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SEC 1913 (3-99)
Neose Technologies, Inc.
[LOGO]
102 Witmer Road
Horsham, Pennsylvania 19044
May 14, 2002
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Neose
Technologies, Inc. on June 25, 2002. You will have the opportunity to ask
questions and make comments. Enclosed with this letter are your Notice of Annual
Meeting of Stockholders, Proxy Statement, Proxy voting card, and 2001 Annual
Report to Stockholders.
At this year's meeting, you will be asked to elect eight directors to
serve a term of one year each, to increase the number of shares issuable under
our Amended and Restated 1995 Stock Option/Stock Issuance Plan, and to increase
the number of shares issuable under our Employee Stock Purchase Plan.
I hope that you attend the meeting. Whether or not you plan to be with
us, please sign, date, and return your voting card promptly in the enclosed
envelope.
Sincerely,
C. Boyd Clarke
President and Chief Executive Officer
Neose Technologies, Inc.
[LOGO NEOSE]
102 Witmer Road
Horsham, Pennsylvania 19044
Notice of Annual Meeting of Stockholders
to be held June 25, 2002
To the Stockholders of Neose Technologies, Inc.:
The 2002 Annual Meeting of Stockholders will be held at our offices at
102 Witmer Road, Horsham, Pennsylvania on Tuesday, June 25, 2002 at 9:00 a.m.
During the Annual Meeting, stockholders will be asked to:
1. Elect eight directors to serve for a term of one year or until the
election and qualification of their successors;
2. Approve an amendment to our Amended and Restated 1995 Stock
Option/Stock Issuance Plan to increase by 1,150,000 shares the number
of shares issuable under the plan;
3. Approve an amendment to our Employee Stock Purchase Plan to increase by
50,000 shares the number of shares issuable under the plan; and
4. Transact any other business properly brought before the Annual Meeting.
If you are a stockholder as of April 26, 2002, you may vote at the
meeting. The date of mailing this Notice of Meeting and Proxy Statement is on or
about May 14, 2002.
By order of the Board of Directors
Debra J. Poul
Secretary
Proxy Statement
This Proxy Statement and the accompanying proxy card are being mailed,
beginning on or about May 14, 2002, to owners of shares of common stock of Neose
Technologies, Inc. in connection with the solicitation of proxies by the Board
of Directors for our Annual Meeting of Stockholders. This proxy procedure is
necessary to permit all stockholders, many of whom are unable to attend the
Annual Meeting, to vote. The Board of Directors encourages you to read this
document thoroughly and to take this opportunity to vote on the matters to be
decided at the Annual Meeting.
Contents
Questions and Answers .................................................................................... 2
Proposal 1-- Election of Directors ....................................................................... 6
Employment Agreements .................................................................................... 10
Retention Agreements ..................................................................................... 12
Retirement and Separation Agreements ..................................................................... 12
Option Grant Table ....................................................................................... 13
Aggregated Fiscal Year-End Option Values ................................................................. 14
Report of the Compensation Committee ..................................................................... 14
Common Stock Performance Graph ........................................................................... 17
Report of the Audit Committee ............................................................................ 17
Section 16(a) Beneficial Ownership Reporting Compliance .................................................. 18
Stock Ownership of our Directors, Executive Officers, and 5% Beneficial Owners ........................... 19
Certain Relationships and Related Transaction ............................................................ 21
Proposal 2-- Amendment to our Amended and Restated 1995 Stock
Option/Stock Issuance Plan ............................................................................. 22
Proposal 3-- Amendment to our Employee Stock Purchase Plan ............................................... 29
Independent Certified Public Accountants ................................................................. 32
Requirements for Advance Notification of Nominations and Stockholder Proposals ........................... 33
1
Questions and Answers
What am I voting on?
1. The election of eight directors for a one-year term or until the
election and qualification of their successors.
2. An amendment to our Amended and Restated 1995 Stock Option/Stock
Issuance Plan to increase by 1,150,000 shares the number of shares
issuable under the plan.
3. An amendment to our Employee Stock Purchase Plan to increase by
50,000 shares the number of shares issuable under the plan.
4. Any other business that properly comes before the meeting for a
vote.
Who is entitled to vote at the Annual Meeting, and how many votes do
they have?
Common stockholders of record at the close of business on April 26,
2002 may vote at the Annual Meeting. Each share has one vote. There
were 14,276,446 shares of common stock outstanding on April 26, 2002.
From June 15, 2002 through June 25, 2002, you may inspect a list of
stockholders eligible to vote. If you would like to inspect the list,
please call Debra J. Poul, our Corporate Secretary, at (215) 315-9000
to arrange a visit to our offices.
How do I vote?
You must be present, or represented by proxy, at the Annual Meeting in
order to vote your shares. Because many of our stockholders are unable
to attend the Annual Meeting in person, we send proxy cards to all of
our stockholders to enable them to be represented and to vote at the
Annual Meeting.
What is a proxy?
A proxy is a person you appoint to vote on your behalf. If you are
unable to attend the Annual Meeting, we are seeking your appointment of
proxies so that your shares of common stock may be voted. You must
complete and return the enclosed proxy card to have your shares voted
by proxy.
By completing and returning this proxy card, who am I designating as my
proxy?
You will be designating C. Boyd Clarke, our President and Chief
Executive Officer, and A. Brian Davis, our Acting Chief Financial
Officer, as your proxies. They may act together or individually on your
behalf, and will have the authority to appoint a substitute to act as
proxy.
How will my proxy vote my shares?
Your proxy will vote according to the instructions on your proxy card.
If you complete and return your proxy card but do not indicate your
vote, your proxy will vote "FOR" Proposals 1, 2 and 3. We do not intend
to bring any other matter for a vote at the Annual Meeting, and we do
not know of anyone else who intends to do so. Your proxies are
authorized to vote on your behalf, however, using their best judgment,
on any other business that properly comes before the Annual Meeting.
How do I vote using my proxy card?
If you do not plan to vote in person at the Annual Meeting, you may
vote by mail by returning the enclosed proxy card to us. To vote by
mail, simply mark, sign, and date the enclosed proxy card, and return
it in the enclosed postage-paid envelope. Alternatively, you may
deliver your proxy card to us
2
in person, by facsimile, or by a courier.
What if my shares are held in "street name?"
If you hold your shares in "street name" through a broker or other
nominee, you will receive separate instructions from the nominee
describing how to vote your shares. If you do not give your broker or
nominee specific instructions for Proposal 1, your broker is entitled
to vote your shares for the election of directors. However, we believe
that brokers are not entitled to vote your shares on Proposal 2, the
amendment to our stock option plan, or Proposal 3, the amendment to our
stock purchase plan. Shares represented by such "broker non-votes" will
be counted in determining whether there is a quorum.
How do I revoke my proxy?
You may revoke your proxy at any time before your shares are voted at
the Annual Meeting by:
. Notifying our Corporate Secretary, Debra J. Poul, in writing at 102
Witmer Road, Horsham, PA 19044, that you are revoking your proxy;
. Executing a new proxy card; or
. Attending and voting by ballot at the Annual Meeting.
Is my vote confidential?
Yes, only certain employees will have access to your proxy card. All
comments remain confidential, unless you ask that your name be
disclosed.
Who will count the votes?
An officer of Neose Technologies, Inc. will act as the inspector of
election and count the votes.
What constitutes a quorum?
A majority of the 14,276,446 shares outstanding as of the record date,
either present or represented by proxy, constitutes a quorum. A quorum
is necessary in order to conduct the Annual Meeting. If you choose to
have your shares represented by proxy at the Annual Meeting, you will
be considered part of the quorum. If a quorum is not present at the
Annual Meeting, the stockholders present in person or by proxy may
adjourn the meeting to a date when a quorum is present. If an
adjournment is for more than 30 days or a new record date is fixed for
the adjourned meeting, we will provide notice of the adjourned meeting
to each stockholder of record entitled to vote at the meeting.
How will my vote be counted?
For Proposal 1, the election of directors, the nominees will be elected
by a plurality of the votes cast at the annual meeting. You may choose
to vote, or withhold your vote, separately for each nominee. Votes that
are withheld will have no effect on the results of the vote. Brokers
that do not receive instructions are entitled to vote those shares for
the election of the directors.
For Proposal 2, the amendment to our Amended and Restated 1995 Stock
Option/Stock Issuance Plan:
. You may abstain, and your abstention will have the same effect as a
vote against Proposal 2; or
. If you hold your shares through a broker in "street name" and you
do not give instructions to
3
2001, by writing to our Corporate Secretary at 102 Witmer Road,
Horsham, Pennsylvania, 19044 or via e-mail at info@neose.com.
4
your broker to vote your shares with respect to Proposal 2, your broker
may not vote those shares on Proposal 2, and there will be no effect on
the vote because "broker non-votes" are not considered present at the
meeting.
For Proposal 3, the amendment to our Employee Stock Purchase Plan:
. You may abstain, and your abstention will have the same effect as
a vote against Proposal 3; or
. If you hold your shares through a broker in "street name" and you
do not give instructions to your broker to vote your shares with
respect to Proposal 3, your broker may not vote those shares on
Proposal 3, and there will be no effect on the vote because
"broker non-votes" are not considered present at the meeting.
What percentage of our common shares do the directors and officers own?
As of April 26, 2002, our current directors and executive officers
beneficially owned approximately 23.4% of our common shares. See the
discussion under the heading "Stock Ownership of our Directors,
Executive Officers, and 5% Beneficial Owners" on page 19 for more
details.
Who is soliciting my proxy, how is it being solicited, and who pays the
cost?
Neose Technologies, Inc., on behalf of the Board of Directors, through
its directors, officers, and employees, is soliciti proxies primarily
by mail. In addition, proxies may also be solicited in person, by
telephone, or facsimile. Morrow & Co., Inc., a proxy solicitation firm,
will be assisting us for a fee of approximately $6,500, plus
out-of-pocket expenses. We will pay the cost of soliciting proxies. We
will also reimburse stockbrokers and other custodians, nominees, and
fiduciari for their reasonable out-of-pocket expenses for forwarding
proxy and solicitation material to the owners of our common shares.
When are stockholder proposals for next year's Annual Meeting due?
To be included in the mailing of the Notice of Annual Meeting of
Stockholders, Proxy Statement, and Proxy voting card for next year's
annual meeting, proposed stockholder proposals must be received between
December 1, 2002 and December 31, 2002 by our Corporate Secretary, at
102 Witmer Road, Horsham, PA 19044. You should submit any proposal by a
method that permits you to prove the date of delivery to us. See the
discussion under the heading "Requirements for Advance Notification of
Nominations and Stockholder Proposals" beginning on page 33 for
information regarding certain procedures provided by our By-Laws with
respect to stockholder proposals and nominations of directors.
Who are Neose's Independent Public Accountants, and will they be
represented at the Annual Meeting?
Arthur Andersen LLP served as our independent public accountants and
auditors from 1994 through the April 29, 2002. We have selected KPMG
LLP to serve as our auditor for 2002. We will invite a representative
of Arthur Andersen LLP to be present at the Annual Meeting to respond
to questions about the periods for which they were our auditors. We
expect a representative of KPMG LLP to be present at the annual
meeting. The representative will have an opportunity to make a
statement, if he or she desires, and will be available to answer
questions.
How may I obtain a copy of Neose's Form 10-K?
You may request a copy of our Annual Report on Form 10-K for the year
ended December 31,
5
Proposal 1 -- Election of Directors
The Board of Directors currently has ten members. Lindsay A. Rosenwald,
M.D., a director since 1989, and Jerry A. Weisbach, Ph.D., a director since
1993, will retire from the Board on June 25, 2002. We thank them for their years
of valued service. The Board of Directors has determined to fix the size of the
Board at eight directors effective at the Annual Meeting on June 25, 2002. Each
member, other than Dr. Rosenwald and Dr. Weisbach, has been nominated for
re-election, and has agreed, if elected, to serve a one-year term or until the
election and qualification of his or her successor. If any nominee is unable to
stand for election, which circumstance we do not anticipate, the Board may
provide for a lesser number of directors or designate a substitute. In the
latter event, shares represented by proxies may be voted for a substitute
nominee.
If a quorum is present at the Annual Meeting, then a plurality of all
votes cast at the meeting will be sufficient to elect a director. There is no
cumulative voting in the election of directors.
The Board of Directors recommends a vote "FOR" each of the nominees.
Stephen A. Roth, 59, has served on our Board since 1989, and as
Chairman since 1994. Dr. Roth co-founded Neose, served as Chief Executive
Officer from August 1994 until March 2002, and now serves as a consultant. From
1992 until August 1994, he served as Senior Vice President, Research and
Development and Chief Scientific Officer. Dr. Roth was on the faculty of the
University of Pennsylvania from 1980 to 1994, and was Chairman of Biology from
1982 to 1987. Dr. Roth received his A.B. in biology from The Johns Hopkins
University, and his Ph.D. in developmental biology from the Case Western Reserve
University. He completed his post-doctorate training in carbohydrate chemistry
at The Johns Hopkins University.
C. Boyd Clarke, 52, has served on our Board, and as President and Chief
Executive Officer, since March 2002. From December 1999 through March 2002, Mr.
Clarke was President and Chief Executive Officer of Aviron, a biotechnology
company, and was also Chairman from January 2001 through March 2002. From 1998
through 1999, Mr. Clarke was Chief Executive Officer and President of U.S.
Bioscience, Inc., also a biotechnology company. Mr. Clarke served as President
and Chief Operating Officer of U.S. Bioscience, Inc. from 1996 to 1998. From
1977 to 1996, Mr. Clarke held a number of positions at Merck & Co., Inc.,
including being the first President of Pasteur-Merieux MSD, and most recently as
Vice President of Merck Vaccines. Mr. Clarke has a B.S. in biochemistry, and an
M.A. in history from the University of Calgary.
William F. Hamilton, 63, has served on our Board since 1991. Dr.
Hamilton has served on the University of Pennsylvania faculty since 1967, and is
the Landau Professor of Management and Technology, and Director of the Jerome
Fisher Program in Management and Technology at The Wharton School and the School
of Engineering and Applied Science. He serves as a director of the following
publicly-held companies: Digital Lightwave, Inc., a manufacturer of
telecommunications test equipment and Hunt Manufacturing Co., a manufacturer of
art and office supplies. Dr. Hamilton received his B.S. and M.S. in chemical
engineering and his M.B.A. from the University of Pennsylvania, and his Ph.D. in
applied economics from the London School of Economics.
6
Douglas J. MacMaster, Jr., 71, has served on our Board since 1993. Mr.
MacMaster served as Senior Vice President of Merck & Co., Inc. from 1988 to
1992, where he was responsible for worldwide chemical and pharmaceutical
manufacturing, the Agvet Division, and the Specialty Chemicals Group. From 1985
to 1988, Mr. MacMaster was President of the Merck Sharp Dohme Division of Merck.
Mr. MacMaster serves as a director of the following publicly-held companies:
Stratton Mutual Funds, and Martek Biosciences Corp., a biological products
manufacturing company. He received his B.A. from St. Francis Xavier University,
and his J.D. from Boston College Law School.
P. Sherrill Neff, 50, has served on our Board since 1994. He served as
President and Chief Financial Officer from December 1994 through January 31,
2002, and as Chief Operating Officer from April 2000 through January 31, 2002.
Mr. Neff is now the Managing Partner of Quaker BioVentures, L.P., a venture
capital firm. From 1993 to December 1994, Mr. Neff was Senior Vice President,
Corporate Development, at U.S. Healthcare, Inc., a managed healthcare company.
From 1984 to 1993, he worked at Alex. Brown & Sons Incorporated, an investment
banking firm, where he held a variety of positions, most recently as Managing
Director and Co-Head of the Financial Services Group. Mr. Neff is a director of
Resource America, Inc., a publicly-held energy and real estate finance company.
Mr. Neff is also on the board of directors of the Pennsylvania Biotechnology
Association, the University City Science Center, and the Biotechnology
Institute. Mr. Neff received his B.A. in religion from Wesleyan University, and
his J.D. from the University of Michigan Law School.
Mark H. Rachesky, 43, has served on our Board since 1999. Dr. Rachesky
is the founder and President of MHR Fund Management LLC and affiliates,
investment managers of various private investment funds that invest in
inefficient market sectors, including special situation equities and distressed
investments. From 1990 through June 1996, Dr. Rachesky was employed by Carl C.
