase Plan shall be 200,000 shares.
If, on the last day of any Offering Period, the number of shares to be issued
exceeds the number of shares then available under the Purchase Plan, the Company
will make a pro rata allocation of the shares remaining available for purchase
under the Purchase Plan in as uniform a manner as practicable and as it
determines to be equitable.
PARTICIPATION
An eligible employee may become a participant in the Purchase Plan by
completing a subscription agreement authorizing payroll deductions in a form
authorized by the Company and filing it with the Company's payroll office prior
to the first day of the applicable Offering Period. Payroll deductions for a
participant will commence on the first payroll following the first day of the
applicable Offering Period and will end on the last payroll in the Offering
Period to which such authorization is applicable, unless sooner terminated by
the participant in accordance with the Purchase Plan.
At the time a participant files his or her subscription agreement, he
or she will elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding the greater of $1,000 or ten percent
of the Compensation that he or she receives on each pay day during the Offering
Period. "Compensation" means all base straight time gross earnings and
commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation. All payroll
deductions made for a participant will be credited to his or her account under
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the Purchase Plan and will be withheld in whole percentages only. A participant
may not make any additional payments into such account. No interest will accrue
on payroll deductions of a participant in the Purchase Plan.
A participant may discontinue his or her participation in the Purchase
Plan as provided therein, or may increase or decrease the rate of his or her
payroll deductions during the Offering Period by completing and filing with the
Company a new subscription agreement authorizing a change in payroll deduction
rate. The Board may, in its discretion, limit the number of participation rate
changes during any Offering Period. The change in rate shall be effective with
the first full payroll period following five business days after the Company's
receipt of the new subscription agreement unless the Company elects to process a
given change in participation more quickly. A participant's subscription
agreement will remain in effect for successive Offering Periods unless
terminated in accordance with the Purchase Plan.
Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and the provisions of the Purchase Plan, a
participant's payroll deductions may be decreased to zero percent at any time
during an Offering Period. Payroll deductions will recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Offering Period that is scheduled to end in the following calendar year,
unless terminated by the participant in accordance with the Purchase Plan.
GRANT OF OPTION; PURCHASE OF STOCK
On the first day of each Offering Period, each eligible employee
participating in such Offering Period will be granted an option to purchase on
the last day of such Offering Period (at the applicable Purchase Price) up to a
number of shares of the Company's Common Stock determined by dividing such
employee's payroll deductions accumulated prior to the last day of such Offering
Period and retained in the Participant's account as of the last day of such
Offering Period by the applicable Purchase Price; provided that in no event
shall an employee be permitted to purchase during each Offering Period more than
250 shares (subject to any adjustment pursuant to the Purchase Plan), and
provided further that such purchase shall be subject to additional limitations
set forth in the Purchase Plan. "Purchase Price" means an amount equal to 85% of
the fair market value of a share of Common Stock on the first day of the
Offering Period or on the last day of the Offering Period, whichever is lower.
Exercise of the option will occur as provided below, unless the participant has
withdrawn in accordance with the Purchase Plan. The Option will expire on the
last day of the Offering Period.
Unless a participant withdraws from the Purchase Plan in accordance
with the Purchase Plan, his or her option for the purchase of shares will be
exercised automatically on the last day of the applicable Offering Period, and
the maximum number of full shares subject to option will be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares will be purchased; any
payroll deductions accumulated in a participant's account that are not
sufficient to purchase a full share will be retained in the participant's
account for the subsequent Offering Period, subject to earlier withdrawal by the
participant in accordance with the Purchase Plan. Any other monies left in a
participant's account after the exercise of the option shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares under the Purchase Plan is exercisable only by the participant.
WITHDRAWAL
A participant may withdraw all, but not less than all, the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Purchase Plan at any time by giving written notice to the
Company in a form approved by the Company. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice
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of withdrawal and such participant's option for the Offering Period will be
automatically terminated, and no further payroll deductions for the purchase of
shares will be made for such Offering Period. If a participant withdraws from an
Offering Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement.
A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan that may
be adopted by the Company or in succeeding Offering Periods that commence after
the termination of the Offering Period from which the participant withdrew.
TERMINATION OF EMPLOYMENT
Upon a participant's ceasing to be an employee of the Company for any
reason, he or she shall be deemed to have elected to withdraw from the Purchase
Plan and the payroll deductions credited to such participant's account during
the Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to such participant's
estate, and such participant's option shall be automatically terminated.
RIGHTS NOT TRANSFERABLE
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Purchase Plan may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will or the laws of descent and distribution) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with the
Purchase Plan.
AMENDMENT
The Board may at any time and for any reason amend the Purchase Plan.
Except as described below, no amendment may make any change in any option
theretofore granted that adversely affects the rights of any participant. To the
extent necessary to comply with Section 423 of the Code (or any other applicable
law, regulation or stock exchange rule), the Company will obtain stockholder
approval in such a manner and to such a degree as required.
Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) will be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Purchase Plan.
In the event the Board determines that the ongoing operation of the
Purchase Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable, modify
or amend the Purchase Plan to reduce or eliminate such accounting consequence.
Such modifications or amendments will not require stockholder approval or the
consent of any participants in the Purchase Plan.
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TERMINATION
The Board may at any time and for any reason terminate the Purchase
Plan. Except as provided below, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the
Board on the last day of any Offering Period if the Board determines that the
termination of the Offering Period or the Purchase Plan is in the best interests
of the Company and its stockholders.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period then in progress may be shortened by setting a new exercise
date (the "Liquidation Exercise Date"), and shall terminate immediately prior to
the consummation of such proposed dissolution or liquidation, unless provided
otherwise by the Board. The Liquidation Exercise Date shall be prior to the date
of the Company's proposed dissolution or liquidation. The Board shall notify
each participant in writing, at least ten business days prior to the Liquidation
Exercise Date, that the exercise date for the participant's option has been
changed to the Liquidation Exercise Date and that the participant's option shall
be exercised automatically on the Liquidation Exercise Date, unless prior to
such date the participant has withdrawn from the Offering Period in accordance
with the Purchase Plan.
In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each outstanding option may be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation does not
assume or substitute for the option, the Offering Period then in progress may be
shortened by setting a new exercise date (The "New Exercise Date"). The New
Exercise Date shall be prior to the date of the Company's proposed sale or
merger. The Board shall notify each participant in writing, at least ten
business days prior to the New Exercise Date, that the exercise date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
in accordance with the Purchase Plan.
FEDERAL TAX CONSIDERATIONS
Payroll deductions under the Purchase Plan will be made after taxes.
Participants will not recognize any additional income as a result of
participation in the Purchase Plan until the disposal of shares of Common Stock
acquired under the Purchase Plan or the death of the participant. Participants
who hold their shares of Common Stock for more than two years or die while
holding their shares of Common Stock will recognize ordinary income in the year
of disposition or death equal to the lesser of (i) the excess of the fair market
value of the shares of Common Stock on the date of disposition or death over the
purchase price paid by the participant or (ii) the excess of the fair market
value of the shares of Common Stock on the date they were purchased over the
purchase price paid by the participant. If the two-year holding period has been
satisfied when the participant sells the shares of Common Stock or if the
participant dies while holding the shares of Common Stock, the Company will not
be entitled to any deduction in connection with the disposition of such shares
by the participant.
