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6725
Mesa Ridge Road, Suite 100
San
Diego, California 92121
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On May 24, 2005
Dear
Stockholder:
You are
cordially invited to attend the Annual Meeting of Stockholders of ADVENTRX
Pharmaceuticals, Inc., a Delaware corporation (the “Company”). The Annual
Meeting will be held on Tuesday, May 24, 2005 at 10:00 a.m. Pacific Daylight
Time at 6725 Mesa Ridge Road, Suite 100, San Diego, California 92121, for the
following purposes:
1. | To elect five members to our board of directors to hold office until the next Annual Meeting of Stockholders or until their respective successors have been elected or appointed; |
2. | To approve our 2005 Equity Incentive Plan; |
3. | To approve our 2005 Employee Stock Purchase Plan; |
4. | To ratify the Audit Committee’s appointment of J.H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005; |
5. | To conduct any other business properly brought before the Annual Meeting or any adjournment of the Annual Meeting. |
The
matters expected to be acted upon at the Annual Meeting are described in detail
in the following Proxy Statement.
It is
important that your shares be represented and voted at the Annual Meeting.
Whether you plan to attend the Annual Meeting or not, it is important that you
promptly register your vote in accordance with the instructions set forth on the
enclosed proxy card. A return addressed envelope is enclosed for your
convenience. This will ensure your proper representation at the Annual Meeting.
Returning the proxy does not deprive you of your right to attend the Annual
Meeting. If you decide to attend the Annual Meeting and wish to change your
proxy vote, you may do so automatically by voting in person at the
meeting.
On behalf
of our board of directors, I would like to express our appreciation for your
continued interest in the affairs of the Company. We look forward to seeing you
at the Annual Meeting.
The
record date for the Annual Meeting is April 15, 2005. Only stockholders of
record at the close of business on that date may vote at the meeting or any
adjournment thereof.
By Order
of the Board of Directors
Evan
Levine,
Chief
Executive Officer, President and Corporate Secretary
San
Diego, California
First
mailed to stockholders on
or about
April 22, 2005
2
ADVENTRX
PHARMACEUTICALS, INC.
6725
Mesa Ridge Road, Suite 100
San
Diego, California 92121
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On May 24, 2005
QUESTIONS
AND ANSWERS
ABOUT
THIS PROXY MATERIAL AND VOTING
Why
am I receiving these materials?
We sent
you this proxy statement and the enclosed proxy card because the Board of
Directors of ADVENTRX Pharmaceuticals, Inc. (sometimes referred to as the
“Company” or “ADVENTRX”) is soliciting your proxy to vote at the Annual Meeting
of Stockholders. You are invited to attend the annual meeting to vote on the
proposals described in this proxy statement. However, you do not need to attend
the meeting to vote your shares. Instead, you may simply complete, sign and
return the enclosed proxy card, or if made available to you by your broker, bank
or other agent, vote over the telephone or the Internet.
The
Company intends to mail this proxy statement and accompanying proxy card on or
about April 22, 2005 to all stockholders of record entitled to vote at the
annual meeting.
Who
can vote at the annual meeting?
Only
stockholders of record at the close of business on April 15, 2005 will be
entitled to vote at the annual meeting. On this record date, there were
54,269,822 shares of common stock outstanding and entitled to vote. The stock
transfer books of the Company will remain open between the record date and the
date of the meeting. A list of stockholders entitled to vote at the annual
meeting will be available for inspection at the executive offices of the
Company.
Stockholder
of Record: Shares Registered in Your Name
If on
April 15, 2005 your shares were registered directly in your name with ADVENTRX’s
transfer agent, Interwest Transfer Company, Inc., then you are a stockholder of
record. As a stockholder of record, you may vote in person at the meeting or
vote by proxy. Whether or not you plan to attend the meeting, we urge you to
fill out and return the enclosed proxy card to ensure your vote is
counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If on
April 15, 2005 your shares were held in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the beneficial owner of
shares held in “street name” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the annual meeting. As a
beneficial owner, you have the right to direct your broker or other agent on how
to vote the shares in your account. You are also invited to attend the annual
meeting. However, since you are not the stockholder of record, you may not vote
your shares in person at the meeting unless you request and obtain a valid proxy
from your broker or other agent.
What
am I voting on?
There are
four matters scheduled for a vote:
1. | To elect five members to our board of directors to hold office until the next Annual Meeting of Stockholders or until their respective successors have been elected or appointed; |
2. | To approve our 2005 Equity Incentive Plan; |
3. | To approve our 2005 Employee Stock Purchase Plan; |
4. | To ratify the Audit Committee’s appointment of J.H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005; |
How
do I vote?
You may
either vote “For” all the nominees to the Board of Directors or you may abstain
from voting for any nominee you specify. For each of the other matters to be
voted on, you may vote “For” or “Against” or abstain from voting. The procedures
for voting are fairly simple:
1
Stockholder
of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote in person at the annual meeting or
vote by proxy using the enclosed proxy card. Whether or not you plan to attend
the meeting, we urge you to vote by proxy to ensure your vote is counted. You
may still attend the meeting and vote in person if you have already voted by
proxy.
• | To vote in person, come to the annual meeting and we will give you a ballot when you arrive. |
• | To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct. |
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If you
are a beneficial owner of shares registered in the name of your broker, bank, or
other agent, you should have received a proxy card and voting instructions with
these proxy materials from that organization rather than from ADVENTRX. Simply
complete and mail the proxy card to that organization to ensure that your vote
is counted. Alternatively, you may vote by telephone or over the Internet as
instructed by your broker, bank or other agent. To vote in person at the annual
meeting, you must obtain a valid proxy from your broker, bank, or other agent.
Follow the instructions from your broker or bank included with these proxy
materials, or contact your broker or bank to request a proxy form.
How
many votes do I have?
On each
matter to be voted upon, you have one vote for each share of common stock you
own as of April 15, 2005.
What
if I return a proxy card but do not make specific choices?
If you
return a signed and dated proxy card without marking any voting selections, your
shares will be voted “For” the election of all five nominees for director, and
“For” the other four proposals. If any other matter is properly presented at the
meeting, your proxy (one of the individuals named on your proxy card) will vote
your shares using his or her best judgment.
Who
is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these mailed proxy
materials, our directors, our employees and ADP Brokerage Services Group may
also solicit proxies in person, by telephone, or by other means of
communication. Directors and employees will not be paid any additional
compensation for soliciting proxies, but ADP Brokerage Services Group will be
paid its customary fee of approximately $5,000 plus out-of-pocket expenses if it
solicits proxies. ADP Brokerage Services Group will mail a search notice to
banks, brokers, nominees and street-name accounts to develop a listing of
stockholders, distribute proxy materials to brokers and banks for subsequent
distribution to beneficial holders of stock, and solicit proxy responses from
holders of our common stock.
What
does it mean if I receive more than one proxy card?
If you
receive more than one proxy card, your shares are registered in more than one
name or are registered in different accounts. Please complete, sign and return
each proxy card to ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes. You
can revoke your proxy at any time before the final vote at the meeting. You may
revoke your proxy in any one of three ways:
• | You may submit another properly completed proxy card with a later date. |
• | You may send a written notice that you are revoking your proxy to ADVENTRX’s Corporate Secretary at 6725 Mesa Ridge Road, Suite 100, San Diego, California 92121. |
• | You may attend the annual meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy. |
Attendance
at the Annual Meeting will not itself revoke an earlier submitted proxy. You
should direct any written notices of revocation and related correspondence to
ADVENTRX Pharmaceuticals, Inc., 6725 Mesa Ridge Road, Suite 100, San Diego,
California 92121, Attention: Secretary.
2
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who will
separately count “For” and (with respect to proposals other than the election of
directors) “Against” votes, abstentions and broker non-votes. Abstentions will
be counted towards the vote total for each proposal and will have the same
effect as “Against” votes. Broker non-votes have no effect and will not be
counted towards the vote total for any proposal.
If your
shares are held by your broker as your nominee (that is, in “street name”), you
will need to obtain a proxy form from the institution that holds your shares and
follow the instructions included on that form regarding how to instruct your
broker to vote your shares. If you do not give instructions to your broker, your
broker can vote your shares with respect to “discretionary” items, but not with
respect to “non-discretionary” items. Discretionary items are proposals
considered routine under the rules of the American Stock Exchange on which your
broker may vote shares held in street name in the absence of your voting
instructions. On non-discretionary items for which you do not give your broker
instructions, the shares will be treated as broker non-votes.
How
many votes are needed to approve each proposal?
• | For the election of directors, the 5 nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. Broker non-votes will have no effect. |
• | To be approved, all other proposals must receive a “For” vote from the majority of shares present and entitled to vote either in person or by proxy. If you abstain from voting, it will have the same effect as an “Against” vote. Broker non-votes will have the same effect as abstentions or “Against” votes. |
What
is the quorum requirement?
A quorum
of stockholders is necessary to hold a valid meeting. A quorum will be present
if at least a majority of the outstanding shares are represented by stockholders
present at the meeting or by proxy. On the record date, there were 54,269,822
outstanding and entitled to vote.
Your
shares will be counted towards the quorum only if you submit a valid proxy vote
or vote at the meeting. Abstentions and broker non-votes will be counted towards
the quorum requirement. If there is no quorum, a majority of the votes present
at the meeting may adjourn the meeting to another date.
How
can I find out the results of the voting at the annual
meeting?
Preliminary
voting results will be announced at the annual meeting. Final voting results
will be published in the Company’s quarterly report on Form 10-Q for the second
quarter of 2005.
3
BOARD
OF DIRECTORS AND OFFICERS
Directors
The names
of each of our directors at April 15, 2005 and certain information about them
are set forth below. Each of our current directors has been nominated for
election to the Board of Directors at the Annual Meeting.
Name |
Age |
Position |
M.
Ross Johnson, Ph.D. |
60 |
Chairman
of the Board |
Evan
M. Levine |
39 |
Director,
Chief Executive Officer, President, Chief Operating Officer, Secretary and
Vice Chairman of the Board |
Michael
M. Goldberg, M.D.(1) |
46 |
Director |
Mark
J. Pykett, V.M.D., Ph.D.
(1) |
40 |
Director |
Mark
Bagnall, CPA(1) |
48 |
Director |
_____________
(1) Member of
the Audit Committee and the Compensation Committee of the Board of
Directors.
M.
Ross Johnson, Ph.D. Dr.
Johnson has served as our Chairman of the Board since October 2002. Dr.
Johnson is also currently Chief Executive Officer, Director and Co-Founder of
Parion Sciences, Inc. He has served on numerous boards and currently holds
additional board positions with Cortex Pharmaceuticals, Inc. (COR) and the
University of North Carolina Education Advancement Board. He also
currently serves on the Advisory Board of the Chemistry Department at the
University of California at Berkley and the University of North Carolina at
Chapel Hill. From 1995 to 1999, he was President, Chief Executive Officer
and Chief Scientific Officer of Trimeris, Inc. (TRMS), a company he took public
in 1997. From 1987 to 1994, he was Vice President of Chemistry at Glaxo
Inc. (GSK) where he was part of the original scientific founding team for
Glaxo’s research entry in the U. S. From 1971 to 1987, Dr. Johnson served
in key scientific and research management positions with Pfizer Central Research
(PFE). He has also served as a Special Advisor to Nobex Corporation,
Ceretec, AtheroGenics, Inc. (AGIX) and Albany Molecular Research, Inc.
(AMRI). Dr. Johnson received his B.S. in Chemistry from the University of
California at Berkeley in 1967 and a Ph.D. in organic chemistry from the
University of California at Santa Barbara in 1970.
Evan
M. Levine.
Mr. Levine has served as our Chief Executive Officer and President since
September 2004, as our Vice Chairman of the Board since January 2004 and as our
Chief Operating Officer and Secretary and a Director since October 2002.
Currently, Mr. Levine also acts as the Managing Member of Mark Capital LLC, a
venture capital and consulting firm specializing in technology and biotechnology
investments. From March 2002 to June 2002, Mr. Levine served as the
Interim Chief Executive Officer of Digital Courier Technologies, Inc., a
provider of advanced e-payment services for businesses, merchants and
financial institutions. From 1997 to 2001, Mr. Levine served as a Managing
Principal and Portfolio Manager of Brown Simpson Asset Management, specializing
in structured finance for public companies. From 1996 to 1997, Mr. Levine
served as Senior Vice President of Convertible Sales and Trading at Dillon Read
& Company, a financial services company. From 1993 to 1996, Mr. Levine
served as Vice President of Convertible Sales and Trading at Hambrecht &
Quist, a financial services company. From 1992 to 1993, Mr. Levine served
as a Global Arbitrage Trader at Spectrum Trading Partners, financial derivatives
trading company. Mr. Levine received his B.A. in Economics and Finance
from Rutgers University and has completed graduate coursework for an MBA at New
York University’s Stern School of Business.
Michael
M. Goldberg, M.D. Dr.
Goldberg has served as a Director since January 2004. Since August 1990, Dr.
Goldberg has been with Emisphere Technologies, Inc. where he is now Chairman and
Chief Executive Officer. Emisphere is a biopharmaceutical company specializing
in the oral delivery of therapeutic macromolecules and other compounds that are
not currently deliverable by oral means. Dr. Goldberg was previously a Vice
President for The First Boston Corporation, where he was a founding member of
the Healthcare Banking Group. He received a B.S. from Rensselaer Polytechnic
Institute, an M.D. from Albany Medical College of Union University and an M.B.A.
from Columbia University Graduate School of Business.
4
Mark
J. Pykett, V.M.D., Ph.D. Dr.
Pykett has served as a Director since January 2004. Since November 2004, Dr.
Pykett has been with Boston Life Sciences, Inc. where he is now President and
Chief Operating Officer. In 1996, Dr. Pykett co-founded Cytomatrix, LLC, a
private biotechnology company focused on the research, development and
commercialization of novel cell-based therapies. Dr. Pykett served as
Cytomatrix’ President and Chief Executive Officer and a Director until April
2003, when Cytomatrix merged with Cordlife, Pte. Ltd., a subsidiary of CyGenics,
Ltd., a public biotechnology company. From April 2003 to February 2004, Dr.
Pykett served as President of Cordlife, Pte. Ltd. and then as President and
Director of CyGenics from February 2004 until November 2004. Dr. Pykett
graduated Phi Beta Kappa, Summa Cum Laude from Amherst College, holds a
veterinary degree, Phi Zeta, Summa Cum Laude, and doctorate in molecular biology
from the University of Pennsylvania, and received an M.B.A. degree Beta Gamma
Sigma from Northeastern University. He completed post-doctoral fellowships at
the University of Pennsylvania and Harvard University. In his research in
academia, Dr. Pykett focused on understanding the molecular basis of cancer. Dr.
Pykett also held an adjunct faculty position at the Harvard School of Public
Health from 1997 to 2003.
Mark
Bagnall, CPA. Mr.
Bagnall has served as a Director since February 2004. Since June 2000, Mr.
Bagnall has been at Metabolex, Inc. where he now serves as Senior Vice President
and Chief Business Officer. Metabolex is a privately held pharmaceutical
company focused on the development of drugs to treat diabetes and related
metabolic disorders. Mr. Bagnall has been in the biotechnology industry
for over 15 years. In the 12 years prior to joining Metabolex, Mr. Bagnall
held the top financial position at four life science companies: Metrika, Inc., a
privately held diagnostics company, and three public biotechnology companies,
Progenitor, Inc., Somatix Therapy Corporation, and Hana Biologics, Inc. During
his career in biotechnology, he has managed several private and public
financings, merger and acquisition transactions and corporate licensing
agreements. Mr. Bagnall received his Bachelor of Science degree in Business
Administration from the U.C. Berkeley Business School and is a Certified Public
Accountant.
Officers
The names
of each of our executive officers at April 15, 2005 and certain information
about them are set forth below.
Name |
Age |
Position |
Evan
Levine(1) |
39 |
Chief
Executive Officer, President, Chief Operating Officer, Secretary and Vice
Chairman of the Board |
Carrie
E. Carlander |
34 |
Chief
Financial Officer, Vice President, Finance, and
Treasurer |
Joan
M. Robbins |
44 |
Chief
Technical Officer |
Cellia
Habita |
37 |
Senior
Vice President, Clinical and Medical Affairs |
Brian
Culley |
33 |
Vice
President, Business Development |
_____________
(1) Information
regarding Mr. Levine appears above under the heading “Directors.”
Carrie
E. Carlander.
Ms. Carlander has served as our Vice President, Finance and Treasurer since
November 2004 and was appointed Chief Financial Officer in December 2004. From
August 2004 to December 2004, Ms. Carlander served in a consulting capacity as
Chief Financial Officer of Singlefin, Inc., an email/internet security software
company. From December 2003 to December 2004, Ms. Carlander served in a
consulting capacity as Chief Financial Officer of SofLinx, Inc., a wireless
sensor network and software company. From December 2002 to June 2004, Ms.
Carlander served as Vice President of Finance of V-Enable, Inc.,. a software
company specializing in multimodal software for wireless devices. From December
1996 to May 2000, Ms. Carlander served first as Director of Finance and Human
Resources, and then as Vice President, Finance and Administration, of Websense
Inc., a publicly traded company that provides software products that analyze,
report and manage computing resource use by employees. Ms. Carlander received
her B.A. in Political Science from University of California, San Diego, her MBA
from San Diego State University and a Certified Management Accountant
designation from the IMA.
5
Joan
M. Robbins, Ph.D. Dr.
Robbins is our Chief Technical Officer and has served in this role since March
2003. From 1996-2003, Dr. Robbins was employed by Immusol, Inc., a
biopharmaceutical company specializing in anticancer and antiviral therapeutics
in addition to certain dermatologic and ophthalmic disorders. At Immusol, she
held several positions, including Vice President, Product Development, Senior
Director, Product Development, and Director, Therapeutics. Dr. Robbins has
directed drug discovery and development resulting in the advancement of drug
candidates into Phase I, II and III human trials, including the development of
clinical protocols with the FDA. She has also led programs for formulation,
manufacturing, toxicology and pharmacology development. From 1994 to 1995, she
was Research Scientist and Project Leader for Cancer Research at Chiron where
she developed gamma-IFN recombinant retroviral immuno-gene therapy for cancer,
and tk-recombinant retroviral gene therapy for brain tumors. From 1992 to 1993,
Dr. Robbins was a Post Graduate Researcher at University of California, San
Diego, where she developed a novel DNA-based immunotherapeutic for treatment of
Her2/neu expressing tumors. From 1990 to 1991, she was a Research Fellow at the
Garvin Institute for Medical Research, Centre for Immunology in Sydney,
Australia, and from 1981 to 1989, Dr. Robbins was a Microbiologist at the
Laboratory of Tumor Immunology and Biology at the National Cancer Institute in
Bethesda, Maryland. Dr. Robbins’ background in drug discovery and development
has resulted in over 20 scientific publications and 5 patents. Dr. Robbins
received her B.S. degree in genetics from the University of California, Davis,
and a Ph.D. degree in genetics from George Washington University, Washington
D.C.
Cellia
Habita, M.D., Ph.D. Dr.
Habita is our Senior Vice President of Medical and Clinical Affairs and has
served in this role since January 2005. Previously, Dr. Habita was Vice
President of Medical and Clinical Affairs since joining us in March 2004. From
2001 to 2004, Dr. Habita was employed by Immusol, Inc., a biopharmaceutical
company involved in development of therapies for cancer, viral diseases and
certain dermatologic and ophthalmic disorders, where her most recent title was
Director of Product Development and Preclinical. At Immusol, Dr. Habita directed
product formulation, toxicology and pharmacology testing and oversaw offsite
manufacturing. Dr. Habita was responsible for regulatory submissions in addition
to assisting with clinical protocols and trial design. Under her leadership, two
drug candidates were successfully launched into clinical trials. Previous to
Immusol, Dr. Habita was Assistant Project Scientist at the Center for Molecular
Genetics at the University of California, San Diego (UCSD). While at UCSD, Dr.
Habita developed an in vivo gene transfer model in fetal tissue and neonates for
the study of metabolic disorders and therapies to treat such disorders. Dr.