Icahn, initially as a senior investment officer and for the last three years as
sole Managing Director of Icahn Holding Corporation, and acting chief investment
advisor. Dr. Rachesky is currently on the board of directors of Samsonite
Corporation and Keryx Biopharmaceuticals, Inc. Dr. Rachesky is a graduate of
Stanford University School of Medicine, and Stanford University School of
Business. Dr. Rachesky graduated from the University of Pennsylvania with a
major in Molecular Aspects of Cancer.
Lowell E. Sears, 51, has served on our Board since 1994. He has been a
private investor involved in portfolio management and life sciences venture
capital since April 1994. From 1988 until April 1994, Mr. Sears was Chief
Financial Officer of Amgen Inc., a pharmaceutical company, and from 1992 until
1994, he also served as Senior Vice President responsible for the Asia-Pacific
region. Mr. Sears is a director of Techne Corp. and Dendreon Corporation, each
of which is a publicly-held biotechnology company. Mr. Sears received his B.A.
in economics from Claremont McKenna College, and his M.B.A. from Stanford
University.
Elizabeth H.S. Wyatt, 54, has served on our Board since May 2002. From
1980 through December 2000, Ms. Wyatt held a variety of positions at Merck &
Co., Inc., most recently as Merck's vice president, corporate licensing, heading
Merck's worldwide product and technology acquisition activities. Prior to
joining Merck in 1980, Ms. Wyatt was a consultant and an academic administrator,
responsible for the Harvard Business School's first formal marketing of its
executive education programs. She currently serves on the Boards of Directors of
MedImmune, Inc., The Seabury Group LLC and certain of its affiliates, and on the
Board of Trustees of Randolph-Macon College. Wyatt received her B.A., magna cum
laude, from Sweet
7
Briar College, an M. Ed. in counseling psychology from Boston University, and an
M.B.A. with honors from Harvard University.
How are directors nominated?
The Board of Directors has nominated each current director to stand for
re-election based upon the recommendations of the Corporate Governance
Committee. See the discussion under the heading "Requirements for Advance
Notification of Nominations and Stockholder Proposals" beginning on page 33 for
information about procedures for stockholder nomination of directors.
How are directors compensated?
Directors who are also Neose employees receive no additional
compensation for serving as a director. Non-employee directors receive:
. A $14,000 annual retainer, which may be applied, in whole or in
part, toward the acquisition of an option to purchase shares of our
common stock;
. Reimbursement for reasonable travel expenses incurred for their
attendance at meetings of the Board of Directors;
. $2,500 for board meetings attended in person;
. $2,000 ($2,500 for the Chairperson) for committee meetings attended
in person;
. $1,000 for telephonic meetings lasting longer than thirty minutes;
. Upon initial election or appointment to the Board of Directors, an
option to purchase 30,000 shares of common stock and upon
re-election to the Board of Directors, an option to purchase 10,000
shares of common stock. Each automatic option grant has an exercise
price equal to the fair market value on the date of grant. Each
automatic grant is immediately exercisable, and has a term of ten
years, subject to earlier termination, following the director's
cessation of service on the Board of Directors. Any shares
purchased upon exercise of the option are subject to repurchase
should the director's service as a non-employee director cease
prior to vesting of the shares. The initial automatic option grant
of 30,000 shares vests in successive equal, annual installments
over the director's initial four-year period of Board service. Each
annual automatic option grant vests upon the director's completion
of one year of service on the Board of Directors, as measured from
the grant date. Each outstanding option vests immediately, however,
upon certain changes in the ownership or control of Neose.
What are the committees of our Board of Directors?
The Board of Directors has a Compensation Committee, an Audit Committee
and a Corporate Governance Committee.
. The Compensation Committee consists of Dr. Hamilton and Mr.
MacMaster, each of whom is a non-employee director. The
Compensation Committee determines the compensation of the Chief
Executive Officer, and reviews and takes action on the
recommendation of the Chief Executive Officer as to the appropriate
compensation of other officers. The Compensation Committee is
primarily responsible for the administration of our Amended and
Restated 1995 Stock Option/Stock Issuance Plan, under which option
grants and stock issuances may be made to all employees, including
executive officers, as well as non-employee directors and
consultants. There are no compensation committee interlocks between
our company and any other entity involving our company's or such
other entity's executive officers or board members.
8
. The Audit Committee consists of Mr. Sears, Dr. Hamilton, and Mr.
MacMaster, each of whom is a non-employee director and all of whom
are independent directors under Nasdaq's listing standards.
The Board of Directors has adopted a written charter for the Audit
Committee. The Audit Committee recommends the selection of our
auditors, and reviews with our auditors the plan and results of
their audit and the adequacy of our systems of internal accounting
controls and management information systems. In addition, the Audit
Committee reviews the independence of the auditors and their fees
for services rendered to Neose.
. The Corporate Governance Committee was established by the Board of
Directors in September 2001, and presently consists of Dr.
Hamilton, Mr. Sears, Dr. Roth and Mr. Clarke. The Corporate
Governance Committee was formed to review annually, and make
recommendations to the Board of Directors concerning, the
performance, structure, composition and size of the Board and the
composition and size of committees of the Board, and establish
criteria and policies for board membership. The Corporate
Governance Committee also screens, interviews, and recommends to
the Board of Directors nominees for election to the board.
How many Board and Committee Meetings were held during 2001?
During 2001, the Board of Directors held six meetings, the Audit
Committee held five meetings, the Compensation Committee held two meetings, and
the Corporate Governance Committee held no meetings. Each director attended at
least two-thirds of the meetings of the Board of Directors, and all of his
appropriate committee meetings.
9
Summary Compensation Table
The following table provides information about all compensation earned
in 2001, 2000, and 1999 by the individual who served as Chairman and Chief
Executive Officer during 2001, and the four other most highly compensated
executive officers during 2001.
Long-term
Compensation
------------
Shares
Annual Compensation Underlying All Other
------------------------
Name and Principal Position Year Salary Bonus Options (#) Compensation
------------------------------- ---- ---------- -------- ------------- ---------------
Stephen A. Roth 2001 $294,866 $147,433 50,000 $5,682(1)(2)
Chairman and Chief Executive 2000 274,294 109,718 50,000 5,472(1)(2)
Officer 1999 263,744 65,936 30,000 5,432(1)(2)
P. Sherrill Neff 2001 288,354 144,177 45,000 5,682(1)(3)
President and Chief Operating 2000 268,237 107,295 50,000 5,472(1)(3)
Officer 1999 257,920 64,480 30,000 5,432(1)(3)
David A. Zopf 2001 200,136 45,021 25,000 5,646(1)(4)
Executive Vice President 2000 180,303 54,091 25,000 4,962(1)(4)
1999 173,368 34,674 12,500 4,966(1)(4)
Edward J. MCGuire 2001 173,056 38,938 5,000 4,968(1)(5)
Vice President, Research and 2000 166,400 33,280 15,000 4,629(1)(5)
Development 1999 160,000 32,000 12,500 4,632(1)(5)
George J. Vergis (6) 2001 93,154 47,250 180,000 180(7)
Vice President, Business and
Commercial Development
(1) Includes $432 in each of 2001, 2000, and 1999 in premiums paid by us
for group term life insurance.
(2) Includes $5,250, $5,040, and $5,000 of matching contributions in 2001,
2000, and 1999, respectively, to Dr. Roth's account in our 401(k) plan.
(3) Includes $5,250, $5,040, and $5,000 of matching contributions in 2001,
2000, and 1999, respectively, to Mr. Neff's account in our 401(k) plan.
(4) Includes $5,214, $4,530, and $4,534 of matching contributions in 2001,
2000 and 1999, respectively, to Dr. Zopf's account in our 401(k) Plan.
(5) Includes $4,536, $4,197, and $4,200 of matching contributions in 2001,
2000, and 1999, respectively, to Dr. McGuire's account in our 401(k)
Plan.
(6) Dr. Vergis joined Neose in July 2001.
(7) Represents $180 in 2001 in premiums paid by us for group term life
insurance.
Employment Agreements
In March 2002, we entered into an employment agreement with C. Boyd
Clarke, our President and Chief Executive Officer. Under this agreement, which
includes non-competition and confidentiality covenants:
. Mr. Clarke is to receive a minimum base salary of $450,000 per
year, and a performance incentive bonus of up to 75% of base salary
based upon the achievement of goals established by the Board of
Directors and Mr. Clarke;
10
. The Board of Directors granted Mr. Clarke options to purchase
500,000 shares of common stock at an exercise price of $32.05 per
share, the fair market value on the date of grant, as follows:
. An incentive stock option to purchase 12,480 shares, which
option vests totally in four years from the date of grant,
with 3,120 shares vesting on March 29, 2003, 260 shares
vesting on the last day of each of the 24 months in 2004
and 2005, and an additional 1,040 shares vesting on the
last day of each of the first three months of 2006; and
. A non-qualified stock option to purchase 487,520 shares,
which option vests totally in four years from the date of
grant, with 121,880 shares vesting on March 29, 2003, and
shares vesting on a monthly basis thereafter such that an
aggregate of 93,750, 121,880, 121,880 and 28,130 options
vest in each of the remainder of 2003, 2004, 2005, and the
first three months of 2006, respectively.
. Mr. Clarke will be reimbursed for job-related expenses and he will
be reimbursed for reasonable costs related to the relocation of
his residence to Pennsylvania, including travel expenses,
temporary housing costs, realtor fees not to exceed $180,000,
moving costs, closing costs in connection with the purchase of a
new home, and $25,000 to defray additional miscellaneous expenses.
Each of these payments is subject to partial repayment by Mr.
Clarke in the event he resigns from Neose other than for good
reason, as defined in the agreement.
. In the event Mr. Clarke is involuntarily terminated without cause
or resigns for good reason (each as defined in the agreement),
provided that Mr. Clarke and Neose enter into a mutual release of
claims, Mr. Clarke would receive on the date of such termination a
cash payment equal to one year of base salary, target annual bonus
for the year in which the termination occurs, and any unpaid bonus
amounts from prior years. Additionally, all outstanding options
that would have vested in the 12 months following termination
would immediately vest and remain exercisable for 12 months
following termination.
. In the event Mr. Clarke is involuntarily terminated without cause
or resigns for good reason (each as defined in the agreement)
within 18 months following certain changes of control of Neose or
a sale of all or substantially all of our assets in a complete
liquidation or dissolution, provided that Mr. Clarke and Neose
enter into a mutual release of claims, Mr. Clarke would receive on
the date of such termination a cash payment equal to two years of
base salary, two times the target annual bonus for the year in
which termination occurs, and any unpaid bonus amounts from prior
years. Additionally, all outstanding options would immediately
vest and remain exercisable for 12 months following termination.
. In the event payments to Mr. Clarke under the employment agreement
would result in the imposition of a parachute excise tax under
Internal Revenue Code Section 4999, Mr. Clarke would be entitled
to receive an additional "gross-up" payment to insulate him from
the effect of that tax.
In April 1992, we entered into a one-year employment agreement,
extendable in one-year increments, with David A. Zopf, M.D., our Executive Vice
President. The agreement has been extended through March 31, 2003. The agreement
currently provides for an annual base salary of $240,163 and a bonus of up to
25% of base salary at the discretion of the Chief Executive Officer. In
connection with the original agreement, the Board of Directors granted Dr. Zopf
options, which are now fully vested, to purchase 26,666 shares of common stock
at the fair market value on the date of grant. The agreement contains certain
restrictive covenants, including provisions relating to non-competition,
non-solicitation, and the non-disclosure of proprietary information during his
employment with Neose and for specified periods thereafter.
In December 1994, we entered into an employment agreement for an
initial period of three years (with automatic one-year extensions) with P.
Sherrill Neff, who served as our President and Chief Operating
11
Officer through January 31, 2002. Under this agreement, which included our
standard non-competition and confidentiality agreement:
. Mr. Neff received a minimum base salary of $225,000 per year, and a
performance incentive bonus of up to 50% of base salary at the
discretion of the Compensation Committee;
. The Board of Directors granted Mr. Neff options, which are fully
vested, to purchase 100,000 shares of common stock at an exercise
price of $5.70 per share; and
. We would have been required to continue to pay Mr. Neff for the
shorter of 12 months after termination or the amount of time
remaining in his employment term if Mr. Neff were:
. Involuntarily terminated without cause (as defined in the
agreement); or
. Terminated voluntarily or involuntarily following certain
changes of control of Neose or a sale of all or substantially
all of our assets in a complete liquidation
or dissolution.
Mr. Neff resigned from Neose, effective January 31, 2002, and he did not
receive any severance upon termination of his employment.
Retention Agreements
In January 2002, we entered into retention agreements with our
executive officers and certain members of senior management, other than Mr.
Clarke. In the event any of these executives is involuntarily terminated without
cause or resigns for good reason (each as defined in the agreement), and
provided that the executive agrees to release us from any obligations we may
have incurred in connection with the executive's employment with us, the
executive would receive on the date of termination a cash payment equal to one
year of base salary and any accrued and unpaid salary or bonuses from periods
prior to the termination. In the event the executive is involuntarily terminated
without cause or resigns for good reason (each as defined in the agreement)
within 18 months following certain changes of control of Neose or a sale of all
or substantially all of our assets in a complete liquidation or dissolution, in
additional to the above payments, the executive would continue to be deemed an
employee through the first anniversary of the termination for purposes of any
vesting, forfeiture, survival, exercise or similar term applicable to any stock
option, restricted stock or other equity-based incentive held by the executive
immediately prior to the termination. The payments to each executive are limited
to the minimum extent necessary to ensure that no portion of these payments fail
to be tax deductible to Neose under Section 280(G) of the Internal Revenue Code.
Retirement and Separation Agreements
In March 2002, we entered into a Separation and Consulting Agreement
with Stephen A. Roth, Ph.D., who was our Chief Executive Officer. Under this
agreement, Dr. Roth will continue to serve as Chairman of the board of directors
for a period of one year, and will provide consulting services to the Chief
Executive Officer and the board of directors for a period of three years. We
will provide health insurance benefits to Dr. Roth and pay him $39,622 per month
for twelve months. On or before the first anniversary of the agreement, Dr. Roth
may agree to extend his non-competition and non-solicitation commitments for two
additional years by entering into a separate non-competition agreement. If he
does so, we will continue his health insurance benefits for six additional
months, extend the $39,622 monthly payments for 24 additional months and, for
purposes of stock option vesting and exercisability, treat Dr. Roth as remaining
in service to Neose until the third anniversary of his resignation as Chief
Executive Officer (or until the end of his service as a director, if later). Dr.
Roth also released us from any obligations we may have incurred in connection
with his employment with us.
12
In January 2002, we entered into a Retirement Agreement with Edward J.
McGuire, Ph.D., Vice President, Research and Development. Under this agreement,
Dr. McGuire will remain an employee of Neose until June 30, 2002. Following Dr.
McGuire's retirement, Dr. McGuire will receive annual retirement benefits
through 2006, including $87,500 from the retirement date until December 31,
2002, $125,000 in 2003, and $100,000 in each of 2004, 2005, and 2006. We will
continue to provide Dr. McGuire health insurance benefits through December 31,
2003. We will also provide an office to Dr. McGuire through 2006, during which
time Dr. McGuire shall be available to provide consulting services to us for up
to 10 days per month without further compensation. Dr. McGuire also released us
from any obligations we may have incurred in connection with his employment with
us.
Option Grant Table
The following table provides information about grants of stock options
made during 2001 to each of the executive officers named in our Summary
Compensation Table.
Individual Grants
---------------------------------------------------------------
Number of Potential Realizable Value
Shares Percentage of at Assumed Annual Rates of
Underlying Total Options Stock Price Appreciation for
Options Granted to Exercise Expiration Option Term (3)
-----------------------------
Name Granted Employees Price Date 5% 10%
---- ------- --------- ----- ---------- ------------ -----------
Stephen A. Roth 50,000 (1) 6.9% $34.61 12/19/11 $1,088,302 $ 2,757,971
P. Sherrill Neff 45,000 (1) 6.2 34.61 12/19/11 979,472 2,482,174
David A. Zopf 25,000 (1) 3.4 29.00 12/13/11 455,949 1,155,463
Edward J. McGuire 5,000 (1) 0.7 29.00 12/13/11 91,189 231,093
George J. Vergis 175,000 (2) 24.1 38.25 07/11/11 4,583,087 11,262,729
5,000 (1) 0.7 29.00 12/13/11 91,190 231,093
________________
(1) Each option has a term of ten years from the date of grant and vests
ratably over a four-year period, beginning on the first anniversary of
the date of grant.
