As
filed
with the Securities and Exchange Commission on November 7, 2006
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________
FORM
S-8
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________
DISCOVERY
LABORATORIES, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
94-3171943
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
2600
Kelly Road, Suite 100, Warrington, Pennsylvania
|
18976-3622
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Discovery
Laboratories, Inc. Amended and Restated 1998 Stock Incentive Plan
(Full
title of the plan)
David
L.
Lopez, C.P.A., Esq.
Executive
Vice President, General Counsel
Discovery
Laboratories, Inc.
2600
Kelly Road, Suite 100
Warrington,
Pennsylvania 18976-3622
(215)
488-9300
(Name,
address and telephone number of agent for service)
Copies
to:
Ira
L.
Kotel, Esq.
Dickstein
Shapiro LLP
1177
Avenue of the Americas, 47th Floor
New
York,
New York 10036-2714
(212)
277-6500
CALCULATION
OF REGISTRATION FEE
|
Title
of Securities
to
be Registered
|
Amount
to be
Registered(1)
|
Proposed
Maximum Offering
Price
Per
Share(2)
|
Proposed
Maximum
Aggregate
Offering
Price(2)
|
Amount
of
Registration
Fee(1)(2)
|
|
Common
stock, $.001 par value
|
1,200,000
|
$2.29
|
$2,748,000
|
$294.04
|
(1)
Represents additional shares of common stock, par value $0.001 per share,
issuable under the Amended and Restated 1998 Stock Incentive Plan, as a result
of the amendment of such plan to increase the number of shares issuable under
such plan from 12,570,000 to 13,770,000. This Registration Statement shall
also
cover any additional shares of common stock which become issuable under the
Discovery Laboratories, Inc. Amended and Restated 1998 Stock Incentive Plan
by
reason of any stock dividend, stock split, recapitalization or other similar
transaction effected without the registrant's receipt of consideration, which
results in an increase in the number of the outstanding shares of registrant's
common stock.
(2)
Pursuant to paragraphs (c) and (h) of Rule 457 of the Securities Act of 1933,
as
amended, the proposed maximum offering price per share of such shares of
common
stock is estimated solely for the purpose of determining the registration
fee
and is based upon the average of the high and low prices per share of the
registrant's shares of common stock reported on The Nasdaq Global Market
on
November 3, 2006.
REGISTRATION
OF ADDITIONAL SECURITIES
This
registration statement is being filed pursuant to General Instruction
E of Form
S-8 under the Securities Act of 1933, as amended, to register 1,200,000
additional shares of our common stock, par value $0.001 per share, issuable
under the Amended and Restated 1998 Stock Incentive Plan (the “Plan” attached
hereto as Exhibit 4.1), as a result of an amendment to the Plan increasing
the
number of shares of common stock available for issuance thereunder from
12,570,000 shares to 13,770,000 shares (the “Plan Amendment”). The Plan
Amendment was approved by the requisite vote of stockholders at the Company’s
Annual Meeting of Stockholders held on June 8, 2006. The Company previously
registered shares of its common stock for issuance under the Plan on
registration statements on Form S-8 filed with the Securities and Exchange
Commission on July 24, 1998 (File No. 333-59945), March 31, 2000 (File
No.
333-33900), February 20, 2001 (File No. 333-55900), August 13, 2001 (File
No.
333-67422), October 30, 2002 (File No. 333-100824), September 30, 2003
(File No.
333-109274), June 8, 2004 (File No. 333-116268) and August 23, 2005 (File
No. 333-127790). Pursuant to General Instruction E to Form S-8, the
contents of such registration statements, including all exhibits thereto
as
applicable, are incorporated herein by reference.
All
documents subsequently filed by the Company pursuant to Sections 13(a),
13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior
to the
filing of a post-effective amendment which indicates that all securities
offered
have been sold or which deregisters all such securities then remaining
unsold,
shall be deemed to be incorporated by reference herein and to be part
hereof
from the date of filing of such documents. Any statement contained herein
or in
a document incorporated or deemed to be incorporated by reference herein
shall
be deemed to be modified or superseded for purposes of this registration
statement to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any such
statement so modified or superseded shall not be deemed, except as so
modified
or superseded, to constitute a part of this registration statement.
EXHIBITS
|
Exhibit
No.
|
Description
|
Method
of Filing
|
||
|
4.1
|
Amended
and Restated 1998 Stock Incentive Plan
|
Filed
herewith.
|
||
|
5.1
|
Opinion
of Dickstein Shapiro LLP, legal counsel.
|
Filed
herewith.
|
||
|
23.1
|
Consent
of Dickstein Shapiro LLP (included in its opinion filed as Exhibit
5.1 to
this registration statement).
|
Filed
herewith.
|
||
|
23.2
|
Consent
of Ernst & Young LLP, independent registered public accounting
firm.
|
Filed
herewith.
|
||
|
24.1
|
Powers
of Attorney (included in signature page to this registration
statement).
|
Filed
herewith.
|
2
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-8 and has duly caused this registration statement to be
signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of
Warrington, Commonwealth of Pennsylvania on this 4th day of November, 2006.
|
DISCOVERY
LABORATORIES, INC.
|
|
|
(Registrant)
|
|
|
By:
/s/ Robert J. Capetola,
Ph.D.
|
|
|
Robert J. Capetola, Ph.D.