Participants who dispose of their shares of Common Stock within two years
after the shares of Common Stock were purchased will be considered to have
realized ordinary income in the year of disposition in an amount equal to the
excess of the fair market value of the shares of Common Stock on the date they
were purchased by the participant over the purchase price paid by the
participant. If such dispositions occur, the Company generally will be entitled
to a deduction at the same time and in the same amount as the participants who
make those dispositions are deemed to have realized ordinary income.
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Participants will have a basis in their shares of Common Stock equal to
the purchase price of their shares of Common Stock plus any amount that must be
treated as ordinary income at the time of disposition of the shares of Common
Stock, as explained above. Any additional gain or loss realized on the
disposition of shares of Common Stock acquired under the Purchase Plan will be
capital gain or loss.
At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Purchase Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the employee. Each employee shall be required to provide the
Company with any information reasonably required by the Company to enable the
Company to claim any tax deductions or benefits attributable to the sale or
early disposition by any employee of Common Stock acquired under the Purchase
Plan.
NEW PLAN BENEFITS
No rights have yet been granted pursuant to the Purchase Plan. The
closing price of the Company's Common Stock on the Nasdaq National Market on
March 22, 2001 was $____ per share.
REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION
The Company intends to file a Registration Statement covering the
Purchase Plan with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended.
VOTING REQUIREMENT
The affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting shall be necessary to adopt and approve
the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2001 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1986.
Representatives of Ernst & Young LLP 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 Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board will reconsider its
selection. Even if the selection is ratified, the Audit Committee may recommend,
and the Board in their discretion may direct, the
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appointment of different independent auditors at any time during the year if
they determine 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 5.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director for such liabilities permitted under Delaware law, to
the full extent permitted under Delaware law, subject to certain limitations.
OTHER MATTERS
The Board 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
/s/ David A. Feste
-----------------------------
David A. Feste
Secretary
April 4, 2001
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EXHIBIT A
CIMA LABS INC.
AUDIT COMMITTEE CHARTER
(AS OF FEBRUARY 16, 2001)
PURPOSE
There shall be an Audit Committee of the Board of Directors of CIMA
LABS INC., a Delaware corporation (the "Company").
The Committee shall have responsibility to oversee the Company's
management and outside auditors in regard to corporate accounting and financial
reporting. The Committee has the authority to conduct any investigation it deems
appropriate, with full access to all books and records, facilities, personnel
and outside advisors of the Company. The Committee is empowered to retain
outside counsel, auditors or other experts in its discretion.
ORGANIZATION
The Committee shall consist of at least three directors. Each director
appointed to the Committee shall:
a) not be disqualified from being an "independent director" within
the meaning of Rule 4200 of the NASD Manual, and shall have no
relationship with the Company which, in the opinion of the Board,
would interfere with the exercise of independent judgment; and
b) be able to read and understand fundamental financial statements,
including the Company's balance sheet, income statement and cash
flow statement. If a director is not capable of understanding such
fundamental financial statements, he or she must become able to do
so within a reasonable period of time after appointment to the
Committee.
At least one member of the Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting or any other comparable experience or background which results in the
director's financial sophistication.
RESPONSIBILITIES
The Committee recognizes that the preparation of the Company's
financial statements and other financial information is the responsibility of
the Company's management and that the auditing, or conducting limited reviews,
of those financial statements and other financial information is the
responsibility of the Company's outside auditors. The Committee's responsibility
is to oversee the financial reporting process.
The Company's management, and its outside auditors, in the exercise of
their responsibilities, acquire greater knowledge and more detailed information
about the Company and its financial affairs than the members of the Committee.
Consequently, the Committee is not responsible for providing any expert or other
special assurance as to the Company's financial statements and other financial
information or any professional certification as to the outside auditors' work,
including without limitation their reports on and limited reviews of, the
Company's financial statements and other financial information. In addition, the
Committee is entitled to rely on information provided by the Company's
management and the outside auditors with respect to the nature of services
provided by the outside auditor and the fees paid for such services.
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In carrying out its oversight responsibilities, the Committee shall:
a) review and reassess the adequacy of the Audit Committee Charter
annually;
b) require that the outside auditors provide the Committee with a
formal written statement delineating all relationships between the
outside auditors and the Company, consistent with Independence
Standards Board Standard No. 1, and discuss with the outside
auditors their independence;
c) actively engage in a dialogue with the outside auditors regarding
any disclosed relationships or services that may impact the
objectivity and independence of the outside auditors;
d) take, or recommend that the full Board take, appropriate action to
oversee the independence of the outside auditors;
e) review and consider the matters identified in Statement on
Auditing Standards No. 61 with the outside auditors and
management;
f) review and discuss the Company's audited financial statements that
are to be included in the Company's Form 10-K with the outside
auditors and management and determine whether to recommend to the
Board of Directors that the financial statements be included in
the Company's Form 10-K for filing with the Securities and
Exchange Commission;
g) review, or the Committee's Chairman shall review, any matters
identified by the outside auditors pursuant to Statement on
Auditing Standards No. 71 regarding the Company's interim
financial statements. Any such review shall occur prior to the
filing of such interim financial statements on the Company's Form
10-Q;
h) review the terms of proposed engagements of the outside auditors
relating to services to the Company (other than those services
rendered in respect of the audit or review of the Company's annual
or quarterly financial statements) prior to such engagements; and
i) consider whether the provision of the services by the outside
auditors (other than those services rendered in respect of the
audit or review of the Company's annual or quarterly financial
statements) is compatible with maintaining the outside auditor's
independence.
The outside auditors are ultimately accountable to the Board and the
Committee, as representatives of the shareholders. The Board and the Committee
have ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditors, and, if applicable, to nominate the
outside auditors to be proposed for approval by the shareholders in any proxy
statement.
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EXHIBIT B
TEXT OF PROPOSED AMENDMENT TO
FIFTH RESTATED CERTIFICATE OF INCORPORATION
OF CIMA LABS INC.
Article 4, Paragraph 4.1 of the Fifth Certificate of Incorporation of
CIMA LABS INC. is hereby amended by deleting the language set forth therein and
replacing such language with the following:
4.1) Authorized Capital Stock. The aggregate number of shares
of stock which the Corporation is authorized to issue is 65,000,000
shares, par value $.01 per share, of which 60,000,000 shares shall be
designated common stock (the "Common Stock"), and 5,000,000 shall be
undesignated preferred stock (the "Undesignated Preferred Stock"). Each
share of Common Stock of the Corporation shall be entitled to one vote
on all matters on which such stock is entitled to vote.
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EXHIBIT C
CIMA LABS INC.
2001 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this 2001 Stock Incentive Plan (the "Plan")
is to motivate key personnel to produce a superior return to the stockholders of
CIMA LABS INC. (the "Company") and its Affiliates by offering such individuals
an opportunity to realize Stock appreciation, by facilitating Stock ownership,
and by rewarding them for achieving a high level of corporate performance. This
Plan is also intended to facilitate recruiting and retaining key personnel of
outstanding ability.
2. Definitions. The capitalized terms used in this Plan have the
meanings set forth below.