(2) Each option has a term of ten years from the date of grant. Options for
25,000 shares vested on the date of grant, and options for 66,667
shares vest ratably over a four-year period, beginning on the first
anniversary of the date of grant. Options for 83,333 shares will vest
on the fifth anniversary of the date of grant, unless certain
conditions are met, in which case some portion of the options may vest
as soon as the first, second, third, or fourth anniversary of the date
of grant.
(3) The potential realizable value of each grant is calculated assuming
that the market price per share of common stock appreciates at
annualized rates of 5% and 10% over the ten-year option term. The
results of these calculations are based on rates set forth by the
Securities and Exchange Commission and are not intended to forecast
possible future appreciation of the price of our common stock.
13
Aggregated Fiscal Year-End Option Values
The following table provides information about the exercise of stock
options during 2001 and the value of stock options unexercised at the end of
2001 for the executive officers named in our Summary Compensation Table. The
value of unexercised stock options is calculated by multiplying the number of
option shares by the differences between the option exercise price and the
year-end stock price.
Number of Shares
Number of Underlying Unexercised Values of Unexercised
Shares Options In-The-Money Options
Acquired On Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Stephen A. Roth ........ -- $ -- 350,833 117,500 $ 7,438,905 $ 971,725
P. Sherrill Neff ....... 1,000 29,150 441,500 112,500 10,206,705 961,675
David A. Zopf .......... 800 21,494 81,315 53,750 2,026,696 566,138
Edward J. McGuire ...... 9,500 261,630 70,750 26,250 1,703,903 354,713
George J. Vergis ....... -- -- 25,000 155,000 -- 38,100
The following Report of the Compensation Committee, Common Stock Performance
Graph, and Report of the Audit Committee shall not be deemed incorporated by
reference into any previous or subsequent filing with the Securities and
Exchange Commission, except to the extent that we specifically incorporate them
by reference in any such document.
Report of the Compensation Committee
What is our compensation philosophy?
Our philosophy is to provide competitive compensation levels and to
align compensation of senior management with the long-term interests of our
stockholders. We determine the compensation of the senior management team by
evaluating our corporate performance, as well as each executive officer's own
level of performance.
What is the structure of our executive compensation?
The elements of our executive compensation programs are:
. Base salary;
. Annual cash bonuses; and
. Annual long-term stock-based incentives.
We have structured our compensation plan to provide incentives for
senior management performance that promote continuing improvements in our
corporate performance and stock price over both the short- and long-term.
How do we determine base salaries?
We determine base salaries by each individual's experience and personal
performance, and by comparisons to similar positions within the biotechnology
industry. Base salaries are reviewed annually
14
based on these criteria.
How do we determine annual bonuses?
We base the amount of the award to each executive officer on a
combination of our overall performance and the individual's performance. The
Compensation Committee approved bonuses in 2001 to our executive officers
totaling $436,866, which was approximately $132,482, or 44% higher than bonuses
approved by the Compensation Committee to our executive officers in 2000. The
Compensation Committee considered our corporate performance and each
individual's contributions to our success in determining the bonus amounts.
How is compensation used to ensure senior management is focused on long-term
results?
We use stock options to provide long-term incentives to our executive
officers. The Compensation Committee approves all grants of stock options to
executive officers. These stock option grants are designed to align the
interests of each executive officer with those of our other stockholders. Each
option is exercisable over a ten-year period at the market price on the date of
grant, with the exception of options granted to George J. Vergis, Ph.D., Vice
President, Business and Commercial Development, in connection with his hiring.
Excluding these options granted to Dr. Vergis (which are described in note 2 to
the Option Grant Table on page 13), each option becomes exercisable in
installments over a four-year vesting period. The option will provide a benefit
to the executive officer only if he or she remains employed (or is deemed
employed) by Neose during the vesting period, and then only if the market price
of our common stock increases. Excluding the options granted to George Vergis in
connection with his joining Neose, the Compensation Committee approved grants of
options during 2001 to executive officers to purchase 149,500 shares of common
stock, which were 9,500, or 7%, more option shares than were granted by the
Compensation Committee to executive officers during 2000. We based the number of
shares granted to each executive officer on a combination of our overall
performance and the individual's performance, as well as the size of option
grants made to executive officers of comparable biotechnology companies.
How do we determine the compensation of our Chief Executive Officer?
We hired Mr. Clarke in March 2002. His compensation was designed to
attract him to Neose, to be competitive with the compensation packages offered
by comparable companies, and to make a significant percentage contingent on his
and our performance.
Dr. Roth was our Chief Executive Officer during 2001. His compensation
was determined by establishing a base salary competitive with those paid by
other biotechnology companies, and making a significant percentage of his total
compensation package contingent upon corporate and individual performance. The
Compensation Committee set Dr. Roth's base salary at $294,866 for 2001. His 2001
bonus of $147,433 was based on the Compensation Committee's assessment of Dr.
Roth's individual performance and his contribution to our corporate performance.
The Compensation Committee granted Dr. Roth options in 2001 to purchase 50,000
shares of common stock. The grant was designed to provide Dr. Roth with a
continuing incentive to remain with Neose and contribute to our corporate
success.
What is the impact of Internal Revenue Code Section 162(m)?
Under Section 162(m) of the Internal Revenue Code, we will not be
allowed a federal income tax deduction for compensation paid to certain
executive officers, to the extent that compensation exceeds $1 million per
executive officer in any one year. Compensation that qualifies as
performance-based compensation is not taken into account for purposes of the
limitation. The definition of performance-based
15
compensation includes compensation deemed paid in connection with the exercise
of certain stock options. The exercised stock options must have an exercise
price equal to the fair market value of the option shares on the grant date to
qualify as performance-based compensation. Our Amended and Restated 1995 Stock
Option/Stock Issuance Plan is intended to assure that the exercise of such stock
options will qualify as performance-based compensation. The non-qualified option
granted to Mr. Clarke upon commencement of his employment was not granted under
the 1995 Stock Option/Stock Issuance Plan and is not intended to qualify for the
performance-based exemption under Section 162(m).
The Compensation Committee has not taken any action to limit or
restructure the elements of cash compensation payable to our executive officers.
The Compensation Committee will reconsider this decision should the individual
compensation of any executive officer approach the $1 million level.
Compensation Committee of the Board of Directors
William F. Hamilton, Chairman
Douglas J. MacMaster, Jr.
Lindsay A. Rosenwald, M.D.
16
Common Stock Performance Graph
The following graph assumes $100 was invested on December 31, 1996, in
our common stock. The graph compares the cumulative return, which includes the
reinvestment of dividends, of this investment with an equivalent investment on
that date in the Nasdaq Stock Market - U.S. Index (the "Nasdaq Composite") or
the Nasdaq Stock Market Biotech Index (the "Nasdaq Biotech Index").
[CHART]
Ntec Nasdaq Biotech
12/31/1996 100 100 100
12/31/1997 84.72 121.64 99.93
12/31/1998 78.11 169.84 144.18
12/31/1999 79.88 315.2 290.72
12/31/2000 183.33 191.36 357.56
12/31/2001 203.44 151.01 299.63
Report of the Audit Committee
Management is responsible for the financial reporting process,
including the system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Our independent auditors are responsible for auditing
those financial statements. Our responsibility is to monitor and review these
processes. We are not professionally engaged in the practice of accounting or
auditing. We rely, without independent verification, on the information provided
to us and on the representations made by management and the independent
auditors.
The Audit Committee has reviewed and discussed the audited financial
statements of Neose with its independent auditors for the relevant periods,
Arthur Andersen LLP, with and without management present. The Audit Committee
has discussed with the auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
amended, by the Auditing Standards Board of the American Institute of Certified
Public Accountants. The Audit Committee has also received and reviewed the
written disclosures and the letter from Arthur Andersen LLP required by
Independence Standards Board Statement No. 1, Independence Discussions with
Audit Committees, as amended, and has discussed with Arthur Andersen LLP their
independence.
Based on the reviews and discussions referred to above, we recommended
to the Board that the financial statements referred to above be included in our
Annual Report on Form 10-K for the year ended
17
December 31, 2001.
On April 29, 2002, we recommended to the Board, and the Board selected,
KPMG LLP as our independent auditors for 2002.
Audit Committee of the Board of Directors
Lowell E. Sears, Chairman
William F. Hamilton
Douglas J. MacMaster, Jr.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of reports of stock ownership (and changes
in stock ownership) and written representation received by us, we believe that
our directors and executive officers met all of their filing requirements under
Section 16(a) of the Securities and Exchange Act of 1934 during the year ended
December 31, 2001, except that William F. Hamilton, one of our directors, failed
to report in a timely fashion his exercise on August 20, 2001 of an option to
purchase 16,666 shares of common stock.
18
Stock Ownership of our Directors, Executive Officers,
and 5% Beneficial Owners
The following table shows information, as of April 26, 2002, about the
beneficial ownership (as defined under the regulations of the Securities and
Exchange Commission) of our common stock by:
. Each person we know to be the beneficial owner of at least five
percent of our common stock;
. Each director (nine of whom are nominees for re-election and two
of whom are not);
. Each executive officer named in our Summary Compensation Table;
and
. All directors and executive officers as a group.
As of April 26, 2002, there were 14,276,446 shares of our common stock
outstanding. To calculate a shareholder's percentage of beneficial ownership, we
must include in the numerator and denominator those shares underlying options
that a person has the right to acquire upon the exercise of stock options within
60 days of April 26, 2002. Options held by other shareholders are disregarded in
this calculation. Therefore, the denominator used in calculating beneficial
ownership among our shareholders may differ. Unless we have indicated otherwise,
each person named in the table below has sole voting power and investment power
for the shares listed opposite such person's name.
Number of Shares
of Common Stock Percent of
Beneficially Shares
Name of Beneficial Owner Owned Outstanding
------------------------ ---------------- -----------
Kopp Investment Advisors, Inc. (1)
7701 France Avenue South
Suite 500
Edina, MN 55455........................................................ 2,069,871 14.5%
Eastbourne Capital Management, LLC (2)
1101 Fifth Avenue
Suite 160
San Rafael, CA 94901................................................... 1,169,600 8.2%
Directors and Executive Officers
Lindsay A. Rosenwald, M.D. (3)(4)
c/o Paramount Capital, Inc.
787 7/th/ Avenue
New York, NY 10019.............................................. 1,179,039 8.2%
Mark H. Rachesky, M.D. (3)(5)
c/o MHR Fund Management LLC
40 West 57/th/ Street, 33/rd/ Floor
New York, NY 10019.............................................. 786,141 5.5%
Stephen A. Roth, Ph.D. (3)(6).......................................... 564,724 3.9%
P. Sherrill Neff (3)(7)................................................ 458,941 3.1%
Edward J. McGuire, Ph.D. (3)(8)........................................ 137,599 1.0%
William F. Hamilton, Ph.D. (3)......................................... 112,881 *
Douglas J. MacMaster, Jr. (3).......................................... 99,649 *
19
David A. Zopf, M.D. (3) ................................ 81,878 *
Jerry A. Weisbach, Ph.D. (3)(9) ........................ 74,882 *
Lowell E. Sears (3)(10) ................................ 65,956 *
George J. Vergis (3) ................................... 25,000 *
C. Boyd Clarke (3) ..................................... 0 *
All current directors and executive officers as a group
(16 persons) (3) ....................................... 3,628,415 23.4%
________
* Less than one percent.
(1) According to a Schedule 13G filed January 30, 2001, Kopp Investment
Advisors, Inc. (KIA) is an investment adviser registered under the
Investment Advisers Act of 1940. It is wholly owned by Kopp Holding
Company (KHC), which is wholly owned by Mr. Leroy C. Kopp. KIA reported
sole voting power over 890,700 shares, sole dispositive power over 715,000
shares and shared dispositive power over 1,354,871 shares. KHC reported
beneficial ownership of 2,069,871 shares. Mr. Kopp reported beneficial
ownership of 2,169,871 shares of which Mr. Kopp reported sole voting power
over 100,000 shares and sole dispositive power over 100,000 shares. Of the
shares beneficially owned by KIA, KHC, and Mr. Kopp, 2,094,871 are held in
a fiduciary or representative capacity.
(2) According to a Schedule 13G filed February 1, 2002, Eastbourne Capital
Management, LLC is a registered investment advisor whose clients have the
right to receive or the power to direct the receipt of dividends proceeds
from the sale of these shares and does not hold sole voting power for any
shares.
(3) Includes the following shares of common stock issuable under stock options
that are exercisable within 60 days of April 19, 2002: Rosenwald - 31,979
shares; Rachesky - 20,751 shares; Roth - 350,833 shares; Neff - 354,875
shares; McGuire - 61,250 shares; Hamilton - 58,131 shares; MacMaster -
59,798 shares; Zopf - 60,416 shares; Weisbach - 59,798 shares; Sears -
34,632 shares; Vergis - 25,000; Clarke - 0; Wyatt - 0; and all current
directors and executive officers as a group - 1,202,472 shares.
(4) Includes (i) 75,624 shares of common stock owned by Dr. Rosenwald's wife;
(ii) 30,250 shares of common stock held by Dr. Rosenwald's wife as
custodian for Dr. Rosenwald's children; (iii) 357,694 shares of common
stock held by Aries Select Ltd.; (iv) 167,133 shares of common stock held
by the Aries Select I LLC; (v) 37,942 shares of common stock held by the
Aries Select II LLC; and (vi) 24,500 shares of common stock held by The
Rosenwald Foundation, Inc. Paramount Capital Asset Management, Inc., of
which Dr. Rosenwald is the sole shareholder, serves as the investment
manager to Aries Select Ltd. and also is the General Partner of the Aries
Select I LLC and Aries Select II LLC. Dr. Rosenwald disclaims beneficial
ownership of the shares held by Aries Select Ltd., Aries Select I LLC and
Aries Select II LLC, except to the extent of his pecuniary interest in the
funds. Dr. Rosenwald may be deemed to have voting and investment control
with respect to the shares held by Aries Select Ltd., Aries Select I LLC
and Aries Select II LLC. In addition, Dr. Rosenwald disclaims beneficial
ownership of the shares held by The Rosenwald Foundation. Dr. Rosenwald
may be deemed to share voting and investment power with respect to the
shares held by The Rosenwald Foundation.
(5) Includes (i) 210,526 shares of common stock held by MHR Capital Partners
LP, (ii) 502,759 shares of common stock held by MRL Partners LP, and (iii)
42,105 shares of common stock held by OTT LLC. Dr. Rachesky is the
managing member of MHR Advisors LLC, which is the General Partner of MHR
Capital Partners and MRL Partners. Dr. Rachesky is the managing member of
OTT LLC. Dr. Rachesky may be deemed to have voting and investment control
over the shares held by MHR Capital Partners, MRL Partners, and OTT LLC.
Dr. Rachesky disclaims beneficial ownership of the shares held by MHR
Capital Partners, MRL Partners, and OTT LLC, except to the extent of his
pecuniary interest in the funds.
(6) Includes 100,000 shares of common stock owned by Dr. Roth's wife and
15,758 shares of common stock owned by Dr. Roth's daughter. Dr. Roth
disclaims beneficial ownership of the shares held by his wife and
daughter.
20
(7) Includes 1,000 shares of common stock owned by Mr. Neff's wife. Mr. Neff
disclaims beneficial ownership of the shares held by his wife.
(8) Includes 20,000 shares of common stock held by Dr. McGuire's wife. Dr.
McGuire disclaims beneficial ownership of the shares held by his wife.
(9) Includes 3,000 shares of common stock held by Dr. Weisbach's children as
custodian for his grandchildren. Dr. Weisbach disclaims beneficial
ownership of the shares held by his children.
(10) Includes 21,324 shares of common stock owned by the Sears Family Living
Trust, of which Mr. Sears is trustee.
Certain Relationships and Related Transaction
In May 2001, we entered into a tuition reimbursement agreement with A.