|
|
|
President and Chief Executive
Officer
|
POWER
OF ATTORNEY
We,
the
undersigned officers and directors of Discovery Laboratories, Inc., and
each of
us, do hereby constitute and appoint each of Robert J. Capetola, Ph.D.,
and
David L. Lopez, CPA., Esq., or any of them, each acting alone, his true
and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to do any and all acts and things in our name, place and
stead,
in any and all capacities, in connection with this registration statement
on
Form S-8 under the Securities Act of 1933, as amended, or any registration
statement for the same offering that is to be effective upon filing under
the
Securities Act of 1933, as amended, including, without limitation, to sign
for
us or any of us in our names in the capacities indicated below any and
all
amendments or supplements to this registration statement, including any
and all
stickers and post-effective amendments to the registration statement, and
to
sign any and all additional registration statements relating to the same
offering of securities as this registration statement that are filed pursuant
to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the
same,
with all exhibits thereto, and other documents in connection therewith,
with the
Securities and Exchange Commission and any applicable securities exchange
or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each
and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do
in
person, hereby ratifying and confirming all that said attorneys-in-fact
and
agents, or their substitutes or substitute, may lawfully do or cause to
be done
by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities indicated on
the
dates indicated.
|
Signature
|
Name
& Title
|
Date
|
||
|
/s/
Robert J. Capetola
|
Robert
J. Capetola, Ph.D.
President,
Chief Executive Officer and Director
|
November
3, 2006
|
||
|
/s/
John G. Cooper
|
John
G. Cooper
Executive
Vice President and Chief Financial Officer
|
November
2, 2006
|
||
|
/s/Kathleen
A. McGowan
|
Kathleen
A. McGowan
Controller
(Principal Accounting Officer)
|
November
2, 2006
|
||
|
|
Herbert
McDade, Jr.
Chairman
of the Board of Directors
|
|
||
|
/s/
W. Thomas Amick
|
W.
Thomas Amick
Director
|
November
4, 2006
|
||
|
/s/
Max Link
|
Max
Link, Ph.D.
Director
|
November
2, 2006
|
||
|
/s/
Antonio Esteve
|
Antonio
Esteve, Ph.D.
Director
|
November
3, 2006
|
||
|
/s/
Marvin E. Rosenthale
|
Marvin
E. Rosenthale, Ph.D.
Director
|
November
2, 2006
|
3
INDEX
TO EXHIBITS
|
Exhibit
No.
|
Description
|
Method
of Filing
|
||
|
4.1
|
Amended
and Restated 1998 Stock Incentive Plan
|
Filed
herewith.
|
||
|
5.1
|
Opinion
of Dickstein Shapiro LLP, legal counsel.
|
Filed
herewith.
|
||
|
23.1
|
Consent
of Dickstein Shapiro LLP (included in its opinion filed as Exhibit
5.1 to
this registration statement).
|
Filed
herewith.
|
||
|
23.2
|
Consent
of Ernst & Young LLP, independent registered public accounting
firm.
|
Filed
herewith.
|
||
|
24.1
|
Powers
of Attorney (included in signature page to this registration
statement).
|
Filed
herewith.
|
Exhibit
4.1
DISCOVERY
LABORATORIES, INC.
AMENDED
AND RESTATED 1998 STOCK INCENTIVE PLAN
June
8,
2006
DISCOVERY
LABORATORIES, INC.
AMENDED
AND RESTATED 1998 STOCK INCENTIVE PLAN
ARTICLE
ONE
GENERAL
PROVISIONS
I. PURPOSE
OF THE PLAN
This
Amended and Restated 1998 Stock Incentive Plan (the "Plan") is intended to
promote the interests of Discovery Laboratories, Inc., a Delaware corporation,
by providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the
Corporation.
The
Plan
amends and restates the Corporation's 1998 Stock Incentive Plan and shall
serve
as the successor to the Corporation's 1995 Stock Option Plan and 1993 Stock
Option Plan (the "Predecessor Plans"). No further option grants shall be
made
under the Predecessor Plans after the Initial Approval Date. All options
outstanding under the Predecessor Plans on the Initial Approval Date are
incorporated into the Plan and shall be treated as outstanding options under
the
Plan. However, each outstanding option so incorporated shall continue to
be
governed solely by the terms of the documents evidencing such option, and
no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to
their
acquisition of shares of Common Stock.
Capitalized
terms shall have the meanings assigned to such terms in the attached
Appendix.
II. STRUCTURE
OF THE PLAN
A. The
Plan
shall be divided into three separate equity programs:
(i) the
Discretionary Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares
of
Common Stock,
(ii) the
Stock
Issuance Program under which eligible persons may, at the discretion of the
Plan
Administrator, be issued shares of Common Stock directly, either through
the
immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary), and
(iii) the
Automatic Option Grant Program under which eligible non-employee board members
shall automatically receive option grants at periodic intervals to purchase
shares of Common Stock.
B. The
provisions of Articles One and Five shall apply to all equity programs under
the
Plan and shall govern the interests of all persons under the Plan.
III. ADMINISTRATION
OF THE PLAN
A. The
Board
shall have authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders but may delegate such
authority to the Primary Committee. Administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons eligible
to
participate in those programs may, at the Board's discretion, be vested in
the
Primary Committee or a Secondary Committee, or the Board may retain the power
to
administer those programs with respect to all such persons.
B. Members
of the Primary Committee or any Secondary Committee shall serve for such
period
of time as the Board may determine and may be removed by the Board at any
time.
The Board may also at any time terminate the functions of any Secondary
Committee and reassume all powers and authority previously delegated to such
committee.
C. Each
Plan
Administrator shall, within the scope of its administrative functions under
the
Plan, have full power and authority (subject to the provisions of the Plan)
to
establish such rules and regulations as it may deem appropriate for 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 options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the
Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction
or
any option or stock issuance thereunder.
D. Service
on the Primary Committee or the Secondary Committee shall constitute service
as
a Board member, and members of each such committee shall accordingly be entitled
to full indemnification and reimbursement as Board members for their service
on
such committee. No member of the Primary Committee or the Secondary Committee
shall be liable for any act or omission made in good faith with respect to
the
Plan or any option grants or stock issuances under the Plan.