Habita earned a Ph.D. in Human Genetics, completed her graduate research at
Oxford University in the UK at The Wellcome Trust for Human Genetics where she
identified chromosomal regions involved in Type I Diabetes. Dr. Habita received
an MS in Biology and Genetics of Aging from The University of Paris VII in
France and an M.D. in General Medicine from the National Institute of Medical
Sciences in Algiers, Algeria. Her clinical training covered Pediatric and Adult
Endocrinology, Obstetrics/Gynecology and Orthopedic Surgery at The Saint Louis
and Robert Debré Hospitals in Paris, and she has conducted Genetic studies for
Diabetes and Aging and Epidemiological studies in public health.
Brian
M. Culley, MS, MBA. Mr.
Culley is Vice President, Business Development and has served in this role since
joining us in December 2004. From 2002 until 2004, Mr. Culley managed all
strategic collaborations and licensing agreements for Immusol, Inc. in San
Diego, where his most recent title was Director of Business Development and
Marketing. From 1999 until 2000, he was a licensing and marketing associate at
the University of California, San Diego Department of Technology Transfer &
Intellectual Property Services and from 1996 to 1999, he was a research
associate for Neurocrine Biosciences, Inc., where he performed drug discovery
research. Mr. Culley has over 12 years of experience in the biotechnology
industry, including deal structure and negotiation, licensing, due diligence,
market and competitive research, and venture funding. He received a MS in
Biochemistry from the University of California Santa Barbara and an MBA from The
Johnson School of Business at Cornell University with an emphasis on private
equity and entrepreneurship.
6
COMPOSITION
OF THE BOARD AND COMMITTEES
The Board
of Directors is currently composed of five members. Each director’s term is
subject to the election and qualification of his successor, or his earlier
death, resignation or removal. The authorized number of directors may not be
less than three or more than nine and be changed by resolution of our Board of
Directors. There are no family relationships among any of our directors or
executive officers.
Majority
of Independent Directors
A
majority of the members of our Board of Directors are independent. We consider a
director independent if that director does not have a direct or indirect
material relationship with us. A material relationship is one which impairs or
inhibits—or has the potential to impair or inhibit—a director’s exercise of
critical and disinterested judgment on behalf of the Company and its
stockholders. Our Board consults with our legal counsel to ensure that the
Board’s determinations are consistent with all relevant securities and other
laws and regulations regarding the definition of “independent,” including those
set forth in pertinent listing standards of the American Stock Exchange
(“AMEX”), as in effect from time to time.
Consistent
with these considerations, after review of all relevant transactions or
relationships between each director, or any of his family members, and the
Company, its senior management and its independent auditors, the Board has
affirmatively determined that Messrs. Pykett, Goldberg and Bagnall are
independent directors.
Board
Committees
Our Board
of Directors has standing Audit and Compensation Committees, each of which is
comprised of our three independent directors- Messrs. Pykett, Goldberg and
Bagnall. Mr. Bagnall serves as Chairman of the Audit Committee and Mr. Goldberg
serves as Chairman of the Compensation Committee.
Below is
a description of both committees of the Board of Directors. The Board of
Directors has determined that each member of both committees meets the
applicable rules and regulations regarding “independence” and that each member
is free of any relationship that would interfere with his individual exercise of
independent judgment with regard to the Company. Both committees have authority
to engage legal counsel or other experts or consultants, as it deems appropriate
to carry out its responsibilities.
We do not
have a standing nominating committee or a committee performing similar
functions. We believe that it is appropriate to have a standing nominating
committee and the Board of Directors currently plans to appoint such a committee
after the Annual Meeting. Each director participated in the consideration of
director nominees for consideration at the Annual Meeting.
Audit
Committee
The Audit
Committee of the Board of Directors oversees our corporate accounting and
financial reporting process. For this purpose, the Audit Committee performs
several functions. The Audit Committee evaluates the performance of and assesses
the qualifications of the independent auditors; determines and approves the
engagement of the independent auditors; determines whether to retain or
terminate the existing independent auditors or to appoint and engage new
independent auditors; reviews and approves the retention of the independent
auditors to perform any proposed permissible non-audit services; monitors the
rotation of partners of the independent auditors on our audit engagement team as
required by law; confers with management and the independent auditors regarding
the effectiveness of internal controls over financial reporting; establishes
procedures, as required under applicable law, for the receipt, retention and
treatment of complaints received by us regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous submission by
employees of concerns regarding questionable accounting or auditing matters;
reviews the financial statements to be included in our Annual Report on Form
10-K; and discusses with management and the independent auditors the results of
the annual audit and the results of our quarterly financial statements. The
responsibilities of our Audit Committee are described in the Audit Committee
Charter adopted by our Board of Directors, which is attached to this proxy
statement as Appendix A.
7
We
believe that each member of the Audit Committee is an “audit committee financial
expert” within the meaning of Item 401(e)(2) of Regulation S-B under the
Securities Act of 1933, as amended.
Report
of the Audit Committee
of
the Board of Directors
The
Company’s management is responsible for the preparation, presentation, and
integrity of the Company’s financial statements, accounting and financial
reporting principles, internal controls, and procedures designed to ensure
compliance with accounting standards, applicable laws, and regulations. The
Company’s independent auditors, J.H. Cohn LLP, are responsible for performing an
independent audit of the consolidated financial statements and expressing an
opinion on the conformity of those financial statements with generally accepted
accounting principles. The following is the report of the Audit Committee with
respect to the Company’s audited financial statements for the fiscal year ended
December 31, 2004, included in the Company’s Annual Report on Form 10-K for that
year.
The Audit
Committee has reviewed and discussed these audited financial statements with the
Company’s management. The Audit Committee has also discussed with the Company’s
independent auditors, J.H. Cohn LLP, the matters required to be discussed by SAS
61 (Codification of Statements on Auditing Standards, AU Section 380) as
amended, which includes, among other items, matters related to the conduct of
the audit of the Company’s financial statements. Further, the Audit Committee
has received the written disclosures and the letter from J.H. Cohn LLP required
by Independence Standards Board Standard No. 1 (“Independence Discussions with
Audit Committees”) as amended, and has discussed with J.H. Cohn LLP the
independence of J.H. Cohn LLP from the Company.
Based on
these reviews and discussions, the Audit Committee recommended to the Company’s
Board of Directors that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004 for
filing with the Securities and Exchange Commission.
Submitted
by the Audit Committee of the Board of Directors,
Mark N.K.
Bagnall
Michael
M. Goldberg
Mark
Pykett
Compensation
Committee
The
Compensation Committee of the Board of Directors reviews and approves the
overall compensation strategy and policies for the Company. The Compensation
Committee reviews and approves corporate performance goals and objectives
relevant to the compensation of the Company’s executive officers and other
senior management; reviews and approves the compensation and other terms of
employment of the Company’s Chief Executive Officer; reviews and approves the
compensation and other terms of employment of the other executive officers; and
administers the Company’s stock option and purchase plans, pension and profit
sharing plans, stock bonus plans, deferred compensation plans and other similar
programs. All members of the Company’s Compensation Committee are
independent.
Report
of the Compensation Committee
on
Executive Compensation
The
Compensation Committee approves compensation objectives and policies for all
employees and sets compensation for the Company’s executive
officers.
Objectives
and Policies
The
Committee seeks to ensure that:
§ |
Rewards
are closely linked to Company-wide, area, team and individual
performance; |
§ |
The
interests of the Company’s employees are aligned with those of its
stockholders through potential stock ownership;
and |
§ |
Compensation
and benefits are set at levels that enable the Company to attract, retain
and motivate the highly qualified employees necessary to achieve the
Company’s objectives. |
8
Executive
Officer Compensation Program Components. The
Committee reviews the Company’s compensation program to ensure that salary
levels and incentive opportunities are competitive and reflect the performance
of the Company. The Company’s compensation program for the Chief Executive
Officer and other executive officers currently consists of base salary and
equity-based compensation in the form of stock options.
Base
Salary. Base
salary levels for the Chief Executive Officer and the other executive officers
are determined, in part, through comparisons with companies in the local
pharmaceutical industry and other companies with which the Company competes for
personnel. In addition, the Committee evaluates individual experience and
performance and specific issues particular to the Company, such as creation of
stockholder value and achievement of specific Company milestones. The Committee
reviews each executive’s salary once a year and may increase each executive’s
salary at that time based on: (i) the individual’s increased contribution to the
Company over the prior 12 months; (ii) the individual’s increased
responsibilities over the prior 12 months; and (iii) any increase in median
competitive pay levels.
Annual
Incentive Compensation. The Chief
Executive and other executive officers may also be eligible to receive cash
incentive compensation. In the last three years the Company has not awarded any
annual incentive compensation to its named executive officers except that the
Company paid its Chief Executive Officer a $15,000 bonus in 2003. The
Compensation Committee currently intends to formulate bonus guidelines for
executive officers which would provide a direct financial incentive in the form
of annual cash bonuses based on the achievement during the fiscal year of
specifically defined individual and corporate performance goals. We expect that
a portion of the total possible incentive compensation will be based on the
achievement of individual accomplishments and that the remaining portion will be
based on the Company’s achievement of certain goals, measured both quarterly and
annually. We will set bonus awards at a level competitive within the local
pharmaceutical and high technology industries as well as among a broader group
of technology companies of comparable size and complexity.
Equity-Based
Incentive Compensation. The
Compensation Committee believes that equity-based compensation in the form of
stock options links the interests of management and stockholders by focusing
employees and management on increasing stockholder value. The Company does not
currently have a formal equity incentive plan. Prior to the Company’s listing on
AMEX in April 2004, the Company granted options to employees, directors and
certain consultants pursuant to individual stock option agreements. The Company
has approved and submitted to the stockholders for approval the 2005 Equity
Incentive Plan (the “Incentive
Plan”). If
the Incentive Plan is approved by the stockholders, the Compensation Committee
expects that it will grant options executives and certain other employees when
such persons join the Company and periodically thereafter in connection with
significant changes in responsibilities, and, occasionally, to achieve equity
within a peer group. The number of shares subject to each stock option granted
will take into account or be based on anticipated future contribution and
ability to impact corporate and/or business unit results, past performance or
consistency within the employee’s peer group, prior option grants to the
employee and the level of vested and unvested options. The Compensation
Committee expects that these options will generally vest as to 25% of the total
shares within one year after the date of grant and then monthly over the next
three years.
After its
review of all existing programs, the Committee believes that, with the adoption
of the Incentive Plan, the Company’s compensation program for its executive
officers will be competitive with the compensation programs provided by other
companies with which the Company competes.
Submitted
by the Compensation Committee of the Board of Directors,
Mark N.K.
Bagnall
Michael
M. Goldberg
Mark
Pykett
9
Meetings
of the Board of Directors
During
the fiscal year ended December 31, 2004, our Board of Directors met five times,
our Audit Committee met four times and our Compensation Committee met two times.
In addition, our Board of Directors acted by unanimous written consent on two
occasions during the last fiscal year. Each Board member attended 75% or more of
the aggregate of the meetings of the Board and of the committees on which he
served, held during the period for which he was a director or committee member,
respectively during the last fiscal year.
Stockholder
Communications with the Board of Directors
We have a
formal process by which stockholders may communicate with the Board or any of
its directors. Stockholders who wish to communicate with the Board may do so by
sending written communications addressed to the our Secretary at ADVENTRX
Pharmaceuticals, Inc., 6725 Mesa Ridge Road, Suite 100, San Diego, California
92121. All communications will be compiled by our Secretary and submitted to the
Board or the individual directors on a periodic basis. These communications will
be reviewed by one or more of our employees designated by the Board, who will
determine whether they should be presented to the Board. The purpose of this
screening is to allow the Board to avoid having to consider irrelevant or
inappropriate communications (such as advertisements or solicitations). All
communications directed to the Audit Committee in accordance with our Code of
Business Conduct and Ethics that relate to questionable accounting or auditing
matters involving the Company will be promptly and directly forwarded to the
Audit Committee.
Code
of Ethics
We
adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all
of our employees (including our executive officers) and directors. We will
provide to any person without charge, upon request, a copy of the Code. Any such
request must be made in writing to ADVENTRX Pharmaceuticals, Inc., c/o Investor
Relations, 6725 Mesa Ridge Road, Suite 100, San Diego, California
92121.
Compensation
of Directors
Michael
Goldberg, Mark Pykett and Mark Bagnall, as members of our Board of Directors,
each receive a quarterly payment of $5,000 in consideration of such member’s
services as a director. M. Ross Johnson receives a quarterly payment of $6,250
in consideration of his services as director and Chairman of the Board of
Directors. In addition the Company has issued options to purchase shares of
Common Stock to directors as compensation for their services as
directors.
10
OWNERSHIP
OF SECURITIES
The
following table sets forth certain information as of April 15, 2005, concerning
the ownership of Common Stock by (i) each of our stockholders that we
believe is the beneficial owner of more than 5% of the outstanding shares of
Common Stock, (ii) each current member of our Board of Directors and
(iii) each of our executive officers.
We
determined beneficial ownership in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, and included all shares over which
the beneficial owner exercises voting or investment power. Options and warrants
to purchase Common Stock that are presently exercisable or exercisable within
60 days of April 15, 2005 that are held by the persons listed below are
included in the total number of shares beneficially owned for such person and
are considered outstanding for the purpose of calculating the percentage
ownership of such holder. We have relied on information supplied by our
officers, directors and certain stockholders and on information contained in
filings with the SEC in completing the table below. Except as otherwise
indicated, and subject to community property laws where applicable, we believe,
based on information provided by these persons or contained in filings with the
SEC, that the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them.
The percentage of beneficial ownership of Common Stock is based on 54,269,822
shares of Common Stock outstanding as of April 15, 2005 and for any particular
stockholder, the options or warrants described above held by that
holder.
Name
and Address of Beneficial Owner(1) |
Beneficial
Ownership as of April 15, 2005 |
Percent
of
Outstanding |
Mark
Capital LLC(2)
PO
Box 8030
Rancho
Santa Fe, CA 92067 |
4,374,399
|
8.0% |
Matthew
Balk(3)
570
Lexington Ave.
New
York, NY 10022 |
3,345,390 |
6.1% |
Current
Directors |
||
M.
Ross Johnson, Ph.D.(4) |
2,247,592 |
4.1% |
Evan
M. Levine(5) |
4,624,399
|
8.5% |
Mark
Bagnall(6) |
50,000
|
* |
Michael
Goldberg(7) |
476,000
|
* |
Mark
Pykett(8) |
53,000
|
* |
Executive
Officers who are not Directors |
||
Joan
Robbins, Ph.D.(9) |
462,500 |
* |
Cellia
Habita, Ph.D.(10) |
65,000
|
* |
Carrie
Carlander |
5,000 |
* |
Brian
Culley |
0 |
- |
All
directors and executive officers as a group |
7,983,491 |
14.2% |
_____________________
* Less
than one percent.
(1) |
Unless
indicated otherwise, the address of each person listed in the table is c/o
ADVENTRX Pharmaceuticals, Inc.; 6725 Mesa Ridge Road, Suite 100; San
Diego, California 92121 |
(2) |
Includes
180,000 shares of Common Stock subject to a warrant. |
(3) |
We
have relied on information contained in a Schedule 13D filed by Mr. Balk
on February 6, 2003 and on our records pertaining to issuance of
securities to Mr. Balk. Mr. Balk has neither confirmed nor denied the
information regarding his beneficial ownership set forth in this table.
Includes 400,000 shares of Common Stock held by Mr. Balk’s wife’s
retirement plan; 623,600 shares of Common Stock held by Mr. Balk as
custodian for his two children; and exercisable warrants to purchase an
aggregate of 254,528 shares of Common Stock. |
(4) |
Includes
500,000 shares of Common Stock exercisable under an option and exercisable
warrants to purchase 532,528 shares of Common Stock. |
(5) |
Includes
4,194,399 shares of Common Stock held by Mark Capital LLC and 180,000
shares of Common Stock subject to a warrant held by Mark Capital
LLC. Mr. Levine is the managing member of Mark Capital LLC. Includes
250,000 shares of Common Stock exercisable under an
option. |
(6) |
Consists
of 50,000 shares of Common Stock exercisable under an
option. |
(7) |
Includes
50,000 shares of Common Stock exercisable under an option; a warrant to
purchase 6,000 shares of Common Stock; and 400,000 shares of Common Stock
held by Emisphere Technologies, Inc., of which Dr. Goldberg is the
President and Chief Executive Officer. |
(8) |
Includes
50,000 shares of Common Stock exercisable under an
option. |
(9) |
Includes
300,000 shares of Common Stock exercisable under an option; 125,000 shares
of Common Stock held by Dr. Robbins’ husband; and an exercisable warrant
to purchase 37,500 share of Common Stock held by Dr. Robbins’
husband. |
(10) |
Consists
of 60,000 shares of Common Stock exercisable under an
option. |
11
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
fiscal year 2004, we engaged Burnham Hill Partners to provide placement agent
services to us in connection with the sale of certain of our securities. In
consideration of the services Burnham Hill Partners provided to us, we paid
Burnham Hill Partners $874,532 and issued to Burnham Hill Partners and certain
other persons designated by Burnham Hill Partners warrants to purchase up to an
aggregate of 612,547 shares of Common Stock at $2.00 per share. Burnham Hill
Partners is also entitled to a four percent cash commission on each cash
exercise of warrants to purchase up to an aggregate of (i) 3,125,272 shares of
Common Stock at $2.00 per share and (ii) 2,083,518 shares of Common Stock at
$2.50 per share, which warrants were acquired by investors in transactions for
which Burnham Hill Partners acted as placement agent. We believe that Matthew
Balk, a person we believe is the beneficial holder of more than five percent of
our outstanding Common Stock, is a partner of Burnham Hill Partners and
therefore may have an indirect material interest in the amounts we paid to
Burnham Hill Partners. We do not know the nature or extent of Mr. Balk’s
indirect interest in the amounts we paid to Burnham Hill Partners, except that
Burnham Hill Partners directed us to issue a warrant to purchase up to 184,447
shares of Common Stock directly to Mr. Balk from the warrants we were obligated
to issue to Burnham Hill Partners.
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
Summary
Compensation Table
The
following Summary Compensation Table sets forth summary information as to
compensation received by the Company’s Chief Executive Officer and each of the
other most highly compensated persons who were serving as executive officers of
the Company as of December 31, 2004.
Name
and Principal Position |
Year |
Annual
Salary |
Bonus |
Securities
underlying
Options | ||||
Evan
Levine (1)
Chief
Executive Officer, President, Chief Operating Officer and
Secretary |
|
2004
2003
2002 |
|
$
210,000
$
85,000
$
— |
—
—
— |
|
—
250,000
— | |
Nicholas
J. Virca (2)
Chief
Executive Officer and President |
|
2004
2003
2002 |
|
$
155,036
$
157,789
$
120,192 |
—
$15,000
— |
|
—
—
1,665,000 | |
Joan
M. Robbins (3)
Chief
Technical Officer |
|
2004
2003
2002 |
|
$
182,500
$
127,497
$
— |
—
—
— |
|
—
300,000
— | |
Carrie
E. Carlander (4)
Chief
Financial Officer, Vice President, Finance, and
Treasurer |
|
2004
2003
2002 |
|
$
22,500
$
—
$
— |
—
—
— |
|
—
—
— | |
Cellia
Habita (5)
Senior
Vice President, Clinical Operations |
|
2004
2003
2002 |
|
$
130,000
$
—
$
— |
—
—
— |
|
100,000
—
— | |
Brian
M. Culley (6)
Vice
President, Business Development |
|
2004
2003
2002 |
|
$
14,167
$
—
$
— |
—
—
— |
|
—
—
— |
________________________
(1) |
Mr.
Levine became an executive of the Company in October 2002 but did not
receive any salary or other compensation from the Company in 2002.
Mr. Levine began receiving an annual salary in July
2003. |
(2) |
Mr.
Virca’s employment as Chief Executive Officer ended on September 4,
2004. |
(4) |
Ms.
Carlander began her employment with the Company on November 17, 2004. Ms.
Carlander’s current annual salary is $180,000. |
(5) |
Dr.
Habita began her employment with the Company on March 8, 2004. Dr.
Habita’s current annual salary is $210,000. |
(6) |
Mr.
Culley began his employment with the Company on December 1, 2004. Mr.
Culley’s current annual salary is $170,000. |
12
Option
Grants.