Brian Davis, who serves as our Acting Chief Financial Officer. Under the
agreement, we agreed to lend to Mr. Davis the amounts necessary to cover all
tuition payments and related costs and fees for an MBA degree from The Wharton
School of the University of Pennsylvania. All amounts provided will bear
interest at the rate of 4.71% per annum. We have agreed to forgive repayment of
the principal amount outstanding in four equal, annual installments commencing
in May 2004 if Mr. Davis has completed the program, received an MBA degree, and
remains employed by Neose on each forgiveness date. We will forgive the accrued
interest as it becomes due. In addition, we will forgive all outstanding
principal and interest in the event Mr. Davis is terminated without cause. As of
December 31, 2001, the aggregate amount outstanding under this agreement was
$71,507.
21
Proposal 2 -- Amendment to our Amended and Restated 1995 Stock
Option/Stock Issuance Plan
Proposed Amendment
At the Annual Meeting, a proposal will be presented to the stockholders
to approve and adopt an amendment to our Amended and Restated 1995 Stock
Option/Stock Issuance Plan to increase by 1,150,000 shares the number of shares
of common stock authorized under the stock option plan. Of the 3,901,666 shares
currently authorized under the stock option plan, 701,391 shares have been
issued pursuant to option exercises and are no longer available for grant. Of
the remaining 3,200,275 shares available for grant under the stock option plan
as of April 26, 2002, options to purchase 2,927,688 shares of common stock were
outstanding, and options to purchase 272,587 shares remained available for
future grants.
In April 2002, the Board adopted the amendment, subject to approval by
our stockholders. We believe that our ability to grant options under the stock
option plan is a valuable and necessary compensation tool that aligns the
long-term financial interests of employees and directors with the financial
interests of our stockholders. In addition, we believe that the stock option
plan helps us to attract, retain, and motivate qualified employees, and
encourages them to devote their best efforts to our business and financial
success. An increase in the number of shares available for issuance under the
stock option plan is necessary to meet these objectives. The Board of Directors
believes that approval of Proposal 2 is in the best interests of Neose and its
stockholders.
The material features of the stock option plan are described below.
Approval of the proposal to amend the Amended and Restated 1995 Stock
Option/Stock Issuance Plan requires the affirmative vote of the holders of a
majority of shares present in person or represented by proxy at the Annual
Meeting.
The Board of Directors recommends a vote "FOR" the proposal to amend
the stock option plan.
Description of the Stock Option Plan
We adopted the stock option plan in 1995, and most recently amended the
stock option plan on April 10, 2002. We amended the stock option plan to:
. Increase by 1,150,000 shares the number of shares of common stock
authorized under the plan, the approval of which is the subject
of Proposal 2;
. Increase from 16,666 to 30,000 the number of shares subject to
the initial option grant to non-employee directors;
. Change the timing of option grants under the director fee option
grant program; and
. Vest immediately on the date of grant any options granted
pursuant to the director fee option grant program.
The stock option plan, which provides for a committee of two or more
non-employee directors to act as the plan administrator, is currently
administered by our Compensation Committee. The plan incorporates our two
predecessor stock option plans, the 1991 Stock Option Plan and the 1992 Stock
Option Plan. The stock option plan is divided into four separate components:
. The Discretionary Option Grant Program, under which employees,
non-employee directors (other than the members of the Compensation
Committee), and consultants may be granted options to purchase
shares of common stock;
. The Stock Issuance Program, under which employees, non-employee
directors (other than the
22
members of the Compensation Committee), and consultants may be
issued shares of common stock either through the purchase of
shares or as a bonus tied to the performance of services;
. The Automatic Option Grant Program, under which option grants
will automatically be made annually to eligible non-employee
directors to purchase shares of common stock; and
. The Director Fee Option Grant Program, under which non-employee
directors may elect to receive all, or part, of their annual
retainer fees in the form of a special option grant instead of
cash.
As of April 26, 2002, options to purchase 2,927,688 shares of common
stock were outstanding under the stock option plan, and options to purchase
272,587 shares remained available for future grants. Shares of common stock
issued or currently issuable under the stock option plan are covered by
registration statements on Form S-8, which were filed with the Securities and
Exchange Commission on February 15, 1996, September 10, 1997, October 13, 1999,
October 11, 2000 and November 14, 2001.
Eligibility
All employees, non-employee directors, and consultants are eligible to
receive grants under the stock option plan. Non-employee directors are eligible
to receive grants pursuant to the Automatic Option Grant Program and the
Director Fee Option Grant Program, and non-employee directors who do not serve
on the Compensation Committee are eligible to participate in the Discretionary
Option Grant Program and the Stock Issuance Program. As of April 26, 2002, there
were approximately 116 employees and 9 non-employee directors eligible to
participate in the stock option plan. No person may be granted, in any given
year, more than 50% of the total number of shares for which stock options, stock
appreciation rights, and direct stock issuances may be granted over the term of
the stock option plan.
Discretionary Option Grant Program
Under the Discretionary Option Grant Program, the Compensation
Committee has complete discretion to determine:
. Which eligible individuals are to receive option grants or stock
appreciation rights;
. The time or times when option grants are to be made;
. The number of shares subject to, and the vesting schedule for,
each option grant;
. The designation of each stock option as either an incentive or a
non-qualified stock option;
. The maximum term for which each option grant is to remain
outstanding, which term, for an incentive stock option, may not
exceed ten years, and for an incentive stock option granted to a
person who owns more than 10% of the voting power of Neose may
not exceed five years; and
. The option exercise price, which for a non-qualified stock option
may not be less than 85% of the fair market value of the stock on
the date of grant. The exercise price of an incentive stock
option must have an exercise price of at least 100% of the fair
market value on the date of grant, provided that the recipient of
the option grant does not own more than 10% of the voting power
of Neose. If the recipient of an incentive stock option owns more
than 10% of the voting power of Neose, the exercise price must be
at least 110% of the fair market value on the date of grant. The
Internal Revenue Code allows an optionee to receive incentive
stock options only to the extent that the aggregate amount of
incentive stock options exercisable for the first time by an
optionee during any calendar year does not exceed $100,000. Any
stock option that fails to meet the criteria for an incentive
stock option will be treated as a non-qualified stock option.
The fair market value of the common stock is the closing sale price per
share on the grant date as such price is reported on The Nasdaq Stock Market. If
there is no reported closing sale price on such date,
23
the fair market value is the closing sale price on the last preceding date for
which a quotation exists. The closing sale price per share of common stock on
April 26, 2002 was $25.00.
The Compensation Committee also has the authority to cancel outstanding
options under the Discretionary Option Grant Program (including options
incorporated from our two predecessor stock option plans) in return for the
grant of new options for the same or different number of option shares, with an
exercise price per share based upon the fair market value of the common stock on
the new grant date.
Stock appreciation rights may be issued under the Discretionary Option
Grant Program. These stock appreciation rights will allow the holders to
surrender their outstanding options for an appreciation distribution from Neose
equal to the fair market value of the vested shares of common stock subject to
the surrendered option less the aggregate exercise price payable for such
shares. The appreciation distribution may be made in cash or in shares of common
stock.
Stock Issuance Program
Under the Stock Issuance Program, the Compensation Committee has
complete discretion to determine:
. Which eligible individuals are to receive stock issuances;
. The time or times when stock issuances are to be made; and
. The number of shares subject to, and the vesting schedule for,
each stock issuance.
The Compensation Committee may issue shares of common stock for cash, a
promissory note, or past services rendered. The consideration must be equal in
value to at least 85% of the fair market value of the common stock issued. The
issued shares may be fully and immediately vested, vest in one or more
installments over a period of service, or vest upon the attainment of certain
performance milestones determined by the Compensation Committee.
Automatic Option Grant Program
Under the Automatic Option Grant Program, each non-employee director,
on the date first elected or appointed to the Board of Directors, will
automatically be granted an option to purchase 30,000 shares of common stock,
provided such individual has not been previously employed by us. In addition,
upon each annual re-election to the Board, each non-employee director with at
least six months of Board service will automatically be granted an option to
purchase 10,000 shares of common stock.
All grants under the Automatic Option Grant Program will be made in
strict compliance with the provisions of such programs. Accordingly, the
Compensation Committee does not exercise any administrative discretion with
respect to these automatic options. Each automatic option has a term of ten
years, subject to earlier termination following the director's cessation of
service on the Board. Each automatic option is immediately exercisable. Any
shares purchased upon exercise of the option, however, are subject to repurchase
if the director's service as a non-employee director ceases prior to vesting of
the shares. The 30,000 shares subject to each initial automatic option grant
will vest in successive equal, annual installments over the director's initial
four-year period of Board service. The shares subject to each additional
automatic option grant vest upon the director's completion of one year of
service on the Board of Directors, as measured from the grant date. In addition,
shares subject to each outstanding option will vest immediately upon certain
changes in the ownership or control of Neose.
Director Fee Option Grant Program
24
Under the Director Fee Option Grant Program, each non-employee director
may elect to receive all, or part, of his or her annual retainer fee otherwise
payable in cash in the form of a special option grant under the Director Fee
Option Grant Program. An election to receive an option grant in lieu of annual
retainer fees must be filed with us prior to the annual meeting of stockholders.
If an election is filed, the option grant is automatically made on the date of
the annual meeting, and has an exercise price per share equal to one-third of
the fair market value of the common stock on the grant date. The number of
option shares is determined by dividing the amount of the retainer fee applied
to the program by two-thirds of the fair market value of common stock on the
grant date. As a result, the total spread on the option (the fair market value
of the option shares on the grant date less the aggregate exercise price payable
for those shares) is equal to the portion of the retainer fee subject to the
director's election.
All grants under the Director Fee Option Grant Program will be made in
strict compliance with the provisions of such programs. Accordingly, the
Compensation Committee does not exercise any administrative discretion with
respect to these options. The option becomes exercisable on the date of grant.
The option remains exercisable for such shares until the earlier of the
expiration of the ten-year option term or the end of the three-year period
measured from the date of the director's cessation of Board service.
Corporate Transactions
If we are a party to certain corporate transactions (as defined in the
stock option plan), including certain mergers or asset sales, each outstanding
option and unvested stock issuance will, under certain circumstances,
automatically vest in full. Options and stock issuances that do not vest in full
at the time of the acquisition will vest in full if the individual's service is
terminated, whether involuntarily or through a resignation for good reason,
within 18 months following the acquisition. The Compensation Committee may also
accelerate the vesting of options and unvested stock issuances upon a change in
control (as defined in the stock option plan) of Neose or the termination of the
individual's service, whether involuntarily or through a resignation for good
reason, within a specified period following the change in control. Options
currently outstanding under our predecessor stock option plans contain different
provisions for acceleration of vesting in connection with an acquisition of
Neose. Options outstanding under the 1992 Stock Option Plan may, under certain
circumstances, vest in full upon a change in control. Options outstanding under
the 1991 Stock Option Plan do not contain any acceleration of vesting provisions
in connection with a change in control. The Compensation Committee has the
discretion, however, to extend the acceleration of vesting provisions of the
stock option plan to outstanding options under our predecessor stock option
plans.
Amendment and Termination of the Stock Option Plan
The Board has complete and exclusive power and authority to amend or
modify the stock option plan in any, or all, respects. No amendment, however,
may adversely affect the rights and obligations of options outstanding at the
time under the stock option plan. In addition, no amendment may adversely affect
the rights of any optionee with respect to common stock issued under the stock
option plan prior to such action, unless the optionee consents to such action.
In addition, the Board may not, without stockholder approval, amend the stock
option plan to:
. Increase the maximum number of shares issuable under the stock
option plan, or the maximum amount of shares for which any one
individual participating in the stock option plan may be granted
stock options, stock appreciation rights, and direct stock
issuances for any given year;
. Materially modify the eligibility requirements for participation;
or
. Otherwise materially increase the benefits accruing to
participants.
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The stock option plan will terminate on the earlier of February 28,
2005 or the date on which all shares available for issuance under the stock
option plan have been issued.
Federal income tax consequences of the stock option plan
The following discussion summarizes the principal federal income tax
consequences of the stock option plan based on the Internal Revenue Code and its
regulations, and administrative and judicial interpretations. The summary does
not address any foreign, state, or local tax consequences of participation in
the stock option plan.
Non-Qualified Stock Options
There generally are no federal income tax consequences to an optionee
or to Neose upon the grant of a non-qualified stock option. Upon the exercise of
a non-qualified stock option, an optionee will recognize ordinary compensation
income in an amount equal to the fair market value of the shares at the time of
exercise less the exercise price of the non-qualified stock option. We generally
will be entitled to a corresponding federal income tax deduction. Upon the sale
of shares of common stock that were acquired by the exercise of a non-qualified
stock option, an optionee will recognize a capital gain or loss. The amount of
the capital gain or loss will be equal to the difference between the amount
realized upon the sale of the shares and the optionee's adjusted tax basis in
the shares of common stock. The optionee's adjusted tax basis in the shares of
common stock is equal to the exercise price plus the amount of ordinary income
recognized by the optionee at the time of exercise of the non-qualified stock
option. The tax rate for the capital gain will depend on the length of time the
shares were held by the optionee and other factors.
Incentive Stock Options
A recipient of an incentive stock option will not recognize taxable
income, for purposes of the regular income tax, upon either the grant or
exercise of the incentive stock option. Under the regulations of the Internal
Revenue Code governing the alternative minimum tax, however, the exercise of an
incentive stock option generally increases the recipient's alternative minimum
taxable income in the year in which an incentive stock option is exercised. The
amount of the increase is equal to the fair market value of the shares of common
stock acquired upon exercise less the stock option exercise price. Upon a
qualifying disposition of shares acquired upon exercise of an incentive stock
option, an optionee will recognize long-term capital gain or loss, and we will
not be entitled to a corresponding federal income tax deduction. For these
purposes, a qualifying disposition is defined as a disposition of shares at
least two years after the incentive stock option was granted and at least one
year after exercise of the incentive stock option. As a general rule, if an
optionee disposes of the shares acquired upon exercise of an incentive stock
option before satisfying both holding period requirements, the gain recognized
on such a disposition will be taxed to the optionee as ordinary income, and we
generally will be entitled to a corresponding federal income tax deduction. The
amount of ordinary income is the difference between the fair market value of the
shares on the date of exercise and the option exercise price. The gain, if any,
in excess of the amount recognized as ordinary income on such a disqualifying
disposition will be long-term or short-term capital gain, depending upon the
length of time the optionee held the shares prior to the disposition.
Stock Appreciation Rights
An optionee will not recognize any income upon the grant of a stock
appreciation right. Upon the exercise of a stock appreciation right, the
optionee will recognize ordinary compensation income in the amount of both the
cash and the fair market value of the shares of common stock received upon such
exercise, and we generally will be entitled to a corresponding federal income
tax deduction. When an
26
optionee sells shares acquired upon the exercise of a stock appreciation right,
the optionee will recognize a capital gain or loss. The amount of the capital
gain or loss will be equal to the difference between the amount realized on the
sale and the amount of ordinary income recognized at the time of exercise of the
stock appreciation right.
Stock Issuances
A recipient generally will recognize taxable income upon the grant of a
stock issuance if:
. The shares are not subject to a substantial risk of forfeiture; and
. There are no restrictions on the transferability of the shares at the
time of grant.
A recipient of a grant of restricted stock (a stock issuance not
meeting either of the above criteria) normally will not recognize taxable income
upon the grant, and we will not be entitled to a corresponding federal income
tax deduction. When the shares either are transferable or are no longer subject
to a substantial risk of forfeiture, the recipient will recognize ordinary
compensation income, and we generally will be entitled to a corresponding
federal income tax deduction. The amount of the ordinary compensation income
will be equal to the difference between the fair market value of the common
stock at that time and any amount paid for the shares. A recipient may, however,
elect to recognize ordinary compensation income in the year the restricted stock
grant is awarded, and we generally will be entitled to a corresponding federal
income tax deduction. The amount of ordinary compensation income will be equal
to the difference between the fair market value of the common stock at that time
and any amount paid for the shares.
Payment of Withholding Taxes
Our obligation to deliver shares of common stock upon the exercise of
any stock option or upon the issuance of any shares is subject to the
satisfaction of all applicable income and employment tax withholding
requirements. In some circumstances, we permit an optionee to remit directly to
the appropriate taxing authority the amount of the optionee's withholding tax
obligations.