IV. ELIGIBILITY
A. The
persons eligible to participate in the Discretionary Option Grant and Stock
Issuance Programs are as follows:
(i) Employees,
(ii) non-employee
members of the Board or the board of directors of any Parent or Subsidiary,
and
(iii) consultants
and other independent advisors who provide services to the Corporation (or
any
Parent or Subsidiary).
B. Each
Plan
Administrator shall, within the scope of its administrative jurisdiction
under
the Plan, have full authority to determine, (i) with respect to the option
grants under the Discretionary Option Grant Program, which eligible persons
are
to receive option grants, the time or times when such option grants are to
be
made, the number of shares to be covered by each such grant, the status of
the
granted option as either an Incentive Option or a Non-Statutory Option, the
time
or times when each option is to become exercisable, the vesting schedule
(if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares
to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration for such shares.
C. The
Plan
Administrator shall have the absolute discretion either to grant options
in
accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
D. Only
non-employee members of the Board shall be eligible to participate in the
Automatic Option Grant Program.
V. STOCK
SUBJECT TO THE PLAN
A. The
stock
issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock reserved for issuance
over
the term of the Plan shall not exceed 13,770,000 shares.
B. No
one
person participating in the Plan may receive options, separately exercisable
stock appreciation rights and direct stock issuances for more than 250,000
shares of Common Stock in the aggregate per calendar year, beginning with
the
1998 calendar year, provided, however, that the Board shall have the absolute
discretion to approve annual aggregate grants in excess of such limitation
in
the event the Board deems any such action to be in accordance with the
Corporation’s general compensation policies with respect to executive
management.
C. Shares
of
Common Stock subject to outstanding options (including options incorporated
into
this Plan from the Predecessor Plans) shall be available for subsequent issuance
under the Plan to the extent those options expire or terminate for any reason
prior to exercise in full. Unvested shares issued under the Plan and
subsequently cancelled or repurchased by the Corporation, at the original
issue
price paid per share, pursuant to the Corporation's repurchase rights under
the
Plan shall be added back to the number of shares of Common Stock reserved
for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under
the
Plan. However, should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting
of a
stock issuance 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 stock issuance,
and not by the net number of shares of Common Stock issued to the holder
of such
option or stock issuance.
D. If
any
change is made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
number and/or class of securities for which any one person may be granted
options, separately exercisable stock appreciation rights and direct stock
issuances under this Plan per calendar year, (iii) the number and/or class
of
securities for which grants are subsequently to be made under the Automatic
Option Grant Program to new and continuing non-employee Board members, (iv)
the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan 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 Plan. 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. OPTION
TERMS
Each
option shall be evidenced by one or more documents in the form approved by
the
Plan Administrator; provided, however, that each such document shall comply
with
the terms specified below. Each document evidencing an Incentive Option shall,
in addition, be subject to the provisions of the Plan applicable to such
options.
A. Exercise
Price.
1. The
exercise price per share shall be fixed by the Plan Administrator but shall
not
be less than one hundred percent (100%) of the Fair Market Value per share
of
Common Stock on the option grant date.
2. The
exercise price shall become immediately due upon exercise of the option and
shall, subject to the provisions of Section I of Article Five and the documents
evidencing the option, be payable in one or more of the forms specified
below:
(i) cash
or
check made payable to the Corporation,
(ii) shares
of
Common Stock held for the requisite period necessary to avoid a charge to
the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or
(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 to (a) a Corporation-designated brokerage
firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment
taxes
required to be withheld by the Corporation by reason of such exercise and
(b)
the Corporation to deliver the certificates for the purchased shares directly
to
such brokerage firm in order to complete the sale.
Except
to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.
B. Exercise
and Term of Options. Each option shall be exercisable at such time or times,
during such period and for such number of shares as shall be determined by
the
Plan Administrator and set forth in the documents evidencing the option.
However, no option shall have a term in excess of ten (10) years measured
from
the option grant date.
C. Effect
of
Termination of Service.
1. The
following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:
(i) Any
option outstanding at the time of the Optionee's cessation of Service for
any
reason shall remain exercisable for such period of time thereafter as shall
be
determined by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the expiration
of the
option term.
(ii) Any
option exercisable in whole or in part by the Optionee at the time of death
may
be subsequently 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) During
the applicable post-Service exercise period, the option may not be exercised
in
the aggregate for more than the number of vested shares for which the option
is
exercisable on the date of the Optionee's cessation of Service. Upon the
expiration of the applicable exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be outstanding
for
any vested shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not otherwise at
that
time exercisable for vested shares.
(vi) Should
the Optionee's Service be terminated for Misconduct, then all outstanding
options held by the Optionee shall terminate immediately and cease to remain
outstanding.
2. The
Plan
Administrator shall have complete discretion, exercisable either at the time
an
option is granted or at any time while the option remains outstanding,
to:
(i) extend
the period of time for which the option is to remain exercisable following
the
Optionee's cessation of Service from the limited exercise period otherwise
in
effect for that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the option
term, and/or
(ii) permit
the option to be exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of Common Stock for
which
such option is exercisable at the time of the Optionee's cessation of Service
but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
D. Stockholder
Rights. The holder of an option shall have no stockholder rights with respect
to
the shares subject to the option until such person shall have exercised the
option, paid the exercise price and become a holder of record of the purchased
shares.
E. Repurchase
Rights. The Plan Administrator shall have the discretion to grant options
which
are exercisable for unvested shares of Common Stock. Should the Optionee
cease
Service while holding such unvested shares, the Corporation shall have the
right
to repurchase, at the exercise price paid per share, any or all of those
unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase
right.
F. Limited
Transferability of Options. During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not be assignable
or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person
or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same
as
those in effect for the option immediately prior to such assignment and shall
be
set forth in such documents issued to the assignee as the Plan Administrator
may
deem appropriate.