(a) "Affiliate" means any corporation that is a "parent
corporation" or "subsidiary corporation" of the Company, as those terms
are defined in Sections 424(e) and (f) of the Code, or any successor
provision, and, for purposes other than the grant of Incentive Stock
Options, any joint venture in which the Company or any such "parent
corporation" or "subsidiary corporation" owns an equity interest.
(b) "Agreement" means a written contract entered into between
the Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form (not inconsistent with this Plan)
as the Committee approves from time to time, together with all
amendments thereof, which amendments may be unilaterally made by the
Company (with the approval of the Committee) unless such amendments are
deemed by the Committee to be materially adverse to the Participant and
are not required as a matter of law.
(c) "Award" means a grant made under this Plan in the form of
Options, Stock Appreciation Rights, Restricted Stock, Performance
Shares or any Other Stock-Based Award.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means:
(i) a majority of the directors of the Company shall
be persons other than persons
(A) for whose election proxies shall have
been solicited by the Board or
(B) who are then serving as directors
appointed by the Board to fill vacancies on the Board
caused by death or resignation (but not by removal)
or to fill newly-created directorships,
35
(ii) 30% or more of the (1) combined voting power of
the then outstanding voting securities of the Company entitled
to vote generally in the election of directors ("Outstanding
Company Voting Securities") or (2) the then outstanding Shares
of Stock ("Outstanding Company Common Stock") is directly or
indirectly acquired or beneficially owned (as defined in Rule
13d-3 under the Exchange Act, or any successor rule thereto)
by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act), provided,
however, that the following acquisitions and beneficial
ownership shall not constitute Changes in Control pursuant to
this paragraph 2(e)(ii):
(A) any acquisition or beneficial ownership
by the Company or a Subsidiary, or
(B) any acquisition or beneficial ownership
by any employee benefit plan (or related trust)
sponsored or maintained by the Company or one or more
of its Subsidiaries,
(C) any acquisition or beneficial ownership
by the Participant or any group that includes the
Participant, or
(D) any acquisition or beneficial ownership
by a Parent or its wholly-owned subsidiaries, as long
as they shall remain wholly-owned subsidiaries, of
100% of the Outstanding Company Voting Securities as
a result of a merger or statutory share exchange
which complies with paragraph 2(e)(iii)(A)(2) or the
exception in paragraph 2(e)(iii)(B) hereof in all
respects,
(iii) the stockholders of the Company approve a
definitive agreement or plan to
(A) merge or consolidate the Company with or
into another corporation (other than (1) a merger or
consolidation with a Subsidiary or (2) a merger in
which
(a) the Company is the surviving
corporation,
(b) no Outstanding Company Voting
Securities or Outstanding Company Common
Stock (other than fractional shares) held by
stockholders of the Company immediately
prior to the merger is converted into cash,
securities, or other property (except (i)
voting stock of a Parent owning directly or
indirectly through wholly-owned
subsidiaries, both beneficially and of
record 100% of the Outstanding Company
Voting Securities immediately after the
Merger or (ii) cash upon the exercise by
holders of Outstanding Company Voting
Securities of statutory dissenters' rights),
(c) the persons who were the
beneficial owners, respectively, of the
Outstanding
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36
Company Voting Securities and Outstanding
Company Common Stock immediately prior to
such merger beneficially own, directly or
indirectly, immediately after the merger,
more than 70% of, respectively, the then
outstanding common stock and the voting
power of the then outstanding voting
securities of the surviving corporation or
its Parent entitled to vote generally in the
election of directors, and
(d) if voting securities of the
Parent are exchanged for Outstanding Company
Voting Securities in the merger, all holders
of any class or series of Outstanding
Company Voting Securities immediately prior
to the merger have the right to receive
substantially the same per share
consideration in exchange for their
Outstanding Company Voting Securities as all
other holders of such class or series),
(B) exchange, pursuant to a statutory share
exchange, Outstanding Company Voting Securities of
any one or more classes or series held by
stockholders of the Company immediately prior to the
exchange for cash, securities or other property,
except for (a) voting stock of a Parent owning
directly, or indirectly through wholly-owned
subsidiaries, both beneficially and of record 100% of
the Outstanding Company Voting Securities immediately
after the statutory share exchange if (i) the persons
who were the beneficial owners, respectively, of the
Outstanding Company Voting Securities and Outstanding
Company Common Stock immediately prior to such
statutory share exchange own, directly or indirectly,
immediately after the statutory share exchange more
than 70% of, respectively, the then outstanding
common stock and the voting power of the then
outstanding voting securities of such Parent entitled
to vote generally in the election of directors, and
(ii) all holders of any class or series of
Outstanding Company Voting Securities immediately
prior to the statutory share exchange have the right
to receive substantially the same per share
consideration in exchange for their Outstanding
Company Voting Securities as all other holders of
such class or series or (b) cash with respect to
fractional shares of Outstanding Company Voting
Securities or payable as a result of the exercise by
holders of Outstanding Company Voting Securities of
statutory dissenters' rights,
(C) sell or otherwise dispose of all or
substantially all of the assets of the Company (in
one transaction or a series of transactions), or
(D) liquidate or dissolve the Company,
except that it shall not constitute a Change in Control with
respect to any Participant if a majority of the voting stock
(or the voting equity interest) of the surviving
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37
corporation or its parent corporation or of any corporation
(or other entity) acquiring all or substantially all of the
assets of the Company (in the case of a merger, consolidation
or disposition of assets) or the Company or its Parent (in the
case of a statutory share exchange) is, immediately following
the merger, consolidation, statutory share exchange or
disposition of assets, beneficially owned by the Participant
or a group of persons, including the Participant, acting in
concert.
(f) "Code" means the Internal Revenue Code of 1986, as amended
and in effect from time to time, or any successor statute.
(g) "Committee" means two or more Non-Employee Directors
designated by the Board to administer this Plan under Section 3 hereof
and constituted so as to permit this Plan to comply with Exchange Act
Rule 16b-3; provided that if no Committee is designated by the Board,
the Board shall constitute the Committee.
(h) "Company" means CIMA LABS INC., a Delaware corporation, or
any successor to all or substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.
(i) "Disability" means the disability of a Participant such
that the Participant is considered disabled under any retirement plan
of the Company which is qualified under Section 401 of the Code, or as
otherwise determined by the Committee.
(j) "Employee" means any full-time or part-time employee
(including an officer or director who is also an employee) of the
Company or an Affiliate. Except with respect to grants of Incentive
Stock Options, "Employee" shall also include Non-Employee Directors and
other individuals and entities who are not "employees" of the Company
or an Affiliate but who provide services to the Company or an Affiliate
in the capacity of an independent contractor. References in this Plan
to "employment" and related terms shall include the providing of
services in any such capacity.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by
the Securities and Exchange Commission under the Exchange Act as in
effect with respect to the Company or any successor regulation.
(l) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
(i) the closing sale price of a Share (A) on the
National Association of Securities Dealers, Inc. Automated
Quotation System National Market System, or (B) if the Shares
are not traded on such system, on the composite tape for New
York Stock Exchange ("NYSE") listed shares, or (C) if the
Shares are not quoted on the NYSE composite tape, on the
principal United States securities exchange registered under
the Exchange Act on which the Shares are listed, in any case
on the date immediately preceding that date, or, if no sale of
Shares shall have occurred on that date, on the next preceding
day on which a sale of Shares occurred, or
(ii) if clause (i) is not applicable, what the
Committee determines in good faith to be 100% of the fair
market value of a Share on that date.
