UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CATALYTICA, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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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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Notes:
[CATALYTICA LOGO APPEARS HERE]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 17, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
Catalytica, Inc., a Delaware corporation (the "Company" or "Catalytica"), will
be held on June 17, 1998, at 10:30 a.m., local time, in the Park Hyatt San
Francisco, 333 Battery Street, San Francisco, California 94111 for the
following purposes:
1. To elect directors to serve for the following year and until their
successors are duly elected.
2. To consider and vote to approve an amendment to the Company's 1992
Employee Stock Purchase Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 1,500,000 shares.
3. To consider and vote to approve an amendment to the Company's 1992
Stock Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 2,000,000 shares and make certain amendments to
the terms of the plan, including, but not limited to, the share
limitations, for purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended.
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent accountants for the 1998 fiscal year.
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Nominees for directors are set forth in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on May 1, 1998 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed Proxy as promptly as
possible in the envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if he or she has previously
returned a Proxy.
Sincerely,
/S/ LAWRENCE W. BRISCOE
LAWRENCE W. BRISCOE
Vice President, Finance and
Administration Chief Financial
Officer
Mountain View, California
April 30, 1998
CATALYTICA, INC.
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PROXY STATEMENT
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1998 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Catalytica, Inc. (the "Company"
or "Catalytica") for the 1998 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on June 17, 1998, at 10:30, local time, in the Park Hyatt
San Francisco, 333 Battery Street, San Francisco, California 94111, or any
adjournment or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Company's
principal executive offices are located at 430 Ferguson Drive, Mountain View,
CA 94043 and its telephone number is (650) 960-3000.
These proxy solicitation materials and the Annual Report for the year ended
December 31, 1997 are expected to be mailed on or about May 13, 1998 to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND OUTSTANDING SHARES
Only stockholders of record at the close of business on May 1, 1998 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. The outstanding voting securities of the Company as of April 29, 1998
consisted of 41,237,033 shares of Common Stock, which includes 13,270,000
shares of Class A Common Stock and excludes 11,730,000 shares of non-voting
Class B Common Stock. The Company expects that the change in the number of
shares outstanding between April 29, 1998 and the record date will be
insignificant. For information regarding holders of more than 5% of the
outstanding Common Stock of the Company, see "Proposal No. 1--Election of
Directors--Security Ownership of Principal Stockholders and Management."
REVOCABILITY OF PROXIES
The enclosed Proxy is revocable at any time before its use by delivering to
the Company a written notice of revocation or a duly executed Proxy bearing a
later date. If a person who has executed and returned a Proxy is present at
the Annual Meeting and wishes to vote in person, he or she may elect to do so
and thereby suspend the power of the proxy holders to vote his or her Proxy.
VOTING AND SOLICITATION
Except as provided below with respect to cumulative voting, every
stockholder of record on the Record Date is entitled, for each share held, to
one vote on each proposal or item that comes before the Annual Meeting. In the
election of directors, each stockholder will be entitled to vote for eight
nominees, and the eight nominees receiving the greatest number of votes will
be elected.
Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected, multiplied by the number of votes to which
the stockholder's shares are entitled, or distribute the stockholder's votes
on the same principle among as many candidates as the stockholder thinks fit,
provided that votes cannot be cast for more than eight candidates. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name
has been placed in nomination prior to the voting and the stockholder, or any
other stockholder, has given notice at the meeting prior to the voting of the
intention to cumulate the stockholder's votes.
The cost of this solicitation will be borne by the Company. The Company may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material to beneficial
owners. Proxies may be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally or
by telephone, telegram, letter, electronic mail or facsimile.
Stockholders representing an aggregate of 20,618,517 shares of the Company's
Common Stock, including the Class A Common Stock, present or represented by
proxy at the Annual Meeting will constitute a quorum for purposes of voting.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting of Stockholders must
be received by the Company no later than February 17, 1999 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
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PROPOSAL NO. 1--ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, a Board of eight directors is to be
elected. Unless otherwise instructed, the proxyholders will vote all of the
proxies received by them for the Company's eight nominees named below, all of
whom are currently directors of the Company. If any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who is designated by the current
Board of Directors to fill the vacancy. In the event that additional persons
are nominated for election as directors and if cumulative voting has been
properly invoked, the proxyholders intend to cumulate their votes and to vote
all proxies received by them in accordance with cumulative voting procedures
in such a manner as they believe will ensure the election of as many of the
nominees listed below as possible. In such event, the specific nominees for
whom such votes will be cast will be determined by the proxyholders. It is not
expected that any nominee will be unable or will decline to serve as a
director. Directors Hoffen and Goldberg are nominated to the Company's Board
of Directors pursuant to certain agreements. See "Transactions with
Management." The term of office of each person elected as a director will
continue until the next annual meeting of stockholders and until a successor
has been elected and qualified.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD
The eight nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected to the Board of Directors. Votes
withheld from any director are counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under Delaware
law. The Company believes that both abstentions and broker non-votes should be
counted for purposes of determining whether a quorum is present at the Annual
Meeting. In the absence of controlling precedent to the contrary, the Company
intends to treat abstentions and broker non-votes with respect to the election
of directors in this manner.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES LISTED BELOW.
NOMINEES
The names of and certain information about the nominees of management are
set forth below:
NAME OF NOMINEE AGE POSITION/PRINCIPAL OCCUPATION DIRECTOR SINCE
--------------- --- ----------------------------- --------------
James A. Cusumano 55 Chairman of the Board and Chief 1974
Technical Officer of the Company
Utz Felcht 51 Board of Directors of Hoechst AG 1991
Richard Fleming(2) 73 President and Chief Executive 1985
Officer of Richard Fleming
Associates, Inc.
Alan Goldberg 43 Managing Director of Morgan Stanley 1997
Dean Witter
Howard I. Hoffen(1)(2) 34 Managing Director of Morgan Stanley 1997
Dean Witter
Ricardo B. Levy 53 President and Chief Executive 1974
Officer of the Company
Ernest Mario(1) 59 Chairman and Chief Executive Officer 1996
of ALZA
John A. Urquhart 69 Vice Chairman of Enron Corp. 1997
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(1) Member of the Compensation Committee
(2) Member of the Audit Committee. Mr. Hoffen replaced Dr. Felcht as a member
in August 1997.
Except as set forth below, each of the nominees has been engaged in the
principal occupation described above during the past five years. There is no
family relationship between any of the directors or executive officers of the
Company.
JAMES A. CUSUMANO, a founder of Catalytica and a director since 1974, served
as President of the Company from its inception in 1974 until 1985, when he
assumed his current position of Chairman of the Board and Chief Technical
Officer. Dr. Cusumano has also served as Chairman and Chief Executive Officer
of
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Catalytica Pharmaceuticals, Inc., a subsidiary of the Company, since February
1995. Dr. Cusumano served as Director of Catalysis Research and Development at
Exxon Corporation's Corporate Research Laboratory from 1967 to 1974. Dr.
Cusumano has a Ph.D. in physical chemistry from Rutgers University.
UTZ FELCHT has been a director of Catalytica since March 1991. He served as
Vice Chairman of Celanese Mexicana, a chemical company located in Mexico, from
1989 until 1993. From July 1986 until July 1988, he served as the head of
Corporate Research of Hoechst AG, a broadly diversified chemical company, and
from 1988 to 1991, he served as Group President, Advanced Technology and Vice
President of Hoechst Celanese Corporation, also a diversified chemical company
that is a subsidiary of Hoechst AG. Since April 1991, Dr. Felcht has also been
a member of the board of directors of Hoechst AG where he currently is
responsible for research and development and for director personnel. Dr.
Felcht has a Ph.D. in organic chemistry from the University of Kaiserslautern.
RICHARD FLEMING has been a director of Catalytica since 1985 and also serves
as an advisor and consultant to Catalytica. Mr. Fleming was President and
Chief Executive Officer of the Company from 1985 through August 1991. He has
served as President and Chief Executive Officer of Richard Fleming Associates,
Inc., a consulting firm, since May 1981 and was Vice Chairman for Membership
and Fiscal Affairs of the Chemical Industry Institute of Toxicology until
1997. From 1969 to 1980, Mr. Fleming served at Air Products and Chemicals,
most recently as Executive Vice President, and from 1980 to 1981, he served as
President and Chief Operating Officer of GAF Corporation, a multi-industry
company. Mr. Fleming is also a director of Catalytica Pharmaceuticals, Inc.
Mr. Fleming has an M.S. in chemical engineering from New York University.
ALAN GOLDBERG has been a director of Catalytica since August 1997. Mr.
Goldberg has been a Managing Director of Morgan Stanley & Co. since 1988, and
is Vice Chairman of MSLEF, Inc. and of Morgan Stanley Capital Partners III,
Inc. Mr. Goldberg also serves as director of Amerin Guaranty, CIMIC Holdings
Limited, Centre Cat Limited, Hamilton Services Limited, Jefferson Smurfit
Corporation, and several private companies.
HOWARD I. HOFFEN has been a director of Catalytica since August 1997. Mr.
Hoffen is a Managing Director of MSDW Capital Partners IV, Inc. and Morgan
Stanley Dean Witter. He joined Morgan Stanley in 1985 and the Private Equity
Group in 1986. He is a Managing Director of MSCP III, Inc. and a Director of
MSLEF II, Inc., Amerin Guaranty, Coho Energy, Highlands Gas, Somerset Energy
and Union Drilling. Mr. Hoffen has a B.S. from Columbia University and an
M.B.A. from the Harvard Business School.
RICARDO B. LEVY, a founder of Catalytica and a director since 1974, served
as Chief Operating Officer from the Company's inception in 1974 until August
1991, when he was promoted to his current position of President and Chief
Executive Officer. Mr. Levy is also a director of Catalytica Pharmaceuticals,
Inc. and Catalytical Combustion Systems, Inc. Prior to founding Catalytica,
Dr. Levy was a founding member of Exxon Corporation's Chemical Physics
Research Team. Dr. Levy is an alumnus of Princeton and Harvard University's
Executive Management Program and has a Ph.D. in chemical engineering from
Stanford University.
ERNEST MARIO has been a director of Catalytica since 1996. Dr. Mario has
been Chairman and Chief Executive Officer of ALZA since August 1993. Prior to
joining ALZA, Dr. Mario was Deputy Chairman and Chief Executive Officer of
Glaxo Holdings p.l.c., and has served in a variety of executive positions with
Glaxo Inc. beginning in 1986. From 1977 to 1984, he held various executive
level positions with Squibb Corporation, ending as President and Chief
Executive Officer of Squibb Medical Products. Dr Mario is also a director of
Catalytica Pharmaceuticals, Inc. Dr. Mario has a Ph.D. and M.S. in physical
sciences from the University of Rhode Island, and a B.S. in pharmacy from
Rutgers University.