Name |
Number
of shares
of
Common Stock
underlying
options granted |
Percent
of total options
granted
to employees
in
the fiscal year ended
December
31, 2004 |
Exercise
Price |
Expiration
Date |
Potential
Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term | ||
0% |
5% |
10% | |||||
Evan
Levine |
0 |
0% |
- |
- |
- |
- |
- |
Nicholas
J. Virca |
0 |
0% |
- |
- |
- |
- |
- |
Joan
M. Robbins |
0 |
0% |
- |
- |
- |
- |
- |
Carrie
E. Carlander |
0 |
0% |
- |
- |
- |
- |
- |
Cellia
Habita |
100,000 |
76.9% |
$1.50 |
03/01/2007 |
$10,000 |
$35,220 |
$62,960 |
Brian
M. Culley |
0 |
0% |
- |
- |
- |
- |
- |
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End
Values
No
executive officer or Director of the Company exercised any options during the
fiscal year ended December 31, 2004.
The
following table provides information regarding the number of shares covered by
both exercisable and unexercisable stock options held by the named executive
officers as of December 31, 2004, and the value of options that were
“in-the-money” as of December 31, 2004, which values represent the positive
spread between the exercise price of any such options and the fiscal year-end
value of the Common Stock.
Number
of Securities
Underlying
Unexercised
Options
At December 31, 2004 |
Value
of in-the-Money
Options
At
December 31,
2004 (1) |
||||||||||||
|
Exercisable |
Unexercisable |
Exercisable |
Unexercisable |
|||||||||
Evan
Levine |
250,000 |
0 |
$ |
55,000 |
$ |
0 |
|||||||
Nicholas
J. Virca |
0 |
0 |
$ |
0 |
$ |
0 |
|||||||
Joan
M. Robbins |
200,000 |
100,000
|
$ |
124,000 |
$ |
62,000 |
|||||||
Carrie
E. Carlander |
0 |
0 |
$ |
0 |
$ |
0 |
|||||||
Cellia
Habita |
30,000 |
70,000 |
$ |
0 |
$ |
0 |
|||||||
Brian
M. Culley |
0 |
0 |
$ |
0 |
$ |
0 |
________________________
(1)
Value based on the closing price of Common Stock of $1.12 on December 31, 2004,
less the option exercise price.
13
Employment
Contracts
We have
entered into employment offer letters with each of our named executive officers
other than Mr. Levine, our Chief Executive Officer. Each letter sets forth the
named executive officer’s initial base salary amount and initial stock option
grant. None of the letters indicate a specific term of employment, and each
officer’s employment may be terminated by either party at any time. We have not
entered into an employment offer letter or agreement with Mr. Levine; Mr. Levine
is employed as an at-will employee.
PERFORMANCE
MEASUREMENT COMPARISON
The
following graph shows the approximate eight-month cumulative total stockholder
return (change in stock price plus reinvested dividends) assuming the investment
of $100 on April 27, 2004 (the day we registered our Common Stock under Section
12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) in each
of the Company’s Common Stock, the Amex Composite Index, the Amex
Biotech Index and the Nasdaq Biotechnology Index. The
comparisons in the table are required by the SEC and are not intended to
forecast or be indicative of possible future performance of our Common Stock.
![](https://cdn.kscope.io/9d8755a2ffd94df8ed58b77d1ba50553-chart.jpg)
14
Cumulative
Total Return | |||||||||
4/27/2004 |
5/28/2004 |
6/30/2004 |
7/30/2004 |
8/31/2004 |
9/30/2004 |
10/29/2004 |
11/30/2004 |
12/31/2004 | |
ADVENTRX
Pharmaceuticals, Inc. |
$100.00
|
$105.41
|
$97.30
|
$75.68
|
$89.73
|
$63.78
|
$53.51
|
$49.19
|
$60.54
|
Amex
Biotech Index |
$100.00
|
$90.72
|
$92.30
|
$85.29
|
$87.65
|
$92.71
|
$91.12
|
$91.71
|
$96.24
|
Nasdaq
Biotechnology Index |
$100.00
|
$90.25
|
$89.85
|
$81.31
|
$81.85
|
$84.55
|
$82.26
|
$85.11
|
$90.94
|
Amex
Composite Index |
$100.00
|
$95.73
|
$99.86
|
$99.11
|
$98.47
|
$101.62
|
$104.78
|
$112.35
|
$114.61
|
COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a)
of the Exchange Act, requires our directors and officers, and persons who own
more than 10% of a registered class of our equity securities (“Section 16
Persons”), to file with the Securities and Exchange Commission (the “SEC”)
initial reports of ownership and reports of changes in ownership of our Common
Stock and derivative securities to acquire our Common Stock. Section 16
Persons are required by SEC regulation to furnish us with copies of all
Section 16(a) reports they file. Based on our review of the forms we
have received, on other reports filed by Section 16 Persons with the SEC and on
our records, we believe that during 2004 Cellia Habita and Mark Bagnall did not
timely file a Form 3 to report their beneficial ownership of our Common Stock
and Cellia Habita did not file a Form 4 in October 2004 to report her open
market purchase of 5,000 shares of our common stock.
15
PROPOSAL
1
ELECTION
OF DIRECTORS
At the
Annual Meeting, five directors (constituting our entire Board of Directors) are
to be elected to serve until the next annual meeting of stockholders and until a
successor for such director is elected and qualified, or until the death,
resignation or removal of such director. There are five nominees, all of whom
are currently directors of the Company.
NOMINEES
Set forth
below is information regarding the nominees for election to our board of
directors:
Name |
Position |
Year
First Elected |
M.
Ross Johnson, Ph.D. |
Chairman
of the Board |
2002 |
Evan
M. Levine |
Director,
Chief Executive Officer, President, Chief Operating Officer, Secretary and
Vice Chairman of the Board |
2002 |
Michael
M. Goldberg, M.D. |
Director |
2004 |
Mark
J. Pykett, V.M.D., Ph.D. |
Director |
2004 |
Mark
Bagnall, CPA |
Director |
2004 |
Each
person nominated has agreed to serve if elected, and our Board of Directors has
no reason to believe that any nominee will be unavailable or will decline to
serve. In the event, however, that any nominee is unable or declines to serve as
a director at the time of the Annual Meeting, the proxies will be voted for any
nominee who is designated by the current Board of Directors to fill the
vacancy
THE
BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS
A
VOTE IN FAVOR OF ALL NOMINEES NAMED IN
PROPOSAL
1
16
PROPOSAL
2
APPROVAL
OF
2005
EQUITY INCENTIVE PLAN
Our board
of directors is asking our stockholders to approve our 2005 Equity Incentive
Plan (the “Incentive Plan”). Our Incentive Plan was adopted by our Board of
Directors in April 2005. The Incentive Plan would take effect upon the approval
of our stockholders. Set forth below is a description of the terms of the
Incentive Plan. Please
see Appendix B for a complete copy of the Incentive Plan.
General.
The
purposes of the Incentive Plan are to attract and retain the best available
personnel, provide additional incentive to our employees, consultants and
directors and promote the success of our business. The Incentive Plan provides
for the following types of awards:
· |
stock
options; |
· |
stock
appreciation rights; |
· |
restricted
stock and stock unit awards; |
· |
performance
shares; |
· |
stock
grants; and |
· |
performance-based
awards. |
Participants.
Any of
our employees, our non-employee directors, consultants and advisors to us, as
determined by the compensation committee, may be selected to participate in the
Incentive Plan. As of April 15, 2005, there were approximately 21 persons who
would be eligible to participate in the Incentive Plan. No participant may be
granted an award to acquire more than 1,500,000 shares of common stock in any
calendar year.
Automatic
Option Grants. The
Incentive Plan provides for the automatic grant, on an annual basis, to each
non-employee director of a nonstatutory stock option to purchase 50,000 shares
of our common stock. These automatic grants would be made at the first meeting
of our board of directors following the annual meeting of stockholders in each
year, commencing with the 2005 annual meeting of stockholders. To be eligible
for an automatic grant, the non-employee director must have served on our board
of directors for at least six months preceding the grant. Each automatic option
grant would have an exercise price per share equal to 105% of the closing price
of our common stock on the date of grant or if the date of grant is not a
trading day, then 105% of the closing price of our common stock on the next
trading day following the date of grant. Each of these option grants to
non-employee directors would vest with respect to one twelfth of the shares
subject to the option at the end of each calendar month after the date of
grant.
Administration.
The
Incentive Plan will be administered by the compensation committee of the board
of directors (the “Committee”), which is presently composed of three members,
all of whom are independent directors as defined by the regulations of the SEC
and the American Stock Exchange. Members of the Committee serve until the
appointment of their successors or their removal by the board of directors at
any time. The board of directors may at any time exercise any of the powers and
responsibilities assigned to the Committee under the Incentive Plan. Subject to
the provisions of the Incentive Plan, the Committee has complete authority to
make, or select the manner of making, all determinations with respect to awards
to be granted, including the form of award and the employee, consultant or
director to receive the award, by considering such factors as the Committee
shall deem relevant in its discretion. Subject to the provisions of the
Incentive Plan, the Committee also has complete authority to interpret the
Incentive Plan, to prescribe, amend and rescind rules and regulations relating
to the Incentive Plan, to determine the terms and provisions of any agreements
concerning the terms of an award, and to make all other determinations necessary
or advisable for the administration of the Incentive Plan. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all holders of options or rights and on all persons deriving their rights
therefrom.
17
Stock
options. Stock
options may be granted under the Incentive Plan, including incentive stock
options, as defined under Section 422 of the Internal Revenue Code (the “Code”),
and nonqualified stock options. Any incentive stock option or any option
intended to qualify as performance-based compensation under Code Section 162(m)
would not be granted at a price that is less than 100.0% of the fair market
value of our common stock on the date of grant or, in the case of grants to
holders of at least 10.0% of the voting power of all classes of our stock,
110.0% of the fair market value. The term of options granted shall generally be
ten years, except that incentive stock options granted to 10.0% stockholders
shall have a term of five years. The option exercise price of all nonqualified
stock options would be determined by the administrator and is not limited by the
foregoing restrictions on price.
Upon the
exercise of a stock option, the purchase price must be paid in full in either
cash or its equivalent. The administrator may also allow payment by tendering
previously acquired shares of our common stock with a fair market value at the
time of exercise equal to the exercise price, provided such shares have been
held for at least six months prior to tender and broker-assisted cashless
exercises and may authorize loans for the purpose of exercise as permitted under
applicable law.
Stock
appreciation rights (SAR). A SAR
entitles a participant to receive a payment equal in value to the difference
between the fair market value of a share of stock on the date of exercise of the
SAR over the grant price of the SAR. The administrator may pay that amount cash,
in shares of our common stock, or a combination. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and any
other terms and conditions of any SAR would be determined by the administrator
at the time of the grant of award and would be reflected in the award agreement.
Restricted
stock and stock units. A
restricted stock award or restricted stock unit award is the grant of shares of
our common stock either currently (in the case of restricted stock) or at a
future date (in the case of restricted stock units), at a price determined by
the administrator (including zero), that is nontransferable and is subject to
substantial risk of forfeiture until specific conditions or goals are met.
Conditions may be based on continuing employment or achieving performance goals.
During the period of restriction, participants holding shares of restricted
stock may, if permitted by the administrator, have full voting and dividend
rights with respect to such shares. The restrictions would lapse in accordance
with a schedule or other conditions determined by the administrator.
Performance
units. A
performance unit award is a contingent right to receive a pre-determined number
of shares of our common stock if certain performance goals are met. The value of
performance units would depend on the degree to which the specified performance
goals are achieved but are generally based on the value of our common stock. The
administrator may, in its discretion, pay earned performance shares in cash, or
stock or a combination of both.
Stock
grants. A stock
grant is an award of shares of common stock without restriction. Stock grants
may only be made in limited circumstances, such as in lieu of other earned
compensation.
Performance-based
awards. Grants
of performance-based awards enable us to treat other awards granted under the
Incentive Plan as “performance-based compensation” under Section 162(m) of the
Code and preserve the deductibility of these awards for federal income tax
purposes. Because Section 162(m) of the Code only applies to those employees who
are “covered employees” as defined in Section 162(m) of the Code, only covered
employees and those likely to become covered employees are eligible to receive
performance-based awards.
Participants
are only entitled to receive payment for a performance-based award for any given
performance period to the extent that pre-established performance goals set by
the administrator for the period are satisfied. These pre-established
performance goals must be based on one or more of the following performance
criteria: pre- or after-tax net earnings, sales or revenue, operating earnings,
operating cash flow, return on net assets, return on stockholders’ equity,
return on assets, return on capital, stock price growth, stockholder returns,
gross or net profit margin, earnings per share, price per share, and market
share. These performance criteria may be measured in absolute terms or as
compared to any incremental increase or as compared to results of a peer group.
With regard to a particular performance period, the administrator would have the
discretion to select the length of the performance period, the type of
performance-based awards to be granted, and the goals that would be used to
measure the performance for the period. In determining the actual size of an
individual performance-based award for a performance period, the administrator
may reduce or eliminate (but not increase) the award. Generally, a participant
would have to be employed on the date the performance-based award is paid to be
eligible for a performance-based award for that period.
18
Shares
reserved for issuance. Subject
to certain adjustments, we would be able to issue a maximum of 6,000,000 shares
of our common stock, including shares of our common stock that may be issued
upon the exercise of options, under the Incentive Plan. In addition, on January
1 of each year, there would be an automatic increase in the number of shares
reserved for issuance under the Incentive Plan equal to the lesser of (i) one
percent of the number of outstanding shares of our common stock on such day,
(ii) 750,000 and (iii) such other amount as our board of directors may specify
prior to the date such annual increase is to take effect. The maximum aggregate
number of shares of our common stock which may be issued pursuant to or subject
to outstanding “incentive stock options” (within the meaning of Section 422 of
the Internal Revenue Code) granted under the Incentive Plan is
5,000,000.
Acceleration
of vesting. The
vesting of any awards granted under the Incentive Plan may be accelerated in
full in the event of a merger or sale of the company if the acquiring entity
does not assume or replace the awards with comparable awards.
Limitation
of Rights. Participants
in the Incentive Plan will not be deemed for any purpose to be a stockholder of
the Company with respect to any of the shares of stock subject to an award
unless and until a certificate has been issued for the shares and delivered to
the participant. Any stock issued pursuant to awards is subject to all
restrictions on transfer imposed by our certificate of incorporation and bylaws.
Transferability.
Except as
otherwise provided in the Incentive Plan, options and awards are not
transferable, and no options, awards or interests in them may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated other
than by will or the laws of descent and distribution. All of a participant’s
rights in any option or award may be exercised during the life of the
participant only by the participant or the participant’s legal representative.
However, the administrator may, at or after the grant of a nonstatutory option,
or shares of restricted stock, provide that such award may be transferred by the
recipient to a family member; provided, however, that any such transfer is
without payment of any consideration whatsoever and that no transfer will be
valid unless first approved by the administrator, acting in its sole discretion.
Amendment
and termination. The
administrator, with the approval of our board of directors, may terminate, amend
or modify the Incentive Plan at any time, however, stockholder approval would be
obtained for any amendment to the extent necessary and desirable to comply with
any applicable law, regulation or stock exchange rule. We may not make any
grants under the Incentive Plan after the tenth anniversary of the effective
date of the plan.
Tax
Effect for Us. We
generally will be entitled to a tax deduction in connection with an option or
award under the Incentive Plan in an amount equal to the ordinary income
realized by a participant and at the time the participant recognizes such income
(for example, the exercise of a nonstatutory stock option). Special rules limit
the deductibility of compensation paid to our chief executive officer and to
each of the named executive officers. Under Section 162(m) of the Code, the
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1,000,000. However, we can preserve
the deductibility of certain compensation in excess of $1,000,000 if the
conditions of Section 162(m) are met with respect to awards. These conditions
include stockholder approval of the Incentive Plan and performance goals under
the Incentive Plan, setting individual annual limits on each type of award, and
certain other requirements. The Incentive Plan has been designed to permit the
Committee to grant awards that qualify as performance-based for purposes of
satisfying the conditions of Section 162(m), thereby permitting us to receive a
federal income tax deduction in connection with such awards if we should make
them.
Registration
with the SEC. Upon
approval of the Incentive Plan, we plan to file a Registration Statement on Form
S-8 with the SEC to register the issuance of the shares issuable under the
Incentive Plan.
Stockholder
Approval. Approval
of the Incentive Plan requires the affirmative vote of a majority of the shares
present and entitled to vote at the Annual Meeting.
19
Post-approval
Grants/Plan Benefits. We
currently anticipate that if the stockholders approve the Incentive Plan then
promptly after such approval we would recommend that the Committee authorize the
grant to 14 of our employees of non-statutory stock options to purchase an
aggregate of approximately 709,000 shares of our common stock representing the
options we would have granted such employees on the date of their hire or the
date we agreed to issue such options for those grants that were bonus grants;
each of these options would have an exercise price equal to the closing price on
the date we agreed to grant such option. The Committee may, however, determine
to increase the exercise price of each of these options to equal the current
market price or some other price that is higher than the closing price on the
date we agreed to issue these options. If the Committee does determine to
increase the exercise price of these options, we believe that the Committee
would also increase the number of shares subject to these options in order to
compensate for the higher exercise price. In addition, pursuant to the terms of
the Incentive Plan, an option to purchase 50,000 shares of our common stock
would be automatically granted to each of our four non-employee directors at the
first meeting of our board of directors following the Annual Meeting.
The table
below identifies with more specificity the allocation of these grants. Unless
otherwise indicated below, each
option listed below would (i) have an exercise price as indicated below, (ii)
vest with respect to 25% of the shares subject to the option on the first
anniversary of the vesting commencement date and with respect to 1/48 of the
shares subject to the option each month thereafter, (iii) expire ten years after
the vesting commencement date. The closing price of our Common Stock on April
15, 2005 was $2.60.
Name
and Position |
Shares
Subject to Option |
Exercise
Price |
Vesting
Commencement Date |
Evan
Levine
Chief
Executive Officer, President, Chief Operating Officer and
Secretary |
- |
- |
- |
Joan
M. Robbins
Chief
Technical Officer |
100,0001 |
$1.032 |
01-03-2005 |
Carrie
E. Carlander
Chief
Financial Officer, Vice President, Finance, and
Treasurer |
200,0003 |
$0.852 |
11-17-2004 |
Cellia
Habita
Senior
Vice President, Clinical Operations |
100,0001 |
$1.032 |
01-03-2005 |
Brian
M. Culley
Vice
President, Business Development |
100,0003 |
$0.852 |
12-01-2004 |
Executive
Group |
500,0004 |
$0.925 |
see
above |
Non-Executive
Director Group |
200,000 |
(6) |
(6) |
Non-Executive
Officer Employee Group |
209,0004 |
$1.315 |
05-01-2004
to
03-21-2005 |
1 | The shares subject to this option represent the number of option shares we agreed to grant to this employee as a bonus on January 3, 2005. |
2 | The per share exercise price of this option represents the closing price of our common stock on the date we agreed to grant this option. |
3 | The shares subject to this option represent the number of option shares we agreed to grant to this employee on the date of their hire. |
4 | This share figure represents the aggregate number of shares we agreed to grant to this employee group on the date of their hire or, for bonus grants, on January 3, 2005, the effective date of these bonuses. |
5 | This exercise price represents the weighted-average closing price of our common stock on the dates we agreed to grant these option shares. |
6 | The options to be granted to non-executive directors will have an exercise price equal to 105% of the closing price of our common stock on the date of grant. We currently expect that our board of directors will meet promptly after the conclusion of our Annual Meeting. |
United
States Income Tax Considerations
The grant
of the above-listed nonqualified stock options will not result in taxable income
to the recipient. Except as described below, the recipient will realize ordinary
income at the time of exercise in an amount equal to the excess of the fair
market value of the shares acquired over the exercise price for those shares and
we will be entitled to a corresponding deduction. Gains or losses realized by
the participant upon disposition of such shares will generally be treated as
capital gains and losses, with the basis in such shares equal to the fair market
value of the shares at the time of exercise.