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38
However, if the applicable securities exchange or system has
closed for the day at the time the event occurs that triggers a
determination of Fair Market Value, all references in this paragraph to
the "date immediately preceding that date" shall be deemed to be
references to "that date." In the case of an Incentive Stock Option, if
such determination of Fair Market Value is not consistent with the then
current regulations of the Secretary of the Treasury, Fair Market Value
shall be determined in accordance with said regulations. The
determination of Fair Market Value shall be subject to adjustment as
provided in Section 12(f) hereof.
(m) "Fundamental Change" means a dissolution or liquidation of
the Company, a sale of substantially all of the assets of the Company,
a merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving
corporation, or a statutory share exchange involving capital stock of
the Company.
(n) "Incentive Stock Option" means any Option designated as
such and granted in accordance with the requirements of Section 422 of
the Code or any successor to such section.
(o) "Non-Employee Director" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act
Rule 16b-3.
(p) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(q) "Other Stock-Based Award" means an Award of Stock or an
Award based on Stock other than Options, Stock Appreciation Rights,
Restricted Stock or Performance Shares.
(r) "Option" means a right to purchase Stock, including both
Non-Qualified Stock Options and Incentive Stock Options.
(s) "Parent" means a "parent corporation", as that term is
defined in Section 424(e) of the Code, or any successor provision.
(t) "Participant" means an Employee to whom an Award is made.
(u) "Performance Period" means the period of time as specified
in an Agreement over which Performance Shares are to be earned.
(v) "Performance Shares" means a contingent award of a
specified number of Performance Shares, with each Performance Share
equivalent to one Share, a variable percentage of which may vest
depending upon the extent of achievement of specified performance
objectives during the applicable Performance Period.
(w) "Plan" means this 2001 Stock Incentive Plan, as amended
and in effect from time to time.
(x) "Restricted Stock" means Stock granted under Section 10
hereof so long as such Stock remains subject to one or more
restrictions.
(y) "Retirement" means termination of employment on or after
age 55, provided the Employee has been employed by the Company and/or
one or more Affiliates for at least ten years, or termination of
employment on or after age 62, provided in either case that the
Employee has given
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39
the Company at least six months' prior written notice of such
termination, or as otherwise determined by the Committee.
(z) "Share" means a share of Stock.
(aa) "Stock" means the common stock of the Company.
(bb) "Stock Appreciation Right" means a right, the value of
which is determined relative to appreciation in value of Shares
pursuant to an Award granted under Section 8 hereof.
(cc) "Subsidiary" means a "subsidiary corporation," as that
term is defined in Section 424(f) of the Code, or any successor
provision.
(dd) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant is
deceased, the legal representative of the estate of the Participant or
the person or persons who may, by bequest or inheritance, or under the
terms of an Award or of forms submitted by the Participant to the
Committee under Section 12(i) hereof, acquire the right to exercise an
Option or Stock Appreciation Right or receive cash and/or Shares
issuable in satisfaction of an Award in the event of a Participant's
death.
(ee) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions placed on Restricted Stock or any other Award are in
effect.
Except when otherwise indicated by the context, reference to
the masculine gender shall include, when used, the feminine gender and
any term used in the singular shall also include the plural.
3. Administration.
(a) Authority of Committee. The Committee shall administer
this Plan. The Committee shall have exclusive power to make Awards and
to determine when and to whom Awards will be granted, and the form,
amount and other terms and conditions of each Award, subject to the
provisions of this Plan. The Committee may determine whether, to what
extent and under what circumstances Awards may be settled, paid or
exercised in cash, Shares or other Awards or other property, or
canceled, forfeited or suspended. The Committee shall have the
authority to interpret this Plan and any Award or Agreement made under
this Plan, to establish, amend, waive and rescind any rules and
regulations relating to the administration of this Plan, to determine
the terms and provisions of any Agreements entered into hereunder (not
inconsistent with this Plan), and to make all other determinations
necessary or advisable for the administration of this Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the
extent it shall deem desirable. The determinations of the Committee in
the administration of this Plan, as described herein, shall be final,
binding and conclusive.
(b) Delegation of Authority. The Committee may delegate all or
any part of its authority under this Plan to persons who are not
Non-Employee Directors for purposes of determining and administering
Awards solely to Employees who are not then subject to the reporting
requirements of Section 16 of the Exchange Act.
(c) Rule 16b-3 Compliance. It is intended that this Plan and
all Awards granted pursuant to it shall be administered by the
Committee so as to permit this Plan and Awards to comply
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40
with Exchange Act Rule 16b-3. If any provision of this Plan or of any
Award would otherwise frustrate or conflict with the intent expressed
in this Section 3(c), that provision to the extent possible shall be
interpreted and deemed amended in the manner determined by the
Committee so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall be deemed
void as applicable to Participants who are then subject to the
reporting requirements of Section 16 of the Exchange Act to the extent
permitted by law and in the manner deemed advisable by the Committee.
(d) Indemnification. To the full extent permitted by law, each
member and former member of the Committee and each person to whom the
Committee delegates or has delegated authority under this Plan shall be
entitled to indemnification by the Company against and from any loss,
liability, judgment, damage, cost and reasonable expense incurred by
such member, former member or other person by reason of any action
taken, failure to act or determination made in good faith under or with
respect to this Plan.
4. Shares Available; Maximum Payouts.
(a) Shares Available. The number of Shares available for
distribution under this Plan is one million five hundred thousand
(1,500,000) (subject to adjustment under Section 12(f) hereof).
(b) Shares Again Available. Any Shares subject to the terms
and conditions of an Award under this Plan which are not used because
the Award expires without all Shares subject to such Award having been
issued or because the terms and conditions of the Award are not met may
again be used for an Award under this Plan. Any Shares that are the
subject of Awards which are subsequently forfeited to the Company
pursuant to the restrictions applicable to such Award may again be used
for an Award under this plan. If a Participant exercises a Stock
Appreciation Right, any Shares covered by the Stock Appreciation Right
in excess of the number of Shares issued (or, in the case of a
settlement in cash or any other form of property, in excess of the
number of Shares equal in value to the amount of such settlement, based
on the Fair Market Value of such Shares on the date of such exercise)
may again be used for an Award under this Plan. If, in accordance with
the Plan, a Participant uses Shares to (i) pay a purchase or exercise
price, including an Option exercise price, or (ii) satisfy tax
withholdings, such Shares may again be used for an Award under this
Plan.
(c) Unexercised Awards. Any unexercised or undistributed
portion of any terminated, expired, exchanged, or forfeited Award or
any Award settled in cash in lieu of Shares (except as provided in
Section 4(b) hereof) shall be available for further Awards.
(d) No Fractional Shares. No fractional Shares may be issued
under this Plan; fractional Shares will be rounded to the nearest whole
Share.
(e) Maximum Payouts. No more than 25% of all Shares subject to
this Plan may be granted in the aggregate pursuant to Restricted Stock
(if vesting is based on a period of time without regard to the
attainment of specified performance conditions) and Other Stock-Based
Awards.