JOHN A. URQUHART has been a director of Catalytica, Inc. since April 1997
and has served as a special board advisor to Catalytica Combustion Systems,
Inc., since July 1995. He has been the Vice Chairman of Enron Corp., a global
integrated natural gas and electricity company, since 1990. Mr. Urquhart also
serves on a number of other corporate Boards of Directors, including Enron
Corp., Aquarion Company, Hubbell Incorporated, TECO Energy, Inc., Weir Group
PLC, and Tampa Electric Co. He previously served as the Senior Vice President
of
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Industrial and Power Systems at General Electric. In addition, he served five
years as a Committee Member on the Board of US Council for Energy Awareness.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each of the executive officers named in the table under "Executive
Compensation--Summary Compensation Table" and (iv) all directors and executive
officers as a group. Except as otherwise indicated in the footnotes to this
table, the persons and entities named in the table have sole voting and
investment power with respect to all shares beneficially owned, subject to
community property laws, where applicable.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------
PERCENTAGE
NAME OF PERSON OR IDENTITY OF GROUP NUMBER OWNERSHIP
----------------------------------- ------------- -------------
Morgan Stanley Capital Partners III, L.P.(1)......... 13,270,000 32.20%
Alan Goldberg/Howard Hoffen
1221 Avenue of the Americas
New York, New York 10020
Yoshindo Tomoi(2).................................... 1,648,132 4.00%
James A. Cusumano(3)................................. 929,645 2.26%
Ricardo B. Levy(4)................................... 865,474 2.10%
Richard Fleming(5)................................... 552,313 1.34%
Ralph Dalla Betta(6)................................. 473,720 1.15%
Lawrence W. Briscoe(7)............................... 55,216 *
Utz Felcht(8)........................................ 34,388 *
Ernest Mario(9)...................................... 8,556 *
John A. Urquhart(10)................................. 8,555 *
All officers and directors as a group (11
persons)(11)........................................ 17,845,999 43.30%
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(1) Represents 13,270,000 voting shares of Class A Common Stock held by
Morgan Stanley Capital Partners III, L.P. and two affiliated funds (the
"Morgan Stanley Equity Funds"). Excludes 11,730,000 non-voting shares of
Class B Common Stock also held by the Morgan Stanley Equity Funds. Mr.
Goldberg and Mr. Hoffen are Managing Directors of Morgan Stanley Capital
Partners III, L.P. Mr. Goldberg and Mr. Hoffen disclaim beneficial
ownership of the shares owned by the Morgan Stanley Equity Funds.
(2) Represents 1,648,132 shares held by Mitsubishi Oil Co., Ltd. ("Mitsubishi
Oil"). Mr. Tomoi is a member of the Board of Directors of Mitsubishi Oil.
Mr. Tomoi disclaims beneficial ownership of the shares owned by
Mitsubishi Oil. Mr. Tomoi elected not to stand for reelection to the
Board of Directors of the Company in April 1998.
(3) Includes shares held by the following trusts, of which Dr. Cusumano
serves as trustee: (i) 685,600 shares held by the Cusumano Family Trust;
(ii) 114,028 shares held by the Brian K. Levy Trust; and (iii) 115,350
shares held by the Tamara Levy Trust. Dr. Cusumano disclaims beneficial
ownership of the shares owned by the Brian K. Levy Trust and the Tamara
Levy Trust.
(4) Includes shares held by the following trusts, of which Dr. Levy serves as
trustee: (i) 760,877 shares held by the Levy Family Trust; (ii) 35,798
shares held by the Polly Jean Cusumano Trust; and (iii) 35,799 shares
held by the Doreen Ann Nelson Trust. Dr. Levy disclaims beneficial
ownership for the shares owned by the Polly Jean Cusumano Trust and the
Doreen Ann Nelson Trust.
(5) Includes 5,278 shares issuable upon exercise of options held by Mr.
Fleming, which options are exercisable within 60 days of March 31, 1998.
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(6) Includes 6,455 shares issuable upon exercise of options held by Dr. Dalla
Betta, which options are exercisable within 60 days of March 31, 1998.
(7) Includes 52,350 shares issuable upon exercise of options held by Mr.
Briscoe, which options are exercisable within 60 days of March 31, 1998.
(8) Includes 7,499 shares issuable upon exercise of options held by Dr.
Felcht, which options are exercisable within 60 days of March 31, 1998.
(9) Includes 8,556 shares issuable upon exercise of options held by Dr.
Mario, which options are exercisable within 60 days of March 31, 1998.
(10) Includes 8,555 shares issuable upon exercise of options held by Mr.
Urquhart, which options are exercisable within 60 days of March 31, 1998.
(11) Includes 136,360 shares issuable upon exercise of options held by four
directors and four executive officers, which options are exercisable
within 60 days of March 31, 1998.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nine meetings during
the year ended December 31, 1997.
The current members of the Audit Committee are Richard Fleming and Howard I.
Hoffen, who replaced Utz Felcht as a member in August 1997. The Audit
Committee met once during the year ended December 31, 1997. This Committee
recommends engagement of the Company's independent public accountants and is
primarily responsible for approving the services performed by such accountants
and for reviewing and evaluating the Company's accounting principles and its
system of internal accounting controls.
The Compensation Committee, which during the year ended December 31, 1997,
consisted of Directors Hoffen and Mario, met twice during the last fiscal
year. This Committee establishes the salary and incentive compensation of the
executive officers of the Company and administers the Company's employee
benefit plans. See "Report of the Compensation Committee of the Board of
Directors on Executive Compensation."
The Nominating Committee, which for the year ended December 31, 1997,
consisted of Directors Fleming and Levy, did not meet during the past fiscal
year. The Nominating Committee reviews candidates and makes recommendations
for nominees to serve on the Board of Directors. If there are vacancies on the
Board of Directors, the Nominating Committee will consider nominees
recommended by stockholders. Candidates for consideration by the Nominating
Committee should be submitted to the attention of Dr. Levy at the Company by
no later than February 17, 1999. Any stockholder wishing to make a
recommendation to the Nominating Committee must submit the candidate's resume,
together with a statement describing why the candidate should be considered by
the Nominating Committee.
During the fiscal year ended December 31, 1997, no Director attended fewer
than 75% of the aggregate of all meetings of the Board of Directors and any
committees on which such Director served, except that Dr. Felcht attended only
67% of such meetings, Mr. Tomoi attended only 33% of such meetings and Mr.
Urquhart attended only 67% of the meetings held during the period for which he
served as a director during fiscal 1997.
DIRECTOR COMPENSATION
The Directors do not receive any compensation for their services as
Directors of the Company, with the exception of Utz Felcht, Ernest Mario and
John Urquhart, who each will receive $10,000 per year, plus reimbursement of
expenses. Dr. Mario and Mr. Urquhart each serve as Director for one of the
subsidiaries of the Company, as well, and receive similar compensation for
that service. During the fiscal year ended December 31, 1997, Dr. Felcht
received $10,000, Dr. Mario received $20,000, and Mr. Urquhart received
$17,500 in connection with their services as directors of the Company and its
subsidiaries.
During the year ended December 31, 1997, the Company paid Richard Fleming
Associates, a consulting organization of which Richard Fleming, a Director of
the Company, is the President and Chief Executive Officer,
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approximately $246,000. These payments were for services provided to the
Company by Mr. Fleming in his capacity as a consultant to the Company at a
rate of $12,000 per month from January through July, and a rate of $20,000 per
month beginning in August 1997, plus expenses. Mr. Fleming provided assistance
to the Company on various development programs and in identifying and
investigating new business opportunities and in the acquisition of a
manufacturing facility by Catalytica Pharmaceuticals, Inc.
During the fiscal year ended December 31, 1997, Dr. Felcht, Mr. Fleming, and
Dr. Mario each received options to purchase 4,000 shares of Common Stock at an
exercise price of $3.94. Mr. Urquhart received options to purchase 20,000
shares of Common Stock at an exercise price of $8.13. Dr. Felcht's, Mr.
Fleming's, and Dr. Mario's options become exercisable at the rate of one-
twelfth of the shares subject to the option at the end of each month that the
director remains on the Board following the date of grant such that the
options become fully vested within one year of the date of grant. Mr.
Urquhart's options become exercisable at the rate of one-sixth six months
after the date of grant and one-thirty-sixth each month thereafter for so long
as he remains on the Board.
Certain directors who served on the board of directors of a subsidiary or
acted as a consultant to a subsidiary received stock options during the fiscal
year ended December 31, 1997. Mr. Fleming received the following options to
purchase Catalytica Pharmaceuticals, Inc. shares: 2,400 shares at an exercise
price of $0.70, 4,000 shares at an exercise price of $1.50 and 50,000 shares
at an exercise price of $5.50. Mr. Mario received options to purchase 4,000
shares of Catalytica Pharmaceuticals, Inc. at an exercise price of $1.50. Mr.
Urquhart received options to purchase 4,000 shares of Catalytica Combustion
Systems, Inc. at an exercise price of $0.40.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation earned by such executive
officers for the year ended December 31, 1997.
The Compensation Committee of the Board of Directors of Catalytica
establishes the general compensation policies of the Company as well as the
compensation plans and specific compensation levels for executive officers.
The Compensation Committee during the year ended December 31, 1997, consisted
of two independent, non-employee Directors, Howard Hoffen and Ernest Mario.
The Company's compensation philosophy is to provide a total compensation
package that will enable the Company to attract and retain top executive
talent, while emphasizing the linkage of compensation to corporate, team and
individual performance.
The compensation program for the executive officers is identical to that for
all employees and consists of base salary, incentive stock options and bonus.
Other benefits, such as medical insurance, a defined contribution pension
plan, an employee stock purchase plan and supplemental severance benefits, are
also available to all eligible employees.
The Compensation Committee establishes the compensation of the Chief
Executive Officer and the other executive officers based on several criteria
related to competitive compensation levels, the performance of the individual
and the Company's performance relative to plan.
Competitive Compensation. Outside compensation consultants were retained to
assist in the development of an executive compensation program and the
determination of the appropriate levels of executive pay. In order to
establish competitive compensation, a market basket of companies from both
pharmaceuticals and combustion related industries was created and the base
salaries, bonus opportunities and stock option awards for their top executives
were analyzed. In addition, national compensation surveys conducted by
independent companies were also reviewed. The intent of the compensation
committee is to set total compensation for the Company's executive officers at
approximately the 50th percentile of the market basket of companies. Any such
cross-company comparisons require some adjustments to reflect varying levels
of specific responsibilities, complexity of the business, its ultimate
potential and the background and training of the incumbent. Such
considerations set the base level of compensation assuming an acceptable level
of performance. Performance variations on an individual and business level are
then applied.
Individual Performance. Personal performance is appraised against a budget
and business plan laid out at the beginning of each year. The plan includes a
set of personal objectives regarding such things as budgetary control,
achieving milestones in the Company's development programs, successful
execution and implementation of collaborative agreements or contracts,
achieving planned revenues and other criteria. Assessment of performance in
these regards determines the percentile position of the individual on the base
salary scale and also determines, in part, the level of cash bonus and long
term incentive compensation. Bonus and options are also affected by corporate
performance.