II. INCENTIVE
OPTIONS
The
terms
specified below shall be applicable to all Incentive Options. Except as modified
by the provisions of this Section II, all the provisions of Articles One,
Two
and Five shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.
A. Eligibility.
Incentive Options may only be granted to Employees.
B. Dollar
Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or
more
options granted to any Employee under the Plan (or any other option plan
of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first
time
in the same calendar year, the foregoing limitation on the exercisability
of
such options as Incentive Options shall be applied on the basis of the order
in
which such options are granted.
C. 10%
Stockholder. If any Employee to whom an Incentive Option is granted is a
10%
Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock
on
the option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.
III. CORPORATE
TRANSACTION/CHANGE IN CONTROL
A. In
the
event of any Corporate Transaction, each outstanding option shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect
to the
total number of shares of Common Stock at the time subject to such option
and
may be exercised for any or all of those shares as fully-vested shares of
Common
Stock. However, an outstanding option shall not so accelerate if and to the
extent: (i) such option is, in connection with the Corporate Transaction,
either
to be assumed by the successor corporation (or parent thereof) or to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation (or parent thereof), (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves
the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares or (iii) the acceleration
of
such option is subject to other limitations imposed by the Plan Administrator
at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All
outstanding repurchase rights shall also terminate automatically, and the
shares
of Common Stock subject to those terminated rights shall immediately vest
in
full, in the event of any Corporate Transaction, except to the extent: (i)
those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator
at
the time the repurchase right is issued.
C. The
Plan
Administrator shall have the discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration of one or more outstanding options
upon
the occurrence of a Corporate Transaction, whether or not those options are
to
be assumed or replaced in the Corporate Transaction.
D. Each
option which is assumed in connection with a Corporate Transaction shall
be
appropriately adjusted, immediately after such Corporate Transaction, to
apply
to the number and class of securities which would have been issuable to the
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i)
the
exercise price payable per share under each outstanding option, provided
the
aggregate exercise price payable for such securities shall remain the same,
(ii)
the maximum number and/or class of securities available for issuance over
the
remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the
Plan
per calendar year.
E. Notwithstanding
Section III.A. of this Article Two, 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 the Discretionary Option
Grant Program upon the occurrence of a Corporate Transaction, whether or
not
those options are to be assumed or replaced in the Corporate Transaction.
In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by
the
Optionee at the time of such Corporate Transaction shall immediately terminate,
and the shares subject to those terminated repurchase rights shall accordingly
vest in full, even in the event the options are to be assumed.
F. The
Plan
Administrator shall have full power and 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 the Discretionary Option Grant Program in the event the Optionee's
Service
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and
do not
otherwise accelerate. Any options so accelerated shall remain exercisable
for
fully-vested shares until the earlier of (i) the expiration of the option
term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator
may
provide that one or more of the Corporation's outstanding repurchase rights
with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
G. The
Plan
Administrator shall have full power and 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 the Discretionary Option Grant Program upon (i) a Change in Control
or
(ii) the termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Optionee's cessation
of
Service. In addition, the Plan Administrator may provide that one or more
of the
Corporation's outstanding repurchase rights with respect to shares held by
the
Optionee at the time of such Change in Control or Involuntary Termination
shall
immediately terminate, and the shares subject to those terminated repurchase
rights shall accordingly vest in full.
H. The
portion of any Incentive Option accelerated in connection with a Corporate
Transaction or Change in Control shall remain exercisable as an Incentive
Option
only to the extent the applicable One Hundred Thousand Dollar limitation
is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under
the
Federal tax laws.
I. The
outstanding options shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer
all
or any part of its business or assets.
IV. CANCELLATION
AND REGRANT OF OPTION -- OMITTED
V. STOCK
APPRECIATION RIGHTS
A. The
Plan
Administrator shall have full power and authority to grant to selected Optionees
tandem stock appreciation rights and/or limited stock appreciation
rights.
B. The
following terms shall govern the grant and exercise of tandem stock appreciation
rights:
(i) One
or
more Optionees may be granted the right, exercisable upon such terms as the
Plan
Administrator may establish, to elect between the exercise of the underlying
option for shares of Common Stock and the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the excess
of (a)
the Fair Market Value (on the option surrender date) of the number of shares
in
which the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (b) the aggregate exercise price payable
for
such shares.
(ii) No
such
option surrender shall be effective unless it is approved by the Plan
Administrator, either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the distribution to which
the Optionee shall be entitled may be made in shares of Common Stock valued
at
Fair Market Value on the option surrender date, in cash, or partly in shares
and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
(iii) If
the
surrender of an option is not approved by the Plan Administrator, then the
Optionee shall retain whatever rights the Optionee had under the surrendered
option (or surrendered portion thereof) on the option surrender date and
may
exercise such rights at any time prior to the later of (a) five (5) business
days after the receipt of the rejection notice or (b) the last day on which
the
option is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised more
than
ten (10) years after the option grant date.
C. The
following terms shall govern the grant and exercise of limited stock
appreciation rights:
(i) One
or
more Section 16 Insiders may be granted limited stock appreciation rights
with
respect to their outstanding options.
(ii) Upon
the
occurrence of a Hostile Take-Over, each individual holding one or more options
with such a limited stock appreciation right shall have the unconditional
right
(exercisable for a thirty (30)-day period following such Hostile Take-Over)
to
surrender each such option to the Corporation, to the extent the option is
at
the time exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price of
the
shares of Common Stock which are at the time vested under each surrendered
option (or surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five
(5)
days following the option surrender date.
(iii) The
balance of the option (if any) shall remain outstanding and exercisable in
accordance with the documents evidencing such option.