5. Eligibility. Awards may be granted under this Plan to any Employee
at the discretion of the Committee.
6. General Terms of Awards.
(a) Awards. Awards under this Plan may consist of Options
(either Incentive Stock Options or Non-Qualified Stock Options), Stock
Appreciation Rights, Performance Shares,
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41
Restricted Stock and Other Stock-Based Awards. Awards of Restricted
Stock may, in the discretion of the Committee, provide the Participant
with dividends or dividend equivalents and voting rights prior to
vesting (whether vesting is based on a period of time, the attainment
of specified performance conditions or otherwise).
(b) Amount of Awards. Each Agreement shall set forth the
number of Shares of Restricted Stock, Stock or Performance Shares
subject to such Agreement, or the number of Shares to which the Option
applies or with respect to which payment upon the exercise of the Stock
Appreciation Right is to be determined, as the case may be, together
with such other terms and conditions applicable to the Award (not
inconsistent with this Plan) as determined by the Committee in its sole
discretion.
(c) Term. Each Agreement, other than those relating solely to
Awards of Stock without restrictions, shall set forth the Term of the
Award and any applicable Performance Period for Performance Shares, as
the case may be. An Agreement with a Participant may permit
acceleration of vesting requirements and of the expiration of the
applicable Term upon such terms and conditions as shall be set forth in
the Agreement, which may, but need not, include (without limitation)
acceleration resulting from the occurrence of a Change in Control, a
Fundamental Change, or in the event of the Participant's death,
Disability or Retirement. Acceleration of the Performance Period of
Performance Shares shall be subject to Section 9(b) hereof.
Notwithstanding the provisions of any Agreement, the Committee may, in
its discretion, declare at any time that any Award granted under this
Plan shall be immediately exercisable.
(d) Agreements. Each Award under this Plan shall be evidenced
by an Agreement setting forth the terms and conditions, as determined
by the Committee, which shall apply to such Award, in addition to the
terms and conditions specified in this Plan.
(e) Transferability. During the lifetime of a Participant to
whom an Award is granted, only such Participant (or such Participant's
legal representative or, if so provided in the applicable Agreement in
the case of a Non-Qualified Stock Option, a permitted transferee as
hereafter described) may exercise an Option or Stock Appreciation Right
or receive payment with respect to Performance Shares or any other
Award. No Award of Restricted Stock (prior to the expiration of the
restrictions), Options, Stock Appreciation Rights, Performance Shares
or other Award (other than an award of Stock without restrictions) may
be sold, assigned, transferred, exchanged, or otherwise encumbered, and
any attempt to do so shall be of no effect. Notwithstanding the
immediately preceding sentence, (i) an Agreement may provide that an
Award shall be transferable to a Successor in the event of a
Participant's death and (ii) an Agreement may provide that a
Non-Qualified Stock Option shall be transferable to any member of a
Participant's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of
such Participant's "immediate family" or partnerships in which such
family members are the only partners; provided, however, that the
Participant receives no consideration for the transfer. Any
Non-Qualified Stock Option held by a permitted transferee shall
continue to be subject to the same terms and conditions that were
applicable to such Non-Qualified Stock Option immediately prior to its
transfer and may be exercised by such permitted transferee as and to
the extent that such Non-Qualified Stock Option has become exercisable
and has not terminated in accordance with the provisions of this Plan
and the applicable Agreement. For purposes of any provision of this
Plan relating to notice to a Participant or to vesting or termination
of a Non-Qualified Stock Option upon the termination of employment of a
Participant, the references to "Participant" shall mean the original
grantee of the Non-Qualified Stock Option and not any permitted
transferee.
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42
(f) Termination of Employment. No Option or Stock Appreciation
Right may be exercised by a Participant, all Restricted Stock held by a
Participant or any other Award then subject to restrictions shall be
forfeited, and no payment with respect to Performance Shares for which
the applicable Performance Period has not been completed shall be made,
if the Participant's employment or other relationship with the Company
and its Affiliates shall be voluntarily terminated or involuntarily
terminated with or without cause before the expiration of the Term of
the Option, Stock Appreciation Right, Restricted Stock or other Award,
or the completion of the Performance Period, as the case may be, except
as, and to the extent, provided in the Agreement applicable to that
Award. An Award may be exercised by, or paid to, a transferee or the
Successor of a Participant following the death of the Participant to
the extent, and during the period of time, if any, provided in the
applicable Agreement.
(g) Rights as Stockholder. A Participant shall have no rights
as a stockholder with respect to any securities covered by an Award
until the date the Participant becomes the holder of record.
7. Stock Options.
(a) Terms of All Options. Each Option shall be granted
pursuant to an Agreement as either an Incentive Stock Option or a
Non-Qualified Stock Option. Only Non-Qualified Stock Options may be
granted to Employees who are not employees of the Company or an
Affiliate. The purchase price of each Share subject to an Option shall
be determined by the Committee and set forth in the Agreement, but
shall not be less than 100% of the Fair Market Value of a Share as of
the date the Option is granted. The purchase price of the Shares with
respect to which an Option is exercised shall be payable in full at the
time of exercise, provided that, to the extent permitted by law,
Participants may simultaneously exercise Options and sell the Shares
thereby acquired pursuant to a brokerage or similar relationship and
use the proceeds from such sale to pay the purchase price of such
Shares. The purchase price may be paid in cash or, if the Committee so
permits, through a delivery or tender to the Company of Shares held by
such Participant (in such case, such Shares having been held by such
Participant for not less than six months prior to the date on which the
Option is exercised and such Shares having a Fair Market Value as of
the date the Option is exercised equal to the purchase price of the
Shares being purchased pursuant to the Option), or a combination
thereof, unless otherwise provided in the Agreement. If the Committee
so determines, the Agreement relating to any Option may provide for the
issuance of "reload" Options pursuant to which, subject to the terms
and conditions established by the Committee and any applicable
requirements of Exchange Act Rule 16b-3 or any other applicable law,
the Participant will, either automatically or subject to subsequent
Committee approval, be granted a new Option when the payment of the
exercise price of the original Option, or the payment of tax
withholdings pursuant to Section 12(d) hereof, is made through the
delivery or tender to the Company of Shares held by such Participant,
such new "reload" Option (i) being an Option to purchase the number of
Shares provided as consideration for the exercise price and in payment
of taxes in connection with the exercise of the original Option, and
(ii) having a per Share exercise price equal to the Fair Market Value
as of the date of exercise of the original Option. Each Option shall be
exercisable in whole or in part on the terms provided in the Agreement.
In no event shall any Option be exercisable at any time after its Term.
When an Option is no longer exercisable, it shall be deemed to have
lapsed or terminated. No Participant may receive any combination of
Options and Stock Appreciation Rights relating to more than 500,000
Shares in the aggregate pursuant to Awards in any year under this Plan.