Plan benefits
Option grants to our current executive officers and directors to
purchase the following number of shares of common stock have been made under the
stock option plan (including our two predecessor stock option plans) from
adoption of the 1991 Stock Option Plan through April 26, 2002: C. Boyd Clarke -
12,480; David A. Zopf - 147,498; Edward J. McGuire - 127,500; George J. Vergis -
180,000; A. Brian Davis - 56,166; Debra J. Poul - 17,500; current executive
officers as a group - 541,144; current non-employee directors as a group -
1,395,015; and all other employees and consultants as a group - 2,097,890.
The benefits and amounts that may be received in the future by persons
eligible to participate in the stock option plan are not currently determinable,
except as to those future automatic grants to be awarded to non-employee
directors under the Automatic Option Grant Program.
The above description is a partial summary of material provisions of
our stock purchase plan. This summary is qualified in its entirety by reference
to the full text of the plan, as amended and as proposed to be amended, attached
as Appendix A to this proxy statement.
27
Equity Compensation Plan Information
The following table gives information about our common stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of April 26, 2002, including the Amended
and Restated 1995 Stock Option / Stock Issuance Plan. The table does not include
the additional shares requested for issuance under the Amended and Restated 1995
Stock Option/Stock Issuance Plan in this Proposal 2, or the additional shares
requested for issuance under the Employee Stock Purchase Plan in Proposal 3.
Number of Securities
remaining available for
Number of Securities Weighted-average future issuance under
to be issued upon exercise price of equity compensation
exercise of outstanding outstanding options, plans (excluding securities
Plan Category options, warrants and rights warrants and rights reflected in second column)
------------- ---------------------------- ------------------- ---------------------------
Equity
compensation plans
approved by
securityholders 2,927,688(1) $ 21.20(1) 279,200
Equity
compensation plans
not approved by
securityholders 509,713 $ 31.52 --
--------- -------
Total 3,437,401 $ 22.73 279,200
========= =======
(1) Does not include rights granted under the Employee Stock Purchase Plan. The
next scheduled purchase date under the Employee Stock Purchase Plan is July 31,
2002, for which rights were granted in connection with the 24-month offering
period that commenced in February 2002.
Option Grant to C. Boyd Clarke
On March 29, 2002, the Company's board of directors approved a grant to
C. Boyd Clarke in connection with his appointment as President and Chief
Executive officer of a non-qualified stock option to purchase 487,520 shares of
common stock. The option grant to Mr. Clarke is not pursuant to the stock option
plan and has not been submitted to, and is not required to be submitted to, the
stockholders for approval.
The option is exercisable for a period of ten years at a price of
$32.05 per share, which was the fair market value of the underlying stock on the
date of grant. The option is subject to a vesting schedule pursuant to which the
options will vest and become exercisable with respect to 121,880 shares on March
29, 2003, and on a monthly basis thereafter such that the option will vest and
become exercisable with respect to an aggregate of 93,750, 121,880, 121,880 and
28,130 shares in each of the remainder of 2003, 2004, 2005 and the first three
months of 2006, respectively.
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Proposal 3 -- Amendment to our Employee Stock Purchase Plan
Proposed Amendment
At the Annual Meeting, a proposal will be presented to the stockholders
to approve and adopt an amendment to our Employee Stock Purchase Plan to
increase by 50,000 shares the number of shares of common stock authorized under
the stock purchase plan. Of the 100,000 shares currently authorized under the
stock purchase plan, 93,387 shares have been issued purchased pursuant to the
plan and, therefore, are no longer available for grant. The stock purchase plan
is intended to be qualified under Internal Revenue Code Section 423. If a plan
is qualified under Section 423, our employees who participate in the plan enjoy
certain tax advantages, as described below. In order for the plan to be
qualified, our stockholders must approve the plan.
In April 2002, the Board adopted the proposed amendment, subject to
approval by our stockholders. The stock purchase plan allows our employees to
purchase our common stock at a discount, without being subject to tax until they
sell the stock, and without having to pay any brokerage commissions with respect
to the purchases. The purpose of the stock purchase plan is to encourage the
purchase of common stock by our employees, to provide employees with a personal
stake in Neose, and to help us retain our employees. In addition, we believe
that the stock purchase plan encourages employees to devote their best efforts
to our business and financial success. An increase in the number of shares
available for issuance under the stock option plan is necessary to meet the
above objectives. The Board of Directors believes that approval of Proposal 3 is
in the best interests of Neose and its stockholders.
The material features of the stock purchase plan are described below.
Approval of the proposal to amend the Employee Stock Purchase Plan requires the
affirmative vote of the holders of a majority of shares present in person or
represented by proxy at the Annual Meeting.
The Board of Directors recommends a vote "FOR" the proposal to amend
the stock purchase plan.
Description of the Stock Purchase Plan
The stock purchase plan provides employees with the right to purchase
shares of our common stock through payroll deduction. Upon approval by
stockholders of the amendment to the plan, a total of 150,000 shares of our
common stock will be available for purchase under the stock purchase plan,
subject to adjustment in the number and price of shares available for purchase
in the event the outstanding shares of common stock are increased or decreased
through stock dividends, recapitalizations, reorganizations, or similar changes.
The stock purchase plan is administered by a committee of directors
appointed by the board. Subject to the terms of the stock purchase plan, the
committee has authority to interpret the stock purchase plan, prescribe, amend
and rescind rules and regulations relating to it and make all other
determinations deemed necessary or advisable in administering the stock purchase
plan.
Eligibility
To be an eligible participant, an employee must be required to work
more than twenty hours per week for more than five months per calendar year in
return for wages as defined in Internal Revenue Code Section 3401(a).
29
Any employee who, after purchasing our common stock under the stock
purchase plan, would own 5% or more of the total combined voting power or value
of all classes of our stock or any subsidiary corporation is not eligible to
participate. Ownership of stock is determined in accordance with the provisions
of Section 424(d) of the Internal Revenue Code. In addition, an employee is not
permitted to purchase stock worth more than $25,000 in fair market value in any
calendar year.
Purchase Period
Eligible employees may elect to participate in the stock purchase plan
during an offering period, which shall commence as designated by the committee
and shall not exceed twenty-four months. Stock will be available to be purchased
in a series of successive installments, occurring at the end of each purchase
period, during the offering period. Shares of common stock will be deemed to
have been purchased on the last business day of each purchase period. The
purchase price per share will be 85% of the lesser of:
. the fair market value per share of our common stock on the first day
of the applicable offering period; or
. the fair market value per share of our common stock on the last day of
the purchase period.
If any of these dates is not a trading day, then fair market value will be
determined on the next trading day after such date. In no event shall the
maximum number of shares of common stock purchasable per participant on any
purchase date exceed 1,000 shares.
Purchase Procedures
An eligible employee who wishes to participate in the stock purchase plan
must execute a stock purchase agreement and complete the enrollment forms
prescribed by the committee. Each participant will have payroll deductions made
from his or her compensation on each regular payday during the time he or she is
a participant in the stock purchase plan. All payroll deductions will be
credited to the participant's account under the stock purchase plan.
If the total number of shares of common stock for which purchase rights are
exercised on the purchase date exceeds the maximum number of shares of common
stock available, the committee will make a pro rata allocation of shares
available for delivery and distribution. The unapplied account balances will be
credited to participants' accounts for the next succeeding offering or, at the
participant's election, returned to the participant without interest as soon as
practicable following the end of the offering period.
A participant's payroll deductions under the plan may be any multiple of 1%
of their base salary up to a maximum of 10% (the "Deduction Rate"). The
Deduction Rate shall remain in effect throughout the offering period subject to
reduction, at any time, limited to one reduction per purchase period, and the
participant may increase the Deduction Rate prior to the commencement of any new
purchase period.
A participant may elect to terminate outstanding purchase rights by
providing a termination form to the board or the committee at any time before
the end of the purchase period. All amounts credited to such participant's
account shall be, at the participant's election, paid as soon as practicable
following receipt of the participant's termination form or held for the purchase
of shares on the next purchase date, and no further payroll deductions will be
made with respect to the participant.
If a participant's employment terminates for any reason (including death,
disability, or change in status) all amounts credited to such participant's
account will be, at the participant's election, immediately refunded or held for
the purchase of shares on the next purchase date. A participant who is on an
approved leave of absence shall have the election to withdraw all payroll
deductions or have such funds held for the
30
purchase of shares at the end of such purchase period. Upon the participant's
return, his or her payroll deductions under the plan shall automatically resume
at the rate in effect at the time the leave began.
All funds held or received by us under the stock purchase plan may be used
for any corporate purpose until applied to the purchase of shares of our common
stock or refunded to employees and will not be segregated from our general
assets. Shares of our common stock purchased under the stock purchase plan will
be issued from our authorized but unissued or reacquired common stock. We will
pay all fees and expenses incurred, excluding individual Federal, state, local,
or other taxes, in connection with the stock purchase plan.
An employee's rights under the stock purchase plan belong to the employee
alone and may not be transferred or assigned to any other person during the
employee's lifetime.
Corporate Transactions
Immediately prior to a merger, consolidation, or sale, transfer or other
disposition of all or substantially all of the assets of the corporation
("Corporate Transaction"), all outstanding purchase rights shall automatically
be exercised. The purchase price per share preceding a Corporate Transaction
shall be 85% of the lower of: (a) the fair market value per share of common
stock on the first day of the offering period, or (b) the fair market value per
share of common stock immediately prior to the effective date of such Corporate
Transaction. The corporation shall attempt to provide ten days prior written
notice before the occurrence of any Corporate Transaction, and following the
receipt of such notice, participants may terminate their outstanding purchase
rights.
Federal income tax consequences of the stock option plan
The stock purchase plan is not qualified under Section 401(a) of the
Internal Revenue Code. We generally will not be entitled to a deduction with
respect to stock purchased under the stock purchase plan, unless the stock is
disposed of less than one year after it is purchased by the employee, or less
than two years after the start of the offering period pursuant to which the
stock was purchased.
Generally, no tax consequences arise at the time the participant purchases
shares of common stock. Upon a disposition of shares, the participant will
receive compensation taxable as ordinary income for the taxable year in which
the disposition occurs in an amount equal to the lesser of:
. the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
. the excess over the purchase price of (a) the amount actually received
for the shares if sold or exchanged or (b) the fair market value of
the shares on the date of any other termination of his or her
ownership (such as by gift).
The amount of such ordinary income is then added to the participant's basis in
his shares for purposes of determining capital gain or loss. This tax treatment
only applies if the following holding period requirement is satisfied:
. the participant does not dispose of the shares for at least one year
after the date of purchase, and
. the participant does not dispose of the shares for at least two years
after the beginning of the offering period during which the shares
were purchased.
31
If a participant disposes of shares of common stock purchased under the
stock purchase plan before the holding period is satisfied, he or she will
receive compensation taxable as ordinary income in the amount of the difference
between the amount paid for the shares and the fair market value of the shares
at the time of purchase. If the shares are sold or exchanged, the amount of such
ordinary income is added to the participant's basis in his shares for purposes
of determining capital gain or loss.
If a participant dies before disposing of the shares purchased under the
stock purchase plan, he or she will be deemed to have realized compensation
income taxable as ordinary income in the taxable year closing with his or her
death in an amount equal to the lesser of:
. the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
. the excess of the fair market value of the shares on the date of death
over the purchase price
Amendment and Termination of the Stock Purchase Plan
The committee has the right to amend, modify, or terminate the stock
purchase plan at any time to become effective immediately following close of any
purchase period. However, the committee may not, without the approval of the
corporation's stockholders: (i) materially increase the number of shares of
common stock issuable under the plan or the maximum number of shares purchasable
per participant on any one purchase date, (ii) alter the purchase price formula
so as to reduce the purchase price payable for the shares of common stock
purchasable under the plan, (iii) materially increase the benefits accruing to
participants under the plan or materially modify the requirements for
eligibility to participate in the plan, or (iv) otherwise amend the stock
purchase plan, if such amendment, by law, requires stockholder approval.
Plan benefits
Our current executive officers have purchased the following number of
shares of common stock under the stock purchase plan since adoption of the
Employee Stock Purchase Plan in 1995 through April 26, 2002: C. Boyd Clarke - 0;
David A. Zopf - 4,218; Edward J. McGuire - 2,954; George J. Vergis - 0; A. Brian
Davis - 2,802; Debra J. Poul - 412; current executive officers as a
group--10,386; and all other employees as a group--83,001. The benefits and
amounts that may be received in the future by persons eligible to participate in
the stock purchase plan are not currently determinable.
The above description is a partial summary of material provisions of our
stock purchase plan. This summary is qualified in its entirety by reference to
the full text of the plan, as amended and as proposed to be amended, attached as
Appendix B to this proxy statement.
Independent Certified Public Accountants
On April 29, 2002, the Board of Directors decided to no longer engage
Arthur Andersen LLP as our independent public accountants and engaged KPMG LLP
to serve as our independent public accountants for the fiscal year 2002.
Arthur Andersen's reports on the Company's consolidated financial
statements for each of the years ended 2001 and 2000 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the years ended December 31, 2001 and 2000 and through the date of
this proxy statement, there were no disagreements with Arthur Andersen on any
matter of accounting principle or practice,
32
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Arthur Andersen's satisfaction, would have caused them to make
reference to the subject matter in connection with their report on our
consolidated financial statements for such years; and there were no reportable
events as defined in Item 304(a)(l)(v) of Regulation S-K.
During the years ended December 31, 2001 and 2000 and through the date of
the Board's decision, we did not consult KPMG LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our consolidated financial statements, or any other matters or reportable events
as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
We will invite a representative of Arthur Andersen LLP to be present at the
Annual Meeting to respond to questions about the periods for which they were our
auditors. We expect a representative of KPMG LLP to be present at the annual
meeting. The KPMG LLP representative will have an opportunity to make a
statement, if he or she desires, and will be available to answer questions. The
following additional information is provided as required by the Securities and
Exchange Commission.
. Audit Fees. The aggregate fees billed by Arthur Andersen LLP for
professional services for the 2001 audit and for review of the
Company's financial statements included in our Quarterly Reports on
Form 10-Q for 2001 totaled $45,000.
. Financial Information Systems Design and Implementation Fees. We did
not engage Arthur Andersen LLP during 2001 to provide professional
services with respect to financial information systems design and
implementation as described in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X.
. All Other Fees. The aggregate fees billed by Arthur Andersen LLP for
all other services rendered during 2001, including tax related
services, totaled $13,000.
After consideration, the Audit Committee determined that the provision by
Arthur Andersen LLP of professional services not related to the audit of the
financial statements referred to above and not related to the reviews of the
interim financial statements referred to above was compatible with maintaining
the independence of Arthur Andersen LLP.
Requirements for Advance Notification of Nominations
and Stockholder Proposals
Advance Notice Requirements for next year's Annual Meeting
Under Section 11 of Article II of our By-Laws, you may nominate a person
for election as a director or propose business to be considered at next year's
Annual Meeting if you:
. Are a holder of record at the time of giving the notice described
below;
. Are entitled to vote at next year's Annual Meeting; and
. Deliver a written notice of intent to make a nomination or proposal to
our Corporate Secretary at our offices. You must deliver the written
notice of intent, which must contain the relevant information
described below, between December 1, 2002 and December 31, 2002. If
the date of next year's Annual Meeting is earlier than May 28, 2003 or
later than August 25, 2003, however, your written notice of intent
must be delivered between the 90th day before next year's Annual
Meeting and the later of:
33
. The 60th day before next year's Annual Meeting; or
. The 10th day after our first public announcement of next year's
Annual Meeting date.
If the Board of Directors decides to propose, for next year's Annual
Meeting, an increase in the number of directors, the advance notice requirements
will differ from those described above if we fail to make a timely public
announcement of the proposal. Our public announcement must be made as described
in our By-Laws, and must either name all of the nominees for director or specify
the new size of the Board of Directors. To be considered timely, our first
public announcement of such a proposal must be made:
. By April 16, 2003, if the date of next year's Annual Meeting is
between May 26, 2003 and August 24, 2003; or
. By 70 days before next year's Annual Meeting, if the date of next
year's Annual Meeting is earlier than May 26, 2003 or later than
August 24, 2003.
If we fail to meet the applicable deadline for making a timely public
announcement, and you would like to nominate individuals for the new position(s)
created by the increase, you must deliver your written notice of intent by no
later than the 10th day after our first public announcement. Your written notice
of intent may nominate individuals only for new position(s) created by the
increase, and must contain the information described below.