Corporate Performance. Achievement of corporate objectives, designed to
enhance stockholder value, is a key factor in establishing stock option awards
and bonus. Typical corporate objectives would include profitable commercial
operation, sound management of all balance sheet items, appropriate balancing
of new opportunities and risks and the creation of profitable opportunities
for future business activity. The bonus plan for executives is based on the
achievement of a combination of financial and business development goals. The
financial portion of the bonus does not pay out below achievement of 75% of
the planned goal. However, executives were eligible to receive up to a maximum
of 150% of their bonus opportunity for goals achieved up to 125% of the
planned goal.
8
In determining the Chief Executive Officer's compensation, the Committee
considered all of the above factors in relation to specific corporate plan and
CEO objectives and accomplishments in 1997, as well as progress toward longer
range Company goals under his leadership. In addition, the Committee
specifically considered the significant increase in the Company's sales and
profitability resulting from the acquisition of the Greenville plant. The
salary increase of 44% to $330,000 and the bonus of $75,694 (33.49%), both
effective January 1, 1998, and the option award of 60,000 shares effective
September 30, 1997 at an exercise price of $11.13 a share, were all within the
general guidelines we are following. In addition, the Chief Executive Officer
received subsidiary stock options of 86,000 shares at an exercise price of
$5.50 per share and 20,500 shares at an exercise price of $2.50 per share from
Catalytica Pharmaceuticals, Inc. and Catalytica Combustion Systems, Inc.,
respectively, reflecting his contribution to and position with each
subsidiary.
The Company intends to take the necessary steps to comply with the $1
million compensation deduction limitation pursuant to Section 162(m) of the
Omnibus Reconciliation Act of 1993. In addition, the non-equity-based
compensation paid to the Named Officers in fiscal 1995, 1996, and 1997 did not
exceed $1 million for any individual.
COMPENSATION COMMITTEE
Howard I. Hoffen
Ernest Mario
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PERFORMANCE GRAPH
The following is a graph comparing the cumulative total return to
stockholders, calculated on a dividend reinvested basis, from the effective
date of the initial public offering of the Company's Common Stock (February 8,
1993) through December 31, 1997, to the cumulative total return over such
period of (i) the Nasdaq U.S. Stock Market Index, (ii) the Alex Brown & Sons
Environmental Index and (iii) the S & P Chemical Specialty Index. The graph
assumes that $100 was invested in each of the Company's Common Stock at the
initial public offering price, the Nasdaq U.S. Stock Market, the Alex Brown &
Sons Environmental Index and the S & P Chemical Specialty Index on January 29,
1993. Data for the S & P Chemical Specialty Index and the Alex Brown & Sons
Environmental Index was unavailable for dates in the middle of the month. The
information contained in the performance graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
The Company is replacing the Alex Brown & Sons Environmental Index with the
S & P Chemical Specialty Index because the Alex Brown & Sons Environmental
Index is no longer available and the Company feels that the S & P Chemical
Specialty Index better reflects the Company's industry following the
acquisition of the pharmaceutical manufacturing facility in Greenville, North
Carolina last year. Note that Alex Brown & Sons stopped providing data for the
Alex Brown & Sons Environmental Index for periods after December 31, 1996 and
that the last data point for the Alex Brown & Sons Environmental Index graph
line at December 31, 1997 was provided by the Company on a basis it believes
is consistent with data provided by Alex Brown & Sons.
PERFORMANCE GRAPH APPEARS HERE
COMPANY NAME 2/8/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ---------------------- ------- -------- -------- -------- -------- ------
- --
Catalytica, Inc. 100 111 41 63 57 170
NASDAQ US Stock Market 100 112 109 154 190 233
S&P Specialty Chemicals
Index 100 110 94 122 124 166
Alex Brown
Environmental Index 100 88 81 96 106 107
10
EXECUTIVE COMPENSATION
THE COMPANY'S SUMMARY COMPENSATION TABLES
The following table sets forth the compensation paid by the Company with
respect to the years ended December 31, 1995, December 31, 1996, and December
31, 1997, to the Chief Executive Officer and each of the other three most
highly compensated executive officers (collectively, the "Named Officers") of
the Company:
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ------ ---------- --------- ------------ ----------------
Ricardo B. Levy 1997 $229,000 $76,000 60,000 $17,064(1)
President and Chief 1996 $218,000 $ 7,000 40,000 $17,264(2)
Executive Officer 1995 $212,000 $ 7,000 100,000 $16,148(3)
James A. Cusumano 1997 $210,000 $64,000 60,000 $16,052(1)
Chairman of the Board 1996 $206,000 $ 4,140 10,000 $15,891(2)
and Chief Technical Officer 1995 $200,000 $ 1,650 30,000 $15,044(3)
Lawrence W. Briscoe 1997 $198,000 $54,000 100,000 $ 4,000(1)
Vice President, Finance 1996 $188,000 $ 4,500 35,000 $ 4,000(2)
and Administration, and 1995 $179,000 $ 4,500 25,000 $ 4,000(3)
Chief Financial Officer
Ralph A. Dalla Betta 1997 $162,000 $ 3,000 -- $10,808(1)
Vice President and Chief 1996 $152,000 $ 1,000 10,000 $10,640(2)
Scientist 1995 $147,000 $ 1,000 20,000 $10,036(3)
- --------
(1) Includes (i) $4,000 contributed by the Company to each Named Officer's
account under the defined contribution pension plan and (ii) the following
amounts contributed by the Company to the Named Officer's account under
the Supplemental Severance Benefits Plan: Dr. Levy $13,064; Dr. Cusumano
$12,052; and Dr. Dalla Betta $6,808.
(2) Includes (i) $4,000 contributed by the Company to each Named Officer's
account under the defined contribution pension plan and (ii) the following
amounts contributed by the Company to the Named Officer's account under
the Supplemental Severance Benefits Plan: Dr. Levy $13,264; Dr. Cusumano
$11,891; and Dr. Dalla Betta $6,640.
(3) Includes (i) $4,000 contributed by the Company to each Named Officer's
account under the defined contribution pension plan and (ii) the following
amounts contributed by the Company to the Named Officer's account under
the Supplemental Severance Benefits Plan: Dr. Levy $12,148; Dr. Cusumano
$11,044; and Dr. Dalla Betta $6,036.
11
THE SUBSIDIARIES' SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by each of the
Company's subsidiaries with respect to the years ended December 31, 1995,
December 31, 1996, and December 31, 1997, to the Company's Chief Executive
Officer and the Named Officers of the Company:
LONG-TERM COMPENSATION AWARDS
-----------------------------------------------------------
SECURITIES SECURITIES SECURITIES SECURITIES
FISCAL UNDERLYING UNDERLYING UNDERLYING UNDERLYING
NAME AND PRINCIPAL POSITION YEAR OPTIONS (#)(1) OPTIONS (#)(2) OPTIONS (#)(3) OPTIONS (#)(4)
- --------------------------- ------ -------------- -------------- -------------- --------------
Ricardo B. Levy 1997 86,000 20,500 -- --
President and Chief 1996 2,000 4,500 3,000 --
Executive Officer 1995 12,000 25,000 13,000 14,000
James A. Cusumano 1997 80,000 -- -- --
Chairman of the Board 1996 14,000 4,000 3,000 --
and Chief Technical Officer 1995 120,000 18,000 9,000 10,000
Lawrence W. Briscoe 1997 30,000 -- -- --
Vice President, Finance and 1996 1,600 4,000 3,000 --
Administration, and 1995 10,000 18,500 11,000 12,000
Chief Financial Officer
Ralph A. Dalla Betta 1997 -- -- -- --
Vice President and Chief 1996 -- 25,000 -- --
Scientist 1995 -- 75,000 -- 10,000
- --------
(1) Represents long term compensation awards by Catalytical Pharmaceuticals,
Inc.
(2) Represents long term compensation awards by Catalytical Combustion
Systems, Inc.
(3) Represents long term compensation awards by Catalytical Advanced
Technologies, Inc.
(4) Represents long term compensation awards by Catalytical Advanced Sensor
Devices, Inc.
12
COMPANY OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the stock options granted by the Company
during the fiscal year ended December 31, 1997 to each of the Named Officers:
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(4)
------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH.)(3) DATE 5% ($) 10% ($)
---- ---------- ---------- ---------- ---------- ---------- ----------
Ricardo B. Levy......... 60,000 4.6% $11.13 9/30/97 $ 419,787 $1,063,823
James A. Cusumano....... 60,000 4.6% $11.13 9/30/97 $ 419,787 $1,063,823
Lawrence W. Briscoe..... 100,000 7.6% $ 5.00 9/15/97 $1,128,895 $2,093,742
Ralph A. Dalla Betta.... -- -- -- -- -- --
- --------
(1) These options were granted under the Company's Stock Option Plan (the
"Option Plan"). Options granted under the Option Plan generally have a
ten-year term. Generally, 10% of the grant becomes exercisable six months
after the date of grant. The balance of the grant then vests monthly, with
full exercisability occurring on the fifth anniversary date. The per share
exercise price is the Nasdaq closing price for the Company's Common Stock
on the date of grant. Unless otherwise determined by the Board of
Directors, the Option Plan provides for the automatic acceleration of
vesting of all outstanding options (such that they become exercisable in
full) in the event of a "change in control," as defined in the Option
Plan.
(2) Based on options to purchase an aggregate of 1,318,420 shares granted to
employees during 1997.
(3) The exercise price for the grant to Mr. Briscoe was $5.00, 50% of the
Nasdaq closing price for the Company's Common Stock on the date of grant.
Deferred compensation was recognized for the difference between the market
price and the grant price, and is being amortized over the vesting period
of the option, which is five years for all of the Named Executive Officer
except Mr. Briscoe for whom the vesting period is four years.
(4) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date
of grant until the end of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the SEC and do not
reflect the Company's estimate of future stock price.
13
SUBSIDIARY OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the stock options granted by the Company's
subsidiaries during the fiscal year ended December 31, 1997 to each of the
Named Officers:
INDIVIDUAL GRANTS(1)
------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES PRICE APPRECIATION FOR
OPTIONS IN EXERCISE OPTION TERM(3)
GRANTED FISCAL PRICE EXPIRATION -----------------------
NAME SUBSIDIARIES (#)(1) YEAR(2) ($/SH.) DATE 5% ($) 10% ($)
---- ------------ ---------- ---------- -------- ---------- ----------- -----------
Ricardo B. Levy......... CPI 86,000 6.0% $5.50 9/30/07 $ 297,467 $ 753,840
CCSI 20,500 13.3% $2.50 9/30/07 $ 32,231 $ 81,679
CAT -- -- -- -- -- --
James A. Cusumano....... CPI 80,000 5.6% $5.50 9/30/07 $ 276,714 $ 701,247
CCSI -- -- -- -- -- --
CAT -- -- -- -- -- --
Lawrence W. Briscoe..... CPI 30,000 2.1% $1.50 7/25/07 $ 28,300 $ 71,718
CCSI -- -- -- -- -- --
CAT -- -- -- -- -- --
Ralph A. Dalla Betta.... CPI -- -- -- -- -- --
CCSI -- -- -- -- -- --
CAT -- -- -- -- -- --
- --------
(1) These options were granted under each of Catalytica Pharmaceuticals (CPI),
Catalytica Combustion Systems (CCSI) and Catalytica Advanced Technologies
(CAT) Stock Option Plans (the "Subsidiaries Option Plans"). Options
granted under the Subsidiaries Option Plans generally have a ten-year term
and vest ratably over a five year period. The options are not exercisable
until the earlier of (i) January 1, 2004, (ii) an initial public offering
for the subsidiary or (iii) a change in control of the subsidiary. The per
share exercise price is based on the fair market value of the subsidiary's
common stock as determined by the subsidiary's board of directors. Unless
otherwise determined by the Board of Directors, the Option Plan provides
for the automatic acceleration of vesting of all outstanding options (such
that they become exercisable in full) in the event of a "change in
control," as defined in the Option Plan.