ARTICLE
THREE
STOCK
ISSUANCE PROGRAM
I. STOCK
ISSUANCE TERMS
Shares
of
Common Stock may be issued under the Stock Issuance Program through direct
and
immediate issuances without any intervening option grants. Each such stock
issuance shall be evidenced by a Stock Issuance Agreement which complies
with
the terms specified below.
A. Purchase
Price.
1. The
purchase price per share shall be fixed by the Plan Administrator, but shall
not
be less than one hundred percent (100%) of the Fair Market Value per share
of
Common Stock on the issuance date.
2. Subject
to the provisions of Section I of Article Five, shares of Common Stock may
be
issued under the Stock Issuance Program for any of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash
or
check made payable to the Corporation, or
(ii) past
services rendered to the Corporation (or any Parent or Subsidiary).
B. Vesting
Provisions.
1. Shares
of
Common Stock issued under the Stock Issuance Program may, in the discretion
of
the Plan Administrator, be fully and immediately vested upon issuance or
may
vest in one or more installments over the Participant's period of Service
or
upon attainment of specified performance objectives.
2. Any
new,
substituted or additional securities 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 the Participant's unvested shares of Common Stock
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 shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii)
such
escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The
Participant shall have full stockholder rights with respect to any shares
of
Common Stock issued to the Participant under the Stock Issuance Program,
whether
or not the Participant's 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.
4. Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock issued under the Stock Issuance Program or should
the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered
to
the Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those 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 indebtedness),
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 the
surrendered shares.
5. The
Plan
Administrator may in its discretion waive the surrender and cancellation
of one
or more unvested shares of Common Stock which would otherwise occur upon
the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares 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 the Stock Issuance
Program
shall terminate automatically, and all the shares of Common Stock subject
to
those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent (i) those repurchase rights are
to
be assigned to the successor corporation (or parent thereof) in connection
with
such Corporate Transaction or (ii) such accelerated vesting is precluded
by
other limitations imposed in the Stock Issuance Agreement.
B. The
Plan
Administrator shall have the discretion, exercisable either at the time the
unvested shares are issued or at any time while the Corporation's repurchase
right remains outstanding, to provide for the automatic termination of one
or
more of those outstanding rights and the immediate vesting of the shares
of
Common Stock subject to such rights upon the occurrence of a Corporate
Transaction.
C. The
Plan
Administrator shall have the discretionary authority, exercisable either
at the
time the unvested shares are issued or any time while the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part,
and
the shares of Common Stock subject to those terminated rights shall immediately
vest, in the event the Participant's Service should terminate by reason of
an
Involuntary Termination within a designated period (not to exceed eighteen
(18)
months) following the effective date of any Corporate Transaction in which
those
repurchase rights are assigned to the successor corporation (or parent
thereof).
D. The
Plan
Administrator shall have the discretionary authority, exercisable either
at the
time the unvested shares are issued or any time while the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part,
and
the shares of Common Stock subject to those terminated rights shall immediately
vest upon (i) a Change in Control or (ii) the termination of the Participant's
Service by reason of an Involuntary Termination within a designated period
(not
to exceed eighteen (18) months) following the effective date of such Change
in
Control.
III. SHARE
ESCROW/LEGENDS
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 those unvested shares.
ARTICLE
FOUR
AUTOMATIC
OPTION GRANT PROGRAM
I. OPTION
TERMS
A. Grant
Dates. Option grants shall be made on the dates specified below:
1. Each
individual who is first elected or appointed as a non-employee Board member
at
any time after the Plan Effective Date shall automatically be granted, on
the
date of such initial election or appointment, a Non-Statutory Option to purchase
40,000 shares of Common Stock, provided that individual has not previously
been
a director of or in the employ of the Corporation or any Parent or
Subsidiary.
2. On
the
date of the 1998 Annual Meeting (the Stockholder Approval Date) and on the
date
of each Annual Stockholders Meeting held after such date, each individual
who is
to continue to serve as an Eligible Director, whether or not that individual
is
standing for re-election to the Board at that particular Annual Meeting,
shall
automatically be granted a Non-Statutory Option to purchase 10,000 shares
of
Common Stock, provided that such amount shall be increased to 20,000 shares
for
grants on or after the date of the 2000 Annual Meeting, provided further,
that
such amount shall be increased to 25,000 shares for grants on or after the
date
of the 2005 Annual Meeting, and such amount shall be further increased to
30,000
shares for grants on or after the date of the 2006 Annual Meeting, with respect
to each Annual Stockholders Meeting, such individual has served as a
non-employee board member for at least six (6) months. There shall be no
limit
on the number of such 10,000, 20,000, 25,000 or 30,000-share option grants
any
one Eligible Director may receive over his or her period of Board Service,
and
non-employee Board members who have previously been a director of or in the
employ of the Corporation (or any Parent or Subsidiary) shall be eligible
to
receive one or more such annual option grants over their period of continued
Board Service.
B. Exercise
Price.
1. The
exercise price per share shall be equal to the Fair Market Value per share
of
Common Stock on the option grant date.
2. The
exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment
of
the exercise price for the purchased shares must be made on the Exercise
Date.
C. Option
Term. Each option shall have a term of ten (10) years measured from the option
grant date.
D. Exercise
and Vesting of Options. Each option shall be immediately exercisable for
any or
all of the option shares. However, any shares purchased under the option
shall
be subject to repurchase by the Corporation, at the exercise price paid per
share, upon the Optionee's cessation of Board Service prior to vesting in
those
shares. With respect to options granted on or after the date of the 1998
annual
stockholders’ meeting, each option shall vest, and the Corporation’s repurchase
right shall lapse, on the first anniversary of the date of grant.