20
The
preceding discussion is based on U.S. tax laws and regulations presently in
effect, which are subject to change, and the discussion does not purport to be a
complete description of the U.S. income tax aspects of the Incentive Plan. A
participant may also be subject to state and local taxes in connection with the
grant of awards under the Incentive Plan. We suggest that participants consult
with their individual tax advisors to determine the applicability of the tax
rules to the awards granted to them in their personal
circumstances.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A
VOTE IN FAVOR OF PROPOSAL 2
21
PROPOSAL
3
APPROVAL
OF
2005
EMPLOYEE STOCK PURCHASE PLAN
Our board
of directors is asking our stockholders to approve our 2005 Employee Stock
Purchase Plan (the “ESPP”). Our ESPP was adopted by our board of directors in
April 2005. The ESPP would take effect upon the approval of our stockholders and
would be administered by the board of directors or a committee named by the
board of directors would supervise and administer the ESPP. Set forth below is a
description of the terms of the ESPP. Please
see Appendix C for a complete copy of the ESPP.
General.
We may
issue a maximum of 1,000,000 shares of our Common Stock under the ESPP, subject
to an automatic increase on January 1 of each year in the number of shares
reserved for issuance equal to the lesser of (i) one percent of the number of
outstanding shares of Common Stock on such day, (ii) 750,000 and (iii) such
other amount as our board of directors may specify prior to the date such annual
increase is to take effect. The ESPP would terminate on the tenth year
anniversary of the adoption of the ESPP by our stockholders. Our board of
directors may amend or terminate the plan.
Purpose.
We
believe that employees participation in the ESPP will align more closely the
interests of the employees with the interests of the Company and our
stockholders.
Eligibility.
Any
employee of the Company who customarily works more than 20 hours per week and
more than five months in a calendar year, is eligible to participate in the
ESPP. Employees of any future subsidiary of the Company may also
participate.
Participation.
Eligible
employees may voluntarily elect to participate in the ESPP by completing a
payroll deduction authorization which is effective on the first day of the plan
year. Payroll deductions are limited to 10% of the participating employee’s base
pay for the plan year up to a maximum of $25,000 per year.
Purchase
Price. The
payroll deductions authorized by participating employees are used to purchase
newly issued shares of Common Stock from the Company at the end of each plan
year. The purchase price is the lower of 85% of the fair market value of the
shares on the first day or the last day of each offering period.
Exercise
and Withdrawal. Shares
are purchased for participating employees automatically on the last day of an
offering period, unless the participant elects in writing prior to such date not
to complete the purchase. A participant may at any time during an offering
period year give notice that he or she does not wish to continue to participate,
and all amounts withheld are then refunded with interest.
Income
Tax Consequences. The ESPP
is a “qualified” ESPP under Section 423 of the Internal Revenue Code. Under the
Internal Revenue Code, no income will result to a participant upon the purchase
of shares, and no deduction will be allowed by the Company. The gain, if any,
resulting from a disposition of the share received by a participant, is reported
according to the provisions of Section 423 of the Internal Revenue Code, and
will generally be taxed in part as ordinary income and in part as capital
gain.
Registration
with the SEC. Upon
approval of the ESPP, we plan to file a Registration Statement on Form S-8 with
the SEC to register the issuance of the shares issuable under the
ESPP.
Stockholder
Approval. Approval
of the ESPP requires the affirmative vote of a majority of the shares present
and entitled to vote at the Annual Meeting.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A
VOTE IN FAVOR OF PROPOSAL 3
22
PROPOSAL
4
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The Audit
Committee of the Board of Directors has selected J.H. Cohn LLP as the Company’s
independent auditors for the fiscal year ending December 31, 2005 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the annual meeting. J.H. Cohn LLP has
audited the Company’s financial statements for the fiscal years ended December
31, 2004 and 2003.
Neither
the Company’s bylaws nor other governing documents or law require stockholder
ratification of the selection of J.H. Cohn LLP as the Company’s independent
auditors. However, the Board is submitting the selection of J.H. Cohn LLP to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee of the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee of the Board in its discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the annual meeting will be required
to ratify the selection of J.H. Cohn LLP. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been approved.
We do not
expect that representatives of J.H. Cohn LLP will be present at the Annual
Meeting, however, if any representatives of J.H. Cohn LLP do attend the Annual
Meeting such representatives would be given the opportunity to make a statement
if they desire to do so and would likely be available to respond to appropriate
questions.
Independent
Auditors’ Fees
The
following table shows the fees paid or accrued by us for the audit services
provided by J.H. Cohn LLP for fiscal 2004 and 2003. During the fiscal years
ended December 31, 2004 and 2003, no other fees were billed by J.H. Cohn LLP for
information technology consulting or any other services.
2004 |
2003 |
||||||
Audit
Fees(1) |
$ |
61,780 |
$ |
36,534 |
|||
Audit-Related
Fees |
$ |
6,340 |
- |
||||
Tax
Fees |
- |
$ |
4,244 |
||||
All
Other Fees |
- |
- |
|||||
Total |
$ |
68,120 |
$ |
40,778 |
________________
(1) | Audit fees represent fees billed for professional services rendered for the audit of our annual financial statements and review of financial statements included in our Forms 10-QSB. |
Pre-Approval
Policies and Procedures
The Audit
Committee has adopted a policy and procedures for the pre-approval of audit and
non-audit services rendered by our independent auditor, J.H. Cohn LLP. The Audit
Committee generally pre-approves specified services in the defined categories of
audit services, audit-related services, and tax services up to specified
amounts. Pre-approval may also be given as part of the Audit Committee’s
approval of the scope of the engagement of the independent auditor or on an
individual explicit case-by-case basis before the independent auditor is engaged
to provide each service. The pre-approval of services may be delegated to one or
more of the Audit Committee’s members, but the decision must be reported to the
full Audit Committee at its next scheduled meeting. The Audit Committee has
determined that the rendering of the services other than audit services by J.H.
Cohn LLP is compatible with maintaining the principal accountant’s
independence.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A
VOTE IN FAVOR OF PROPOSAL 4
23
STOCKHOLDER
PROPOSALS FOR 2006 ANNUAL MEETING
To be
considered for inclusion in the Company’s proxy statement relating to the 2006
Annual Meeting of Stockholders, stockholder proposals pursuant to
Rule 14a-8 of Regulation 14A under the Securities Exchange Act of 1934
must be received a reasonable time before the date the Company begins to print
and mail its proxy materials for the 2006 Annual Meeting of Stockholders, but in
no event later than December [23], 2005.
For any
other business to be properly submitted by a stockholder for the 2006 Annual
Meeting of Stockholders, the stockholder must give timely notice in writing to
the Company. To be considered timely for the 2006 Annual Meeting of
Stockholders, the stockholder’s notice must be received no later than March [8],
2006, unless otherwise permitted by applicable rules. All stockholder proposals
should be addressed to the attention of the Secretary at the principal office of
the Company and contain the information required by the Company’s
bylaws.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially means extra convenience for
stockholders and cost savings for companies.
This
year, a number of brokers with account holders who are ADVENTRX stockholders
will be “householding” our proxy materials. A single proxy statement will be
delivered to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders. Once you have
received notice from your broker that they will be “householding” communications
to your address, “householding” will continue until you are notified otherwise
or until you revoke your consent. If, at any time, you no longer wish to
participate in “householding” and would prefer to receive a separate proxy
statement and annual report, please notify your broker, direct your written
request to ADVENTRX Pharmaceuticals, Inc., 6725 Mesa Ridge Road, Suite 100, San
Diego, California 92121, Attention: Chief Financial Officer, or call
858-552-0866. Stockholders who currently receive multiple copies of the proxy
statement at their address and would like to request “householding” of their
communications should contact their broker.
ANNUAL
REPORT
A copy of
the Annual Report of the Company for the 2004 fiscal year has been mailed
concurrently with this Proxy Statement to all stockholders entitled to notice of
and to vote at the annual meeting. The Annual Report is not incorporated into
this Proxy Statement and is not considered proxy solicitation
material.
OTHER
MATTERS
Our board
of directors knows of no other matters to be presented for stockholder action at
the Annual Meeting. However, if other matters do properly come before the Annual
Meeting or any adjournments or postponements thereof, our board of directors
intends that the persons named in the proxies will vote upon such matters in
accordance with the best judgment of the proxy holders.
Whether
or not you intend to be present at the meeting, you are urged to fill out, sign,
date and return the enclosed proxy at your earliest convenience.
By Order
of the Board of Directors
Evan
Levine,
Chief
Executive Officer, President and Corporate Secretary
San
Diego, California
April 15,
2005
24
APPENDIX
A
ADVENTRX
Pharmaceuticals, Inc.
Audit
Committee Charter
(Adopted
by the Board of Directors as of March 24, 2004)
Charter
This
charter governs the operations of the Audit Committee (the “Committee”) of the
Board of Directors (the “Board”) of
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the “Company”). At
least annually, the Committee shall review and reassess this charter and
recommend any proposed changes to the Board for its approval.
Membership
of Committee
The
Committee shall be composed of at least three directors, each of whom is
independent of management and the Company. Members of the Committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company and otherwise
satisfy the independence requirements of The American Stock Exchange and the
rules and regulations of the Securities and Exchange Commission (the
“Commission”),
including the independence standards specified in Section 121A and Rule 10A-3
under the Securities Exchange Act of 1934, as amended from time to time (the
“Exchange
Act”).
All
Committee members shall be able to read and understand fundamental financial
statements, including the Company’s balance sheet, income statement, and cash
flow statement and at least one member must be financially sophisticated, in
that he or she has past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in such member’s financial
sophistication, including but not limited to being or having been a chief
executive officer, chief financial officer, other senior officer with financial
oversight responsibilities. A Committee member who qualifies as an audit
committee financial expert under Item 401(h) of Regulation S-K shall be presumed
to qualify as financially sophisticated. Additionally, the Committee shall
periodically review and shall disclose as required under the Securities Act of
1933, as amended, whether any of its members is an “audit committee financial
expert,” as such term is defined in Rule 407 under the Exchange
Act.
Members
of the Committee shall be appointed by the Board, upon the recommendation of the
Nominating and Corporate Governance Committee of the Board, if one exists. The
Chairman of the Committee shall be designated by a majority vote of the full
Committee. Any Committee member may be replaced by the Board at any
time.
Meetings
The
Committee shall meet as often as it shall determine, but not less frequently
than annually. The Committee may request any officer or employee of the Company
or the Company’s outside counsel or independent auditor to attend a meeting of
the Committee or to meet with any members of, or any consultant to, the
Committee.
Except as
otherwise provided by the Certificate of Incorporation or By-Laws of the
Company, the frequency, location and operation of meetings and similar
procedural matters relating to the Committee shall, to the extent applicable, be
the same as those that relate to meetings of and procedural matters concerning
the Board.
Purposes
of the Committee
The
Committee shall assist the Board in overseeing the integrity of the Company’s
financial statements, the Company’s compliance with legal and regulatory
requirements, the independent auditor’s qualifications and independence, and the
performance of the Company’s independent auditors. In doing so, it is the goal
of the Committee to maintain free and open communication among the Committee,
independent auditor, and management of the Company. In discharging its oversight
role, the Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel of
the Company.
Appendix
A-1
Responsibilities
and Processes
The
primary responsibility of the Committee is to oversee the Company’s financial
reporting process on behalf of the Board and report the results of its
activities to the Board and, specifically, any issues that arise with respect to
the quality or integrity of the Company’s financial statements, the performance
and independence of the Company’s independent auditor or the performance of the
internal audit function. Management is responsible for preparing the Company’s
financial statements, and the independent auditor is responsible for auditing
those financial statements. The Committee, in carrying out its responsibilities
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The Committee should take the
appropriate actions to set the overall corporate “tone” for quality financial
reporting, sound business risk practices, and ethical behavior.
The
Committee may form and delegate authority to subcommittees consisting of one or
more members when appropriate. Additionally, the Committee is authorized to
engage, and the Company shall provide funding for, such independent counsel and
other advisors as the Committee may deem necessary or advisable to retain to
assist the Committee in carrying out its duties.
The
following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
Relating
to the Independent Auditor
· |
The
Committee shall have a clear understanding with management and the
independent auditor that the independent auditor is ultimately accountable
to the Committee, as representatives of the Company’s stockholders. The
Committee shall have the sole authority to appoint (subject, if
applicable, to ratification by the stockholders of the Company), terminate
and replace the independent auditor. The Committee may receive input from
the management of the Company on these matters but shall not delegate
these responsibilities. The Committee shall be responsible for the
oversight of the independent auditor, including the resolution of any
disagreements between management and the independent auditor regarding
financial reporting or other matters. |
· |
The
Committee shall have the sole authority to approve the scope, fees and
terms of all audit engagements, as well as all permissible non-audit
engagements of the independent auditor. The Committee shall pre-approve
all audit and permissible non-audit services to be performed for the
Company by the independent auditor, giving effect to the “de minimus”
exception for ratification of certain non-audit services set forth in
Section 10A(a)(i)(1)(B) of Exchange Act. On an annual basis, the Committee
shall consider whether the provision of non-audit services by the
independent auditor, on an overall basis, is compatible with maintaining
the independent auditor’s independence from
management. |
· |
The
Committee shall discuss with the auditors their independence from
management and the Company, and shall review all written disclosures
required by the Independence Standards Board to be provided by the
independent auditor. The Committee shall ensure the rotation of the lead
(or coordinating) audit partner having primary responsibility for the
audit and the audit partner responsible for reviewing the audit, to the
extent required by law. |
Relating
to Audits and Financial Statements
· |
The
Committee shall discuss with the independent auditor the overall scope and
plans for the annual audit. Also, the Committee shall discuss with
management and the independent auditor the adequacy and effectiveness of
the accounting and financial controls, including the Company’s system to
monitor and manage business risk, and legal and ethical compliance
programs. |
· |
The
Committee shall review with management and the independent auditor the
audited financial statements (including management’s discussion and
analysis contained therein) to be included in the Company’s Annual Report
of Form 10-K, including their judgment as to the quality, and not only the
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
independent auditor under generally accepted accounting principles. Based
on the foregoing and on review of other information made available to the
Committee, the Committee shall recommend to the Board whether the audited
financial statements should be included in the Company’s Form 10-K.
Additionally, the Committee shall prepare annually a report to the
stockholders of the Company, as required by the rules of the
Commission. |
Appendix
A-2
· |
The
Committee shall similarly review the interim financial statements with
management and the independent auditor prior to the filing of the each of
the Company’s Quarterly Reports on Form 10-Q. Additionally, the Committee
shall discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent auditor
under generally accepted accounting standards. The chairman of the
Committee may represent the entire Committee for the purposes of this
review. |
· |
The
Committee shall discuss with the independent auditor the matters required
to be discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the course
of the audit work, any restrictions on the scope of activities or access
to requested information, and any significant disagreements with
management. The Committee shall also obtain from the independent auditor
assurance that Section 10A(b) of the Exchange Act (including auditor
discovery that illegal acts may have occurred) has not been
implicated. |
· |
The
Committee shall review each report of the independent auditor, delivered
to the Committee pursuant to Section 10A(k) under the Exchange Act,
concerning: (a) all critical accounting policies and practices to be
used; (b) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditor; and
(c) other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences. |
· |
The
Committee shall review the disclosures made by officers of the Company in
the certification required to be filed (a) as part of the Company’s
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, regarding
any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management
or other employees who have a significant role in the Company’s internal
controls and (b) pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, regarding the compliance of periodic reports and their fair
presentation of the Company’s financial statements and results of
operations. |
Relating
to Other Compliance Matters
· |
The
Committee shall establish, or determine that there have been established,
procedures for the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal accounting controls or
auditing matters, and the confidential, anonymous submission by employees
of concerns regarding questionable accounting or auditing matters and
shall monitor ongoing compliance with those
provisions. |
· |
The
review and approval of the Committee shall be required prior to the
Company entering into any transactions with a related
party. |
· |
The
Committee shall review such other reports, adopt such other policies and
implement such other procedures as shall be necessary to comply with the
rules and regulations that may, from time to time, be established by the
American Stock Exchange or the Commission. |
· |
The
Company shall also be designated as the committee of the Board that shall
receive, review and take action with respect to any reports by attorneys,
pursuant to Section 307 of the Sarbanes-Oxley Act of 2002, of evidence of
material violations of securities laws or breaches of fiduciary duty or
similar violations by the Company or one of its
agents. |
Appendix
A-3
APPENDIX
B
ADVENTRX
PHARMACEUTICALS, INC.
2005
EQUITY INCENTIVE PLAN
1. Purpose.
The 2005
Equity Incentive Plan (the “Plan”) of
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the “Company”), is
intended to encourage ownership of Stock by employees, consultants and directors
of the Company and Affiliates and to provide additional incentive for them to
promote the success of the Company’s business through the grant of Awards. The
Plan is intended to be an incentive stock option plan within the meaning of
Section 422 of the Code, but not all Awards are required to be Incentive
Options.
2. Definitions.
As used
in the Plan, the terms set forth below shall have the meanings set forth
below:
2.1 Accelerate,
Accelerated, and
Acceleration
means:
(a) when used with respect to an Option or Stock Appreciation Right, that as of
the time of reference the Option or Stock Appreciation Right will become
exercisable with respect to some or all of the Stock or Stock Appreciation Right
for which it was not then otherwise exercisable by its terms; (b) when used with
respect to Restricted Stock or Restricted Stock Units, that the Risk of
Forfeiture otherwise applicable to such Stock or Restricted Stock Units shall
expire with respect to some or all of the Restricted Stock or Units then still
otherwise subject to the Risk of Forfeiture; and (c) when used with respect to
Performance Units, that the applicable Performance Goals shall be deemed to have
been met as to some or all of the Units.
2.2 Acquisition
means a
merger or consolidation of the Company with or into another person or the sale,
transfer, or other disposition of all or substantially all of the Company’s
assets to one or more other persons in a single transaction or series of related
transactions.
2.3 Affiliate
means any
corporation, partnership, limited liability company, business trust, or other
entity controlling, controlled by or under common control with the
Company.
2.4 Award
means any
grant or sale pursuant to the Plan of Options, Stock Appreciation Rights,
Performance Units, Restricted Stock, Restricted Stock Units or Stock
Grants.
2.5 Award
Agreement means an
agreement between the Company and a Participant, setting forth the terms and
conditions of an Award.
2.6 Board
means the
Board of Directors of the Company.
2.7 Change
of Control means the
occurrence of any of the following after the date of the approval of the Plan by
the Board:
(a) an
Acquisition, unless in connection with any merger or consolidation securities
possessing more than 50% of the total combined voting power of the survivor’s or
acquiror’s outstanding securities (or the securities of any parent thereof) are
held by a person or persons who held securities possessing more than 50% of the
total combined voting power of the Company’s outstanding securities immediately
prior to that transaction;
(b) any
person or group of persons (within the meaning of Section 13(d)(3) of the
Exchange Act) directly or indirectly acquires beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of securities
possessing more than 50% of the total combined voting power of the Company’s
outstanding securities pursuant to a tender or exchange offer made directly to
the Company’s stockholders that the Board does not recommend such stockholders
accept, other than (i) the Company or an Affiliate, (ii) an employee
benefit plan of the Company or any Affiliates, (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Affiliates, or (iv) an underwriter temporarily holding securities
pursuant to an offering of such securities;
Appendix
B-1
(c) over a
period of 36 consecutive months or less, there is a change in the composition of
the Board such that a majority of the Board members (rounded up to the next
whole number, if a fraction) ceases, by reason of one or more proxy contests for
the election of Board members, to be composed of individuals who either
(i) have been Board members continuously since the beginning of that
period, or (ii) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members described
in the preceding clause (i) who were still in office at the time that
election or nomination was approved by the Board; or
(d) a
majority of the Board votes in favor of a decision that a Change of Control has
occurred.
2.8 Code
means the
Internal Revenue Code of 1986, as amended, or any successor statutes thereto,
and any regulations issued from time to time thereunder.
2.9 Committee
means the
Compensation Committee of the Board, which in general is responsible for the
administration of the Plan, as provided in Section 5. For any period during
which no such committee is in existence, “Committee” means the Board, and all
authority and responsibility assigned to the Committee under the Plan shall be
exercised, if at all, by the Board.
2.10 Continuous
Service means
the absence of any interruption or termination of service as an employee,
director or consultant of the Company or any Subsidiary. Continuous Service
shall not be considered interrupted during any period of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company and any Parent, Subsidiary or successor of the
Company.