Requirements for a Written Notice of Intent
Your written notice of intent to make a nomination or proposal must
contain your name, address, and the number of each class of our shares you own
beneficially and of record. If you are delivering the written notice of intent
on behalf of a beneficial owner of our shares, the written notice of intent also
must contain the beneficial owner's name, address, and the number of each class
of our shares held beneficially and of record. Your written notice of intent
also must include:
. As to each person you propose to nominate for election or
re-election as a director, the nominee's written consent to be
named in the proxy statement as a nominee and to serve as a
director if elected.
. As to any other business you propose to bring before the meeting:
- A brief description of the business;
- The reasons for conducting the business at the meeting; and
- Your material interest in the business, or the material
interest in the business of the beneficial owner, if any, on
whose behalf the proposal is made.
Other Requirements
You also must comply with all applicable requirements of the Securities
Exchange Act of 1934 for nominations of directors and proposals of business to
be conducted at stockholder meetings. If you have not complied with the
procedures described above, the chairman of a meeting may refuse to acknowledge
your nomination or proposal. These procedures will not be deemed to affect any
of your rights under Rule 14a-8 under the Securities Exchange Act of 1934 to
request inclusion of proposals in our proxy statements.
34
Appendix A
NEOSE TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(Amended and Restated as of June 25, 2002)
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
A. This 1995 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of Neose Technologies, Inc., a Delaware
corporation (the "Corporation"), by providing eligible individuals with the
opportunity to obtain an equity interest, or otherwise increase their equity
interest, in the Corporation. This Plan shall serve as the successor equity
incentive program to the Corporation's 1992 Stock Option Plan and 1991 Stock
Option Plan.
B. The Discretionary Option Grant and Stock Issuance Programs of
the Plan became effective immediately upon the adoption of the Plan by the
Corporation's Board of Directors. Such date is hereby designated the "Plan
Effective Date." The Automatic Option Grant Program became effective upon the
execution and final pricing of the Underwriting Agreement for the initial public
offering of the Corporation's Common Stock. The execution date of such
Underwriting Agreement is hereby designated as the Automatic Option Program
Effective Date. The Director Fee Option Grant Program became effective on March
16, 1996.
II. DEFINITIONS
A. For the purposes of this Plan, the following definitions shall
be in effect:
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the
Corporation effected through either of the following transactions:
-- the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's shareholders which
the Board does not recommend such shareholders to accept, or
-- a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members ceases,
by reason of one or more
contested elections for Board membership, to be comprised of individuals who
either (a) have been Board members continuously since the beginning of such
period or (b) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (a) who were still in office at the time such election or nomination was
approved by the Board.
Code: the Internal Revenue Code of 1986, as amended.
Committee: the committee of two (2) or more Board members
appointed by the Board to administer and interpret the Plan. The Committee
members shall be "outside directors" as defined under Code Section 162(m) and
related Treasury Regulations and may be "non-employee" Board members as defined
under Rule 16b-3 of the 1934 Act. However, notwithstanding anything in the Plan
to the contrary, the Board must ratify or approve any grants made under the
Discretionary Option Grant Program or Stock Issuance Program to any Board
members or officers of the Corporation. References in the Plan to the Committee
shall be deemed to include the Board, with respect to ratification or approval
of grants made to Board members and officers of the Corporation. In addition,
the Board may appoint a "Non-Section 16(b) Committee" solely for the purpose of
making grants under the Discretionary Option Grant Program to individuals who
are not covered by Section 16 of the 1934 Act. Such Committee shall have no
powers other than the power to make grants to such individuals. Any reference to
"Committee" herein shall also encompass the Non-Section 16(b) Committee where
appropriate.
Common Stock: shares of the Corporation's common stock.
Corporate Transaction: either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
Employee: an individual who performs services while in the
employ of the Corporation or one or more parent or subsidiary corporations,
subject to the control and direction of the employer entity not only as to the
work to be performed but also as to the manner and method of performance.
Exercise Date: the date on which the Corporation shall have
written notice of the option exercise.
Fair Market Value: the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:
-- If the Common Stock is at the time traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price per
share on the date in question, as such
-2-
price is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which
such quotation exists.
-- If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the Fair Market Value shall be
the closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on such exchange
on the date in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.
-- If the Common Stock is on the date in question neither
listed nor admitted to trading on any national securities exchange nor traded on
the Nasdaq National Market, then the Fair Market Value of the Common Stock on
such date shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
Hostile Take-Over: a change in ownership of the Corporation
effected through the following transaction:
-- the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's shareholder's which
the Board does not recommend such shareholders to accept, and
-- the acceptance of more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer from holders other than
the officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
Incentive Option: a stock option which satisfies the
requirements of Code Section 422.
Involuntary Termination: the termination of the Service of
any Optionee or Participant which occurs by reason of:
-- such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces his
or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-discretionary
and objective-standard incentive payment or bonus award) by more than ten
percent (10%) in the aggregate or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the individual's
consent.
-3-
Misconduct: the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such individual of confidential information or trade secrets of the
Corporation or its parent or subsidiary corporations, any failure to perform
specific lawful direction of the Corporation's Board or officers of the
Corporation, any refusal or neglect to perform such individual's duties, any
conviction of, or entering of a plea of nolo contendre to, a crime which
constitutes a felony or any other Misconduct by such individual adversely
affecting the business or affairs of the Corporation. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation or any parent or subsidiary may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other individual in the
Service of the Corporation.
1934 Act: the Securities Exchange Act of 1934, as amended.
Non-Statutory Option: a stock option not intended to meet the
requirements of Code Section 422.
Optionee: a person to whom an option is granted under the
Discretionary Option Grant Program, the Automatic Option Grant Program or the
Director Fee Option Grant Program.
Participant: a person who is issued Common Stock under the
Stock Issuance Program.
Permanent Disability: the inability of an individual to engage
in any substantial gainful activity, by reason of any medically determinable
physical or mental impairment which is expected to result in death or which has
lasted or can be expected to last for a period of not less than twelve (12)
months.
Plan Administrator: either the Board or the Committee, to the
extent the Committee is at the time responsible for the administration of the
Plan in accordance with Section IV of Article One.
Predecessor Plans: the Corporation's 1992 Stock Option Plan
and 1991 Stock Option Plan.
Service: the performance of services on a periodic basis for
the Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant, except to the extent otherwise specifically provided in the
applicable stock option or stock issuance agreement.
Section 12(g) Registration Date: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act became
effective.
Take-Over Price: the greater of (a) the Fair Market Value per
share of Common Stock on the date the particular option to purchase such stock
is surrendered to the Corporation in connection with a Hostile Take-Over or (b)
the highest reported price per share of Common Stock paid by the tender offeror
in effecting such Hostile Take-Over. However, if the canceled option is an
Incentive Option, then the Take-Over Price shall not exceed the clause (a) price
per share.
-4-
10% Shareholder: the owner of stock (as determined under Code
Section 424(d)) possessing ten (10%) percent or more of the total combined
voting power of all classes of stock of the Corporation or any parent or
subsidiary corporation.
B. The following provisions shall be applicable in determining
the parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation
shall be considered to be a parent of the Corporation,
provided each such corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes or stock in one of the
other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a subsidiary of the Corporation,
provided each such corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Stock Issuance
Program specified in Article Three, the Automatic Option Grant Program specified
in Article Four and the Director Fee Option Grant Program specified in Article
Five. Under the Discretionary Option Grant Program, eligible individuals may at
the discretion of the Plan Administrator be granted options to purchase shares
of Common Stock in accordance with the provisions of Article Two at a price not
less than eighty-five percent (85%) of the Fair Market Value of such shares on
the grant date. Under the Stock Issuance Program, eligible individuals may be
issued shares of Common Stock directly, either through the immediate purchase of
the shares (at Fair Market Value or at discounts of up to 15%) or as a bonus
tied to the individual's performance of services or the Corporation's attainment
of prescribed milestones. Under the Automatic Option Grant Program, each
individual serving as a non-employee Board member on the Automatic Option Grant
Program Effective Date and each individual who first joins the Board as a
non-employee director at any time after such Effective Date shall at periodic
intervals receive option grants to purchase shares of Common Stock in accordance
with the provisions of Article Four, with the first such grants to be made on
such Effective Date. Under the Director Fee Option Grant Program, each
non-employee Board member may elect to apply all or a portion of his or her
annual retainer fee otherwise payable in cash to a special below market option
grant.
B. Unless the context clearly indicates otherwise, the provisions
of Articles One and Six shall apply to all equity programs under the Plan and
shall accordingly govern the interests of all individuals under the Plan.
-5-
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs shall be
administered solely and exclusively by the Committee, subject to such conditions
and limitations as the Board may decide, to the extent permissible under
applicable securities and tax laws requirements.
B. Members of the Committee shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.
C. The Plan Administrator shall have full power and authority (subject to
the express provisions of the Plan) to establish rules and regulations for the
proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding option grants or stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Discretionary Option Grant or Stock Issuance Program or any
outstanding option grant or share issuance thereunder.
D. Administration of the Automatic Option Grant and Director Fee Option
Grant Programs shall be self-executing in accordance with the express terms and
conditions of those programs, and the Plan Administrator shall exercise no
discretionary functions with respect to option grants made pursuant to those
programs.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two and the Stock Issuance Program under Article Three
shall be limited to the following
(i) officers and other employees of the Corporation (or any
parent or subsidiary corporation);
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any parent or subsidiary corporation; and
(iii) consultants who provide valuable services to the
Corporation (or any parent or subsidiary corporation); provided such services
are not in connection with the offer or sale of securities in a capital-raising
transaction.
B. The Plan Administrator shall have full authority to determine, (i) with
respect to the option grants made under the Discretionary Option Grant Program,
which eligible individuals are to receive option grants, the time or times when
such grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding, and (ii) with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued
-6-
to each Participant, the vesting schedule (if any) to be applicable to the
issued shares, and the consideration to be paid by the Participant for such
shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
5,171,664* shares, subject to adjustment from time to time in accordance with
the provisions of this Section VI. Such authorized share reserve is comprised of
(i) the number of shares which remained for issuance, as of the Plan Effective
Date, under the Predecessor Plans as last approved by the Corporation's
shareholders, including the shares subject to the outstanding options
incorporated into this Plan and any other shares which would have been available
for future option grant under the Predecessor Plans as last approved by the
shareholders, plus (ii) an additional increase of 333,333* shares authorized by
the Board on the Plan Effective Date, (iii) an additional increase of 600,000*
shares authorized by the Board on December 6, 1995, (iv) an additional increase
of 500,000 shares authorized by the Board on March 19, 1997, (v) an additional
increase of 495,000 shares authorized by the Board on April 16, 1999, (vi) an
additional increase of 690,000 shares authorized by the Board on April 17, 2000,
(vii) an additional increase of 700,000 shares authorized by the Board on March
21, 2001, and (viii) an additional increase of 1,200,000 shares authorized by
the Board on April 10, 2002. As one or more outstanding options under the Plan
are exercised, the number of shares issued with respect to each such option
shall reduce, on a share-for-share basis, the number of shares available for
issuance under this Plan.
B. In no event shall the aggregate number of shares of Common Stock for
which any one individual participating in the Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances for
any given year exceed fifty percent (50%) of the total number of shares for
which stock options, separately exercisable stock appreciation rights and direct
stock issuances may be granted over the term of the Plan.
C. Should one or more outstanding options under this Plan (including
options incorporated from the Predecessor Plans) expire or terminate for any
reason prior to exercise in full (including any option canceled in accordance
with the cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan. Shares subject to any
stock appreciation rights exercised under the Plan and all share issuances under
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction
______________
* Reflects the 1-for-3 stock split that was effected immediately prior to the
consummation of the initial public offering of the Common Stock.
-7-
of the withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan or the vesting of a direct share issuance made
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the share issuance, and not by the net
number of shares of Common Stock actually issued to the holder of such option or
share issuance.
D. Should any change be made to the Common Stock issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum amount and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for any given year under the Plan, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made per
eligible non-employee Board member under the Automatic Option Grant Program,
(iv) the number and/or class of securities and price per share in effect under
each option outstanding under the Discretionary Option Grant, Automatic Option
Grant or Director Fee Option Grant Program and (v) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plans. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program shall
be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan Administrator
in accordance with the following provisions:
-8-
(i) The exercise price per share of Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of such Common Stock on the grant date.
(ii) The exercise price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than eighty-five percent (85%) of
the Fair Market Value of such Common Stock on the grant date.
(iii) If any individual to whom an Incentive Option is granted is a
10% Shareholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Six, be
payable in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable written instructions (a) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.
3. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Term and Exercise of Options. Each option granted under this Plan shall
----------------------------
be exercisable at such time or times and during such period as is determined by
the Plan Administrator and set forth in the instrument evidencing the grant. No
such option, however, shall have a maximum term in excess of ten (10) years
measured from the grant date.
1. During the lifetime of the Optionee, the option, together with any
related stock appreciation right, shall be exercisable only by the Optionee and
shall not be assignable or transferable by the Optionee, except for a transfer
of the option by will or by the laws of descent and distribution following the
Optionee's death or, with respect to options other than Incentive Options, if
permitted in any specific case by the Plan Administrator, pursuant to a domestic
relations order (as defined under the Code or Treasury Regulations).
-9-
2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.
C. Termination of Service.
----------------------
1. Except to the extent otherwise provided pursuant to subsection C.2
below, the following provisions shall govern the exercise period applicable to
any options held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service for any reason
other than death, Permanent Disability or Misconduct, then the period during
which each outstanding option held by such Optionee is to remain exercisable
shall be limited to the three (3)-month period following the date of such
cessation of Service.
(ii) Should the Optionee's Service terminate by reason of
Permanent Disability, then the period during which each outstanding option held
by the Optionee is to remain exercisable shall be limited to the twelve
(12)-month period following the date of such cessation of Service.
(iii) Should the Optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
Optionee's death. During such limited period, the option may be exercised by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
(iv) Should the Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
(v) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
(vi) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be exercisable for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding with respect to any
option shares for which the option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding,
-10-
- to extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of
Service or death from the limited period in effect under
subsection C.1 of this Section I of Article Two to such
greater period of time as the Plan Administrator shall deem
appropriate; provided that in no event shall such option be
exercisable after the specified expiration date of the option
term; and/or
- to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited
post-Service exercise period applicable under this paragraph
C, not only with respect to the number of vested shares of
Common Stock for which each such option is exercisable at the
time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments for which the
option would otherwise have become exercisable had such
cessation of Service not occurred.
D. Shareholder Rights. An Optionee shall have no shareholder
------------------
rights with respect to any shares covered by the option until such individual
shall have exercised the option and paid the exercise price for the purchased
shares.
E. Unvested Shares. The Plan Administrator shall have the
---------------
discretion to authorize the issuance of unvested shares of Common Stock under
the Plan. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
agreement evidencing such repurchase right. All outstanding repurchase rights
under the Plan shall terminate automatically upon the occurrence of any
Corporate Transaction, except to the extent the repurchase rights are expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
II. INCENTIVE OPTIONS
Incentive Options may only be granted to individuals who are
Employees, and the terms and conditions specified below shall be applicable to
all Incentive Options granted under the Plan. Except as modified by the
provisions of this Section II, all the provisions of Articles One, Two and Six
of the Plan shall be applicable to all Incentive Options granted hereunder. Any
Options specifically designated as Non-Statutory shall not be subject to the
terms and conditions of this Section II.
A. Dollar Limitation. The aggregate Fair Market Value (determined
-----------------
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its parent or subsidiary corporations) may for the
first time become exercisable as incentive stock options under the Federal tax
laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax
-11-
laws shall be applied on the basis of the order in which such options are
granted. Should the number of shares of Common Stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then that option may nevertheless
be exercised in that calendar year for the excess number of shares as a
Non-Statutory Option under the Federal tax laws.