E. Termination
of Board Service. The following provisions shall govern the exercise of any
options held by the Optionee at the time the Optionee ceases to serve as
a Board
member:
(i) The
Optionee (or, in the event of the Optionee's death, the personal representative
of the Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of
descent and distribution) shall have a twelve (12)-month period following
the
date of such cessation of Board Service in which to exercise each such
option.
(ii) During
the twelve (12)-month post-service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of Common
Stock for which the option is exercisable at the time of the Optionee's
cessation of Board Service.
(iii) Should
the Optionee cease to serve as a Board member by reason of death or Permanent
Disability, then all shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month exercise period
following such cessation of Board Service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.
(iv) In
no
event shall the option remain exercisable after the expiration of the option
term. Upon the expiration of the twelve (12)-month post-service exercise
period
or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option
has not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board Service for any reason other than death or
Permanent Disability, terminate and cease to be outstanding to the extent
the
option is not otherwise at that time exercisable for vested shares.
(v) Notwithstanding
anything contained in Subparagraphs (i) through (iv), above, of Paragraph
E of
this Article Four, the Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while
the
option remains outstanding, to:
1. extend
the period of time for which the option is to remain exercisable following
Optionee's cessation of Board Service from the limited exercise period otherwise
in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration
of
the option term, and/or
2. permit
the option to be exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of Common Stock for
which
such option is exercisable at the time of the Optionee's cessation of Service
but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Board
Service.
II. CORPORATE
TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In
the
event of any Corporate Transaction, the shares of Common Stock at the time
subject to each outstanding option but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable for all of the
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of those shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except
to
the extent assumed by the successor corporation (or parent
thereof).
B. In
connection with any Change in Control, the shares of Common Stock at the
time
subject to each outstanding option but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of the Change in Control, become fully exercisable for all of the shares
of
Common Stock at the time subject to such option and may be exercised for
all or
any portion of those shares as fully-vested shares of Common Stock. Each
such
option shall remain exercisable for such fully-vested option shares until
the
expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.
C. Upon
the
occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day
period in which to surrender to the Corporation each of his or her outstanding
automatic option grants. 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 each
surrendered option (whether or not the Optionee is otherwise at the time
vested
in those shares) over (ii) the aggregate exercise price payable for such
shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the
Board
or any Plan Administrator shall be required in connection with such option
surrender and cash distribution.
D. Each
option which is assumed in connection with a Corporate Transaction shall
be
appropriately adjusted, immediately after such Corporate Transaction, to
apply
to the number and class of securities which would have been issuable to the
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for
such
securities shall remain the same.
E. The
grant
of options under the Automatic Option Grant Program shall in no way affect
the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
III. REMAINING
TERMS
The
remaining terms of each option granted under the Automatic Option Grant Program
shall be the same as the terms in effect for option grants made under the
Discretionary Option Grant Program.
ARTICLE
FIVE
MISCELLANEOUS
I. FINANCING
The
Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price under the Discretionary Option Grant Program or the purchase price
of
shares issued under the Stock Issuance Program by delivering a full-recourse,
interest bearing promissory note payable in one or more installments. The
terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. In no event may the maximum credit available to the Optionee
or
Participant exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state
and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share
purchase.
II. TAX
WITHHOLDING
A. The
Corporation's obligation to deliver shares of Common Stock upon the exercise
of
options or the issuance or vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The
Plan
Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan (other
than the options granted or the shares issued under the Automatic Option
Grant
Program) with the right to use shares of Common Stock in satisfaction of
all or
part of the Taxes incurred by such holders in connection with the exercise
of
their options or the vesting of their shares. Such right may be provided
to any
such holder in either or both of the following formats:
Stock
Withholding: The election to have the Corporation withhold, from the shares
of
Common Stock otherwise issuable upon the exercise of such Non-Statutory Option
or the vesting of such shares, a portion of those shares with an aggregate
Fair
Market Value equal to the percentage of the Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
Stock
Delivery: 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 holder (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 (not to exceed one
hundred percent (100%)) designated by the holder.
III. EFFECTIVE
DATE AND TERM OF THE PLAN
A. The
Plan
shall become effective immediately upon the Plan Effective Date. Options
may be
granted under the Discretionary Option Grant or Automatic Option Grant Program
at any time on or after the Plan Effective Date. However, no options granted
under the Plan may be exercised, and no shares shall be issued under the
Plan,
until the Stockholder Approval Date. If the Stockholder Approval Date does
not
occur within twelve (12) months after the Plan Effective Date, then all options
previously granted under this Plan shall terminate and cease to be outstanding,
and no further options shall be granted and no shares shall be issued under
the
Plan.
B. One
or
more provisions of the Plan, including (without limitation) the option/vesting
acceleration provisions of Article Two relating to Corporate Transactions
and
Changes in Control, may, in the Plan Administrator's discretion, be extended
to
one or more options incorporated from the Predecessor Plan on the Stockholder
Approval Date which do not otherwise contain such provisions.
C. The
Plan
shall terminate upon the earliest of (i) March 24, 2008 (ii) the date on
which
all shares available for issuance under the Plan shall have been issued as
fully-vested shares or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such plan termination, all
outstanding option grants and unvested stock issuances shall thereafter continue
to have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.
IV. AMENDMENT
OF THE PLAN
A. The
Board
shall have complete and exclusive power and authority to amend or modify
the
Plan in any or all respects. However, no such amendment or modification shall
adversely affect the rights and obligations with respect to stock options
or
unvested stock issuances at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification. In
addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations.
B. Options
to purchase shares of Common Stock may be granted under the Discretionary
Option
Grant Programs and shares of Common Stock may be issued under the Stock Issuance
Program that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the
date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees
and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease
to
be outstanding.
V. USE
OF
PROCEEDS
Any
cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for general corporate purposes.