(2) Based on options to purchase an aggregate of 1,430,000 shares, 154,500
shares and 172,000 shares granted during 1997 to employees of Catalytica
Pharmaceuticals, Catalytica Combustion Systems and Catalytica Advanced
Technologies, respectively, pursuant to the Subsidiary Option Plans.
(3) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date
of grant until the end of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the SEC and do not
reflect the Company's estimate of future stock price.
14
COMPANY AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
VALUES
The following table sets forth for each of the Named Officers, information
with respect to Company stock options exercised during the fiscal year ended
December 31, 1997 and stock options held at fiscal year end:
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR END (#) AT FISCAL YEAR END ($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ----------- ------------- ----------- -------------
Ricardo B. Levy......... 48,667 $475,126 2,666 148,667 $ 21,149 $ 782,475
James A. Cusumano....... 14,000 $150,990 833 85,167 $ 6,608 $ 252,270
Lawrence W. Briscoe..... 80,900 $870,095 25,684 153,416 $189,284 $1,152,066
Ralph A. Dalla Betta.... 12,362 $127,045 833 20,743 $ 6,608 $ 167,985
- --------
(1) Market value of underlying securities on the exercise date minus the
exercise price.
(2) Market value of underlying securities at December 31, 1997 minus the
exercise price.
SUBSIDIARY AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
VALUES
The following table sets forth for each of the Named Officers, information
with respect to subsidiary stock options exercised during the fiscal year
ended December 31, 1997 and stock options held at fiscal year end:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(2)
------------------------------------- ----------------------------
NAME SUBSIDIARIES EXERCISABLE (1) UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
---- ------------ ---------------- ----------------- -------------- -------------
Ricardo B. Levy......... CPI -- 100,000 -- $ 70,800
CCSI -- 50,000 -- $ 61,950
CAT -- 16,000 -- --
James A. Cusumano....... CPI -- 214,000 -- $679,200
CCSI -- 22,000 -- $ 46,200
CAT -- 12,000 -- --
Lawrence W. Briscoe..... CPI -- 41,600 -- $178,680
CCSI -- 22,500 -- $ 47,250
CAT -- 14,000 -- --
Ralph A. Dalla Betta.... CPI -- -- -- --
CCSI -- 100,000 -- $210,000
CAT -- -- -- --
- --------
(1) None of the Subsidiaries Option Plans provide for options that are
currently exerciseable.
(2) Market value of underlying securities at December 31, 1997 minus the
exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Directors Hoffen and Mario in 1997.
No executive officer of the Company serves as a member of the Board of
Directors or on the Compensation Committee of any entity that has an executive
officer serving as a member of the Company's Board of Directors or
Compensation Committee.
During the year ended December 31, 1997, the Company paid Richard Fleming
Associates, a consulting organization of which Richard Fleming, a Director of
the Company, is the President and Chief Executive Officer, approximately
$246,000. These payments were for services provided to the Company by Mr.
Fleming in his capacity as a consultant to the Company at a rate of $12,000
from January through July, and a rate of $20,000 per month beginning in August
1997, plus expenses. Mr. Fleming provided assistance to the Company on various
development programs and in identifying and investigating new business
opportunities.
15
TRANSACTIONS WITH MANAGEMENT
Mitsubishi Oil Co., Ltd. In December 1992, the Company entered into a Stock
Purchase Agreement with Mitsubishi Oil Company, Ltd. ("Mitsubishi Oil"),
pursuant to which the Company agreed to sell preferred stock to Mitsubishi Oil
simultaneously with the sale of shares offered by the Company in its Initial
Public Offering. Concurrently with the Stock Purchase Agreement, the Company
entered into a Technical Cooperation Agreement with Mitsubishi Oil, pursuant
to which Catalytica agreed to provide certain advice with regard to research
activities and projects of Mitsubishi Oil and agreed to have up to two
individuals from Mitsubishi Oil serve at Catalytica in various research
capacities.
The Preferred Stock purchased by Mitsubishi Oil pursuant to the Stock
Purchase Agreement automatically converted into 1,536,099 shares of Common
Stock upon the closing of the Initial Public Offering. Mitsubishi Oil has
certain rights under the Stock Purchase Agreement. Until December 1999,
Mitsubishi Oil has a right of first refusal, subject to certain exceptions, to
purchase additional shares of capital stock or securities convertible into
capital stock to maintain its percentage equity ownership in the Company and
certain registration rights. Until the earlier of (i) December 10, 1999, (ii)
such time as Mitsubishi Oil ceases to own at least 80% of the shares of the
Common Stock received upon conversion of the Preferred Stock or (iii) such
time as the Technical Cooperation Agreement is no longer in effect, the
Company is required to include one nominee chosen by Mitsubishi Oil in its
slate of nominees recommended by the Board of Directors for election as
directors of the Company and to use its best efforts to cause the Company's
directors and management to vote shares as to which any of them hold proxies
or are otherwise entitled to vote in favor of the election of Mitsubishi Oil's
designee. Mitsubishi Oil has agreed that, until December 10, 1999, it will not
acquire over 20% of the aggregate outstanding stock of the Company without the
written consent of the Company. Mitsubishi Oil currently owns approximately
4.0% of the outstanding voting stock of the Company.
Pursuant to the Technical Cooperation Agreement, the parties agreed to meet
regularly to review research strategies and directions and to investigate
potential future collaborative research and development projects. This
agreement has a term of 10 years. However, Catalytica may terminate it sooner
if Mitsubishi Oil ceases to own at least 80% of the shares of Common Stock
received upon conversion of the Preferred Stock.
Morgan Stanley Capital Partners III, Inc. In June 1997, the Company entered
into a Stock Purchase Agreement (the "Investment Agreement") with Morgan
Stanley Capital Partners III, Inc. and two other affiliated equity funds (the
"Morgan Stanley Equity Funds"), pursuant to which the Company sold 30,000,000
shares of Class A Common Stock and Class B Common Stock to the Morgan Stanley
Equity Funds for an aggregate purchase price of $120 million. The proceeds
were used to fund the acquisition of the pharmaceutical manufacturing facility
in Greenville, North Carolina. The Morgan Stanley Equity Funds are entitled to
certain registration rights, which come into effect on July 1, 1998, and
certain rights of repurchase held by the Morgan Stanley Equity Funds, which
will come into effect on July 1, 2005.
The Investment Agreement also provides that the Morgan Stanley Equity Funds
are entitled to elect (i) 3 persons to the Company's Board of Directors for so
long as such funds own at least 30% of the outstanding Common Stock of the
Company, (ii) 2 persons to the Company's Board of Directors for so long as
such funds own between 10% and 30% of the outstanding Common Stock of the
Company or (iii) 1 person to the Company's Board of Directors for so long as
they own between 6% and 10% of the outstanding Common Stock of the Company
(Common Stock assumes conversion of the Class A and Class B Common Stock into
Common Stock of the Company).
In August 1997, pursuant to the Investment Agreement, the Company amended
its bylaws to increase the size of the Board of Directors from 7 to 9 and
appointed Messrs. Howard Hoffen and Alan Goldberg to the Board of Directors.
Messrs. Hoffen and Goldberg have been nominated as directors to the Company's
Board of Directors in connection with this annual meeting of stockholders.
16
With the proceeds received from exercise of warrants that the Company
distributed in August 1997 to its stockholders in connection with the
financing of the acquisition of the pharmaceutical manufacturing facility in
Greenville, North Carolina, the Company redeemed in October 1997 an aggregate
of 5,000,000 shares of Class B Common Stock held by the Morgan Stanley Equity
Funds at a redemption price of $4.75 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc. Executive 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. Based solely in its review
of the copies of such forms received by it, or written representations from
certain reporting persons, the Company believes that, during fiscal 1997, all
reporting persons complied with Section 16(a) filing requirements applicable
to them, except that Mr. Ralph Dalla Betta filed one Form 4 late with respect
to one transaction and Mr. John A. Urquhart filed one Form 3 late with respect
to his appointment to the Company's Board of Directors.
17
PROPOSAL NO. 2--APPROVAL OF AMENDMENT TO THE COMPANY'S 1992 EMPLOYEE STOCK
PURCHASE PLAN
GENERAL
The 1992 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors in April 1992, approved by the stockholders in August
1992 and subsequently amended in July 1997. A total of 2,000,000 shares of
Common Stock have been reserved for issuance under the Purchase Plan. The
Purchase Plan, which is intended to qualify under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), permits eligible employees to
purchase Common Stock through payroll deductions at a price equal to 85% of
the lower of the fair market value of the Common Stock at the beginning of the
offering period or at the end of a purchase period. Employees are eligible to
participate if they are regularly employed by the Company for at least 20
hours per week and more than five months per calendar year. As of March 31,
1998, a total of 417,873 shares of Common Stock had been purchased under the
Purchase Plan, and 1,069 employees were participating under the Purchase Plan.
The Board believes the Purchase Plan provides an attractive and important
opportunity for employees to acquire an ownership interest in the Company. The
Company and its subsidiaries currently have approximately 1,300 employees. The
Board is soliciting stockholder approval of the increase in the number of
shares reserved under the Purchase Plan because of the significant increase in
employees participating in the Purchase Plan resulting from the acquisition by
Catalytica Pharmaceuticals, Inc. of the manufacturing facility in Greenville,
North Carolina.
PROPOSAL
On April 15, 1998, the Board approved an amendment to the Purchase Plan to
increase the number of shares reserved thereunder by an additional 1,500,000
shares of Common Stock, for an aggregate of 3,500,000 shares reserved for
issuance thereunder. At the Annual Meeting, the stockholders are being
requested to approve this amendment.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares represented,
in person or by proxy, and voting at the Annual Meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) will
be required to approve and ratify the increase in the number of shares
reserved under the Purchase Plan.
The continued success of the Company and its subsidiaries depends upon the
ability to attract and retain highly qualified and competent employees. The
Purchase Plan enhances that ability and provides additional incentive to such
personnel to advance the interests of the Company and its stockholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
SUMMARY OF PURCHASE PLAN
The essential features of the Purchase Plan, a copy of which may be obtained
from the Company, are outlined below.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company and its subsidiaries, currently, Catalytica Pharmaceuticals, Inc.,
Catalytica Combustion Systems, Inc. and Catalytica Advanced Technologies,
Inc., with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the
Purchase Plan qualify as an "Employee Stock Purchase Plan" under Section 423
of the Code. The provisions of the Purchase Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
18
Administration. The Purchase Plan is administered by the Board of Directors
or a committee appointed by the Board (the "Administrator"). Every finding,
decision and determination by the Administrator shall, to the full extent
permitted by law, be final and binding upon all parties.