(b) Incentive Stock Options. In addition to the other terms
and conditions applicable to all Options:
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43
(i) the aggregate Fair Market Value (determined as of
the date the Option is granted) of the Shares with respect to
which Incentive Stock Options held by an individual first
become exercisable in any calendar year (under this Plan and
all other incentive stock option plans of the Company and its
Affiliates) shall not exceed $100,000 (or such other limit as
may be required by the Code), if such limitation is necessary
to qualify the Option as an Incentive Stock Option, and to the
extent an Option or Options granted to a Participant exceed
such limit, such Option or Options shall be treated as a
Non-Qualified Stock Option;
(ii) an Incentive Stock Option shall not be
exercisable and the Term of the Award shall not be more than
ten years after the date of grant (or such other limit as may
be required by the Code) if such limitation is necessary to
qualify the Option as an Incentive Stock Option;
(iii) the Agreement covering an Incentive Stock
Option shall contain such other terms and provisions which the
Committee determines necessary to qualify such Option as an
Incentive Stock Option; and
(iv) notwithstanding any other provision of this Plan
to the contrary, no Participant may receive an Incentive Stock
Option under this Plan if, at the time the Award is granted,
the Participant owns (after application of the rules contained
in Section 424(d) of the Code, or its successor provision)
Shares possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or its
subsidiaries, unless (A) the option price for such Incentive
Stock Option is at least 110% of the Fair Market Value of the
Shares subject to such Incentive Stock Option on the date of
grant and (B) such Option is not exercisable after the date
five years from the date such Incentive Stock Option is
granted.
8. Stock Appreciation Rights. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. No Stock Appreciation Right shall be exercisable at
any time after its Term. When a Stock Appreciation Right is no longer
exercisable, it shall be deemed to have lapsed or terminated. Except as
otherwise provided in the applicable Agreement, upon exercise of a Stock
Appreciation Right, payment to the Participant (or to his or her Successor)
shall be made in the form of cash, Stock or a combination of cash and Stock as
promptly as practicable after such exercise. The Agreement may provide for a
limitation upon the amount or percentage of the total appreciation on which
payment (whether in cash and/or Stock) may be made in the event of the exercise
of a Stock Appreciation Right. As specified in Section 7(a) hereof, no
Participant may receive any combination of Options and Stock Appreciation Rights
relating to more than 500,000 Shares in the aggregate pursuant to Awards in any
year under this Plan.
9. Performance Shares.
(a) Initial Award. An Award of Performance Shares shall
entitle a Participant (or a Successor) to future payments based upon
the achievement of performance targets established in
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44
writing by the Committee. Payment shall be made in Stock, or a
combination of cash and Stock, as determined by the Committee. With
respect to those Participants who are "covered employees" within the
meaning of Section 162(m) of the Code and the regulations thereunder,
such performance targets shall consist of one or any combination of two
or more of gross revenues, license revenues, earnings or earnings per
share before income tax (profit before taxes), net earnings or net
earnings per share (profit after tax), operating income, total
stockholder return, return on equity, pre-tax and pre-interest expense
return on average invested capital, which may be expressed on a current
value basis, or sales growth, and any such targets may relate to one or
any combination of two or more of corporate, group, unit, division,
Affiliate or individual performance. The Agreement may establish that a
portion of the maximum amount of a Participant's Award will be paid for
performance which exceeds the minimum target but falls below the
maximum target applicable to such Award. The Agreement shall also
provide for the timing of such payment. Following the conclusion or
acceleration of each Performance Period, the Committee shall determine
the extent to which (i) performance targets have been attained, (ii)
any other terms and conditions with respect to an Award relating to
such Performance Period have been satisfied, and (iii) payment is due
with respect to a Performance Share Award. No Participant may receive
Performance Shares relating to more than 500,000 Shares pursuant to
Awards in any year under this Plan.
(b) Acceleration and Adjustment. The Agreement may permit an
acceleration of the Performance Period and an adjustment of performance
targets and payments with respect to some or all of the Performance
Shares awarded to a Participant, upon such terms and conditions as
shall be set forth in the Agreement, upon the occurrence of certain
events, which may, but need not, include without limitation a Change in
Control, a Fundamental Change, the Participant's death, Disability or
Retirement, a change in accounting practices of the Company or its
Affiliates, or, with respect to payments in Stock for Performance Share
Awards, a reclassification, stock dividend, stock split or stock
combination as provided in Section 12(f) hereof.
(c) Valuation. Each Performance Share earned after conclusion
of a Performance Period shall have a value equal to the Fair Market
Value of a Share on the last day of such Performance Period.
10. Restricted Stock. Subject to Section 4(e), Restricted Stock may be
granted in the form of Shares registered in the name of the Participant but held
by the Company until the end of the Term of the Award. Any employment
conditions, performance conditions and the Term of the Award shall be
established by the Committee in its discretion and included in the applicable
Agreement. The Committee may provide in the applicable Agreement for the lapse
or waiver of any such restriction or condition based on such factors or criteria
as the Committee, in its sole discretion, may determine. No Award of Restricted
Stock may vest earlier than one year from the date of grant, except as provided
in the applicable Agreement.
11. Other Stock-Based Awards. Subject to Section 4(e), the Committee
may from time to time grant Awards of Stock, and other Awards under this Plan
(collectively herein defined as "Other Stock-Based Awards"), including without
limitation those Awards pursuant to which Shares may be acquired in the future,
such as Awards denominated in Stock units, securities convertible into Stock and
phantom securities. The Committee, in its sole discretion, shall determine the
terms and conditions of such Awards provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan. The Committee may, in its
sole discretion, direct the Company to issue Shares subject to restrictive
legends and/or stop transfer instructions which are consistent with the terms
and conditions of the Award to which such Shares relate.
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12. General Provisions.
(a) Effective Date of this Plan. This Plan shall become
effective as of May 11, 2001, provided that this Plan is approved and
ratified by the affirmative vote of the holders of a majority of the
outstanding Shares of Stock present or represented and entitled to vote
in person or by proxy at a meeting of the stockholders of the Company
no later than December 31, 2001. If this plan is not so approved by
such holders, any Awards granted under this Plan subject to such
approval shall be cancelled and be null and void.
(b) Duration of this Plan. This Plan shall remain in effect
until all Stock subject to it shall be distributed or all Awards have
expired or lapsed, whichever is latest to occur, or this Plan is
terminated pursuant to Section 12(e) hereof. No Award of an Incentive
Stock Option shall be made more than ten years after the effective date
provided in Section 12(a) hereof (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option. The date and time of approval by
the Committee of the granting of an Award shall be considered the date
and time at which such Award is made or granted, notwithstanding the
date of any Agreement with respect to such Award; provided, however,
that the Committee may grant Awards other than Incentive Stock Options
to be effective and deemed to be granted on the occurrence of certain
specified contingencies.
(c) Right to Terminate Employment. Nothing in this Plan or in
any Agreement shall confer upon any Participant who is an Employee the
right to continue in the employment of the Company or any Affiliate or
affect any right which the Company or any Affiliate may have to
terminate or modify the employment of the Participant with or without
cause.
(d) Tax Withholding. The Company may withhold from any payment
of cash or Stock to a Participant or other person under this Plan an
amount sufficient to cover any required withholding taxes, including
the Participant's social security and Medicare taxes (FICA) and
federal, state and local income tax with respect to income arising from
payment of the Award. The Company shall have the right to require the
payment of any such taxes before issuing any Stock pursuant to the
Award. In lieu of all or any part of a cash payment from a person
receiving Stock under this Plan, the Committee may, in the applicable
Agreement or otherwise, permit a person to cover all or any part of the
minimum statutory tax withholding requirements through a reduction of
the number of Shares delivered to such person or through delivery or
tender to the Company of Shares held by such person, in each case
valued in the same manner as used in computing the withholding taxes
under applicable laws.