B. 10% Shareholder. If any individual to whom an Incentive
---------------
Option is granted is a 10% Shareholder, then the option term shall not exceed
five (5) years measured from the grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which
is at the time outstanding under this Article Two shall automatically accelerate
so that each such option shall, immediately prior to the specified effective
date for such Corporate Transaction, become fully exercisable with respect to
the total number of shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of such shares as fully-vested
shares. However, an outstanding option under this Article Two shall not so
accelerate if and to the extent: (i) such option is, in connection with such
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of such
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option, (iii) such option is to be
replaced by another incentive program which the Plan Administrator determines is
reasonably equivalent in value to the program contemplated by either clause (i)
or (ii) above, or (iv) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
However, upon an Optionee's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within eighteen (18) months after a
Corporate Transaction in which his or her outstanding options are assumed or
replaced pursuant to clause (i), (ii) or (iii) above, each such option under
clause (i) shall automatically accelerate and become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully-vested shares, the cash incentive program under clause (ii) shall become
fully vested and the benefits under a clause (iii) replacement program shall
become fully vested. The option as so accelerated shall remain exercisable until
the earlier of (i) the expiration of the option term or (ii) the expiration of a
ninety (90)-day period measured from the date of such Involuntary Termination.
The determination of option comparability under clause (i) or program
comparability under clause (iii) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of a Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to remain outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two that is assumed
in connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate
-12-
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder in consummation of such Corporate
Transaction had such person exercised the option immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share, provided the aggregate exercise price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and
participant basis following the consummation of such Corporate Transaction shall
be appropriately adjusted.
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control. The Plan Administrator shall also
have full power and authority to condition any such option acceleration (and the
termination of any outstanding repurchase rights) upon the Optionee's cessation
of Service by reason of an Involuntary Termination (other than for Misconduct)
within a specified period following such Change in Control.
E. Any options accelerated in connection with a Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term or the surrender of such option in accordance with Section V of this
Article Two.
F. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
G. The portion of any Incentive Option accelerated under this
Section III in connection with a Corporate Transaction or Change in Control
shall remain exercisable as an incentive stock option under the Federal tax laws
only to the extent the dollar limitation of Section II of this Article Two is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a non-statutory option under the
Federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any, or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering the
same or different numbers of shares of Common Stock but with an exercise price
per share not less than (i) one hundred percent (100%) of the Fair Market Value
on the new grant date in the case of a grant of an Incentive Option, (ii) one
hundred ten percent (110%) of such Fair Market Value in the case of an Incentive
Option grant to a 10% Shareholder or (iii) eighty-five percent (85%) of such
Fair Market Value in the case of all other grants.
-13-
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this Article Two in exchange for a distribution
from the Corporation in an amount equal to the excess of (i) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate exercise price payable for such vested
shares.
B. No surrender of an option shall be effective hereunder unless
it is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when the Corporation's outstanding
Common Stock is registered under Section 12(g) of the 1934 Act, each such
officer holding one or more options with such a limited stock appreciation right
in effect for at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the option is at
the time exercisable for fully vested shares of Common Stock. The officer shall
in return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to each surrendered option (or surrendered portion of
such option) over (ii) the aggregate exercise price payable for such vested
shares. Such cash distribution shall be made within five (5) days following the
option surrender date. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Any unsurrendered portion of the option shall continue to
remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered
for an appreciation distribution pursuant to this Section V shall not be
available for subsequent issuance under the Plan.
-14-
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Three.
A. Consideration.
-------------
1. Shares of Common Stock may be issued under the Stock Issuance
Program for one or more of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable to the
Corporation's order;
(ii) a promissory note payable to the Corporation's order
in one or more installments; or
(iii) past services rendered to the Corporation or any
parent or subsidiary corporation.
2. The shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one hundred
percent (100%) of the Fair Market Value of such shares at the time of issuance,
but in no event less than eighty-five percent (85%) of such Fair Market Value.
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance (as a bonus for past services) or may vest in
one or more installments over the Participant's period of Service or the
Corporation's attainment of performance milestones. The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
-15-
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule, shall
be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full shareholder rights with respect to
any shares of Common Stock issued to him or her under the Plan, whether or not
his or her interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares. Any new, additional or different shares of stock
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration or by reason of any Corporate Transaction, shall be issued subject
to (i) the same vesting requirements applicable to his or her unvested shares
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock under the Stock Issuance Program, then
the Corporation shall have the right to require the Participant to surrender
those shares immediately to the Corporation for cancellation, and the
Participant shall cease to have any further shareholder rights with respect to
the surrendered shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note), the Corporation
shall repay to the Participant the cash consideration paid for the surrendered
shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered shares.
4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the extent the Corporation's outstanding repurchase
rights are expressly assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction. However, any assigned repurchase
rights covering the unvested shares held by a Participant under this Article
Three shall immediately terminate should there occur an Involuntary Termination
of that Participant's Service (other than for Misconduct) within eighteen (18)
months after such Corporate Transaction.
-16-
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under this Article Three or
at any time while those shares remain outstanding, to provide for the automatic
termination of the Corporation's repurchase rights with respect to those shares
should there occur a Change in Control. The Plan Administrator shall also have
full power and authority to condition the termination of those repurchase rights
upon the Participant's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within a specified period following such
Change in Control.
III. SHARE ESCROW/TRANSFER RESTRICTIONS
A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
distributed with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such (or the distributed securities or assets) vests.
B. The Participant shall have no right to transfer any unvested shares of
Common Stock issued to him or her under the Stock Issuance Program. For purposes
of this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift or other disposition of such shares,
whether voluntary or involuntary. Upon any such attempted transfer, the unvested
shares shall immediately be canceled in accordance with substantially the same
procedure in effect under Section I.B.3 of this Article Three, and neither the
Participant nor the proposed transferee shall have any rights with respect to
such canceled shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Stock Issuance Program to his or her
spouse or issue, including adopted children, or to a trust established for such
spouse or issue, provided the transferee of such shares delivers to the
Corporation a written agreement to be bound by all the provisions of the Stock
Issuance Program and the Issuance Agreement applicable to the gifted shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant to
the provisions of this Article Four program shall be limited to (i) those
individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date, (ii) those individuals who are first
elected or appointed as non-employee Board members on or after such Effective
Date, whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who are re-elected to serve as
non-employee Board members at one or more Annual Shareholders Meetings held
after the Section 12(g) Registration Date. In no event, however, shall a
non-employee Board member be eligible to receive an automatic option grant
pursuant to clause (i) or (ii) above if such individual has at any time been
-17-
in the prior employ of the Corporation (or any parent or subsidiary
corporation), but such individual shall be eligible to receive one or more
automatic option grants pursuant to clause (iii). Each non-employee Board member
eligible to receive one or more automatic option grants pursuant to the
foregoing criteria shall be designated an "Eligible Director" for purposes of
the Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION
A. Grant Dates. Option grants shall be made under this Article Four on the
-----------
dates specified below:
1. Initial Grant. Each Eligible Director who is first elected or
-------------
appointed as a non-employee Board member after the Automatic Option Grant
Program Effective Date shall automatically be granted, on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option to
purchase 30,000 shares of Common Stock upon terms and conditions of this Article
Four.
2. Annual Grant. On the date of each Annual Shareholders Meeting,
------------
beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who will continue to serve as an Eligible
Director shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 10,000 shares of Common Stock
upon the terms and conditions of this Article Four, provided he or she has
served as a non-employee Board member for at least six (6) months prior to the
date of such Annual Meeting.
3. No Limitation. There shall be no limit on the number of shares for
-------------
which any one Eligible Director may be granted stock options under this Article
Four over his or her period of Board service.
B. Exercise Price. The exercise price per share of Common Stock subject to
--------------
each automatic option grant made under this Article Four shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock, on
the automatic grant date.
C. Payment. The exercise price shall be payable in one of the alternative
-------
forms specified below. To the extent the option is exercised for any unvested
shares, the Optionee must execute and deliver to the Corporation a stock
purchase agreement for those unvested shares which provides the Corporation with
the right to repurchase, at the exercise price paid per share, any unvested
shares held by the Optionee at the time of cessation of Board service and which
precludes the sale, transfer or other disposition of the purchased shares at any
time while those shares remain subject to the Corporation's repurchase right.
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date;
-18-
(iii) full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check drawn to the Corporation's order; or
(iv) to the extent the option is exercised for vested shares, full
payment through a sale and remittance procedure pursuant to which the Optionee
shall provide irrevocable written instructions to (a) a Corporation designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares and (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure specified above
is used for the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Four shall have a
-----------
maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability/Vesting. Each automatic grant shall be immediately
----------------------
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares in accordance with the applicable schedule
below:
Initial Grant. Each initial 30,000-share automatic grant shall
vest, and the Corporation's repurchase right shall lapse, in a series
of four successive and equal annual installments over the Optionee's
period of continued service as a Board member, with the first such
installment to vest upon Optionee's completion of one (1) year of Board
service measured from the automatic grant date.
Annual Grant. Each additional 10,000-share automatic grant shall
vest, and the Corporation's repurchase right shall lapse, upon the
Optionee's completion of one (1) year of Board service measured from
the automatic grant date.
Vesting of the option shares shall be subject to acceleration, as
provided in Section II.G.3 and Section III of this Article Four. In no event
shall any additional option shares vest after the Optionee's cessation of Board
service, except as otherwise provided in Section II.G.3 of this Article Four.
F. Non-Transferability.
-------------------
1. During the lifetime of the Optionee, each automatic option grant,
together with the limited stock appreciation right pertaining to that option,
shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee, except for a transfer of the option by will or by
the laws of descent and distribution following Optionee's death or, with respect
to options other than Incentive Options, if permitted in any specific case by
the Plan
-19-
Administrator, pursuant to a domestic relations order (as defined under the Code
or Treasury Regulations).
2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.
G. Effect of Termination of Board Service.
--------------------------------------
1. Should the Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding one or more automatic
option grants under this Article Four, then such individual shall have a six
(6)-month period following the date of such cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock in
which the Optionee is vested at the time of such cessation of Board service.
However, each such option shall immediately terminate and cease to be
outstanding at the time of such cessation of Board service, with respect to any
shares in which the Optionee is not otherwise at that time vested under that
option.
2. Should the Optionee die within six (6) months after cessation of
Board service, then any automatic option grant held by the Optionee at the time
of death may subsequently be exercised. for any or all of the shares of Common
Stock in which the Optionee is vested at the time of his or her cessation of
Board service (less any option shares subsequently purchased by the Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. The
right to exercise such option shall lapse upon the expiration of a twelve
(12)-month period measured from the date of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then the shares of Common Stock at the time subject
to each automatic option grant held by such Optionee under this Article Four
which are vested may be purchased by the Optionee (or the representative of the
Optionee's estate or the person or persons to whom the option is transferred
upon the Optionee's death) pursuant to the option for a twelve (12)-month period
following the date of the Optionee's cessation of Board service.
4. In no event shall any automatic grant under this Article Four
remain exercisable after the expiration date of the ten (10)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any option shares in which the Optionee was vested at the time
of his or her cessation of Board service but for which such option was not
subsequently exercised.
H. Shareholder Rights. The holder of an automatic option grant under this
------------------
Article Four shall have none of the rights of a shareholder with respect to any
shares subject to such
-20-
option until such individual shall have exercised the option and paid the
exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each automatic
---------------
option grant shall be as set forth in the form of Automatic Stock Option
Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option under this Article Four but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for all or any portion of
those shares as fully-vested shares. Immediately following the consummation of
the Corporate Transaction, all automatic option grants under this Article Four
shall terminate and cease to be outstanding, except to the extent one or more of
those grants are assumed by the acquiring entity or its parent corporation.
B. In connection with any Change in Control of the Corporation, the
shares of Common Stock at the time subject to each outstanding option under this
Article Four but not otherwise vested shall automatically vest in full so that
each such option shall, immediately prior to the specified effective date for
the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares. Each such option shall remain so
exercisable for all the option shares following the Change in Control, until the
expiration or sooner termination of the option term.
C. Should a Hostile Take-Over occur at any time following the Section
12(g) Registration Date, then the Optionee shall have a thirty (30)-day period
in which to surrender to the Corporation each option held by him or her under
this Article Four for a period of at least six (6) months. The optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not those shares are
otherwise at the time fully vested) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. The
shares of Common Stock subject to each option surrendered in connection with the
Hostile Take-Over shall not be available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Four shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
-21-
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------
I. OPTION GRANTS
Effective with respect to elections of Board members occurring at or
after the Company's regular 2003 annual meeting of shareholders, each
non-employee Board member may elect to receive all or any portion of the
retainer fees otherwise payable in cash for his or her service on the Board (on
any committee thereof) in the form of a special option grant under this Director
Fee Option Grant Program. Such election must be filed with the Corporation's
Chief Financial Officer prior to the shareholder vote that will determine
whether that Board member (or Board candidate) will be elected to serve or
continue to serve as a Board member and will apply to all retainer fees payable
during the entire term for which that Board member (or Board candidate) is then
nominated to serve. Each non-employee Board member (or Board candidate) who
files such a timely election and is then elected to serve as a Board member will
automatically be granted an option under this Director Fee Option Grant Program
on the date of the applicable shareholder vote.
With respect to the period between January 1, 2003 and the Company's
regular 2003 annual meeting of shareholders, a pro-rata portion of the regular
annual retainer (the "Fractional Retainer") will be payable to non-employee
Board members. Each non-employee Board Member may elect to receive all or a
portion of the Fractional Retainer that would otherwise be payable in cash in
the form of a special option grant under this Director Fee Option Grant Program.
Such election must be filed with the Corporation's Chief Financial Officer prior
to the Company's regular 2002 annual meeting of shareholders and will apply only
to the Fractional Retainer. Each non-employee Board member (or Board candidate)
who files a timely election with respect to the Fractional Retainer and is then
elected to serve as a Board member at the Company's regular 2002 annual meeting
will automatically be granted an option under this Director Fee Option Grant
Program on the date of the Company's regular 2002 annual meeting of
shareholders.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
--------------
1. The exercise price per share will be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price will become immediately due upon exercise of
the option and will be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedures specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
-22-
B. Number of Option Shares: The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A /(B x 66-2/3 %), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. Exercise and Term of Options. Each option granted under this
----------------------------
Article Five will be fully vested and immediately exercisable. Each such option
will have a maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease Board
--------------------------------
service for any reason while holding one or more options under this Article
Five, then each such option will remain exercisable until the earlier of (i) the
-------
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
E. Death or Permanent Disability. Should the Optionee die while
-----------------------------
holding one or more options under this Article Five, then each such option may
be exercised by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program will be assumed by the successor corporation
(or parent thereof) in the Corporate Transaction and will remain exercisable
until the earlier of (i) the expiration of the ten (10)-year option term or (ii)
-------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
B. The grant of options under the Director Fee Option Grant Program
will in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program will be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
-23-
ARTICLE SIX
MISCELLANEOUS
-------------
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant and Automatic Option Grant Programs or the
purchase of one or more shares issued to such Participant under the Stock
Issuance Program, including the satisfaction of any Federal, state and local
income and employment tax obligations arising therefrom, by:
(i) authorizing the extension of a loan from the Corporation
to such Optionee or Participant, or
(ii) permitting the Optionee or Participant to pay the
exercise price or purchase price for the purchased Common Stock in installments
over a period of years.
B. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate at the time such exercise price or purchase price
becomes due and payable. Loans or installment payments may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee or Participant may not exceed the option or purchase price of the
acquired shares (less the par value of such shares) plus any Federal, state and
local income and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this Section I shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment. In addition, the Board may
not, without the approval of the Corporation's shareholders, amend the Plan to
(i) increase the maximum number of shares issuable under the Plan or the maximum
amount of shares for which any one individual participating in the Plan may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances for any given year under the Plan, except for permissible
adjustments under Article One, (ii) materially modify the eligibility
requirements for Plan participation, or (iii) otherwise materially increase the
benefits accruing to Plan participants.
-24-
B. (i) Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and (ii) shares of Common Stock may be
issued under the Stock Issuance Program, which are in both instances in excess
of the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under the Discretionary Option Grant or the Stock
Issuance Programs are held in escrow until shareholder approval is obtained for
a sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (i) any unexercised excess options shall terminate and cease to be
exercisable and (ii) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any stock options granted under Article Two or upon the issuance
of any shares under Article Three shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III of Article Six and such supplemental rules as
the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission),
provide any or all holders of Non-Statutory Options or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Federal, state and local income and employment tax liabilities incurred
by such holders in connection with the exercise of their options or the vesting
of their shares (the "Taxes"). Such right may be provided to any such holder in
either or both of the following formats:
---- The holder of the Non-Statutory Option or unvested shares
may be provided with the election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion
of those shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
---- The Plan Administrator may, in its discretion, provide the
holder of the Non-Statutory Option or the unvested shares with the
election to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of Common
Stock previously acquired by such individual (other than in
connection with the option exercise or share vesting triggering the
Taxes) with an aggregate Fair Market Value equal to the percentage of
the Taxes incurred in connection with such option exercise or share
vesting (not to exceed one hundred percent (100%)) designated by the
holder.