Eligibility. Employees are eligible to participate if they are regularly
employed by the Company for at least 20 hours per week and more than five
months per calendar year. Participation in the Purchase Plan ends
automatically on termination of employment with the Company. Eligible
employees may become a participant by completing a subscription agreement
authorizing payroll deductions and filing it with the Company's payroll office
at least ten business days prior to the applicable enrollment date.
Offering Periods. The Purchase Plan is implemented by consecutive,
overlapping twenty-four month offering periods commencing on or after July 1
and January 1 of each year. Common Stock may be purchased under the Purchase
Plan every six (6) months, unless the participant withdraws or terminates
employment earlier. To the extent the fair market value of the Common Stock on
any exercise date in an offering period is lower than the fair market value of
the Common Stock on the first day of the offering period, then all
participants in such offering period will be automatically withdrawn from such
offering period immediately after the exercise of their options on such
exercise date and automatically re-enrolled in the immediately following
offering period as of the first day thereof. The Board may change the duration
of the purchase periods or the length or date of commencement of an offering
period.
Purchase Price. The purchase price per share of the shares offered under the
Purchase Plan in a given offering period shall be the lower of 85% of the fair
market value of the Common Stock on the enrollment date or 85% of the fair
market value of the Common Stock on the purchase date. The fair market value
of the Common Stock on a given date shall be the closing sale price of the
Common Stock for such date as reported by the Nasdaq National Market.
Payroll Deductions. The purchase price for the shares is accumulated by
payroll deductions during the offering period. The deductions may not exceed
10% of a participant's eligible compensation, which is defined in the plan to
include all regular straight time earnings (but excluding any payments for
overtime, shift premiums, all bonuses, and commissions and other compensation)
for a given offering period. A participant may discontinue his or her
participation in the Purchase Plan at any time during the offering period.
Grant and Exercise of Option. The maximum number of shares each participant
may be eligible to purchase in each offering period is that number determined
by dividing $12,500 by the fair market value of a share of the Company's
Common Stock on the first day of the offering period. Unless a participant
withdraws from the Purchase Plan, such participant's option for the purchase
of shares will be exercised automatically on each purchase date for the
maximum number of whole shares at the applicable price.
Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the Purchase Plan if, immediately after the grant of the
option, the employee would own 5% or more of the voting power of value of all
classes of stock of the Company or of any of its subsidiaries (including stock
which may be purchased under the Purchase Plan or pursuant to any other
options), nor shall any employee be granted an option which would permit the
employee to buy under all employee stock purchase plans of the Company more
than $25,000 worth of stock (determined at the fair market value of the shares
at the time the option is granted) in any calendar year.
Withdrawal; Termination of Employment. Employees may end their participation
in the offering at any time during the offering period, and participation ends
automatically on termination of employment with the Company for any reason,
including death, disability or the failure of the participant to remain in the
continuous employ of the Company for at least 20 hours per week. A participant
may withdraw all, but not less than all, of the payroll deductions credited to
such participant's account and not yet used by giving written notice to the
Company.
19
Transferability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or pursuant to the Purchase Plan) and any such attempt may be
treated by the Company as an election to withdraw from the Purchase Plan.
Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
or Change of Control. Subject to any required action by the stockholders of
the Company, the shares reserved under the Purchase Plan as well as the price
per share of Common Stock covered by each option under the Purchase Plan that
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 with receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. In the
event of the proposed dissolution or liquidation of the Company, the offering
period will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. In the event of a proposed
sale of all or substantially all the assets of the Company or a merger of the
Company with or into another corporation, the Purchase Plan provides that each
option under the plan be assumed or an equivalent option be substituted by the
successor or Purchaser corporation, unless the Board determines to shorten any
offering periods or purchase periods then in progress to a new exercise date
and the Board shall notify each participant that his or her option shall be
exercised automatically on the new exercise date unless prior to such date the
participant has withdrawn from the offering period.
Amendment and Termination. The Board of Directors of the Company may at any
time and for any reason terminate or amend the Purchase Plan. Except as
provided in the Purchase Plan, 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 Purchase Plan is in the best interests of the Company and
its stockholders. Except as provided in the Purchase Plan, 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 Rule 16b-3
under the Securities Exchange Act of 1934, as amended, or under Section 423 of
the Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain stockholder approval in such manner and
to such a degree as required.
Unless terminated sooner, the Purchase Plan will terminate 10 years from its
effective date.
FEDERAL TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and
423 of the Code. Under these provisions, no income will be taxable to a
participant until the shares purchased under the Purchase Plan are sold or
otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed
of more than two years from the first day of the offering period and one year
from the purchase date, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an amount equal to 15% of the fair market value of the shares as of the first
day of the offering period. Any additional gain will be treated as long-term
capital gain. If the shares are sold or otherwise disposed of before the
expiration of the holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term
capital gain or loss, depending on the holding period. Net capital gains on
shares held between 12 and 18 months may be taxed at a maximum federal rate of
28%, while net capital gains on shares held for more than 18 months may be
taxed at a maximum federal rate of 20%. Capital losses are allowed in full
against capital gains and up to $3,000 against other income. The Company is
not entitled to a deduction for amounts taxed and
20
ordinary income or capital gain to a participant except to the extent of
ordinary income recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding periods described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased
under the Purchase Plan. Reference should be made to the applicable provisions
of the Code. In addition, the summary does not discuss the tax consequences of
a participant's death or the income tax laws of any state or foreign country
in which the participant may reside.
PURCHASE PLAN ACTIVITY
Through March 31, 1998 (without taking into account the proposed amendment
to the Purchase Plan), the Company has issued and sold an aggregate of 417,873
shares of Common Stock pursuant to the Purchase Plan and 1,582,127 shares of
Common Stock remain available for future issuance under the Purchase Plan.
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. There were a total of 4,717 shares
purchased during the year ended December 31, 1997 by Named Officers. A total
of 196,673 shares, totaling $1,349,380, were purchased under the Purchase Plan
during the year ended December 31, 1997 by all other employees, excluding
executive officers.
21
PROPOSAL NO. 3--APPROVAL OF AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN
GENERAL
The 1992 Stock Option Plan (the "1992 Plan") was adopted by the Board of
Directors in March 1992, approved by the stockholders in May 1992, and amended
in May 1996 and July 1997. There are currently 3,050,000 shares of Common
Stock reserved under the 1992 Plan. The 1992 Plan provides for the granting to
employees of the Company of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended ("the Code") and
for the granting of nonstatutory stock options to employees and consultants of
the Company. As of March 31, 1998, options to purchase 1,950,237 shares were
outstanding under the 1992 Plan and 916,431 shares remained available for
future grants (without giving effect to the increase in shares being presented
to the stockholders for approval at the Annual Meeting).
In 1993, Section 162(m) was added to the Code. Section 162(m) may limit the
Company's ability to deduct for United States federal income tax purposes
compensation in excess of $1,000,000 paid to the Company's Chief Executive
Officer and its four other highest paid executive officers in any one fiscal
year. Grants under the 1992 Plan will not be subject to the deduction
limitation if the stockholders approve the 1992 Plan, including the option
grant limitations described below.
PROPOSAL
On April 15, 1998, the Board of Directors approved an amendment to the 1992
Plan to increase the number of shares reserved for issuance thereunder by an
additional 2,000,000 shares for an aggregate of 5,050,000 shares reserved for
issuance thereunder. At the Annual Meeting, the stockholders are being
requested to approve the: (i) increase in the number of shares reserved for
issuance under the 1992 Plan by 2,000,000 shares; and (ii) material terms of
the 1992 Plan, including, but not limited to, the share limitations for
purposes of Section 162(m) of the Code. The amendment to the 1992 Plan is
proposed in order to give the Board of Directors flexibility to grant stock
options. The Company believes that grants of stock options motivate high
levels of performance and provide an effective means of recognizing employee
contributions to the success of the Company. At present, all newly hired full-
time employees are eligible to be granted stock options. The Company believes
that this policy is of great value in recruiting and retaining highly
qualified technical and other key personnel who are in great demand. The Board
of Directors believes that the ability to grant options will be important to
the future success of the Company by allowing it to remain competitive in
attracting and retaining such key personnel.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the shares represented
in person or by proxy, and voting at the Annual Meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) will
be required to approve and ratify the increase in the number of shares
reserved under the 1992 Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
SUMMARY OF THE 1992 PLAN
The essential features of the 1992 Plan are outlined below.
Purpose. The purposes of the 1992 Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to
promote the success of the Company's business. Nonstatutory stock options,
incentive stock options and stock purchase rights may be granted under the
1992 Plan.
22
Administration. The 1992 Plan may be administered by the Board or a
committee of the Board, which committee is required to be constituted to
comply with Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Section 162(m) of the Code, and applicable laws (the
"Administrator"). Subject to the other provisions of the 1992 Plan, the
Administrator has the power to determine the terms of any options granted,
including the exercise price, the number of shares subject to the option and
the exercisability thereof. The 1992 Plan is currently administered by the
Compensation Committee of the Board of Directors. The Administrator may make
any determinations deemed necessary or advisable for the 1992 Plan.
Eligibility and Terms of Options. The 1992 Plan provides that nonstatutory
stock options and stock purchase rights may be granted only to employees and
consultants. Incentive stock options may be granted only to employees. An
optionee who has been granted an option may, if he or she is otherwise
eligible, be granted additional options. With respect to any optionee who owns
stock possessing more than 10% of the voting power of all classes of stock of
the Company (a "10% Stockholder"), the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the maximum term of the option must not exceed five years. The term
of all other options under the 1992 Plan may not exceed ten years. The
Administrator selects the optionees and determines the number of shares to be
subject to each option and stock purchase right. In making such determination,
there is taken into account the duties and responsibilities of the employee or
consultant, the value of his or her services, his or her present and potential
contribution to the success of the Company, the anticipated number of years of
future service and other relevant factors.
Limitations. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to preserve the Company's ability to deduct
the compensation income associated with options and stock purchase rights
granted to such persons, the 1992 Plan provides that no employee or consultant
may be granted, in any fiscal year of the Company, options and stock purchase
rights to purchase more than 500,000 shares of Common Stock. Notwithstanding
this limit, however, in connection with such individual's initial employment
with the Company, he or she may be granted options or stock purchase rights to
purchase up to an additional 500,000 shares of Common Stock.
Terms and Conditions of Options. Each option granted under the 1992 Plan is
evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options to purchase shares of Common Stock at the time the options are
granted. However, the exercise price of an incentive stock option must not
be less than 100% (110% if issued to a 10% Stockholder) of the fair market
value of the Common Stock on the date the option is granted and the
exercise price of a nonstatutory stock option must not be less than 50% of
the fair market value of the Common Stock on the date the option is
granted. However, the exercise price of nonstatutory stock options intended
to qualify as "performance-based compensation" within the meaning of
Section 162(m) may not be less than 100% of the fair market value of the
Common Stock on the date such option is granted. For so long as the
Company's Common Stock is traded on The Nasdaq National Market the fair
market value of a share of Common Stock shall be closing sales price for
such stock (or the closing bid if no sales were reported) as quoted on such
system.