2.11 Covered
Employee means an
employee who is a “covered employee” within the meaning of Section 162(m) of the
Code.
2.12 Effective
Date means
___________, 2005, the date the requisite number of stockholders of the Company
approved the Plan.
2.13 Exchange
Act means the
Securities Exchange Act of 1934, as amended.
2.14 Grant
Date means the
date as of which an Award is granted, as determined under
Section 7.1(a).
2.15 Incentive
Option means an
Option which by its terms is to be treated as an “incentive stock option” within
the meaning of Section 422 of the Code.
2.16 Market
Value means the
value of a share of Stock on a particular date determined by such methods or
procedures as may be established by the Committee. Unless otherwise determined
by the Committee, the Market Value of a share of Stock as of any date is the
closing price for a Stock as reported on the American Stock Exchange LLC (or on
any national securities exchange or other established market on which the Stock
is then listed) for that date or, if no closing price is reported for that date,
the closing price on the next preceding date for which a closing price was
reported.
2.17 Nonstatutory
Option means any
Option that is not an Incentive Option.
2.18 Option
means an
option to purchase Stock.
2.19 Optionee
means a
Participant to whom an Option shall have been granted under the
Plan.
2.20 Parent
means a
parent corporation of the Company, whether now or hereafter existing, as defined
by Section 424(e) of the Code.
2.21 Participant
means any
holder of an outstanding Award under the Plan.
2.22 Performance
Criteria means the
criteria that the Committee selects for purposes of establishing the Performance
Goal or Performance Goals for a Participant for a Performance Period. The
Performance Criteria used to establish Performance Goals are limited to: pre- or
after-tax net earnings, sales growth, operating earnings, operating cash flow,
return on net assets, return on stockholders’ equity, return on assets, return
on capital, Stock price growth, stockholder returns, gross or net profit margin,
earnings per share, price per share of Stock, and market share, any of which may
be measured either in absolute terms or as compared to any incremental increase
or as compared to results of a peer group, results of clinical trial or FDA
approvals. The Committee will, in the manner and within the time prescribed by
Section 162(m) of the Code in the case of Qualified Performance-Based Awards,
objectively define the manner of calculating the Performance Criteria it selects
to use for such Performance Period for such Participant.
Appendix
B-2
2.23 Performance
Goals means,
for a Performance Period, the written goals established by the Committee for the
Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance
Goals may be expressed in terms of overall Company performance or the
performance of a division, business unit, Subsidiary, or an
individual.
2.24 Performance
Period means the
one or more periods, which may be of varying and overlapping durations, selected
by the Committee, over which the attainment of one or more Performance Goals
will be measured for purposes of determining a Participant’s right to, and the
payment of, a Performance Unit.
2.25 Performance
Unit means a
right granted to a Participant under Section 7.5 to receive cash, Stock or
other Awards, the payment of which is contingent on achieving Performance Goals
established by the Committee.
2.26 person means an
individual, a corporation, a partnership, a limited liability company, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
2.27 Qualified
Performance-Based Awards means
Awards intended to qualify as “performance-based compensation” under Section
162(m) of the Code.
2.28 Restricted
Stock means a
grant or sale of Stock to a Participant subject to a Risk of
Forfeiture.
2.29 Restricted
Stock Units means
rights to receive Stock at the close of a Restriction Period, subject to a Risk
of Forfeiture.
2.30 Restriction
Period means the
period of time, established by the Committee in connection with an Award of
Restricted Stock or Restricted Stock Units, during which the Restricted Stock or
Restricted Stock Units are subject to a Risk of Forfeiture described in the
applicable Award Agreement.
2.31 Risk
of Forfeiture means a
limitation on the right of the Participant to retain Restricted Stock or
Restricted Stock Units, including a right in the Company to reacquire Restricted
Stock at less than the then Market Value of such Restricted Stock, arising
because of the occurrence or non-occurrence of specified events or
conditions.
2.32 Securities
Act means the
Securities Act of 1933, as amended.
2.33 SEC
means the
Securities and Exchange Commission.
2.34 Stock
means
common stock, par value $0.001 per share, of the Company, and such other
securities as may be substituted for Stock pursuant to
Section 8.
2.35 Stock
Appreciation Right means a
right to receive any excess in the Market Value of a share of Stock (except as
otherwise provided in Section 7.2(c)) over a specified exercise
price.
2.36 Stock
Grant means the
grant of Stock not subject to restrictions or other forfeiture
conditions.
Appendix
B-3
2.37 Subsidiary means a
subsidiary corporation of the Company, whether now or hereafter existing, as
defined in Section 424(f) of the Code.
2.38 Ten
Percent Owner means a
person who owns, or is deemed within the meaning of Section 422(b)(6) of the
Code to own, stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company (or any Parent or Subsidiary of the
Company). Whether a person is a Ten Percent Owner shall be determined with
respect to an Option based on the facts existing immediately prior to the Grant
Date of the Option.
2.39 Vesting
Commencement Date means,
with respect to an Option or Stock Appreciation Right, the date, determined by
the Committee, on which the vesting of the Option or Stock Appreciation Right
shall commence, which may be the Grant Date or a date prior to or after the
Grant Date.
3. Term
of the Plan.
Unless
the Plan shall have been earlier terminated by the Board, Awards may be granted
under the Plan at any time in the period commencing on the Effective Date and
ending immediately prior to the tenth anniversary of the Effective Date. Awards
granted pursuant to the Plan within that period shall not expire solely by
reason of the termination of the Plan.
4. Stock
Subject to the Plan. Subject
to Section 8, the maximum aggregate number of shares of Stock which may be
issued pursuant to or subject to outstanding Awards granted under the Plan is
6,000,000, plus an annual increase to be automatically added on the first day of
the Company’s fiscal year beginning in 2006 equal to the lesser of (i) one
percent of the number of outstanding shares of Stock on such day, (ii) 750,000
and (iii) such other amount as the Board may specify prior to the date such
annual increase is to take effect. The maximum aggregate number of shares of
Stock which may be issued pursuant to or subject to outstanding Incentive
Options granted under the Plan is 5,000,000. For purposes of applying the
foregoing limitations, if any Option or Stock Appreciation Right expires,
terminates, or is cancelled for any reason without having been exercised in
full, or if any other Award is forfeited by the recipient, the shares of Stock
not purchased by the Optionee or which are forfeited by the recipient shall
again be available for Awards to be granted under the Plan. In addition,
exercise or settlement of any Award shall not count against the foregoing
limitations except to the extent settled in the form of Stock. Stock issued
pursuant to Awards granted under the Plan and later repurchased by the Company
pursuant to any repurchase right (other than the repurchase of shares that have
not vested and are subject to forfeiture prior to vesting) that the Company may
have shall not be available for future grant of Awards under the Plan.
5. Administration.
The Plan
shall be administered by the Committee; provided,
however, that at
any time and on any one or more occasions the Board may itself exercise any of
the powers and responsibilities assigned the Committee under the Plan and when
so acting shall have the benefit of all of the provisions of the Plan pertaining
to the Committee’s exercise of its authorities hereunder. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make or to select the manner of making all determinations with
respect to each Award to be granted by the Company under the Plan, including the
employee, consultant or director to receive the Award and the form of Award. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective employees, consultants, and directors,
their present and potential contributions to the success of the Company and
Affiliates, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the provisions of the Plan, the Committee shall also have
complete authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, to determine the terms and provisions of the
respective Award Agreements (which need not be identical), and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee’s determinations made in good faith on matters referred to in the Plan
shall be final, binding and conclusive on all persons having or claiming any
interest under the Plan or an Award made pursuant to hereto.
6. Authorization
of Grants.
6.1 Eligibility. The
Committee may grant from time to time and at any time prior to the termination
or expiration of the Plan one or more Awards, either alone or in combination
with any other Awards, to any employee of or consultant to one or more of the
Company and Affiliates or to any non-employee member of the Board or of any
board of directors (or similar governing authority) of any Affiliate. However,
only employees of the Company, and of any Parent or Subsidiary of the Company,
shall be eligible for the grant of an Incentive Option. Further, in no event
shall the number of shares of Stock covered by Options or other Awards granted
to any one person in any one calendar year exceed 1,500,000 shares of Stock
subject to the Plan.
Appendix
B-4
6.2 General
Terms of Awards. Each
grant of an Award shall be subject to all applicable terms and conditions of the
Plan (including but not limited to any specific terms and conditions applicable
to that type of Award set out in the following Section), and such other terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
may prescribe. No prospective Participant shall have any rights with respect to
an Award, unless and until such Participant has (a) (i) executed an Award
Agreement with respect to such Award and delivered a fully executed copy of such
Award Agreement to the Company, or (ii) otherwise affirmatively assented to the
terms and conditions of an Award Agreement with respect to such Award, including
by “click through” agreement, pursuant to procedures and guidelines approved by
the Committee, and (b) otherwise complied with the applicable terms and
conditions of such Award.
6.3 Effect
of Termination of Employment, Disability or Death.
(a) Termination
of Employment, Etc. Unless
the Committee shall provide otherwise with respect to any Award, if the
Participant’s employment or other association with the Company and Affiliates
ends for any reason other than by total disability or death, including because
of the Participant’s employer ceasing to be an Affiliate, (i) any outstanding
Option or Stock Appreciation Right of the Participant shall cease to be
exercisable in any respect not later than 90 days following that event and, for
the period it remains exercisable following that event, shall be exercisable
only to the extent exercisable at the date of that event, subject to the
condition that no Option or Stock Appreciation Right shall be exercised after
its expiration in accordance with its terms, and (ii) any other outstanding
Award of the Participant shall be forfeited or otherwise subject to return to or
repurchase by the Company on the terms specified in the applicable Award
Agreement. Military or sick leave or other public (such as jury duty) or
personal leave approved by an authorized representative of the Company shall not
be deemed a termination of employment or other association, provided that it
does not exceed the longer of 90 days or the period during which the absent
Participant’s reemployment rights, if any, are guaranteed by statute or by
contract.
(b) Disability
of Participant. If a
Participant’s employment or other association with the Company and Affiliates
ends due to disability (as defined in Section 22(e)(3) of the Code), and such
Participant was in Continuous Service from the Grant Date until the date of
termination of service, (i) any outstanding Option or Stock Appreciation Right
may be exercised at any time within six months following the date of termination
of service, but only to the extent of the accrued right to exercise at the time
of termination of service, subject to the condition that no Option or Stock
Appreciation Right shall be exercised after its expiration in accordance with
its terms and (ii) any other outstanding Award or the Participant shall be
forfeited or otherwise subject to return or repurchase by the Company on the
terms specified in the applicable Award Agreement.
(c) Death
of Participant. In the
event of the death of a Participant who is at the time of such Participant’s
death an employee, director or consultant and who was in Continuous Service as
from the Grant Date until the date of death, (i) any outstanding Option or Stock
Appreciation Right of such Participant shall cease to be exercisable in any
respect not later than 12 months following the date of death and, for the period
it remains exercisable following the date of death, shall be exercisable by such
Participant’s estate or by a person who acquired the right to exercise such
Award by bequest, inheritance or otherwise as a result of the Participant’s
death, but only to the extent exercisable at the date of death, subject to the
condition that no Option or Stock Appreciation Right shall be exercised after
its expiration in accordance with its terms, and (ii) any other outstanding
Award of such Participant shall be forfeited or otherwise subject to return to
or repurchase by the Company on the terms specified in the applicable Award
Agreement.
6.4 Transferability
of Awards. Except
as otherwise provided in this Section 6.4, Awards shall not be transferable, and
no Award or interest therein may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. All of a Participant’s rights in any Award may be
exercised during the life of the Participant only by the Participant or the
Participant’s legal representative. However, the Committee may, at or after the
grant of an Award of a Nonstatutory Option, or Restricted Stock, provide that
such Award may be transferred by the recipient through a gift or domestic
relations order in settlement of marital property rights to any of the following
donees or transferees and may be reacquired by the Participant from any of such
donors or transferees:
Appendix
B-5
(a) any
“family
member,” which
includes any child, stepchild, grandchild, parent, stepparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships and any individual sharing the Participant’s household (other than
a tenant or employee);
(b) a trust
in which family members have more than 50% of the beneficial
interests;
(c) a
foundation in which “family members” (or the Participant) control the management
of assets; and
(d) any other
entity in which “family members” (or the Participant) own more than 50% of the
voting interests.
provided, that
(x) any such transfer is without payment of any consideration whatsoever
and that no transfer shall be valid unless first approved by the Committee,
acting in its sole discretion; (y) the Award Agreement pursuant to which
such Awards are granted, and any amendments thereto, must be approved by the
Committee and must expressly provide for transferability in a manner consistent
with this Section 6.4; and (z) subsequent transfers of transferred
Awards shall be prohibited except in accordance with this Section 6.4.
Following transfer, any such Awards shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer,
provided
that the
term of the Plan or in the Award Agreement shall continue to be applied with
respect to the original Participant, following which any Options or Stock
Appreciation Rights shall be exercisable by the transferee only to the extent,
and for the periods specified in the Award Agreement or Section 6.3, as
applicable.
7. Specific
Terms of Awards.
7.1 Options.
(a) Date
of Grant. The
granting of an Option shall take place at the time specified in the Award
Agreement. Only if expressly so provided in the applicable Award Agreement shall
the Grant Date be a date other than the date on which the Award Agreement shall
have been duly executed and delivered by the Company and the
Optionee.
(b) Exercise
Price. The per
share price at which Stock may be acquired under each Incentive Option shall be
not less than 100% of the Market Value of a share of Stock on the Grant Date, or
not less than 110% of the Market Value of a share of Stock on the Grant Date if
the Optionee is a Ten Percent Owner. The price at which shares may be acquired
under each Nonstatutory Option shall not be so limited solely by reason of this
Section.
(c) Option
Period. No
Incentive Option may be exercised on or after the tenth anniversary of the Grant
Date, or on or after the fifth anniversary of the Grant Date if the Optionee is
a Ten Percent Owner. The Option period under each Nonstatutory Option shall not
be so limited solely by reason of this Section.
(d) Exercisability. An
Option may be immediately exercisable or become exercisable in such
installments, cumulative or non-cumulative, as the Committee may determine.
Unless the Committee specifically determines otherwise at the time of the grant
of the Option, each Option shall vest and become exercisable, cumulatively, as
to one-fourth of the Stock originally subject to the Option at the first
anniversary of the Vesting Commencement Date and as to one forty-eighth of the
Stock originally subject to the Option at the end of each successive month
thereafter until all of the Stock subject to the Option have vested, subject to
Section 6.3. In the case of an Option not otherwise immediately exercisable in
full, the Committee may Accelerate such Option in whole or in part at any time;
provided,
however, that in
the case of an Incentive Option, any such Acceleration of the Option would not
cause the Option to fail to comply with the provisions of Section 422 of
the Code or the Optionee consents to the Acceleration.
Appendix
B-6
(e) Method
of Exercise. An
Option may be exercised by the Optionee giving written notice, in the manner
provided in Section 15, specifying the number of shares of Stock with
respect to which the Option is then being exercised. The notice shall be
accompanied by payment in the form of cash or check payable to the order of the
Company in an amount equal to the exercise price of the Stock to be purchased
or, if the Committee had so authorized on the grant of an Incentive Option or on
or after grant of a Nonstatutory Option (and subject to such conditions, if any,
as the Committee may deem necessary to avoid adverse accounting effects to the
Company) by delivery to the Company of
(i) Stock
having a Market Value equal to the exercise price of the Stock to be purchased
upon exercise of such Option, or
(ii) unless or
to the extent not prohibited by applicable law, the Optionee’s executed
promissory note in the principal amount equal to the exercise price of the
shares to be purchased and otherwise in such form as the Committee shall have
approved.
If the
Stock is traded on an established market, payment of any exercise price may also
be made through and under the terms and conditions of any formal cashless
exercise program authorized by the Company entailing the sale of the Stock
subject to an Option in a brokered transaction (other than to the Company).
Receipt by the Company of such notice and payment in any authorized or
combination of authorized means shall constitute the exercise of the Option.
Within 30 days thereafter but subject to the remaining provisions of the Plan,
the Company shall deliver or cause to be delivered to the Optionee or his agent
a certificate or certificates for the number of shares of Stock then being
purchased. Such shares of Stock shall be fully paid and nonassessable.
(f) Limit
on Incentive Option Characterization. An
Incentive Option shall be considered to be an Incentive Option only to the
extent that the number of shares of Stock for which the Option first becomes
exercisable in a calendar year do not have an aggregate Market Value (as of the
date of the grant of the Option) in excess of the “current
limit.” The
current limit for any Optionee for any calendar year shall be $100,000
minus the
aggregate Market Value at the date of grant of the number of shares of Stock
available for purchase for the first time in the same year under each other
Incentive Option previously granted to the Optionee under the Plan, and under
each other incentive stock option previously granted to the Optionee under any
other incentive stock option plan of the Company and Affiliates. Any Stock which
would cause the foregoing limit to be violated shall be deemed to have been
granted under a separate Nonstatutory Option, otherwise identical in its terms
to those of the Incentive Option.
(g) Notification
of Disposition. Each
person exercising any Incentive Option granted under the Plan shall be deemed to
have covenanted with the Company to report to the Company any disposition of
such shares prior to the expiration of the holding periods specified by
Section 422(a)(1) of the Code and, if and to the extent that the
realization of income in such a disposition imposes upon the Company federal,
state, local or other withholding tax requirements, or any such withholding is
required to secure for the Company an otherwise available tax deduction, to
remit to the Company an amount in cash sufficient to satisfy those
requirements.
(h) Automatic
Option Grants. The
provisions set forth in this Section 7.1(h) shall not be amended more than once
every six months other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules promulgated
thereunder. All grants of Options to non-employee directors under the Plan shall
be automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:
(i) No person
shall have any discretion to select which non-employee directors shall be
granted Options.
(ii) Each
non-employee director shall be automatically granted a Nonstatutory Option (an
“Automatic
Director Option”) to
purchase 50,000 shares of Stock at the first meeting of the Board following the
annual meeting of stockholders in each year, commencing with the 2005 annual
meeting of stockholders, provided that such director is not an employee and if,
as of such date, such non-employee director shall have served on the Board for
at least the preceding six months.
Appendix
B-7
(iii) The terms
of an Automatic Director Option granted hereunder shall be as
follows:
(A) the
term of the Automatic Director Option shall be 10 years;
(B) the
exercise price per share shall be 105% of the Market Value per share on the date
of grant of the Automatic Director Option. In the event that the date of grant
of the Automatic Director Option is not a trading day, the exercise price per
share shall be 105% of the Market Value on the next trading day immediately
following the date of grant of the Automatic Director Option;
(C)
subject to Section 9, the Automatic Director Option shall become exercisable as
to 1/12th of the
shares subject to the Automatic Director Option at the end of each calendar
month after its date of grant, provided that the Optionee was in Continuous
Service on such dates;
(D)
except as the terms of this Section 7.1(h) otherwise provide, the terms and
conditions of the Plan shall apply to Automatic Director Options.
(iv) In the
event that any Automatic Director Option granted under the Plan would cause the
number of shares subject to outstanding Options plus the number of shares
previously purchased under Options to exceed the total number of authorized
shares then available under the Plan, the remaining shares available for Option
grant shall be granted under Options to the non-employee directors on a pro rata
basis. No further grants shall be made until such time, if any, as additional
shares become available for grant under the Plan through action of the Board or
the stockholders to increase the number of shares which may be issued under the
Plan or through cancellation or expiration of Awards previously granted
hereunder.
7.2 Stock
Appreciation Rights.
(a) Tandem
or Stand-Alone. Stock
Appreciation Rights may be granted in tandem with an Option (at or, in the case
of a Nonstatutory Option, after, the award of the Option), or alone and
unrelated to an Option. Stock Appreciation Rights in tandem with an Option shall
terminate to the extent that the related Option is exercised, and the related
Option shall terminate to the extent that the tandem Stock Appreciation Rights
are exercised.
(b) Exercise
Price. Stock
Appreciation Rights shall have such exercise price as the Committee may
determine, except that in the case of Stock Appreciation Rights in tandem with
Options, the exercise price of the Stock Appreciation Rights shall equal the
exercise price of the related Option.