VI. REGULATORY
APPROVALS
A. The
implementation of the Plan, the granting of any stock option under the Plan
and
the issuance of any shares of Common Stock (i) upon the exercise of any granted
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted
under
it and the shares of Common Stock issued pursuant to it.
B. No
shares
of Common Stock or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of
any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.
VII. NO
EMPLOYMENT/SERVICE RIGHTS
Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service or Board Service for any period of specific duration
or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by
each,
to terminate such person's Service or Board Service at any time for any reason,
with or without cause.
APPENDIX
The
following definitions shall be in effect under the Plan:
A. Automatic
Option Grant Program shall mean the automatic option grant program in effect
under the Plan.
B. Board
shall mean the Corporation's Board of Directors.
C. Board
Service shall mean the performance of services for the Corporation by a person
in the capacity of a non-employee member of the board of directors.
D. Change
in
Control shall mean a change in ownership or control of the Corporation effected
through either of the following transactions:
(i) the
acquisition, directly or indirectly by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls,
is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power
of
the Corporation's outstanding securities pursuant to a tender or exchange
offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, or
(ii) a
change
in the composition of the Board over a period of thirty-six (36) consecutive
months or less such that a majority of the Board members ceases, by reason
of
one or more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election
as
Board members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.
E. Code
shall mean the Internal Revenue Code of 1986, as amended.
F. Common
Stock shall mean the Corporation's common stock.
G. Corporate
Transaction shall mean either of the following stockholder-approved transactions
to which the Corporation is a party:
(i) a
merger
or consolidation in which securities possessing more than fifty percent (50%)
of
the total combined voting power of the Corporation's outstanding securities
are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the
sale,
transfer or other disposition of all or substantially all of the Corporation's
assets in complete liquidation or dissolution of the Corporation.
H. Corporation
shall mean Discovery Laboratories, Inc., a Delaware corporation, and its
successors.
I. Discretionary
Option Grant Program shall mean the discretionary option grant program in
effect
under the Plan.
J. Eligible
Director shall mean a non-employee Board member who is not a 10%
Stockholder.
K. Employee
shall mean an individual who is in the employ of the Corporation (or any
Parent
or Subsidiary), subject to the control and direction of the employer entity
as
to both the work to be performed and the manner and method of
performance.
L.
Exercise
Date shall mean the date on which the Corporation shall have received
written
notice of the option exercise.
M. 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 SmallCap Market or Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing
selling price per share of Common Stock on the date in question, as such
price
is reported on such 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 deemed equal to 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.
N. Hostile
Take-Over shall mean the acquisition, directly or indirectly, by any person
or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with,
the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant
to a
tender or exchange offer made directly to the Corporation's stockholders
which
the Board does not recommend such stockholders to accept.
O. Incentive
Option shall mean an option which satisfies the requirements of Code Section
422.
P. Initial
Approval Date shall mean June 16, 1998, the date on which the Corporation's
1998
Stock Incentive Plan was initially approved by the stockholders of the
Corporation.
Q. Involuntary
Termination shall mean the termination of the Service of any individual which
occurs by reason of:
(i) such
individual's involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct, or
(ii) Optionee's
voluntary resignation following (A) a change in Optionee's position with
the
Corporation (or Parent or Subsidiary employing Optionee) which materially
reduces Optionee's duties and responsibilities or the level of management
to
which Optionee reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonus under any corporate
performance-based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of Optionee'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 Optionee's consent.
R. Misconduct
shall mean, unless otherwise determined by the Plan Administrator and recorded
in the agreements evidencing the option grant or stock issuance, the commission
of any act of fraud, embezzlement or dishonesty by the Optionee or Participant,
any unauthorized use or disclosure by such person of confidential information
or
trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts
or
omissions which the Corporation (or any Parent or Subsidiary) may consider
as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or
Subsidiary).
S. 1934
Act
shall mean the Securities Exchange Act of 1934, as amended.
T. Non-Statutory
Option shall mean an option not intended to satisfy the requirements of Code
Section 422.
U. Optionee
shall mean any person to whom an option is granted under the Discretionary
Option Grant or Automatic Option Grant Program.
V. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain
of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. Participant
shall mean any person who is issued shares of Common Stock under the Stock
Issuance Program.
X. Permanent
Disability or Permanently Disabled shall mean the inability of the Optionee
or
the Participant to engage in any substantial gainful activity by reason of
any
medically determinable physical or mental impairment expected to result in
death
or to be of continuous duration of twelve (12) months or more. However, solely
for purposes of the Automatic Option Grant Program, Permanent Disability
or
Permanently Disabled shall mean the inability of the non-employee Board member
to perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or
to be
of continuous duration of twelve (12) months or more.
Y. Plan
shall mean the Corporation's Amended and Restated 1998 Stock Incentive Plan,
as
set forth in this document.
Z. Plan
Administrator shall mean the particular entity, whether the Primary Committee,
the Board or the Secondary Committee, which is authorized to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to one
or
more classes of eligible persons, to the extent such entity is carrying out
its
administrative functions under those programs with respect to the persons
under
its jurisdiction.
AA. Plan
Effective Date shall mean March 24, 1998, the date on which the Plan was
adopted
by the Board.
BB. Predecessor
Plans shall mean the Corporation's 1995 Stock Option Plan and 1993 Stock
Option
Plan as in effect immediately prior to the Plan Effective Date
hereunder.
CC. Primary
Committee shall mean the committee of two (2) or more non-employee Board
members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders.
DD. Secondary
Committee shall mean a committee of one (1) or more Board members appointed
by
the Board to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to eligible persons other than Section 16
Insiders.
EE. Section
16 Insider shall mean an officer or director of the Corporation subject to
the
short-swing profit liabilities of Section 16 of the 1934 Act.