(b) Exercise of the Option. Each stock option agreement will specify the
term of the option and the date when the option is to become exercisable.
The terms of such vesting are to be determined by the Administrator.
Options granted under the 1992 Plan to date generally become exercisable at
a rate of 1/60th of the shares subject to the options per month and have a
ten-year term. An option is exercised by giving written notice of exercise
to the Company, specifying the number of full shares of Common Stock to be
purchased and by tendering full payment of the purchase price to the
Company.
(c) Form of Consideration. The consideration to be paid for the shares of
Common Stock issued upon exercise of an option shall be determined by the
Administrator and is set forth in the option agreement. Such form of
consideration may vary for each option, and may consist entirely of cash,
check, promissory note, other shares of the Company's Common Stock,
"cashless exercise," any combination thereof, or any other legally
permissible form of consideration as may be provided in the option
agreement.
23
(d) Termination of Employment. In the event an optionee's continuous
status as an employee or consultant terminates for any reason (other than
upon the optionee's death or disability), the optionee may exercise his or
her option, but only within such period of time not to exceed six months
from the date of such termination, as is determined by the Administrator
(with such determination being made at the time of grant and not exceeding
ninety days in the case of an incentive stock option) and only to the
extent that the optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
option as set forth in the option agreement). Options granted under the
1992 Plan to date have generally provided that optionees may exercise their
options within ninety days from the date of termination of employment
(other than for death or disability).
(e) Disability. In the event an optionee's continuous status as an
employee or consultant terminates as a result of permanent and total
disability (as defined in Section 22(e)(3) of the Code), the optionee may
exercise his or her option, but only within twelve months from the date of
such termination, and only to the extent that the optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such option as set forth in the option
agreement).
(f) Death. In the event of an optionee's death, the optionee's estate or
a person who acquired the right to exercise the deceased optionee's option
by bequest or inheritance may exercise the option, but only within twelve
months following the date of death, and only to the extent that the
optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of the term of such option as set forth in the
option agreement).
(g) Nontransferability of Options. Options and stock purchase rights are
nontransferable by the optionee, other than by will or the laws of descent
and distribution, and are exercisable during the optionee's lifetime only
by the optionee. In the event of the optionee's death, options may be
exercised by a person who acquires the right to exercise the option by
bequest or inheritance.
(h) Value Limitation. If the aggregate fair market value of all shares of
Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000,
the excess options shall be treated as nonstatutory options.
(i) Other Provisions. The stock option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1992 Plan as may
be determined by the Administrator.
Stock Purchase Rights. In the case of stock purchase rights, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator.
Adjustment Upon Changes in Capitalization; Corporate Transactions. In the
event of changes in the outstanding Common Stock of the Company by reason of
any stock splits, reverse stock splits, stock dividends, mergers,
recapitalizations or other change in the capital structure of the Company, an
appropriate adjustment shall be made by the Administrator in: (i) the number
of shares of Common Stock subject to the 1992 Plan, (ii) the number and class
of shares of stock subject to any option or stock purchase right outstanding
under the 1992 Plan, (iii) and the exercise price of any such outstanding
option or stock purchase right. The determination of the Administrator as to
which adjustments shall be made shall be conclusive. In the event of a
proposed dissolution or liquidation of the Company, all outstanding options
and stock purchase rights will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board. The Board
may, in the exercise of its sole discretion in such instances, declare that
any option or stock purchase right shall terminate as of a date fixed by the
Board and give each optionee the right to exercise his option as to all or any
part of the optioned stock, including shares as to which the option or stock
purchase right would not otherwise be exercisable.
24
In the event of a merger of the Company with or into another corporation or
the sale of substantially all of the assets of the Company, the 1992 Plan
requires that each outstanding option and stock purchase right be assumed or
an equivalent option or stock purchase right be substituted by the successor
corporation; provided, however, if such successor or purchaser refuses to
assume the then outstanding options and stock purchase rights, the 1992 Plan
provides for the full acceleration of the exercisability of all outstanding
options and stock purchase rights for a period of fifteen days from the date
of notice of acceleration to the optionee and the options or stock purchase
rights terminate upon expiration of such period.
In the event of a "change in control" of the Company (as defined in Section
13 of the 1992 Plan), the 1992 Plan provides that the Board may, in its
discretion, (i) accelerate the exercisability of all outstanding options and
stock purchase rights, including shares as to which the option or stock
purchase right would not otherwise be exercisable and/or (ii) terminate all
outstanding vested and exercisable options and stock purchase rights
(including those options and stock purchase rights, if any, that are
accelerated upon a change of control) prior to the change in control and allow
the optionee (or, in the event of the optionee's death, the estate of the
optionee or the person who acquired the right to exercise the optionee's
option) to exchange such options and stock purchase rights for a cash payment
equal to the "change in control price" (as defined in Section 13 of the 1992
Plan).
Amendment and Termination of the 1992 Plan. The Board may at any time amend,
alter, suspend or terminate the 1992 Plan. The Company shall obtain
stockholder approval of any amendment to the 1992 Plan in such a manner and to
such a degree as is necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or Section 422 of the Code (or any other applicable law or
regulation, including the requirements of any exchange or quotation system on
which the Common Stock is traded). Any amendment or termination of the 1992
Plan shall not affect options and stock purchase rights already granted and
such options and stock purchase rights shall remain in full force and effect
as if the 1992 Plan had not been amended or terminated, unless mutually agreed
otherwise between the optionee and the Company, which agreement must be in
writing and signed by the optionee and the Company. In any event, the 1992
Plan shall terminate in May 2002. Any options and stock purchase rights
outstanding under the 1992 Plan at the time of its termination shall remain
outstanding until they expire by their terms.
FEDERAL TAX INFORMATION
Options granted under the 1992 Plan may be either "incentive stock options,"
as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise is an adjustment item for alternative minimum tax
purposes and may subject the optionee to the alternative minimum tax. Upon the
sale or exchange of the shares more than two years after grant of the option
and one year after exercising the option, any gain or loss will be treated as
long-term capital gain or loss. Net capital gains on shares held between 12
and 18 months may be taxed at a maximum federal rate of 28%, while net capital
gains on shares held for more than 18 months may be taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains and up
to $3,000 against other income. If these holding periods are not satisfied,
the optionee will recognize ordinary income at the time of sale or exchange
equal to the difference between the exercise price and lower of (i) the fair
market value of the shares at the date of the option exercise or (ii) the sale
price of the shares. A different rule for measuring ordinary income upon such
a premature disposition may apply if the optionee is also an officer,
director, or 10% Stockholder of the Company. Unless limited by Section 162(m)
of the Code, the Company will be entitled to a deduction in the same amount as
the ordinary income recognized by the optionee. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain
or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any
taxable income at the time he is granted a nonstatutory option. However, upon
25
its exercise, the optionee will recognize taxable income generally measured as
the excess of the then fair market value of the shares purchased over the
purchase price. Any taxable income recognized in connection with an option
exercise by an optionee who is also an employee of the Company will be subject
to tax withholding by the Company. Upon resale of such shares by the optionee,
any difference between the sale price and the optionee's purchase price, to
the extent not recognized as taxable income as described above, will be
treated as long-term or short-term capital gain or loss, depending on the
holding period.
Unless limited by Section 162(m) of the Code, the Company will be entitled
to a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a nonstatutory
option.
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time
of purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, because the Company may
repurchase the stock when the purchaser ceases to provide services to the
Company. As a result of this substantial risk of forfeiture, the purchaser
will not recognize ordinary income at the time of purchase. Instead, the
purchaser will recognize ordinary income on the dates when the stock is no
longer subject to a substantial risk of forfeiture (i.e., when the Company's
right of repurchase lapses). The purchaser's ordinary income is measured as
the difference between the purchase price and the fair market value of the
stock on the date the stock is no longer subject to right of repurchase.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and begin his or her capital gains holding period
by timely filing, (i.e., within thirty days of the purchase), an election
pursuant to Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, is measured as the difference between the purchase price
and the fair market value of the stock on the date of purchase, and the
capital gain holding period commences on such date. The ordinary income
recognized by a purchaser who is an employee will be subject to tax
withholding by the Company. Different rules may apply if the purchaser is also
an officer, director, or 10% shareholder of the Company.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1992 Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
Participation. The Company is unable to predict the amount of benefits that
will be received or allocated to any particular participant under the Director
Option Plan, the Purchase Plan or the 1992 Plan. The following table sets
forth the dollar amount and the number of shares that were granted and/or
allowed under the Purchase Plan and the 1992 Plan during the fiscal year ended
December 31, 1997 to (i) each of the Company's Named Executive Officers, (ii)
all current executive officers as a group, (iii) all current directors who are
not executive officers as a group and (iv) all employees other than executive
officers as a group.
26
PURCHASE PLAN 1992 PLAN
---------------------------- ----------------------------
DOLLAR VALUE SHARES SUBJECT DOLLAR VALUE
SHARES OF SHARES TO OPTIONS OF OPTION
NAME AND POSITION PURCHASED(#) PURCHASED(1)($) GRANTED(#) GRANTS (2)($)
- ----------------- ------------ --------------- -------------- -------------
Ricardo B. Levy......... -- -- 60,000 $ 667,500
President & Chief
Executive Officer
James A. Cusumano....... -- -- 60,000 $ 667,500
Chairman of the Board
and
Chief Technical Officer
Lawrence W. Briscoe..... -- -- 100,000 $ 500,000
Vice President, Finance
and Administration, and
Chief Financial Officer
Ralph A. Dalla Betta.... 4,717 $ 15,797 -- --
Vice President and
Chief Scientist
All current executive 4,717 $ 15,797 220,000 $ 1,835,000
officers as a group
(4 persons)............
All current non- -- -- 32,000 $ 209,780
executive directors as
a group
(4 persons)............
All other employees 196,673 $1,349,380 1,066,420 $11,220,012
(excluding current
executive officers) as
a group................
- --------
(1) The dollar value of the shares purchased under the Purchase Plan was
computed by multiplying the number of shares purchased by the fair market
value on the date of purchase.
(2) The dollar value of the option grants under the 1992 Plan was computed by
multiplying the number of shares subject to the option times the exercise
price of the option. All options granted under the 1992 Plan were granted
at an exercise price equal to the fair market value of the Common Stock on
the date of grant.
27
PROPOSAL NO. 4--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has selected Ernst & Young, independent accountants, to audit
the financial statements of the Company for the current fiscal year ending
December 31, 1998. Ernst & Young has audited the Company's financial
statements since the fiscal year ended December 31, 1982. A representative of
Ernst & Young is expected to be available at the Annual Meeting to make a
statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL AND RATIFICATION OF
THE SELECTION OF ERNST & YOUNG. IN THE EVENT THAT A MAJORITY OF THE VOTES CAST
AT THE MEETING ARE CAST AGAINST SUCH RATIFICATION, THE BOARD OF DIRECTORS WILL
RECONSIDER ITS SELECTION.