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IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Discretionary Option Grant and Stock Issuance Programs of this
Plan became effective immediately upon adoption of the Plan by the Board on
March 23, 1995 (the "Plan Effective Date"). The Plan was approved by the
Corporation's shareholders on April 12, 1995. On December 9, 1995, the Board
approved an increase of 600,000 shares (which number reflects the 1-for-3
reverse stock split that was effected immediately prior to the consummation of
the initial public offering of the Common Stock) in the aggregate number of
shares issuable under the Plan; such increase was approved by the Corporation's
shareholders on December 19, 1995. The Automatic Option Grant Program of this
Plan became effective on the Automatic Option Grant Program Effective Date. The
Plan was amended by the Board on March 16, 1996 to implement the Director Fee
Option Grant Program, which amendment was approved by the Corporation's
shareholders at the 1996 Annual Stockholders Meeting. On March 19, 1997, the
Board approved an increase of 500,000 shares in the aggregate number of shares
issuable under the Plan, and on April 23, 1997, the Board approved a change in
the aggregate number of shares of Common Stock for which any one individual
participating in the Plan may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances, from a limitation of
250,000 shares over the term of the Plan, to an annual limitation not in excess
of 50% of the total number of shares for which stock options, separately
exercisable stock appreciation rights and direct stock issuances may be granted
over the term of the Plan. Both of such amendments became effective on April 23,
1997, and were approved by the Corporation's shareholders at the 1997 Annual
Stockholders Meeting. On April 16, 1999, the Board approved an increase of
495,000 shares in the aggregate number of shares issuable under the Plan and an
increase in the number of shares issuable to Eligible Directors under the annual
grant provisions of the Automatic Option Grant Program from 3,333 to 10,000
shares. Both of these changes became effective on June 15, 1999, upon their
approval by the Corporation's shareholders at the 1999 Annual Stockholders
Meeting. On April 17, 2000, the Board approved an increase of 690,000 shares in
the aggregate number of shares issuable under the Plan. This change became
effective on June 26, 2000, upon its approval by the Corporation's shareholders
at the 2000 Annual Stockholders Meeting. On March 21, 2001, the Board approved
an increase of 700,000 shares in the aggregate number of shares issuable under
the Plan. This change became effective on June 20, 2001, upon its approval by
the Corporation's shareholders at the 2001 Annual Stockholders Meeting. On April
10, 2002, the Board approved an increase of 1,200,000 shares in the aggregate
number of shares issuable under the Plan. This change became effective on June
25, 2002, upon its approval by the Corporation's shareholders at the 2002 Annual
Stockholders Meeting.
B. Each stock option grant outstanding under the Predecessor Plans
immediately prior to the Plan Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such option
shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.
However, the Plan Administrator shall have complete discretion to extend, under
such circumstances as it may deem appropriate, one or more provisions of this
Plan to any or all of the stock options which are incorporated into this Plan
from the Predecessor Plans but which do not otherwise contain such provisions.
-26-
C. No further option grants or stock issuances shall be made under the
Predecessor Plans from and after the Plan Effective Date.
D. The Plan shall terminate upon the earlier of (i) February 28, 2005
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or stock appreciation
rights granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
option grants or share issuances.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be used
for general corporate purposes.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the
Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
VIII. CHANGE OF CONTROL/CORPORATE TRANSACTION
Notwithstanding any other provision of the Plan to the contrary, in
the event of a Corporate Transaction or a Change in Control, the Plan
Administrator shall not have the right to take any actions described in the
Plan, nor shall any provisions of the Plan be operative, if such actions or
provisions would make the Corporate Transaction or Change in Control ineligible
for pooling of interests accounting treatment or would make the Corporate
Transaction or Change in Control ineligible for desired tax treatment if, in the
absence of such actions or provisions, the Corporate Transaction or Change in
Control would qualify for such treatment and the Corporation intends to use such
treatment with respect to the Corporate Transaction or Change in Control.
-27-
IX. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan may
not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
B. The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the Commonwealth of
Pennsylvania as such laws are applied to contracts entered into and performed in
such Commonwealth.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
-28-
Appendix B
NEOSE TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Neose Technologies, Inc. by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret
and construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed 150,000 shares.
B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and class of securities issuable under the Plan,
(ii) the maximum number and class of securities purchasable per Participant on
any one Purchase Date and (iii) the number and class of securities and the price
per share in effect under each outstanding purchase right in order to prevent
the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date. The initial offering period shall commence at the Effective Time and
terminate on the last business day in January 1998. The next offering period
shall commence on the first business day in February 1998, and subsequent
offering periods shall commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of one or more
successive Purchase Periods. Purchase Periods shall begin on the first business
day in February and August each year and terminate on the last business day in
the following July and January, respectively, each year. However, the first
Purchase Period under the initial offering period shall commence at the
Effective Time and terminate on the last business day in July 1996.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee at the Effective Time
may enter an offering period under the Plan on the start date of any Purchase
Period within that offering period, provided he or she remains an Eligible
Employee on such start date.
B. Each individual who first becomes an Eligible Employee after the
Effective Time may enter an offering period under the Plan on the start date of
any Purchase Period following his or her completion of one (1) month of Service,
provided he or she remains an eligible Employee on such start date.
C. The date an individual enters the offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization form) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock under the Plan may be any multiple of one
percent (1%) of the Base Salary paid to the Participant during each Purchase
Period within that offering period, up to a maximum of ten percent (10%). The
deduction rate so authorized shall continue in effect for the remainder of the
offering period, except to the extent such rate is changed in accordance with
the following guidelines:
(i) The Participant may, at any time during the offering
period, reduce his or her rate of payroll deduction to become effective
as soon as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one
(1) such reduction per Purchase Period.
(ii) The Participant may, prior to the commencement of any new
Purchase Period within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the ten percent (10%)
maximum) shall become effective as of the start date of the Purchase
Period following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The
-2-
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of
the Participant's purchase right in accordance with the provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
VII. PURCHASE RIGHTS
A. Grant of Purchase Right. A Participant shall be granted a separate
-----------------------
purchase right for each offering period in which he or she participates. The
purchase right shall be granted on the Participant's Entry Date into the
offering period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than any Participant whose payroll
deductions have previously been refunded in accordance with the Termination of
Purchase Right provisions below) on each such Purchase Date. The purchase shall
be effected by applying the Participant's payroll deductions for the Purchase
Period ending on such Purchase Date (together with any carryover deductions from
the preceding Purchase Period) to the purchase of shares of Common Stock
(subject to the limitation on the maximum number of shares purchasable per
Participant on any one Purchase Date) at the purchase price in effect for the
Participant for that Purchase Date.
C. Purchase Price. The purchase price per share at which Common Stock
--------------
will be purchased on the Participant's behalf on each Purchase Date within the
offering period shall be equal to eighty-five percent (85%) of the lower of (i)
-----
the Fair Market Value per share of Common Stock on the Participant's Entry Date
into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date. However, for each Participant whose Entry Date is
other than the start date of the offering period, the clause (i) amount shall in
no
-3-
event be less than the Fair Market Value per share of Common Stock on the start
date of that offering period.
D. Number of Purchasable Shares. The number of shares of Common Stock
----------------------------
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of shares obtained by dividing the amount collected from the
Participant through payroll deductions during the Purchase Period ending with
that Purchase Date (together with any carryover deductions from the preceding
Purchase Period) by the purchase price in effect for the Participant for that
Purchase Date. However, the maximum number of shares of Common Stock purchasable
per Participant on any one Purchase Date shall not exceed 1,000 shares, subject
to periodic adjustments in the event of certain changes in the Corporation's
capitalization.
E. Excess Payroll Deductions. Any payroll deductions not applied to the
-------------------------
purchase of Common Stock by reason of the limitation on the maximum number of
shares purchasable by the Participant on the Purchase Date shall be promptly
refunded.
F. Termination of Purchase Right. The following provisions shall govern
-----------------------------
the termination of outstanding purchase rights:
(i) A Participant may, at any nine prior to the next
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the terminated
purchase right. Any payroll deductions collected during the Purchase
Period in which such termination occurs shall, at the Participant's
election, be immediately refunded or held for the purchase of shares on
the next Purchase Dare. If no such election is made at the time such
purchase right is terminated, then the payroll deductions collected
with respect to the terminated right shall be refunded as soon as
possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted. In
order to resume participation in any subsequent offering period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled Entry
Dale into that offering period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Period in which the
purchase right so terminates shall, at the Participant's election, be
immediately refunded or held for the purchase of shares on the next
Purchase Date. If no such election is made at the time such purchase
right is terminated, then the payroll deductions collected with respect
to the terminated right shall be refunded as soon as possible.
(iv) Should the Participant cease to remain in active service
by reason of an approved unpaid leave of absence, then the Participant
shall have the election,
-4-
exercisable up until the last business day of the Purchase Period in
which such leave commences, to (a) withdraw all the payroll deductions
collected during such Purchase Period or (b) have such funds held for
the purchase of shares at the end of such Purchase Period. In no event,
however, shall any further payroll deductions be collected from the
Participant during such leave. Upon the Participant's return to active
service, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began.
G. Corporate Transaction. Each outstanding purchase right shall
---------------------
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Period in which such Corporate Transaction occurs to the
purchase of shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
-----
Common Stock on the Participant's Entry Date into the offering period in which
such Corporate Transaction occurs or (ii) the Fair Market Value per share of
Common Stock immediately prior to the effective date of such Corporate
Transaction. However, the applicable limitation on the number of shares of
Common Stock purchasable per Participant shall continue to apply to any such
purchase, and the clause (i) amount above shall not, for any Participant whose
Entry Date for the offering period is other than the start date of that offering
period, be less than the Fair Market Value per share of Common Stock on such
start date.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice, have
the right to terminate their outstanding purchase rights prior to the effective
date of the Corporate Transaction.
H. Proration of Purchase Rights. Should the total number of shares of
----------------------------
Common Stock which are to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. During the Participant's lifetime, the purchase right
-------------
shall be exercisable only by the Participant and shall not be assignable or
transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder rights
------------------
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the
-5-
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value of such stock on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations, the following
provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Dare during the offering period on which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire Common Stock under one (1) or more
other purchase rights at a rate equal to Twenty-Five Thousand Dollars
($25,000) worth of Common Stock (determined on the basis of the Fair Market
Value of such stock on the date or dates of grant) for each calendar year
such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Period, then the payroll
deductions which the Participant made during that Purchase Period with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on December 6, 1995 and shall become
effective at the Effective Time, provided no purchase rights granted under the
--------
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect and all sums collected from Participants during
the initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate upon the
earliest of (i) the last business day in January 2006, (ii) the date on which
all shares available for issuance under the Plan shall have been sold pursuant
to purchase rights exercised under the Plan or (iii) the date on which all
purchase rights are exercised in connection with a Corporate Transaction.
-6-
No further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following its termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at
any time to become effective immediately following the close of any Purchase
Period. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasab1e under the Plan, or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Pennsylvania without resort to that State's conflict-of-laws rules.
-7-
SCHEDULE A
Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------
Neose Technologies, Inc.
APPENDIX
The following definitions shall be in effect under the Plan:
A. Base Salary shall mean the regular base salary paid to a Participant by
-----------
one or more Participating Companies during such individual's period of
participation in the Plan, plus any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program now or hereafter established by the Corporation or
any Corporate Affiliate. The following items of compensation shall not be
included in Base Salary: (i) all overtime payments, bonuses, commissions (other
than those functioning as base salary equivalents), profit-sharing distributions
and other incentive-type payments and (ii) any and all contributions (other than
Code Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate under any employee benefit
or welfare plan now or hereafter established.
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock
------------
E. Corporate Affiliate shall mean any parent or subsidiary corporation of
-------------------
the Corporation (as determined in accordance with Code Section 424), whether now
existing or subsequently established.
F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation.
G. Corporation shall mean Neose Technologies, Inc., a Delaware corporation,
-----------
and any corporate successor to all or substantially all of the assets or voting
stock of Neose Technologies, Inc. which shall by appropriate action adopt the
Plan.
H. Effective Time shall mean the time at which the Underwriting Agreement
--------------
is executed and finally priced. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty
(20) hours of service per week for more than five (5) months per calendar year
for earnings considered wages under Code Section 3401(a).
J. Entry Date shall mean the date an Eligible Employee first commences
----------
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Time.
K. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of the initial offering period which begins at
the Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.
L. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
M. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
N. Participating Corporation shall mean the Corporation and such Corporate
-------------------------
Affiliate or Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Corporations in the Plan as of the Effective Time are listed in attached
Schedule A.
O. Plan shall mean the Corporation's Employee Stock Purchase Plan, as set
----
forth in this document.
P. Plan Administrator shall mean the committee of two (2) or more Board
------------------
members appointed by the Board to administer the Plan.
Q. Purchase Date shall mean the last business day of each Purchase Period.
-------------
The initial Purchase Date shall be July 31, 1996.
R. Purchase Period shall mean each successive period within the offering
---------------
period at the end of which there shall be purchased shares of Common Stock on
behalf of each Participant.
S. Service shall mean an individual's performance of services for the
-------
Corporation or any Corporate Affiliate as an employee, subject to the control
and direction of the employer entity as to both the work to be performed and the
manner and method of performance.
T. Stock Exchange shall mean either the American Stock Exchange or the New
--------------
York Stock Exchange.
U. Underwriting Agreement shall mean the agreement between the Corporation
----------------------
and the underwriter or underwriters managing the initial public offering of the
Common Stock.
Neose Technologies, Inc.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 25, 2001
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned stockholder of Neose Technologies, Inc. hereby appoints C. Boyd
Clarke, President and Chief Executive Officer, and A. Brian Davis, Acting Chief
Financial Officer, and each of them, with full power of substitution, proxies to
vote the shares of stock that the undersigned could vote if personally present
at the Annual Meeting of Stockholders of Neose Technologies, Inc. to be held at
the Company's headquarters at 102 Witmer Road, Horsham, PA 19044, on June 25,
2002, at 1:00 P.M. (Eastern Daylight Time), or any adjournment thereof.
(Continued and to be signed on reverse side)
Please date, sign and mail
your proxy card back as soon as
possible:
Annual Meeting of Stockholders
NEOSE TECHNOLOGIES, INC.
June 25, 2002
Please Detach and Mail in the Envelope Provided
------------------------------------------------------------------------
A [X] Please mark your votes as in this example.
1. ELECTION FOR all nominees WITHHOLD
OF at right (except as AUTHORITY
DIRECTORS marked to the to vote for all
contrary below) nominees at right
[_] [_]
INSTRUCTION: To withhold authority to vote for
an individual nominee, strike a line through
that nominee's name in the list at right.
NOMINEES: Stephen A. Roth
C. Boyd Clarke
William F. Hamilton
Douglas J. MacMaster, Jr.
P. Sherrill Neff
Mark H. Rachesky
Lowell E. Sears
Elizabeth Wyatt
2. PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO THE NEOSE TECHNOLOGIES, INC.
AMENDED AND RESTATED 1995 STOCK OPTIONS/STOCK ISSUANCE PLAN (THE "AMENDED PLAN")
TO INCREASE BY 1,150,000 SHARES THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE AMENDED PLAN.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO OUR EMPLOYEE STOCK PURCHASE
PLAN TO INCREASE BY 50,000 SHARES THE NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED UNDER THE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND THE RELATED PROXY STATEMENT.
Signature_____________________________ Dated:__________
______________________________________ Dated:__________
SIGNATURE IF HELD JOINTLY
Note: Please date and sign exactly as your name appears on the envelope in which
this material was mailed. If shares are held jointly, each stockholder should
sign. Executors, administrators, trustees, etc. should use full title, and if
more than one, all should sign. If the stockholder is a corporation, please sign
full corporate name by an authorized officer. If the stockholder is a
partnership, please sign full partnership name by an authorized person.