FF. Service
shall mean the performance of services for the Corporation (or any Parent
or
Subsidiary) by a person in the capacity of an Employee, a non-employee member
of
the board of directors or a consultant or independent advisor, except to
the
extent otherwise specifically provided in the documents
evidencing
the option grant or stock issuance.
GG. Stock
Exchange shall mean either the American Stock Exchange or the New York Stock
Exchange.
HH. Stockholder
Approval Date shall mean the date on which the Plan is approved by the
Corporation's stockholders.
II Stock
Issuance Agreement shall mean the agreement entered into by the Corporation
and
the Participant at the time of issuance of shares of Common Stock under the
Stock Issuance Program.
JJ. Stock
Issuance Program shall mean the stock issuance program in effect under the
Plan.
KK. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain
of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more
of
the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
LL. Take-Over
Price shall mean the greater of (i) the Fair Market Value per share of Common
Stock on the date the option is surrendered to the Corporation in connection
with a Hostile Take-Over or (ii) the highest reported price per share of
Common
Stock paid by the tender offeror in effecting such Hostile Take-Over. However,
if the surrendered option is an Incentive Option, the Take-Over Price shall
not
exceed the clause (i) price per share.
MM. Taxes
shall mean the Federal, state and local income and employment tax liabilities
incurred by the holder of Non-Statutory Options or unvested shares of Common
Stock in connection with the exercise of those options or the vesting of
those
shares.
NN. 10%
Stockholder shall mean the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
Exhibit
5.1
[Letterhead
of Dickstein Shapiro LLP]
November
7, 2006
Board
of
Directors
Discovery
Laboratories, Inc.
2600
Kelly Road, Suite 100
Warrington,
Pennsylvania 18976-3622
Discovery
Laboratories, Inc.--
Amended
and Restated 1998 Stock Incentive Plan
Ladies
and Gentlemen:
We
have
acted as counsel for Discovery Laboratories, Inc., a Delaware corporation (the
“Company”),
in
connection with the preparation of the Company’s registration statement on Form
S-8, and any amendments thereto (the “Registration
Statement”),
as
filed with the Securities and Exchange Commission (the “Commission”)
under
the Securities Act of 1933, as amended (the “Securities
Act”),
for
the registration under the Securities Act of up to 1,200,000 shares (the
“Shares”)
of the
Company’s common stock, par value $0.001 per share (the “Common
Stock”),
issuable under the Company’s Amended and Restated 1998 Stock Incentive Plan (the
“Plan”).
You
have requested that we furnish our opinion as to matters hereinafter set forth.
In
connection with this opinion, we have examined originals or copies, certified
or
otherwise identified to our satisfaction, of (i) the Company’s Restated
Certificate of Incorporation, as amended; (ii) the Company’s Amended and
Restated By-Laws; and (iii) resolutions adopted by the Company’s Board of
Directors on March 10, 2006. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company and such agreements, certificates of public officials, certificates
of
officers or other representatives of the Company, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein. As to various questions of fact material
to
this opinion, we have also relied upon representations and warranties of the
Company and upon such certificates and other instruments of officers of the
Company and public officials furnished to us by the Company, in each case
without independent investigation or verification of their accuracy.
Discovery
Laboratories, Inc.
November
7, 2006
Page
2
In
our
examination, we have assumed (i) the genuineness of all signatures; (ii) the
authenticity of all documents submitted to us as originals; (iii) the conformity
to original documents of all documents submitted to us as certified, conformed,
photostatic, electronic or facsimile copies and the authenticity of the
originals of such documents; (iv) the authority of all persons signing any
document; (v) the enforceability of all the documents and agreements we have
reviewed in accordance with their respective terms against the parties thereto;
and (vi) the truth and accuracy of all matters of fact set forth in all
certificates and other instruments furnished to us.
Based
upon the foregoing, and subject to the assumptions, qualifications and
limitations set forth herein, we are of the opinion that the Shares offered
by
the Company pursuant to the Registration Statement, when issued and paid for
in
accordance with the Plan, will be validly issued, fully paid and non-assessable.
No
opinion is expressed herein with respect to any laws other than the General
Corporation Law of the State of Delaware. No opinion is expressed as to the
effect that the law of any other jurisdiction may have upon the subject matter
of the opinion expressed herein under conflicts of law principles, rules and
regulations or otherwise.
This
opinion is expressed as of the date hereof. We assume no obligation to
supplement this letter if any applicable laws change after the date hereof
or if
we become aware of any new facts that might effect any view expressed herein
after the date hereof.
We
hereby
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement. In giving this consent, we do not hereby admit that we are within
the
category of persons whose consent is required by Section 7 of the Securities
Act
or the rules and regulations promulgated thereunder by the
Commission.
The
foregoing opinion is delivered to the Board of Directors of the Company in
connection with the Registration Statement, and not for any other
purpose.
We
wish
to call your attention to the fact that the fair market value of all securities
of the Company that are beneficially owned by attorneys of this Firm exceeds
$50,000.
| Very truly yours, | ||
| |
|
|
| /s/ Dickstein Shapiro LLP | ||
Exhibit
23.2
Consent
of Independent Registered Public Accounting Firm
We
consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-xxxxx) pertaining to the Discovery Laboratories, Inc. Amended and
Restated 1998 Stock Incentive Plan of our reports dated January 27, 2006, with
respect to the consolidated financial statements of Discovery Laboratories,
Inc.
included in its Annual Report (Form 10-K) for the year ended December 31, 2005,
Discovery Laboratories, Inc. management’s assessment of the effectiveness of
internal control over financial reporting, and the effectiveness of internal
control over financial reporting of Discovery Laboratories, Inc. filed with
the
Securities and Exchange Commission.
/s/
Ernst
& Young LLP
Philadelphia,
Pennsylvania
November
2, 2006