OTHER MATTERS
The Company does not currently intend to bring before the Annual Meeting any
matters other than those set forth herein, and has no present knowledge that
any other matters will or may be brought before the meeting by others.
However, if any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of proxy to vote the
proxies in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ LAWRENCE W. BRISCOE
LAWRENCE W. BRISCOE
Vice President, Finance and
Administration,
and Chief Financial Officer
Mountain View, California
April 30, 1998
28
EDGAR Annex A
-------
CATALYTICA, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH APRIL 1998)
CATALYTICA, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH APRIL 1998)
The following constitute the provisions of the 1992 Employee Stock Purchase
Plan of Catalytica, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its 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) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Catalytica, Inc., a California corporation.
-------
(e) "Compensation" shall mean all base straight time gross earnings,
------------
exclusive of payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which
-----------------------
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary 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 will be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
---------------
Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
-------------
(j) "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 National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sale
price for the Common Stock (or the mean of the closing bid and asked prices, if
no sales were reported), as quoted on such exchange (or the exchange with the
greatest volume of trading in Common Stock) or system 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 quoted on the NASDAQ system (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, 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.
(4) For purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value of the Common Stock shall be the
Price to Public as set forth in the final prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended.
(k) "Offering Period" shall mean the period of approximately
---------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading
-2-
Day on or after July 1 and January 1 of each year and terminating on the last
Trading Day in the periods ending twenty-four months later, except that the
first Offering Period shall be a shorter Offering Period of approximately
twenty-two and one-half months, commencing with the date on which the Company's
registration statement on Form S-1 (or any successor form thereof) is declared
effective by the Securities and Exchange Commission. The second Offering Period
under the Plan shall commence with the first Trading Day on or after July 1,
1993. The duration of Offering Periods may be changed pursuant to Section 4 of
this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "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.
(n) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date; provided, however, that
the first Purchase Period of the first Offering Period under the Plan shall be
approximately four and one-half months in duration.
(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 National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.
3. Eligibility.
-----------
(a) Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.
-3-
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, 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) which
permits his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue 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,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after July 1 and January 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof; provided, however, that the first Offering
Period under the Plan shall be shorter Offering Period of approximately twenty-
two and one-half months, commencing with the first Trading Day on or after the
date on which the Company's registration statement on Form S-1 (or any
successor form thereof) is declared effective by the Securities and Exchange
Commission and ending on the last Trading Day in the period ending December 31,
1994. The second Offering Period under the Plan shall commence with the first
Trading Day on or after July 1, 1993. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least five (5) business days prior to the applicable Enrollment Date, unless a
later time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on
-4-
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.
(c) Employees may only participate in one Offering Period at any
time.
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 ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed ten percent (10%) of the participant's Compensation during
said Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and will 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 or 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 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the "Current
Purchase Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period
-5-
equal $21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
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 will 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.
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 each Exercise Date during 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 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 Purchase Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, 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, and
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 will
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 will 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
Purchase Period or Offer-
-6-
ing Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over 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 the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(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
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice 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 during the 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.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, including by virtue of him or her having
failed to remain an Employee of the Company for at least twenty (20) hours per
week during an Offering Period in which the Employee is a participant, he or she
will 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 will be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option will be automatically
terminated.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
-7-
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be three million five
hundred thousand (3,500,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof. If on a given
Exercise Date the number of shares with respect to which options are to be
exercised exceeds the number 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) The participant will 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 will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
--------------
(a) Administrative Body. 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. Members of the
Board who are eligible Employees are permitted to participate in the Plan,
provided that:
(1) Members of the Board who are eligible to participate in the
Plan may not vote on any matter affecting the administration of the Plan or the
grant of any option pursuant to the Plan.
(2) If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the Committee.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
----------------------
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule
-8-
16b-3") provides specific requirements for the administrators of plans of this
type, the Plan shall be only administered by such a body and in such a manner as
shall comply with the applicable requirements of Rule 16b-3. Unless permitted
by Rule 16b-3, no discretion concerning decisions regarding the Plan shall be
afforded to any committee or person that is not "disinterested" as that term is
used in Rule 16b-3.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
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, the laws of descent and
distribution or as provided in Section 14 hereof) 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.
-9-
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. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves as well as the price per share 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 Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(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 option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
-10-
assumption or substitution, to shorten the Offering Periods then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board shortens the
Offering Periods then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, 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 his option has been changed to the New Exercise Date and
that his option will be exercised automatically on the New Exercise Date, unless
prior to such date he has withdrawn from the Offering Period as provided in
Section 10 hereof. For purposes of this paragraph, an option granted under the
Plan shall be deemed to be assumed if, following the sale of assets or merger,
the option confers the right to purchase, for each share of option stock subject
to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
19. 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 18 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 Plan is in the best
interests of the Company and its shareholders. Except as provided in 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 Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
-11-
(b) Without shareholder 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.
20. 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.
21. Conditions 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.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
-12-
23. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
-13-
EXHIBIT A
---------
CATALYTICA, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application Enrollment Date:
- ----- -----------
Change in Payroll Deduction Rate
- -----
Change of Beneficiary(ies)
- -----
1. ________________________________________ hereby elects to participate in
the Catalytica, Inc. 1992 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (not to exceed 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete "Catalytica, Inc. 1992 Employee
Stock Purchase Plan." I understand that my participation in the Employee
Stock Purchase Plan is in all respects subject to the terms of the Plan. I
understand that the grant of the option by the Company under this
Subscription Agreement is subject to obtaining shareholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and spouse only):___________
_____________________________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased over the price which I paid for the shares. I hereby
--------
agree to notify the Company in writing within 30 days after the date of any
---------------------------------------------------------------------------
disposition of my shares and I will make adequate provision for Federal,
------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated
-------------------------------
to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to
make available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by me. If I dispose of such
shares at any time after the expiration of the 2-year and 1-year holding
periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such disposition,
and that such income will be taxed as ordinary income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of
the shares at the time of such disposition over the purchase price which I
paid for the shares, or (2) 15% of the fair market value of the shares on
the first day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)
- ------------------------------------ -------------------------------------
Relationship
-------------------------------------
(Address)
-2-
Employee's Social
Security Number:
------------------------------------
Employee's Address:
------------------------------------
------------------------------------
------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
-------------------- --------------------------------------------
Signature of Employee
--------------------------------------------
Spouse's Signature (If beneficiary
other than spouse)
-3-
EXHIBIT B
---------
CATALYTICA, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Catalytica, Inc.
1992 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
---------------------------
-4-
EDGAR Annex B
-------
CATALYTICA, INC.
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 1998)
CATALYTICA, INC.
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 1998)
1. Purposes of the Plan. The purposes of this Stock Option Plan are:
--------------------
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees and Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board in
---------
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Catalytica, Inc., a California corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted
in the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, any such leave may not exceed ninety (90)
days, unless reemployment upon the expiration of such leave is guaranteed by
contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor.
(j) "Director" means a member of the Board.
--------
(k) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
-2-
(p) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain terms
---------------
and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
--------
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1992 Stock Option Plan.
----
(z) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
-3-
(dd) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ee) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Five Million Fifty Thousand (5,050,000) Shares. The Shares
may be authorized, but unissued, or reacquired Common Stock. However, should
the Company reacquire Shares which were issued pursuant to the exercise of an
Option or Stock Purchase Right, such Shares shall not become available for
future grant under the Plan.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered
------------------------------
by different Committees with respect to different groups of Optionees.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
-4-
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan);
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
-5-
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has
been granted an Option or Stock Purchase Right may be granted additional Options
or Stock Purchase Rights.
6. Limitations.
-----------
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's incentive stock options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), incentive stock
options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Optionee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, an Optionee
may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For
-6-
this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
--------------
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 50% of the Fair Market Value per Share on
the date of grant. In the case of a Nonstatutory Stock Option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
-7-
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue
-8-
(or cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event that an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option, but only within such period of time as is
determined by the Administrator, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the case of an Incentive Stock Option, the Administrator shall determine such
period of time (in no event to exceed ninety (90) days from the date of
termination) when the Option is granted. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event that an Optionee's
----------------------
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
-9-
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid (which price shall
not be less than 50% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which the offeree must accept such offer, which
shall in no event exceed six (6) months from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. An Option
--------------------------------------------------------
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
-------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted
-10-
or which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, 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 issued 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 or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.
(c) Merger or Asset Sale. Subject to the provisions of paragraph (d)
--------------------
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, the Administrator shall, in lieu of
such assumption or substitution, provide for the Optionee to have the right to
exercise the Option or Stock Purchase Right as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Stock Purchase Right shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or Stock Purchase Right will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the
-11-
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation and the participant, provide for the consideration to
be received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
(d) Change in Control. In the event of a "Change in Control" of the
-----------------
Company, as defined in paragraph (e) below, then the following acceleration and
valuation provisions shall apply:
(i) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, any Options and
Stock Purchase Rights outstanding on the date such Change in Control is
determined to have occurred that are not yet exercisable and vested on such
date shall become fully exercisable and vested;
(ii) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, all outstanding
Options and Stock Purchase Rights, to the extent they are exercisable and
vested (including Options and Stock Purchase Rights that shall become
exercisable and vested pursuant to subparagraph (i) above), shall be
terminated in exchange for a cash payment equal to the Change in Control
Price, (reduced by the exercise price applicable to such Options or Stock
Purchase Rights). These cash proceeds shall be paid to the Optionee or, in
the event of death of an Optionee prior to payment, to the estate of the
Optionee or to a person who acquired the right to exercise the Option or
Stock Purchase Right by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section
---------------------------------
13, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors: or
(ii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve
-12-
an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets; or
(iii) A change in the composition of the Board of Directors of
the Company, as a result of which fewer than a majority of the directors
are Incumbent Directors. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the date the Plan is approved
by the stockholders, or (B) are elected, or nominated for election, to the
Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company).
(f) Change in Control Price. For purposes of this Section 13, "Change
-----------------------
in Control Price" shall be, as determined by the Board, (i) the highest Fair
Market Value of a Share within the 60 day period immediately preceding the date
of determination of the Change in Control Price by the Board (the "60-Day
Period"), or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period, or (iii) some
lower price as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a Share.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including,
-13-
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regula tions promulgated thereunder, Applicable Laws, and the
requirements of any stock exchange or quotation system upon which the Shares may
then be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right 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.
17. Liability of Company.
--------------------
(a) Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
--------------------------------
by an Option or Stock Purchase Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. Continuance of the Plan shall be subject
--------------------
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.
-14-
CATALYTICA, INC. 1992 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Name: _______________________________
Address: ____________________________
____________________________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number __________________
Date of Grant __________________
Vesting Commencement Date __________________
Exercise Price per Share $_________________
Total Number of Shares Granted __________________
Total Exercise Price $_________________
Type of Option: ______ Incentive Stock Option
______ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
20% of the Shares subject to the Option shall vest on the Vesting
Commencement Date, and an additional 20% shall vest upon each succeeding
anniversary of the Vesting Commencement Date until the Option becomes 100%
exercisable.