(e) Amendment, Modification and Termination of this Plan.
Except as provided in this Section 12(e), the Board may at any time
amend, modify, terminate or suspend this Plan. Except as provided in
this Section 12(e), the Committee may at any time alter or amend any or
all Agreements under this Plan to the extent permitted by law.
Amendments are subject to approval of the stockholders of the Company
only if such approval is necessary to maintain this Plan in compliance
with the requirements of Exchange Act Rule 16b-3, Section 422 of the
Code, their successor provisions, or any other applicable law or
regulation. No termination, suspension or modification of this Plan may
materially and adversely affect any right acquired by any Participant
(or a Participant's legal representative) or any Successor or permitted
transferee under an Award granted before the date of termination,
suspension or modification, unless otherwise provided in an Agreement
or otherwise or required as a matter of law. It is conclusively
presumed that any adjustment for changes in capitalization provided for
in Section 9(b) or 12(f) hereof does not adversely affect any right of
a Participant or other person under an Award.
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(f) Adjustment for Changes in Capitalization. Appropriate
adjustments in the aggregate number and type of securities available
for Awards under this Plan, in the limitations on the number and type
of securities that may be issued to an individual Participant, in the
number and type of securities and amount of cash subject to Awards then
outstanding, in the Option exercise price as to any outstanding Options
and, subject to Section 9(b) hereof, in outstanding Performance Shares
and payments with respect to outstanding Performance Shares may be made
by the Committee in its sole discretion to give effect to adjustments
made in the number or type of Shares through a Fundamental Change
(subject to Section 12(g) hereof), recapitalization, reclassification,
stock dividend, stock split, stock combination, spin-off or other
relevant change, provided that fractional Shares shall be rounded to
the nearest whole Share.
(g) Fundamental Change. In the event of a proposed Fundamental
Change:
(a) involving a merger, consolidation or statutory
share exchange, unless appropriate provision shall be made
(which the Committee may, but shall not be obligated to, make)
for the protection of the outstanding Options and Stock
Appreciation Rights by the substitution of options, stock
appreciation rights and appropriate voting common stock of the
corporation surviving any such merger or consolidation or, if
appropriate, the Parent of such surviving corporation, to be
issuable upon the exercise of Options or used to calculate
payments upon the exercise of Stock Appreciation Rights in
lieu of Options, Stock Appreciation Rights and capital stock
of the Company, or
(b) involving the dissolution or liquidation of the
Company,
the Committee may, but shall not be obligated to, declare, at least
twenty days prior to the occurrence of the Fundamental Change, and
provide written notice to each holder of an Option or Stock
Appreciation Right of the declaration, that each outstanding Option and
Stock Appreciation Right, whether or not then exercisable, shall be
canceled at the time of, or immediately prior to the occurrence of, the
Fundamental Change in exchange for payment to each holder of an Option
or Stock Appreciation Right, within 20 days after the Fundamental
Change, of cash (or with respect to an Option, if the Committee so
elects in lieu of solely cash, of such form(s) of consideration,
including cash and/or property, singly or in such combination as the
Committee shall determine, that such holder of an Option would have
received as a result of the Fundamental Change if such holder had
exercised such holder's Option immediately prior to the Fundamental
Change) equal to (i) for each Share covered by the canceled Option, the
amount, if any, by which the Fair Market Value (as defined in this
Section 12(g)) per Share exceeds the exercise price per Share covered
by such Option or (ii) for each Stock Appreciation Right, the price
determined pursuant to Section 8 hereof, except that Fair Market Value
of the Shares as of the date of exercise of the Stock Appreciation
Right, as used in clause (i) of Section 8, shall be deemed to mean Fair
Market Value for each Share with respect to which the Stock
Appreciation Right is calculated determined in the manner hereinafter
referred to in this Section 12(g). At the time of the declaration
provided for in the immediately preceding sentence, each Stock
Appreciation Right and each Option shall immediately become exercisable
in full and each person holding an Option or a Stock Appreciation Right
shall have the right, during the period preceding the time of
cancellation of the Option or Stock Appreciation Right, to exercise the
Option as to all or any part of the Shares covered thereby or the Stock
Appreciation Right in whole or in part, as the case may be. In the
event of a declaration pursuant to this Section 12(g), each outstanding
Option and Stock Appreciation Right that shall not have been exercised
prior to the Fundamental Change shall be canceled at the time of, or
immediately prior to, the Fundamental Change, as provided in the
declaration. Notwithstanding the foregoing, no person holding an Option
or Stock Appreciation Right shall be entitled to the payment provided
for in this Section 12(g) if such Option or Stock Appreciation Right
shall have terminated, expired or been
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cancelled. For purposes of this Section 12(g) only, "Fair Market Value"
per Share means the cash plus the fair market value, as determined in
good faith by the Committee, of the non-cash consideration to be
received per Share by the stockholders of the Company upon the
occurrence of the Fundamental Change, notwithstanding anything to the
contrary provided in this Plan.
(h) Other Benefit and Compensation Programs. Payments and
other benefits received by a Participant under an Award shall not be
deemed a part of a Participant's regular, recurring compensation for
purposes of any termination, indemnity or severance pay laws and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar
arrangement provided by the Company or an Affiliate, unless expressly
so provided by such other plan, contract or arrangement or the
Committee determines that an Award or portion of an Award should be
included to reflect competitive compensation practices or to recognize
that an Award has been made in lieu of a portion of competitive cash
compensation.
(i) Beneficiary Upon Participant's Death. To the extent that
the transfer of a Participant's Award at death is permitted by this
Plan or under an Agreement, (i) a Participant's Award shall be
transferable to the beneficiary, if any, designated on forms prescribed
by and filed with the Committee and (ii) upon the death of the
Participant, such beneficiary shall succeed to the rights of the
Participant to the extent permitted by law and this Plan. If no such
designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards, which shall be transferable
by will or pursuant to laws of descent and distribution to the extent
permitted by this Plan or under an Agreement.
(j) Unfunded Plan. This Plan shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Awards under this Plan. Neither the Company, its
Affiliates, the Committee, nor the Board shall be deemed to be a
trustee of any amounts to be paid under this Plan nor shall anything
contained in this Plan or any action taken pursuant to its provisions
create or be construed to create a fiduciary relationship between the
Company and/or its Affiliates, and a Participant or Successor. To the
extent any person acquires a right to receive an Award under this Plan,
such right shall be no greater than the right of an unsecured general
creditor of the Company.
(k) Limits of Liability.
(i) Any liability of the Company to any Participant
with respect to an Award shall be based solely upon
contractual obligations created by this Plan and the
Agreement.
(ii) Except as may be required by law, neither the
Company nor any member or former member of the Board or of the
Committee, nor any other person participating (including
participation pursuant to a delegation of authority under
Section 3(b) hereof) in any determination of any question
under this Plan, or in the interpretation, administration or
application of this Plan, shall have any liability to any
party for any action taken, or not taken, in good faith under
this Plan.