(c) Other
Terms. Except
as the Committee may deem inadvisable or inapplicable in the circumstances,
Stock Appreciation Rights shall be subject to terms and conditions substantially
similar to those applicable to a Nonstatutory Option. In addition, a Stock
Appreciation Right related to an Option which can only be exercised during
limited periods following a Change of Control may entitle the Participant to
receive an amount based upon the highest price paid or offered for Stock in any
transaction relating to the Change of Control or paid during the 30-day period
immediately preceding the occurrence of the Change of Control in any transaction
reported in the stock market in which the Stock is normally traded.
7.3 Restricted
Stock.
(a) Purchase
Price. Shares
of Restricted Stock shall be issued under the Plan for such consideration, in
cash, other property or services, or any combination thereof, as is determined
by the Committee.
(b) Issuance
of Certificates. Each
Participant receiving a Restricted Stock Award, subject to Section 7.3(c), shall
be issued a stock certificate in respect of such Restricted Stock. Such
certificate shall be registered in the name of such Participant, and, if
applicable, shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Award substantially in the following
form:
Appendix
B-8
THE
TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE 2005 EQUITY INCENTIVE
PLAN OF THE ISSUER AND AN AWARD AGREEMENT ENTERED INTO BY THE REGISTERED OWNER
AND THE ISSUER. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF
THE ISSUER.
(c) Escrow
of Shares. The
Committee may require that the stock certificates evidencing Restricted Stock be
held in custody by a designated escrow agent (which may but need not be the
Company) until the restrictions thereon shall have lapsed, and that the
Participant deliver a stock power, endorsed in blank, relating to the Stock
covered by such Award.
(d) Restrictions
and Restriction Period. During
the Restriction Period applicable to Restricted Stock, such shares shall be
subject to limitations on transferability and a Risk of Forfeiture arising on
the basis of such conditions related to the performance of services, Company or
Affiliate performance or otherwise as the Committee may determine and provide
for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived
or terminated, or the Restriction Period shortened, at any time by the Committee
on such basis as it deems appropriate.
(e) Rights
Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except
as otherwise provided in the Plan or the applicable Award Agreement, at all
times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of,
an Award of Restricted Stock, the Participant shall have all of the rights of a
stockholder of the Company, including the right to vote, and the right to
receive any dividends with respect to, the Restricted Stock. The Committee, as
determined at the time of Award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested in
additional Restricted Stock to the extent shares are available under
Section 4.
(f) Lapse
of Restrictions. If and
when the Restriction Period expires without a prior forfeiture of the Restricted
Stock, the certificates for such shares shall be delivered to the Participant
promptly if not theretofore so delivered.
7.4 Restricted
Stock Units.
(a) Character. Each
Restricted Stock Unit shall entitle the recipient to a share of Stock at a close
of such Restriction Period as the Committee may establish and subject to a Risk
of Forfeiture arising on the basis of such conditions relating to the
performance of services, Company or Affiliate performance or otherwise as the
Committee may determine and provide for in the applicable Award Agreement. Any
such Risk of Forfeiture may be waived or terminated, or the Restriction Period
shortened, at any time by the Committee on such basis as it deems
appropriate.
(b) Form
and Timing of Payment. Payment
of earned Restricted Stock Units shall be made in a single lump sum following
the close of the applicable Restriction Period. At the discretion of the
Committee, Participants may be entitled to receive payments equivalent to any
dividends declared with respect to Stock referenced in grants of Restricted
Stock Units but only following the close of the applicable Restriction Period
and then only if the underlying Stock shall have been earned. Unless the
Committee shall provide otherwise, any such dividend equivalents shall be paid,
if at all, without interest or other earnings.
7.5 Performance
Units.
(a) Character. Each
Performance Unit shall entitle the recipient to the value of a specified number
of shares of Stock, over the initial value for such number of shares, if any,
established by the Committee at the time of grant, at the close of a specified
Performance Period to the extent specified Performance Goals shall have been
achieved.
Appendix
B-9
(b) Earning
of Performance Units. The
Committee shall set Performance Goals in its discretion which, depending on the
extent to which they are met within the applicable Performance Period, will
determine the number and value of Performance Units that will be paid out to the
Participant. After the applicable Performance Period has ended, the holder of
Performance Units shall be entitled to receive payout on the number and value of
Performance Units earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding Performance
Goals have been achieved.
(c) Form
and Timing of Payment. Payment
of earned Performance Units shall be made in a single lump sum following the
close of the applicable Performance Period. At the discretion of the Committee,
Participants may be entitled to receive any dividends declared with respect to
Stock which have been earned in connection with grants of Performance Units
which have been earned, but not yet distributed to Participants. The Committee
may permit or, if it so provides at grant require, a Participant to defer such
Participant’s receipt of the payment of cash or the delivery of Stock that would
otherwise be due to such Participant by virtue of the satisfaction of any
requirements or goals with respect to Performance Units. If any such deferral
election is required or permitted, the Committee shall establish rules and
procedures for such payment deferrals.
7.6 Stock
Grants. Stock
Grants shall be awarded solely in recognition of significant contributions to
the success of the Company or Affiliates, in lieu of compensation otherwise
already due and in such other limited circumstances as the Committee deems
appropriate. Stock Grants shall be made without forfeiture conditions of any
kind.
7.7 Qualified
Performance-Based Awards.
(a) Purpose. The
purpose of this Section 7.7 is to provide the Committee the ability to qualify
Awards as “performance-based compensation” under Section 162(m) of the Code. If
the Committee, in its discretion, decides to grant an Award as a Qualified
Performance-Based Award, the provisions of this Section 7.7 will control over
any contrary provision contained in the Plan. In the course of granting any
Award, the Committee may specifically designate the Award as intended to qualify
as a Qualified Performance-Based Award. However, no Award shall be considered to
have failed to qualify as a Qualified Performance-Based Award solely because the
Award is not expressly designated as a Qualified Performance-Based Award, if the
Award otherwise satisfies the provisions of this Section 7.7 and the
requirements of Section 162(m) of the Code and the regulations promulgated
thereunder applicable to “performance-based compensation.”
(b) Authority. All
grants of Awards intended to qualify as Qualified Performance-Based Awards and
determination of terms applicable thereto shall be made by the Committee or, if
not all of the members thereof qualify as “Outside
Directors” within
the meaning of applicable IRS regulations under Section 162 of the Code, a
subcommittee of the Committee consisting of such of the members of the Committee
as do so qualify. Any action by such a subcommittee shall be considered the
action of the Committee for purposes of the Plan.
(c) Applicability. This
Section 7.7 will apply only to those Covered Employees, or to those persons
who the Committee determines are reasonably likely to become Covered Employees
in the period covered by an Award, selected by the Committee to receive
Qualified Performance-Based Awards. The Committee may, in its discretion, grant
Awards to Covered Employees that do not satisfy the requirements of this
Section 7.7.
(d) Discretion
of Committee with Respect to Qualified Performance-Based Awards. Options
may be granted as Qualified Performance-Based Awards in accordance with Section
7.1, except that the exercise price of any Option intended to qualify as a
Qualified Performance-Based Award shall in no event be less that the Market
Value of the Stock on the date of grant. With regard to other Awards intended to
qualify as Qualified Performance-Based Awards, such as Restricted Stock,
Restricted Stock Units, or Performance Units, the Committee will have full
discretion to select the length of any applicable Restriction Period or
Performance Period, the kind or level of the applicable Performance Goal, and
whether the Performance Goal is to apply to the Company, a Subsidiary or any
division or business unit or to the individual. Any Performance Goal or Goals
applicable to Qualified Performance-Based Awards shall be objective, shall be
established not later than 90 days after the beginning of any applicable
Performance Period (or at such other date as may be required or permitted for
“performance-based compensation” under Section 162(m) of the Code) and shall
otherwise meet the requirements of Section 162(m) of the Code, including
the requirement that the outcome of the Performance Goal or Goals be
substantially uncertain (as defined in the regulations under Section 162(m)
of the Code) at the time established.
Appendix
B-10
(e) Payment
of Qualified Performance-Based Awards. A
Participant will be eligible to receive payment under a Qualified
Performance-Based Award which is subject to achievement of a Performance Goal or
Goals only if the applicable Performance Goal or Goals period are achieved
within the applicable Performance Period, as determined by the Committee. In
determining the actual size of an individual Qualified Performance-Based Award,
the Committee may reduce or eliminate the amount of the Qualified
Performance-Based Award earned for the Performance Period, if in its sole and
absolute discretion, such reduction or elimination is appropriate.
(f) Maximum
Award Payable. The
maximum Qualified Performance-Based Award payment to any one Participant under
the Plan for a Performance Period is the number of shares of Stock set forth in
Section 4, or if the Qualified Performance-Based Award is paid in cash, that
number of shares multiplied by the Market Value of the Stock as of the date the
Qualified Performance-Based Award is granted.
(g) Limitation
on Adjustments for Certain Events. No
adjustment of any Qualified Performance-Based Award pursuant to Section 8 shall
be made except on such basis, if any, as will not cause such Award to provide
other than “performance-based compensation” within the meaning of Section 162(m)
of the Code.
7.8 Awards
to Participants Outside the United States. The
Committee may modify the terms of any Award under the Plan, granted to a
Participant who is, at the time of grant or during the term of the Award,
resident or primarily employed outside of the United States in any manner deemed
by the Committee to be necessary or appropriate in order that the Award shall
conform to laws, regulations, and customs of the country in which the
Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant’s residence or
employment abroad, shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United States. The
Committee may establish supplements to, or amendments, restatements, or
alternative versions of, the Plan for the purpose of granting and administrating
any such modified Award. No such modification, supplement, amendment,
restatement or alternative version may increase the share limit of
Section 4.
7.9 Notwithstanding
any other provisions of the Plan, it is not intended that any grant of an Award
shall result in the deferral of compensation within the meaning of Section 409A
of the Code; provided,
however, that to
the extent the grant of an Award would result in the deferral of compensation
under Section 409A of the Code, such Award shall comply with the requirements of
Section 409A of the Code. .
8. Adjustment
Provisions.
8.1 Adjustment
for Corporate Actions. All of
the share numbers set forth in the Plan reflect the capital structure of the
Company as of the Effective Date. Subject to Section 8.2, if subsequent to that
date the outstanding number of shares of Stock (or any other securities covered
by the Plan by reason of the prior application of this Section) are increased,
decreased, or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such outstanding Stock, through
merger, consolidation, sale of all or substantially all the property of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar distribution with respect to
such Stock, an appropriate and proportionate adjustment will be made in
(i) the maximum numbers and kinds of shares provided in Section 4,
(ii) the numbers and kinds of shares or other securities subject to the
then outstanding Awards, (iii) the exercise price for each share or other
unit of any other securities subject to then outstanding Options and Stock
Appreciation Rights (without change in the aggregate purchase price as to which
such Options or Rights remain exercisable), and (iv) the repurchase price
of each share of Restricted Stock then subject to a Risk of Forfeiture in the
form of a Company repurchase right.
Appendix
B-11
8.2 Treatment
in Certain Acquisitions.
(a) Subject
to any provisions of then outstanding Awards granting different rights to the
holders thereof, in the event of an Acquisition constituting a Change of Control
in which outstanding Awards are not Accelerated in full, any then
outstanding Awards shall nevertheless Accelerate in full if not assumed or
replaced by comparable Awards referencing shares of the capital stock of the
successor or acquiring entity or the entity in control of such successor or
acquiring entity, and thereafter (or after a reasonable period following such
Acquisition, as determined by the Committee) terminate. As to any one or more
outstanding Awards which are not otherwise Accelerated in full by reason of such
Acquisition, the Committee may also, either in advance of such Acquisition or at
the time thereof and upon such terms as it may deem appropriate, provide for the
Acceleration of such outstanding Awards in the event that the employment of the
Participants should subsequently terminate following such Acquisition. Each
outstanding Award that is assumed in connection with such Acquisition, or is
otherwise to continue in effect subsequent to such Acquisition, will be
appropriately adjusted, immediately after such Acquisition, as to the number and
class of securities and other relevant terms in accordance with Section 8.1.
(b) For the
purposes of this Section 8.2, an Award shall be considered assumed or replaced
by a comparable Award if, following the Acquisition constituting a Change of
Control, the Award confers the right to purchase, for each share of Stock
subject to the Award immediately prior to such Acquisition, the consideration
(whether stock, cash or other securities or property) received in such
Acquisition by holders of Stock on the effective date of such Acquisition (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Stock); provided,
however, that if
such consideration received in such Acquisition was not solely common stock of
the successor corporation or its Parent or Subsidiary, the Committee may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Award for each share of Stock subject to the
Award to be solely common stock of the successor corporation or its Parent or
Subsidiary equal in fair market value to the per share consideration received by
holders of Stock in such Acquisition.
8.3 Dissolution
or Liquidation. Upon
dissolution or liquidation of the Company, other than as part of an Acquisition
or similar transaction, (a) each outstanding Option and Stock Appreciation Right
shall terminate, but the Optionee or Stock Appreciation Right holder shall have
the right, immediately prior to such dissolution or liquidation, to exercise the
Option or Stock Appreciation Right to the extent exercisable on the date of
dissolution or liquidation; (b) each share of Restricted Stock that is subject
to a Risk of Forfeiture immediately prior to such dissolution or liquidation
may, at the election of the Company, be forfeited by the Company prior to such
dissolution or liquidation pursuant to the terms of the applicable Award
Agreement; and (c) subject to subparts (a) and (b) of this Section 8.3, each
other outstanding Award shall be forfeited.
8.4 Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. In the
event of any corporate action not specifically covered by the preceding
sections, including but not limited to an extraordinary cash distribution on
Stock, a corporate separation or other reorganization or liquidation, the
Committee may make such adjustment of outstanding Awards and their terms, if
any, as it, in its sole discretion, may deem equitable and appropriate in the
circumstances. The Committee may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in this
Section 8.4) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan.
8.5 Related
Matters. Any
adjustment in Awards made pursuant to this Section 8 shall be determined
and made, if at all, by the Committee and shall include any correlative
modification of terms, including of Option exercise prices, rates of vesting or
exercisability, Risks of Forfeiture, applicable repurchase prices for Restricted
Stock, and Performance Goals and other financial objectives which the Committee
may deem necessary or appropriate so as to ensure the rights of the Participants
in their respective Awards are not substantially diminished nor enlarged as a
result of the adjustment and corporate action other than as expressly
contemplated in this Section 8. No fraction of a share shall be purchasable or
deliverable upon exercise, but in the event any adjustment hereunder of the
number of shares covered by an Award shall cause such number to include a
fraction of a share, such number of shares shall be adjusted to the nearest
smaller whole number of shares. No adjustment of an Option exercise price per
share pursuant to this Section 8 shall result in an exercise price which is less
than the par value of the Stock.
Appendix
B-12
9. Settlement
of Awards
9.1 In
General. Options
and Restricted Stock shall be settled in accordance with their terms. All other
Awards may be settled in cash, Stock, or other Awards, or a combination thereof,
as determined by the Committee at or after grant and subject to any contrary
Award Agreement. The Committee may not require settlement of any Award in Stock
pursuant to the immediately preceding sentence to the extent issuance of such
Stock would be prohibited or unreasonably delayed by reason of any other
provision of the Plan.
9.2 Violation
of Law.
Notwithstanding any other provision of the Plan or the relevant Award Agreement,
if, at any time, in the reasonable opinion of the Company, the issuance of Stock
covered by an Award may constitute a violation of law, then the Company may
delay such issuance and the delivery of a certificate for such shares until
(i) approval shall have been obtained from such governmental agencies,
other than the SEC, as may be required under any applicable law, rule, or
regulation and (ii) in the case where such issuance would constitute a
violation of a law administered by or a regulation of the SEC, one of the
following conditions shall have been satisfied:
(a) the
shares are at the time of the issue of such shares effectively registered under
the Securities Act; or
(b) the
Company shall have determined, on such basis as it deems appropriate (including
an opinion of counsel in form and substance satisfactory to the Company) that
the sale, transfer, assignment, pledge, encumbrance or other disposition of such
shares or such beneficial interest, as the case may be, does not require
registration under the Securities Act or any applicable State securities
laws.
The
Company shall make all reasonable efforts to bring about the occurrence of said
events.
9.3 Corporate
Restrictions on Rights in Stock. Any
Stock to be issued pursuant to Awards granted under the Plan shall be subject to
all restrictions upon the transfer thereof which may be now or hereafter imposed
by the charter, certificate or articles, or bylaws, of the Company.
9.4 Investment
Representations. The
Company shall be under no obligation to issue any shares covered by any Award
unless the shares to be issued pursuant to Awards granted under the Plan have
been effectively registered under the Securities Act, or the Participant shall
have made such written representations to the Company (upon which the Company
believes it may reasonably rely) as the Company may deem necessary or
appropriate for purposes of confirming that the issuance of such shares will be
exempt from the registration requirements of the Securities Act and any
applicable state securities laws and otherwise in compliance with all applicable
laws, rules and regulations, including but not limited to that the Participant
is acquiring the shares for such Participant’s own account for the purpose of
investment and not with a view to, or for sale in connection with, the
distribution of any such shares.
9.5 Registration. If the
Company shall deem it necessary or desirable to register under the Securities
Act or other applicable statutes any Stock issued or to be issued pursuant to
Awards granted under the Plan, or to qualify any such Stock for exemption from
the Securities Act or other applicable statutes, then the Company shall take
such action at its own expense. The Company may require from each recipient of
an Award, or each holder of Stock acquired pursuant to the Plan, such
information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for that
purpose and may require reasonable indemnity to the Company and its officers and
directors from that holder against all losses, claims, damage and liabilities
arising from use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made. In addition, the Company may require of any such person that such person
agree that, without the prior written consent of the Company or the managing
underwriter in any public offering of Stock, such person will not sell, make any
short sale of, loan, grant any option for the purchase of, pledge or otherwise
encumber, or otherwise dispose of, any Stock during the 180-day period
commencing on the effective date of the registration statement relating to the
underwritten public offering of securities. Without limiting the generality of
the foregoing provisions of this Section 9.5, if in connection with any
underwritten public offering of securities of the Company the managing
underwriter of such offering requires that the Company’s directors
and officers enter into a lock-up agreement containing provisions that are more
restrictive than the provisions set forth in the preceding sentence, then (a)
each holder of Stock acquired pursuant to the Plan (regardless of whether such
person has complied or complies with the provisions of clause (b) below) shall
be bound by, and shall be deemed to have agreed to, the same lock-up terms as
those to which the Company’s directors and officers are required to adhere; and
(b) at the request of the Company or such managing underwriter, each such person
shall execute and deliver a lock-up agreement in form and substance equivalent
to that which is required to be executed by the Company’s directors and
officers.
Appendix
B-13
9.6 Placement
of Legends; Stop Orders; etc. Each
share of Stock to be issued pursuant to Awards granted under the Plan may bear a
reference to the investment representation made in accordance with
Section 9.4 in addition to any other applicable restriction under the Plan,
the terms of the Award and, if applicable, to the fact that no registration
statement has been filed with the SEC in respect to such Stock. All certificates
for Stock or other securities delivered under the Plan shall be subject to such
stock transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of any stock exchange upon
which the Stock is then listed, and any applicable federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
9.7 Tax
Withholding.
Whenever Stock are issued or to be issued pursuant to Awards granted under the
Plan, the Company shall have the right to require the recipient to remit to the
Company an amount sufficient to satisfy federal, state, local or other
withholding tax requirements if, when, and to the extent required by law
(whether so required to secure for the Company an otherwise available tax
deduction or otherwise) prior to the delivery of any certificate or certificates
for such shares. The obligations of the Company under the Plan shall be
conditional on satisfaction of all such withholding obligations and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the recipient of an Award.
However, in such cases Participants may elect, subject to the approval of the
Committee, to satisfy an applicable withholding requirement, in whole or in
part, by having the Company withhold shares to satisfy their tax obligations.
Participants may only elect to have shares withheld having a Market Value on the
date the tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. All elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee deems appropriate.
10. Reservation
of Stock.
The
Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to satisfy the requirements of the Plan
(if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.
11. Limitation
of Rights in Stock; No Special Service Rights.