-1-
Termination Period:
------------------
This Option may be exercised for [90 days maximum for ISOs] _____ days
after termination of employment or consulting relationship, or such longer
period as may be applicable upon death or Disability of Optionee as provided in
the Plan, but in no event later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase a number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
-2-
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, AND (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares; or
(e) delivery of Optionee's promissory note (the "Note") in the form
attached hereto as Exhibit C, in the amount of the aggregate Exercise Price of
the Exercised Shares together with the execution and delivery by the Optionee of
the Security Agreement attached hereto as Exhibit B. The Note shall bear
interest at a rate no less than the "applicable federal rate" prescribed under
the Code and its regulations at time of purchase, and shall be secured by a
pledge of the Shares purchased by the Note pursuant to the Security Agreement.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
----------------
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
-3-
(a) Exercising the Option.
---------------------
(i) Nonqualified Stock Option ("NSO"). If this Option does not
---------------------------------
qualify as an ISO, the Optionee may incur regular federal income tax liability
upon exercise. The Optionee will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as
------------------------------
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the fair market value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to alternative minimum tax in the year of exercise.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one year,
---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF (A) the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or (B) the difference between the SALE PRICE of
such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
-4-
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.
OPTIONEE: CATALYTICA, INC.
_____________________________ By:_______________________________
Signature
_____________________________ Title:____________________________
Print Name
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
______________________________
Spouse of Optionee
-5-
EXHIBIT A
---------
CATALYTICA, INC. 1992 STOCK OPTION PLAN
EXERCISE NOTICE
Catalytica, Inc.
430 Ferguson Drive
Mountain View, CA 94043-5272
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 199__, the
------------------
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Catalytica, Inc. (the "Company") under and
pursuant to the Catalytica, Inc. 1992 Stock Option Plan (the "Plan") and the
Stock Option Agreement dated _____________ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers full payment of the Exercise Price until such time as Purchaser
disposes of the Shares.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the
-1-
Company and Purchaser with respect to the subject matter hereof, and such
agreement is governed by California law except for that body of law pertaining
to conflict of laws.
Submitted by: Accepted by:
PURCHASER: CATALYTICA, INC.
___________________________ By: __________________________
Signature
___________________________ Its: _________________________
Print Name
Address: Address:
- ------- -------
___________________________ 430 Ferguson Drive
___________________________ Mountain View, CA 94043-5272
-2-
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Catalytica,
Inc., a California corporation ("Pledgee"), and _________________________
("Pledgor").
Recitals
--------
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1992 Stock Option Plan and Pledgor's election under the terms of the
Option to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obliga tions thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
---------------------------------------------
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
------------
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
-1-
(c) Margin Regulations. In the event that Pledgee's Common Stock is
------------------
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
-----------------
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
------------------
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
-------
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
---------------------
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here under upon payments of the principal of the
Note. The number of the pledged Shares which shall be
-2-
released shall be that number of full Shares which bears the same proportion to
the initial number of Shares pledged hereunder as the payment of principal bears
to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
----
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
----------------------
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" By: _________________________________
_________________________________
Print Name
-3-
Address: _________________________________
_________________________________
"PLEDGEE" Catalytica, Inc.
a California corporation
By: _________________________________
Title: ________________________________
"PLEDGEHOLDER" ________________________________
Secretary of Catalytica, Inc.
-4-
EXHIBIT C
---------
INSTALLMENT NOTE
$_______________ Mountain View, California
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Catalytica, Inc., a
California corporation (the "Company"), or order, the principal sum of
_______________________ ($_____________), together with interest on the unpaid
principal hereof from the date hereof at the rate of _______________ percent
(____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Should the undersigned fail to make full payment of any installment of principal
or interest for a period of 10 days or more after the due date thereof, the
whole unpaid balance on this Note of principal and interest shall become
immediately due at the option of the holder of this Note. Payments of principal
and interest shall be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured by a pledge of the Company's Common
Stock under the terms of a Security Agreement of even date herewith and is
subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
_____________________________
_____________________________
-5-
CATALYTICA, INC. 1992 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
Name: ___________________________________
Address: ________________________________
________________________________
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's repurchase option and your ongoing Continuous Status as
an Employee or Consultant (as described in the Plan and the attached Restricted
Stock Purchase Agreement), as follows:
Grant Number __________________
Date of Grant __________________
Price Per Share $_________________
Total Number of Shares Subject
to This Stock Purchase Right __________________
Expiration Date: _______________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the Catalytica, Inc. 1992 Stock Option Plan and
the Restricted Stock Purchase Agreement, all of which are attached and made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: CATALYTICA, INC.
_____________________________ By:_____________________
Signature
_____________________________ Title:__________________ Print Name
-1-
EXHIBIT A-1
-----------
CATALYTICA, INC. 1992 STOCK OPTION PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Admin istrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
restricted stock purchase agreement (the "Agreement").
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
-------------
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
-------------------------
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
-----------------
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section 4), the Company shall, upon the date of such termination (as reasonably
fixed and determined by the Company) have an irrevocable, exclusive option for a
period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). Said option shall
be exercised by the Company by delivering written notice to the Purchaser or the
Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price
-1-
in any of the ways described above, the Company shall become the legal and
beneficial owner of the Shares being repurchased and all rights and interests
therein or relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares; provided that if the Fair Market Value of
the Shares to be repurchased on the date of such designation or assignment (the
"Repurchase FMV") exceeds the aggregate Repurchase Price of such Shares, then
each such designee or assignee shall pay the Company cash equal to the
difference between the Repurchase FMV and the aggregate Repurchase Price of such
Shares.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) ___________________ (_______) of the Shares shall be released from
the Company's repurchase option ___________________
_________________________________________________________________, provided in
each case that the Purchaser's Continuous Status as an Employee or Consultant
has not terminated prior to the date of any such release.
(b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase
option shall be delivered to the Purchaser at the Purchaser's request (see
Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6
-----------------------
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the provi
sions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
----------------
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section 3 above, the Purchaser shall, upon execution of
this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the
-2-
Company's obligations under this Agreement, the spouse of Purchaser, if any,
shall execute and deliver to the Company the Consent of Spouse attached hereto
as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
7. Legends. The share certificate evidencing the Shares issued hereunder
-------
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that
-3-
the Purchaser (and not the Company) shall be responsible for the Purchaser's own
tax liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the purchase price for the Shares and the Fair Market
Value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to its repurchase option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Company's repurchase option expires by filing an election under Section
83(b) of the Code with the I.R.S. within 30 days from the date of purchase. The
form for making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
------------------
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement, subject to the terms and conditions of the Plan and
the Notice of Grant, represents the entire agreement between the parties with
respect to the purchase of Common Stock by the Purchaser. Subject to Section
15(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this
Agreement.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted
-4-
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(e) The Purchaser agrees upon request to execute any further documents
or instruments necessary or desirable to carry out the purposes or intent of
this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE
OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
PURCHASER: CATALYTICA, INC.
_____________________________ By:_______________________________
Signature
_____________________________ Title:____________________________
Print Name
-5-
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto________________________________________ (__________) shares of the
Common Stock of Catalytica, Inc. standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint ____________________________________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between_______________________ and the undersigned
dated ______________, 19__.
Dated: _______________, 19__
Signature:______________________________
-6-
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
-7-
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
_____________, 19__
Corporate Secretary
Catalytica, Inc.
430 Ferguson Drive
Mountain View, CA 94043-5272
Dear _________________:
As Escrow Agent for both Catalytica, Inc., a California corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities.
-1-
Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
-2-
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Catalytica, Inc.
430 Ferguson Drive
Mountain View, CA 94043-5272
PURCHASER: ________________________________
________________________________
________________________________
ESCROW AGENT: Corporate Secretary
Catalytica, Inc.
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-3-
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
CATALYTICA, INC.
By: __________________________________
Title: ________________________________
PURCHASER:
_________________________________________
(Signature)
_________________________________________
(Typed or Printed Name)
ESCROW AGENT:
_________________________________________
Corporate Secretary
-4-
EXHIBIT A-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of Catalytica, Inc. as set forth in the Agreement,
I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______________, 19____
______________________________
-5-
EXHIBIT A-5
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME : TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Catalytica,
Inc. (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person per
forming the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: _______________, 19__ ___________________________________
_________________________, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: _______________, 19__ ___________________________________
Spouse of Taxpayer
-6-
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R CATALYTICA, INC.
O
X 1998 ANNUAL MEETING OF STOCKHOLDERS
Y
June 17, 1998
The undersigned stockholder of Catalytica, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 29, 1998, and hereby appoints Ricardo B. Levy
and Lawrence W. Briscoe, and each of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1998 Annual Meeting of
Stockholders of Catalytica, Inc., to be held on Wednesday, June 17, 1998, at
10:30 a.m., Western Daylight Savings Time, in Park Hyatt San Francisco located
at 333 Battery Street, San Francisco, California 94111 and at any
continuation(s) or adjournment(s) thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side and, in their
discretion, upon such other matter or matters that may properly come before the
meeting and any adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED (1) FOR THE ELECTION OF DIRECTORS, (2) FOR THE
AMENDMENT TO THE COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN, (3) FOR THE
AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN, (4) FOR THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AND (5) AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
- --------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON THE REVERSE SIDE
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
(FOLD AND DETACH HERE)
[LOGO OF CATALYTICA]
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, June 17, 1998
10:30 a.m.
Park Hyatt San Francisco
333 Battery Street
San Francisco California 94111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" EACH OF THE FOLLOWING PROPOSALS.
Please Mark [X]
your votes as
indicated in
this example
FOR all nominees WITHHOLD
listed (except as for all
indicated) nominees
1. ELECTION OF DIRECTORS [_] [_]
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
James A. Cusumano, Utz Felcht, Richard Fleming, Alan Goldberg, Howard Hoffen,
Ricardo S. Levy, Ernest Mario and John A. Urquhart
FOR AGAINST ABSTAIN
2. Proposal to approve the amendment of the Company's 1992 [_] [_] [_]
Employee Stock Purchase Plan to increase the number of
shares reserved for issuance thereunder by 1,500,000 shares.
3. Proposal to approve the amendment to the Company's 1992 Stock [_] [_] [_]
Option Plan to increase the number of shares
reserved for issuance thereunder by 2,000,000 shares and
make certain amendments to the terms of the plan, including,
but not limited to, the share limitations, for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended.
4. Proposal to approve and ratify the appointment of Ernst & [_] [_] [_]
Young as the independent auditors of the Company for
the fiscal year ending December 31, 1998.
5. The proxies are authorized to vote in their discretion upon [_] [_] [_]
such other business as may properly come before the
meeting.
I PLAN TO ATTEND THE MEETING [_]
COMMENTS/ADDRESS CHANGE [_]
Please mark this if you have written
comments/address on the reverse side
Signature_____________________ Signature___________________ Date________________
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
- --------------------------------------------------------------------------------
(FOLD AND DETACH HERE)