(l) Compliance with Applicable Legal Requirements. No
certificate for Shares distributable pursuant to this Plan shall be
issued and delivered unless the issuance of such certificate complies
with all applicable legal requirements including, without limitation,
compliance with the provisions of applicable state securities laws, the
Securities Act of 1933, as amended and in effect from time to time or
any successor statute, the Exchange Act and the requirements of the
exchanges, if any, on which the Company's Shares may, at the time, be
listed.
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(m) Deferrals and Settlements. The Committee may require or
permit Participants to elect to defer the issuance of Shares or the
settlement of Awards in cash under such rules and procedures as it may
establish under this Plan. It may also provide that deferred
settlements include the payment or crediting of interest on the
deferral amounts.
13. Governing Law. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
14. Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
15. Prior Plans. Notwithstanding the adoption of this Plan by the Board
and approval of this Plan by the Company's stockholders as provided by Section
12(a) hereof, the Company's Equity Incentive Plan, 1994 Directors' Stock Option
Plan and Non-Employee Directors' Fee Option Grant Program, as the same may have
been amended from time to time (the "Prior Plans"), shall remain in effect and
the Committee may continue to make grants of awards pursuant to and subject to
the limitations of the Prior Plans. All grants and awards heretofore or
hereafter made under the Prior Plans shall be governed by the terms of the Prior
Plans.
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EXHIBIT D
CIMA LABS INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the Company
and any Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Committee" shall mean a committee of members of the
Board appointed by the Board in accordance with Section 14 of the Plan to
administer the Plan.
(d) "Common Stock" shall mean the Common Stock of the
Company.
(e) "Company" shall mean CIMA LABS INC., a Delaware
corporation.
(f) "Compensation" shall mean all base straight time
gross earnings and commissions, exclusive of payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation.
(g) "Designated Subsidiary" shall mean any Subsidiary
which has been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(h) "Employee" shall mean any person who is an employee
of the Company or any Designated Subsidiary for tax purposes whose customary
employment with the Company is at least twenty (20) hours per week and more than
five (5) months in any calendar year. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company. Where the period
of leave exceeds 90 days and the individual's right to reemployment is not
guaranteed either by statute or by contract, the employment relationship shall
be deemed to have terminated on the 91st day of such leave.
(i) "Enrollment Date" shall mean the first day of each
Offering Period.
(j) "Exercise Date" shall mean the last day of each
Offering Period.
(k) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last
50
market trading day on the date of such determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(l) "Offering Period" shall mean a period of
approximately three (3) months commencing and terminating on such dates as the
Board or its Committee may determine. The duration of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(o) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company or
Designated Subsidiary on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with new Offering Periods commencing on such dates as the Board or its
Committee shall determine. The Board or its Committee shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
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5. Participation
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in a
form authorized by the Company and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made on
each pay day during the Offering Period in an amount not exceeding the greater
of $1,000 or 10 percent (10%) of the Compensation which he or she receives on
each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period by
completing and filing with the Company a new subscription agreement authorizing
a change in payroll deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering Period. The change in
rate shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Offering Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee. Each Employee shall be
required to provide the Company with any information reasonably required by the
Company to enable the Company to claim any tax deductions or benefits
attributable to the sale or early disposition by any Employee of Common Stock
acquired under the Plan.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise
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Date and retained in the Participant's account as of the Exercise Date by the
applicable Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Offering Period more than two hundred and
fifty (250) shares (subject to any adjustment pursuant to Section 17), and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof. The Option shall expire on the last day of the Offering
Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any monies, other than those funds remaining in a
participant's account that are not sufficient to purchase a full share,
remaining in a participant's account after the Exercise Date shall be returned
to the participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange for the delivery to each
participant, as appropriate, of the shares purchased upon exercise of his or her
option.
10. Withdrawal.
(a) A participant may withdraw all, but not less than
all, the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in a form approved by the Company. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
(b) A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to such
participant's estate, and such participant's option shall be automatically
terminated.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization
of the Company as provided in Section 17 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be two hundred thousand (200,000) shares. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds
the number
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53
of shares then available under the plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) A participant shall have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds from an Offering Period in
accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves, the maximum number of
shares each participant may purchase per Offering Period (pursuant to Section
7), as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period then in
progress may be shortened by setting a new Exercise Date (the "Liquidation
Exercise Date"), and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise by the
Board. The Liquidation Exercise Date shall be before the date of the Company's
proposed dissolution or liquidation. The Board shall notify each participant in
writing, at least ten (10) business days prior to the Liquidation Exercise Date,
that the Exercise Date for the participant's option has been changed to the
Liquidation Exercise Date and that the participant's option shall be exercised
automatically on the Liquidation Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
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(c) Merger or Asset Sale. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option may be assumed
or an equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not assume or substitute for the option, the Offering Period
then in progress may be shortened by setting a new Exercise Date (The "New
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
18. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 17
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its stockholders. Except as
provided in Section 17 and Section 18 hereof, no amendment may make any change
in any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(i) shortening any Offering Period so that
Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Board action; and
(ii) allocating shares.
Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.
19. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
6
55
20. Conditioning Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
7
56
CIMA(TM)
----
CIMA LABS INC.
ANNUAL MEETING
FRIDAY, MAY 11, 2001
2:00 P.M. CENTRAL DAYLIGHT TIME
CIMA LABS INC.
10000 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA
CIMA LABS INC.
10000 VALLEY VIEW ROAD, EDEN PRAIRIE, MINNESOTA 55344 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
By signing this proxy, you revoke all prior proxies and appoint John M. Siebert,
Ph.D. and David A. Feste, or either one of them, as Proxies, each with the power
to appoint his substitute and to act without the other, and authorize each of
them to represent and to vote, as designated herein, all shares of common stock
of CIMA LABS INC. (the "Company") held of record by the undersigned on March 22,
2001, at the Annual Meeting of Stockholders of the Company to be held on May 11,
2001 or at any adjournment thereof.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1,2,3,4 AND 5.
See reverse for voting instructions.
57
CIMA(TM)
--------
Please detach here
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1,2,3,4 AND 5.
1. Election of directors: 01 John M. Slebert, Ph.D. 02 Terrance W. Glarner
03 Steven B. Ratoff 04 Joseph R. Robinson,
Ph.D.
[ ] Votes FOR all [ ] Votes WITHHELD for
nominees (except all nominees
as marked to the
contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR ANY INDICATED NOMINEE, WRITE THE
NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
[ ]
2. Approval of Amendment to Certificate of Incorporation increasing the number
of shares of capital stock authorized for issuance from 25,000,000 to
65,000,000.
[ ] For [ ] Against [ ] Abstain
3. Approval of the CIMA LABS INC. 2001 Stock Incentive Plan.
[ ] For [ ] Against [ ] Abstain
4. Approval of the CIMA LABS INC. Employee Stock Purchase Plan.
[ ] For [ ] Against [ ] Abstain
5. Ratification of the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 2001.
[ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH ITEM. THE PROXIES ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE MEETING.
Date__________________________
Address Change? Mark Box
Indicate changes below: [ ]
[ ]
Signature(s) in Box
Please sign exactly as your
name(s) appear(s) on the Proxy.
If held in joint tenancy, all
persons must sign. Trustees,
administrators, etc., should
include title and authority.
Corporations should provide full
name of corporation and title of
authorized officer signing the
proxy.