Subject
to Section 7.3(e), a Participant shall not be deemed for any purpose to be a
stockholder of the Company with respect to any of the Stock subject to an Award,
unless and until a certificate shall have been issued therefor and delivered to
the Participant or his/her agent. Any Stock to be issued pursuant to Awards
granted under the Plan shall be subject to all restrictions upon the transfer
thereof which may be now or hereafter imposed by the certificate of
incorporation and the bylaws of the Company. Nothing contained in the Plan or in
any Award Agreement shall confer upon any recipient of an Award any right with
respect to the continuation of such recipient’s employment or other association
with the Company (or any Affiliate), or interfere in any way with the right of
the Company (or any Affiliate), subject to the terms of any separate employment
or consulting agreement or provision of law or certificate of incorporation or
bylaws to the contrary, at any time to terminate such employment or consulting
agreement or to increase or decrease, or otherwise adjust, the other terms and
conditions of the recipient’s employment or other association with the Company
and Affiliates.
12. Unfunded
Status of the Plan.
The Plan
is intended to constitute an “unfunded” plan for incentive compensation, and the
Plan is not intended to constitute a plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. With respect to any
payments not yet made to a Participant by the Company, nothing contained in this
Plan shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments with respect to Options,
Stock Appreciation Rights and other Awards hereunder, provided,
however, that
the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.
Appendix
B-14
13. Nonexclusivity
of the Plan.
Neither
the adoption of the Plan by the Board nor the submission of the Plan to the
stockholders of the Company shall be construed as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may deem
desirable, including without limitation, the granting of stock options and
restricted stock other than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
14. Termination
and Amendment of the Plan.
14.1 The Board
may at any time terminate the Plan or make such modifications of the Plan as it
shall deem advisable. Unless the Board otherwise expressly provides, no
amendment of the Plan shall affect the terms of any Award outstanding on the
date of such amendment unless such amendment is necessary to comply with Section
409A of the Code. In any case, no termination or amendment of the Plan may,
without the consent of any recipient of an Award granted hereunder, adversely
affect the rights of the recipient under such Award.
14.2 The
Committee may amend the terms of any Award theretofore granted, prospectively or
retroactively, provided that the Award as amended is consistent with the terms
of the Plan, but no such amendment shall impair the rights of the recipient of
such Award without such recipient’s consent unless the impairment of such rights
is necessary to comply with Section 409A of the Code.
15. Notices
and Other Communications.
Any
notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by first class registered, certified or overnight mail, postage
prepaid, or telecopied with a confirmation copy by regular, certified or
overnight mail, addressed or telecopied, as the case may be, (i) if to the
recipient of an Award, at such recipient’s residence address last filed with the
Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Chief Financial Officer, or to such other
address or telecopier number or electronic mail address, as the case may be, as
the addressee may have designated by notice to the addressor. All such notices,
requests, demands and other communications shall be deemed to have been
received: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of mailing, when received by the addressee;
(iii) in the case of facsimile transmission, when confirmed by facsimile
machine report; and (iv) in the case of electronic mail, when directed to
an electronic mail address at which the receiving party has consented to receive
notice, provided, that
such consent is deemed revoked if the sender is unable to deliver by electronic
transmission two consecutive notices and such inability becomes known to the
secretary or assistant secretary of the Company or to the transfer agent, or
other person responsible for giving notice.
16. Governing
Law.
The Plan
and all Award Agreements and actions taken thereunder shall be governed,
interpreted and enforced in accordance with the laws of the State of California,
without regard to the conflict of laws principles thereof.
Appendix
B-15
2005
EQUITY INCENTIVE PLAN
FORM
OF STOCK OPTION AGREEMENT
ADVENTRX
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and
the undersigned person (“Optionee”) have
entered into this Stock Option Agreement (this “Agreement”)
effective as of the Grant Date set forth below. The Company has granted to
Optionee the option (the “Option”) to
purchase the number of shares (the “Shares”) of
common stock, par value $0.001 per share, of the Company (“Common
Stock”) set
forth below at the per Share purchase price (the “Exercise
Price”) set
forth below, pursuant to the terms of this Agreement. The Option was granted
under the Company’s 2005 Equity Incentive Plan (the “Plan”).
Optionee
Name:
|
_____________________
|
Grant
Date:
|
MM/DD/YYYY
|
Vesting
Commencement Date:
|
MM/DD/YYYY
|
Shares:
|
X,XXX
|
Exercise
Price:
|
$X.XX
|
1. Terms
of Plan. All
capitalized terms used in this Agreement and not otherwise defined shall have
the meanings ascribed thereto in the Plan. Optionee confirms and acknowledges
that Optionee has received and reviewed copies of the Plan and the Information
Statement, dated _____________, with respect to the Plan. Optionee and the
Company agree that the terms and conditions of the Plan are incorporated in this
Agreement by this reference.
2. Nature
of the Option. The
Option has been granted as an incentive to Optionee’s Continuous Service, and is
in all respects subject to such Continuous Service and all other terms and
conditions of this Agreement. The Option is intended to be an
[Incentive/Nonstatutory] Option within the meaning of the Plan.
3. Vesting
and Exercise of Option. The
Option shall vest and become exercisable during its term in accordance with the
following provisions:
(a) Vesting
and Right of Exercise.
(i)
The
Option shall vest and become exercisable with respect to one-fourth of the
Shares at the first anniversary of the Vesting Commencement Date set forth in
the preamble of this Agreement and as to one forty-eighth of the Shares at the
end of each successive month thereafter until all of the Shares have vested,
subject to Optionee’s Continuous Service.
(ii)
In the
event of Optionee’s death, disability or other termination of Optionee’s
Continuous Service, the Option shall be exercisable in the manner and to the
extent provided in Section 6.3 of the Plan.
(iii)
No
fraction of a Share shall be purchasable or deliverable upon exercise of the
Option, but in the event any adjustment hereunder of the number of Shares shall
cause such number to include a fraction of a Share, such number of Shares shall
be rounded down to the nearest smaller whole number of Shares.
(b) Method
of Exercise. In order
to exercise any portion of the Option which has vested, Optionee shall notify
the Company in writing of the election to exercise such vested portion of the
Option and the number of Shares in respect of which the Option is being
exercised, by executing and delivering the Notice of Exercise of Stock Option in
the form attached hereto as Exhibit
A (the
“Exercise
Notice”). The
certificate or certificates representing Shares as to which the Option has been
exercised shall be registered in the name of Optionee.
Appendix
B-16
(c) Restrictions
on Exercise.
(i)
Optionee
may exercise the Option only with respect to Shares that have vested in
accordance with Section 3(a) of this Agreement.
(ii)
Optionee
may not exercise the Option if the issuance of the Shares upon such exercise or
the method of payment of consideration for such Shares would constitute a
violation of any applicable federal or state securities law or other law or
regulation.
(iii)
The
method and manner of payment of the Exercise Price will be subject to the rules
under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by
the Federal Reserve Board if such rules apply to the Company at the date of
exercise.
(iv)
As a
condition to the exercise of the Option, the Company may require Optionee to
make any representation or warranty to the Company at the time of exercise of
the Option as in the opinion of legal counsel for the Company may be required by
any applicable law or regulation, including the execution and delivery of an
appropriate representation statement. Accordingly, the stock certificate(s) for
the Shares issued upon exercise of the Option may bear appropriate legends
restricting transfer.
(v)
Optionee
may only exercise the Option upon, and the obligations of the Company under this
Agreement to issue Shares to Optionee upon any exercise of the Option is
conditioned on, satisfaction of all federal, state, local or other withholding
tax obligations associated with such exercise (whether so required to secure for
the Company an otherwise available tax deduction or otherwise) (“Withholding
Obligations”). The
Company reserves the right to require Optionee to remit to the Company an amount
sufficient to satisfy all Withholding Obligations prior to the issuance of any
Shares upon any exercise of the Option. Optionee authorizes the Company to
withhold in accordance with applicable law from any compensation payable to
Optionee any amounts necessary to meet any Withholding Obligations.
4. Non-Transferability
of Option. The
Option may not be transferred in any manner other than by will or by the laws of
descent and distribution. The terms of this Agreement shall bind the executors,
administrators, heirs and successors of Optionee.
5. Method
of Payment.
(a) Upon
exercise, Optionee shall pay the aggregate Exercise Price of the Shares
purchased by any of the following methods, or a combination thereof, at the
election of Optionee:
(i)
by cash;
(ii)
by
certified or bank cashier’s check;
(iii)
if shares
of Common Stock are traded on an established stock market or exchange on the
date of exercise, by surrender of whole shares of Common Stock having a Market
Value equal to the portion of the Exercise Price to be paid by such surrender,
provided that if
such shares of Common Stock to be surrendered were acquired upon exercise of an
Incentive Option, Optionee must have first satisfied the holding period
requirements under Section 422(a)(1) of the Code; or
(iv)
if shares
of Common Stock are traded on an established stock market or exchange on the
date of exercise, pursuant to and under the terms and conditions of any formal
cashless exercise program authorized by the Company entailing the sale of the
Stock subject to an Option in a brokered transaction (other than to the
Company).
Appendix
B-17
(b) If
Optionee shall pay all or a portion of the aggregate Exercise Price due upon an
exercise of the Option by surrendering shares of Common Stock pursuant to
Section 5(a)(iii), then Optionee:
(i)
shall
accompany the Exercise Notice with a duly endorsed blank stock power with
respect to the number of shares of Common Stock to be surrendered and shall
deliver the certificate(s) representing such surrendered shares to the Company
at its principal offices within two business days after the date of the Exercise
Notice;
(ii)
authorizes
and directs the Secretary of the Company to transfer so many of the shares of
Common Stock represented by such certificate(s) as are necessary to pay the
aggregate Exercise Price in accordance with this Agreement;
(iii)
agrees
that Optionee may not surrender any fractional share as payment of any portion
of the Exercise Price; and
(iv)
agrees
that, notwithstanding any other provision in this Agreement, Optionee may only
surrender shares of Common Stock owned by Optionee as of the date of the
Exercise Notice in the manner and within the time periods allowed under Rule
16b-3 promulgated under the Exchange Act.
6. Adjustments
to Option. Subject
to any required action by the stockholders of the Company, the number of Shares
covered by the Option, and the Exercise Price, shall be proportionately adjusted
in accordance with and pursuant to Section 8.1 of the Plan. Such adjustments
shall be made by the Committee, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided in this Agreement,
no issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of Shares or the
Exercise Price.
7. Term
of Option. The
Option may not be exercised more than 10 years after the Grant Date, and may be
exercised during such term only in accordance with the terms of this
Agreement.
8. Not
Employment Contract. Nothing
in this Agreement shall confer upon Optionee any right to continue in the employ
of the Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to terminate Optionee’s Continuous
Service at any time for any reason whatsoever, with or without cause, subject to
the provisions of applicable law.
9. Tax
Consequences Generally. Optionee
acknowledges that Optionee may suffer adverse tax consequences as a result of
Optionee’s exercise of the Option. Optionee acknowledges that the Company
advises that Optionee consult with Optionee’s tax advisers in connection with
any exercise of the Option or disposition of the Shares receivable upon exercise
of the Option. Optionee agrees that Optionee is not relying on the Company for
any tax advice with respect to the acceptance or exercise of the Option, the
disposition of any Shares Optionee may acquire upon exercise of the Option or
otherwise. Any adverse consequences incurred by an Optionee with respect to the
use of shares of Common Stock to pay any part of the aggregate Exercise Price or
of any tax in connection with the exercise of an Option, including, without
limitation, any adverse tax consequences arising as a result of a disqualifying
disposition within the meaning of Section 422 of the Code shall be the sole
responsibility of Optionee.
10. Adjustments
in Acquisitions. [APPLICABLE
PROVISION TO BE DESIGNATED BY COMPENSATION COMMITTEE AT TIME OF
GRANT]
[In
accordance with the provisions of Section 8.2(a) of the Plan, the Option will
Accelerate in full in the event of an Acquisition constituting a Change of
Control if Optionee remains employed by the Company or one of its Affiliates as
of the closing date of such Acquisition, and the Option is not assumed or
replaced by the successor or acquiring entity or the entity in control of such
successor or acquiring entity in accordance with Section 8.2 (referred to for
purposes of this section as the “Acquirer”).
Otherwise, the Option will not Accelerate in the event of an Acquisition. In
this regard, if Optionee is offered employment or some other continuing role by
or on behalf of the Acquirer, including but not limited to, continuing
employment with the Company, and in connection therewith, the Acquirer offers to
assume or replace the Option, the Option will not Accelerate if Optionee does
not accept the offer.] OR
[Notwithstanding the provision of Section 8.2(a) of the Plan, in the event
of an Acquisition, the Option will not vest and become exercisable except as
follows: [specify
alternative treatment]
Appendix
B-18
[Subject
to the terms of any other written agreement between Optionee and the Company
related to Optionee’s Continuous Service and in accordance with Sections 8.1,
8.2, 8.4 and 8.5 of the Plan, the Committee may, if it so determines in the
exercise of its sole discretion, also make provision for proportionately
adjusting the number or class of securities covered by the Option, as well as
the Exercise Price, in the event that the Company effects one or more
Acquisitions, corporate separations, reorganizations, liquidations or other
increases or reductions of shares of its outstanding Common Stock.]
OR
[If,
following a Change of Control in which the Option has been assumed by the
successor or acquiring entity as of the closing date of such Change of Control,
in the event of Optionee’s Involuntary Termination of employment within 24
months after the closing date of such Change of Control the vesting of the
assumed Option shall be accelerated such that the Option will so vest as of the
effective date of such Involuntary Termination with respect to all Shares that
would have become vested during such 24-month period but for the Change of
Control and Involuntary Termination (assuming Optionee’s Continuous Service). An
“Involuntary
Termination” is one
that occurs by reason of dismissal for any reason other than Misconduct or of
voluntary resignation following: (i) a change in position that materially
reduces the level of Optionee’s responsibility, (ii) a material reduction in
Optionee’s base salary, or (iii) relocation by more than 50 miles; provided that
(ii) and (iii) will apply only if Optionee has not consented to the change or
relocation. “Misconduct” shall
mean the commission of any act of fraud, embezzlement or dishonesty by Optionee,
any unauthorized use or disclosure by such person of confidential information or
trade secrets of the Company (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business affairs
of the Company (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 Company (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of Optionee.]
11. Consent
of Spouse/Domestic Partner. Optionee
agrees that Optionee’s spouse’s or domestic partner’s interest in the Option is
subject to this Agreement and such spouse or domestic partner is irrevocably
bound by the terms and conditions of this Agreement. Optionee agrees that all
community property interests of Optionee and Optionee’s spouse or domestic
partner in the Option, if any, shall similarly be bound by this Agreement.
Optionee agrees that this Agreement is binding upon Optionee’s and Optionee’s
spouse’s or domestic partner’s executors, administrators, heirs and assigns.
Optionee represents and warrants to the Company that Optionee has the authority
to bind Optionee’s spouse/domestic partner with respect to the Option. Optionee
agrees to execute and deliver such documents as may be necessary to carry out
the intent of this Section 11 and the consent of Optionee’s spouse/domestic
partner.
IN
WITNESS WHEREOF, Optionee and the Company have entered into this Agreement as of
the Grant Date.
[Optionee
Name]
|
ADVENTRX
Pharmaceuticals, Inc.
By:
Name:
Title: |
Appendix
B-19
EXHIBIT
A
NOTICE
OF EXERCISE OF STOCK OPTION
I
________________________________________ (please print legibly) hereby elect to
exercise the stock options(s) identified below (the “Option(s)”)
granted to me by ADVENTRX
Pharmaceuticals, Inc. (the
“Company”) under
its 2005 Equity Incentive Plan (the “Plan”) with
respect to the number of shares of Common Stock of the Company set forth below
(the “Shares”). I
represent that each Share is fully vested and exercisable and subject to the
Option(s). I acknowledge and agree that my exercise of the Option(s) is subject
to the terms and conditions of the Plan and the Stock Option Agreement(s)
governing the Option(s).
1. |
_____________
Shares at $ ________ per share (Grant date):
____________ |
2. |
_____________
Shares at $ ________ per share (Grant date):
____________ |
3. |
_____________
Shares at $ ________ per share (Grant date):
____________ |
4. |
_____________
Shares at $ ________ per share (Grant date):
____________ |
I
choose to pay for the exercise of the above option(s) as follows (please
circle applicable item numbers):
1. Cash:
$____________________
2. Check:
$____________________ (please make checks payable to ADVENTRX
Pharmaceuticals, Inc.)
3. Surrender
of _________________ Shares:
|
Please
deliver the stock certificate(s) representing the Shares to (please print
legibly):
|
Name:
(please
print legibly)
Signature:
Date:
Phone
No:
Appendix
B-20
APPENDIX
C
ADVENTRX
PHARMACEUTICALS, INC.
2005
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
The
purpose of the 2005 Employee Stock Purchase Plan (the “Plan”) of
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the “Company”) is to
provide employees of the Company and its Designated Subsidiaries with an
opportunity to purchase Common Stock. The Company intends to have the Plan
qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
As used
in the Plan, the terms set forth below shall have the meanings set forth
below:
2.1 Acquisition means a
merger or consolidation of the Company with and into another person or the sale,
transfer, or other disposition of all or substantially all of the Company’s
assets to one or more persons (other than any wholly-owned subsidiary of the
Company) in a single transaction or series of related transactions.
2.2 Board means
the Board of Directors of the Company.
2.3 Code means
the Internal Revenue Code of 1986, as amended.
2.4 Common
Stock means
the Common Stock, par value $0.001 per share, of the Company.
2.5 Compensation means
all regular, straight-time compensation, including commissions, but not payments
for overtime, shift premium, incentive compensation, incentive payments, bonuses
and other irregular or infrequent compensation or benefits.
2.6 Continuous
Status as an Employee means
the absence of any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered interrupted in the case
of (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Administrator, provided, that
such leave is for a period of not more than 90 days, unless reemployment upon
the expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or
(iv) in the case of transfers between locations of the Company or between
the Company and its Designated Subsidiaries.
2.7 Contributions means
all amounts credited to the account of a participant pursuant to the
Plan.
2.8 Designated
Subsidiaries means
the Subsidiaries which have been or will be designated by the Board from time to
time in its sole discretion as eligible to participate in the Plan.
2.9 Employee means
any person, including an Officer, who is customarily employed for at least 20
hours per week and more than five months in a calendar year by the Company or
one of its Designated Subsidiaries.
2.10 Exchange
Act means the
Securities Exchange Act of 1934, as amended.
2.11 Initial
Offering Period means the
first Offering Period of the Plan.
2.12 Offering
Commencement Date means the
first business day of each Offering Period of the Plan.
2.13 Offering
Period means any
of the periods, generally of six months duration, as set forth in Section
4.
2.14 Officer
means a
person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
Appendix
C-1
2.15 Offering
Termination Date means the
last business day of each Offering Period of the Plan.
2.16 Parent
means a
parent corporation of the Company, whether now or hereafter existing, as defined
by Section 424(a) of the Code.
2.17 Purchase
Price means
with respect to an Offering Period an amount equal to 85% of the Fair Market
Value (as defined in Section 7.2) of a Share on the Offering Commencement Date
or on the Offering Termination Date, whichever is lower; provided,
however, that
(i) if there is an increase in the number of Shares available for issuance
under the Plan as a result of a stockholder-approved amendment to the Plan,
(ii) all or a portion of such additional Shares are to be issued with
respect to the Offering Period underway at the time of such increase
(“Additional
Shares”), and
(iii) the Fair Market Value of a Share of Common Stock on the date of such
increase (the “Approval
Date Fair Market Value”) is
higher than the Fair Market Value on the Offering Commencement Date for such
Offering Period, then in such instance the Purchase Price with respect to
Additional Shares shall be 85% of the Approval Date Fair Market Value or the
Fair Market Value of a Share of Common Stock on the Offering Termination Date,
whichever is lower.
2.18 Securities
Act means the
Securities Act of 1933, as amended.
2.19 Share
means a
share of Common Stock, as adjusted in accordance with Section 18.
2.20 Subsidiary
means a
subsidiary corporation of the Company, whether now or hereafter existing, as
defined in Section 424(f) of the Code.
The terms
set forth below have the meanings ascribed to them in the following
sections:
Term |
Section | |
Administrator |
13.2 | |
AMEX |
7.2 | |
Company |
1 | |
Fair
Market Value |
7.2 | |
New
Offering Termination Date |
18.2 | |
Plan |
1 | |
Reserves |
18.1 | |
3. Eligibility.
3.1 Eligible
Persons. Any
person who is an Employee as of the Offering Commencement Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Sections 5.1 and the limitations
imposed by Section 423(b) of the Code.
3.2 Certain
Restrictions. Any
provisions of the Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan (i) if, immediately after the grant, such
Employee (taking into account stock which would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own capital stock of the Company
or hold outstanding options to purchase stock possessing five percent or more of
the total combined voting power or value of all classes of stock of the Company
or of any Parent or Subsidiary of the Company, or (ii) if such option would
permit such Employee’s rights to purchase an aggregate of stock under all
employee stock purchase plans (described in Section 423 of the Code) of the
Company and its Parent or Subsidiaries with a Fair Market Value in excess of
Twenty-Five Thousand Dollars ($25,000) (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any
time.
Appendix
C-2
4. Offering
Periods.
Each
Offering Period will begin on January 1 or July 1 and end on the next following
June 30 or December 31, respectively. The Initial Offering Period shall commence
on July 1, 2005. At any time and from time to time, the Board may change the
duration or the frequency of Offering Periods with respect to future Offering
Periods or suspend operation of the Plan with respect to Offering Periods not
yet commenced.
5. Participation
5.1 Subscription
Agreement. An
eligible Employee may become a participant in the Plan by completing a
subscription agreement on the form provided by the Company and filing it with
the Company’s payroll office at least five business days prior to the applicable
Offering Commencement Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a given
Offering Period. The subscription agreement shall set forth the percentage of
the participant’s Compensation (subject to Section 6.1) to be paid as
Contributions pursuant to the Plan.
5.2 Timing
of Payroll Deductions. Payroll
deductions shall commence on the first payroll following the Offering
Commencement Date and shall end on the last payroll paid on or prior to the
Offering Termination Date of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as provided
in Section 10.
5.3 Tax
Withholding. Each
participant who purchases Shares under the Plan shall thereby be deemed to have
agreed that the Company or the Subsidiary that employs the participant shall be
entitled to withhold, from any other amounts that may be payable to the
participant at or around the time of the purchase, such federal, state, local
and foreign income, employment and other taxes which may be required to be
withheld under applicable laws. In lieu of such withholding, the Company or such
Subsidiary may require the participant to remit such taxes to the Company or
such Subsidiary as a condition of the purchase.
6. Method
of Payment of Contributions
6.1 Election. A
participant shall elect to have payroll deductions made on each payday during
the Offering Period in an amount not less than one percent and not more than 10
percent (or such other percentage as the Board may establish from time to time
before an Offering Commencement Date) of such participant’s Compensation on each
payday during the Offering Period. All payroll deductions made by a participant
shall be credited to such participant’s account under the Plan. A participant
may not make any additional payments into such account.
6.2 Discontinuation;
Changes. A
participant may discontinue participation in the Plan as provided in Section 10.
In addition, if the Board has so announced to Employees at least five days prior
to the scheduled beginning of the next Offering Period to be affected by the
Board’s determination, a participant may change the rate of such participant’s
Contributions with respect to the Offering Period by completing and filing with
the Company a new subscription agreement authorizing a change in the payroll
deduction rate. If otherwise permitted, no such change shall enable a
participant to resume Contributions other than as of an Offering Commencement
Date, following a withdrawal of Contributions during an Offering Period pursuant
to Section 10. Any such change in rate shall be effective as of the first
payroll period following the date of filing of the new subscription agreement,
if the agreement is filed at least 10 business days prior to such period and, if
not, as of the second following payroll period.
6.3 Reductions.
Notwithstanding the foregoing, to the extent necessary to comply with Section
423(b)(8) of the Code and Section 3.2, a participant’s payroll deductions may be
decreased during any Offering Period scheduled to end during the current
calendar year to 0%. Payroll deductions reduced to 0% in compliance with this
Section 6.3 shall re-commence automatically at the rate provided in such
participant’s subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
Appendix
C-3
7. Grant
of Option.
7.1 Number
of Shares. On the
Offering Commencement Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Offering Termination Date of that Offering Period a number of Shares
determined by dividing such Employee’s Contributions accumulated during such
Offering Period prior to such Offering Termination Date and retained in the
participant’s account as of the Offering Termination Date by the applicable
Purchase Price. However, the Board may determine from time to time, prior to the
applicable Offering Period, the maximum number of Shares an Employee may
purchase during each such Offering Period, provided that any
such purchase shall be subject to the limitations set forth in Sections 3.2 and
12.
7.2 Fair
Market Value. The
fair market value of the Common Stock on a given date (the “Fair
Market Value”) shall
be (i) the closing sales price on the American Stock Exchange (“AMEX”), or any
national securities exchange or other established market on which the Common
Stock is then listed (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date) or (ii) determined by
the Board in its discretion based on the closing sales price of the Common Stock
for such date (or, in the event that the Common Stock is not traded on such
date, on the immediately preceding trading date), as reported by AMEX or other
such exchange or market, or (iii) if the closing sales price is not
reported, the mean of the bid and asked prices per share of the Common Stock as
reported by AMEX or other such exchange.
8. Exercise
of Option.
Unless a
participant withdraws from the Plan as provided in Section 10, such
participant’s option for the purchase of Shares will be exercised automatically
on the Offering Termination Date of an Offering Period, and the maximum number
of full Shares subject to the option will be purchased at the applicable
Purchase Price with the accumulated Contributions in such participant’s account.
No fractional Shares shall be issued. The Shares purchased upon exercise of an
option hereunder shall be deemed to be transferred to the participant on the
Offering Termination Date. A participant’s option to purchase Shares hereunder
shall be exercisable only by such participant during such participant’s
lifetime.
9. Delivery.
As
promptly as practicable after each Offering Termination Date of each Offering
Period, the Company shall arrange the delivery to or for the benefit of each
participant, as appropriate, of a certificate representing the Shares purchased
upon exercise of such participant’s option. Any payroll deductions accumulated
in a participant’s account which are not sufficient to purchase a full Share
shall be retained in the participant’s account for the subsequent Offering
Period, subject to earlier withdrawal by the participant as provided in Section
10. Any other amounts left over in a participant’s account after an Offering
Termination Date shall be returned to the participant.
10. Voluntary
Withdrawal; Termination of Employment.
10.1 Withdrawal
of Contributions. A
participant may withdraw all but not less than all of the Contributions credited
to such participant’s account under the Plan at any time prior to each Offering
Termination Date by giving written notice to the Company. All of the
participant’s Contributions credited to such participant’s account will be paid
to such participant promptly after receipt of such participant’s notice of
withdrawal and such participant’s option for the current Offering Period will be
automatically terminated, and no further Contributions for the purchase of
Shares will be made during the Offering Period.
10.2 Termination
of Employment. Upon
termination of the participant’s Continuous Status as an Employee prior to the
Offering Termination Date of an Offering Period for any reason, including
retirement or death, the Contributions credited to such participant’s account
will be returned to such participant or, in the case of such participant’s
death, to the person or persons entitled thereto under Section 14, and such
participant’s option will be automatically terminated.
10.3 Automatic
Withdrawal from Plan. In the
event an Employee fails to remain in Continuous Status as an Employee of the
Company for at least 20 hours per week during the Offering Period in which the
Employee is a participant, such participant will be deemed to have elected to
withdraw from the Plan and the Contributions credited to such participant’s
account will be returned and such participant’s option terminated.
Appendix
C-4
10.4 Effect
of Withdrawal from Plan. A
participant’s withdrawal during an Offering Period will not have any effect upon
such participant’s eligibility to participate in a succeeding Offering Period or
in any similar plan which may hereafter be adopted by the Company.
11. Interest.
No
interest shall accrue on the Contributions of a participant in the
Plan.
12. Stock.
12.1 Maximum
Number of Shares. Subject
to adjustment as provided in Section 18, the maximum number of Shares which
shall be made available for sale under the Plan shall be 1,000,000 Shares, plus
an annual increase to be added on the first day of the Company’s fiscal year
beginning in 2006 and on each anniversary of that date thereafter equal to the
lesser of (i) one percent of the number of outstanding shares of Common
Stock on such day, (ii) 750,000 and (iii) such other amount as the Board
may specify prior to the date such annual increase is to take effect. If the
Board determines
that, on a given Offering Termination Date, the number of shares with respect to
which options are to be exercised may exceed (i) the number of Shares that
were available for sale under the Plan on the Offering Commencement Date, or
(ii) the number of shares available for sale under the Plan on such
Offering Termination Date, the Board may in its sole discretion provide that the
Company shall make a pro rata allocation of the Shares available for purchase on
such Offering Commencement Date or Offering Termination Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Offering Termination Date. The Company may make
pro rata allocation of the Shares available on the Offering Commencement Date of
the applicable Offering Period pursuant to the preceding sentence,
notwithstanding any authorization of additional Shares for issuance under the
Plan by the Company’s stockholders subsequent to such Offering Commencement
Date.
12.2 No
Interest or Voting Right. The
participant shall have no interest or voting right in Shares covered by such
participant’s option until such option has been exercised.
12.3 Registration
of Shares. Shares
to be delivered to a participant under the Plan will be registered in the name
of the participant or in the name of the participant and such participant’s
spouse, as directed by the participant.
13. Administration.
13.1 Board
Authority. The
Board, or a committee named by the Board, shall supervise and administer the
Plan and shall have full power to adopt, amend and rescind any rules deemed
desirable and appropriate for the administration of the Plan and not
inconsistent with the Plan, to construe and interpret the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
The Board’s determinations made in good faith on matters referred to in this
Plan shall be final, binding and conclusive on all persons having or claiming
any interest under this Plan.
13.2 Designation
of Administrator. The
Board may from time to time designate an employee or retain a third party to
address routine administrative matters. Any employee or third party so
designated may be referred to herein as the “Administrator.”
14. Designation
of Beneficiary.
14.1 Designation. A
participant may file a written designation of a beneficiary who is to receive
any Shares and cash, if any, from the participant’s account under the Plan in
the event of such participant’s death subsequent to the end of an Offering
Period but prior to delivery to such participant of such Shares and cash. Any
such beneficiary shall also be entitled to receive any cash from the
participant’s account under the Plan in the event of such participant’s death
prior to the Offering Termination Date of an Offering Period.
14.2 Changes
to Designation; Lack of Designation. Such
designation of beneficiary may be changed by the participant at any time by
written notice. In the event of the death of a participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time of
such participant’s death, the Company shall deliver such Shares or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares or cash to the spouse or
to any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
Appendix
C-5
15. Transferability
of Options and Shares.
15.1 Restrictions
on Transfer. Neither
Contributions credited to a participant’s account nor any rights with regard to
the exercise of an option or to receive Shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution, or as provided in Section 14) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 10. In addition, if
the Board has so announced to Employees at least five days prior to the
scheduled beginning of the next Offering Period to be affected by the Board’s
determination, any Shares acquired on the Offering Termination Date of such
Offering Period may be subject to restrictions specified by the Board on the
transfer of such Shares.
15.2 Notice
of Transfer. Any
participant selling or transferring any or all of such participant’s Shares
purchased pursuant to the Plan must provide written notice of such sale or
transfer to the Company within five business days after the date of sale or
transfer. Such notice to the Company shall include the gross sales price, if
any, the Offering Period during which the Shares being sold were purchased by
the participant, the number of Shares being sold or transferred and the date of
sale or transfer.
16. Use
of Funds.
All
Contributions received or held by the Company under the Plan may be used by the
Company for any corporate purpose and shall be subject to claims by creditors of
the Company, and the Company shall not be obligated to segregate such
Contributions from its other assets. The Company shall not pay any interest on
any Contributions.
17. Reports.
Individual
accounts will be maintained for each participant in the Plan. Statements of
account will be given to participating Employees at least annually, which
statements will set forth the amounts of Contributions, the per Share Purchase
Price, the number of Shares purchased and the remaining cash balance, if
any.
18. Adjustments
Upon Changes in Capitalization; Acquisitions.
18.1 Adjustment. Subject
to any required action by the stockholders of the Company, the number of shares
covered by each option under the Plan which has not yet been exercised and the
number of Shares which have been authorized for issuance under the Plan but have
not yet been placed under option (collectively, the “Reserves”), as
well as the maximum number of Shares which may be purchased by a participant in
an Offering Period, the number of Shares set forth in Section 12.1, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of the Company’s issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided,
however, that
conversion of any convertible securities of the Company or the “cashless” or
“net” exercise of any derivative securities of the Company shall not be deemed
to have been “effected without receipt of consideration.” Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive.
18.2 Acquisitions. In the
event of a dissolution or liquidation of the Company, the Offering Period then
in progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of an Acquisition, each
option outstanding under the Plan shall be assumed or an equivalent option shall
be substituted by the successor corporation or a parent or Subsidiary of such
successor corporation. In the event that the successor corporation refuses to
assume or substitute for outstanding options, the Offering Period then in
progress shall be shortened and a new Offering Termination Date shall be set
(the “New
Offering Termination Date”), as of
which date the Offering Period then in progress will terminate. The New Offering
Termination Date shall be on or before the date of consummation of the
transaction and the Board shall notify each participant in writing, at least ten
days prior to the New Offering Termination Date, that the Offering Termination
Date for such participant’s option has been changed to the New Offering
Termination Date and that such participant’s option will be exercised
automatically on the New Offering Termination Date, unless prior to such date
such participant has withdrawn from the Offering Period as provided in Section
10. For purposes of this Section 18, an option granted under the Plan shall be
deemed to be assumed, without limitation, if, at the time of issuance of the
stock or other consideration upon an Acquisition, each holder of an option under
the Plan would be entitled to receive upon exercise of the option the same
number and kind of shares of stock or the same amount of property, cash or
securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to the
transaction, the holder of the number of Shares covered by the option at such
time (after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 18); provided,
however, that if
the consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the
transaction.
Appendix
C-6
18.3 Other
Adjustments. The
Board may, if it so determines in the exercise of its sole discretion, also make
provision for adjusting the Reserves, as well as the price per Share of Common
Stock covered by each outstanding option, in the event that the Company effects
one or more reorganizations, recapitalizations, rights offerings or other
increases or reductions of Shares of its outstanding Common Stock, and in the
event of the Company’s being consolidated with or merged into any other
corporation.
19. Amendment
or Termination.
19.1 Amendment
or Termination by the Board. The
Board may at any time and for any reason terminate or amend the Plan. Except as
provided in Section 18, no such termination of the Plan may affect options
previously granted, provided that the
Plan or an Offering Period may be terminated by the Board on an Offering
Termination Date or by the Board’s setting a new Offering Termination Date with
respect to an Offering Period then in progress if the Board determines that
termination of the Plan or the Offering Period is in the best interests of the
Company and its stockholders or if continuation of the Plan or the Offering
Period would cause the Company to incur adverse accounting charges as a result
of the Plan. Except as provided in Section 18 and in this Section 19, no
amendment to the Plan shall make any change in any option previously granted
which adversely affects the rights of any participant.
19.2 Other
Powers of the Board. Without
stockholder consent and without regard to whether any participant rights may be
considered to have been adversely affected, the Board (or its committee) shall
be entitled to change the Offering Periods, limit the frequency or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company’s processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant’s Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the
Plan.
Appendix
C-7
20. Notices
and Other Communications.
Any
notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by first class registered, certified or overnight mail, postage
prepaid, or telecopied with a confirmation copy by regular, certified or
overnight mail, addressed or telecopied, as the case may be, (i) if to the
recipient of an Award, at such participant’s residence address last filed with
the Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Treasurer, or to such other address or
telecopier number or electronic mail address, as the case may be, as the
addressee may have designated by notice to the addressor. All such notices,
requests, demands and other communications shall be deemed to have been
received: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of mailing, when received by the addressee;
(iii) in the case of facsimile transmission, when confirmed by facsimile
machine report; and (iv) in the case of electronic mail, when directed to
an electronic mail address at which the receiving party has consented to receive
notice, provided, that
such consent is deemed revoked if the sender is unable to deliver by electronic
transmission two consecutive notices and such inability becomes known to the
secretary or assistant secretary of the corporation or to the transfer agent, or
other person responsible for giving notice.
21. Conditions
to Issuance of Shares.
21.1 Compliance
with Securities Laws. Shares
shall not be issued with respect to an option unless the exercise of such option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
21.2 Purchaser
Representation. As a
condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.
22. Term
of Plan; Effective Date.
The Plan
shall be in effect for a term of ten years beginning on ___________, 2005, the
date the requisite number of stockholders of the Company approved the Plan,
unless earlier terminated pursuant to Section 19.
Appendix
C-8
SAMPLE
ADVENTRX
PHARMACEUTICALS, INC.
2005
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION
AGREEMENT
New
Election ___
Change of
Election ___
1. I,
__________________, hereby elect to participate in ADVENTRX Pharmaceuticals,
Inc.’s (the “Company”) 2005
Employee Stock Purchase Plan (the “Plan”) for the
Offering Period __________ to ______________, and subscribe to purchase shares
of Common Stock of the Company (“Common
Stock”) in
accordance with this Subscription Agreement and the Plan. Capitalized terms used
but not defined in this Subscription Agreement shall have the meaning ascribed
to them in the Plan.
2. I elect
to have Contributions in the amount of _____% of my Compensation applied to this
purchase. I understand that this amount must not be less than 1% and not more
than 10% of my Compensation during the Offering Period. (Please note that no
fractional percentages are permitted).
3. I hereby
authorize payroll deductions from each paycheck during the Offering Period at
the rate stated in Item 2 of this Subscription Agreement. I understand that all
payroll deductions made by me shall be credited to my account under the Plan and
that I may not make any additional payments into such account. I understand that
all payments made by me shall be accumulated, without interest or earnings, for
the purchase of Shares at the applicable purchase price determined in accordance
with the Plan. I further understand that, except as otherwise set forth in the
Plan, shares will be purchased for me automatically on the Offering Termination
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose in accordance with the
Plan.
4. I
understand that I may discontinue at any time prior to the Offering Termination
Date my participation in the Plan as provided in Section 10 of the Plan. I
acknowledge that, unless I discontinue my participation in the Plan as provided
in Section 10 of the Plan, my election will continue to be effective for each
successive Offering Period.
5. I have
received a complete copy of the Plan. I understand that my participation in the
Plan is in all respects subject to the terms of the Plan.
6. Shares
purchased for me under the Plan should be issued in the name(s) of (name of
employee or employee and spouse only):
_____________________
_____________________
Appendix
C-9
7. In the
event of my death, I hereby designate the following as my beneficiary(ies) to
receive all payments and shares due to me under the Plan:
NAME:
(Please print)
(First) (Middle) (Last)
(Address)
(Relationship)
8. I
understand that if I dispose of any shares received by me pursuant to the Plan
within two years after the Offering Commencement Date (the first day of the
Offering Period during which I purchased such shares) or within one year after
the Offering Termination Date, I will be treated for federal income tax purposes
as having received ordinary compensation income at the time of such disposition
in an amount equal to the excess of the fair market value of the shares on the
Offering Termination Date over the price which I paid for the shares, regardless
of whether I disposed of the shares at a price less than their fair market value
at the Offering Termination Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or
loss.
I hereby
agree to notify the Company in writing within 30 days after the date of any such
disposition, and I will make adequate provision for federal, state or other tax
withholding obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company any tax
deductions or benefits attributable to the sale or early disposition of Common
Stock by me.
9. If I
dispose of such shares at any time after expiration of the two-year and one-year
holding periods, I understand that I will be treated for federal income tax
purposes as having received compensation income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the shares at
the time of such disposition over the purchase price which I paid for the shares
under the option, or (2) 15% of the fair market value of the shares on the
Offering Commencement Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or
loss.
I
understand that this tax summary is only a summary and is subject to change. I
further understand that I should consult a tax advisor concerning certain tax
implications of the purchase and sale of stock under the Plan.
10. I hereby
agree to be bound by the terms of the Plan. The effectiveness of this
Subscription Agreement is dependent upon my eligibility to participate in the
Plan.
Signature:
Date:
Social
Security Number:
Appendix
C-10