UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
SIGA TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
(212) 672-9100
July 30, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919
Third Avenue, 37th Floor, New York, New York 10022 at 9:00 a.m. on Wednesday,
August 15, 2001. On the following pages you will find the formal Notice of
Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. Accordingly, please
date, sign and return the enclosed proxy card promptly.
I hope that you will attend the meeting and I look forward to seeing you
there.
Sincerely,
/s/ Donald G. Drapkin
----------------------
DONALD G. DRAPKIN
Chairman of the Board
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 15, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of SIGA Technologies, Inc., a Delaware corporation ("Siga"),
will be held on Wednesday, August 15, 2001, at 9:00 a.m. (local time), at the
offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, 37th Floor,
New York, New York 10022, for the following purposes:
1. To elect six Directors to the Board of Directors of Siga;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent auditors of Siga for the fiscal year ending December 31,
2001;
3. To approve the amendment and restatement of Siga's Amended 1996
Incentive and Non-Qualified Stock Option Plan; and
4. To transact such other business as may properly come before the
Annual Meeting or at any adjournment or postponement thereof.
Stockholders of record at the close of business on July 11, 2001 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof. A list of such stockholders will be available at the
Annual Meeting and, for any purpose germane to the Annual Meeting, during the
ten days prior to the Annual Meeting, at the office of the Secretary of Siga,
420 Lexington Avenue, Suite 620, New York, New York 10170, during ordinary
business hours.
All stockholders are cordially invited to attend the Annual Meeting. If
you do not expect to be present at the Annual Meeting, you are requested to fill
in, date and sign the enclosed proxy and mail it promptly in the enclosed
envelope to make sure that your shares are represented at the Annual Meeting. In
the event you decide to attend the Annual Meeting in person, you may, if you
desire, revoke your proxy and vote your shares in person.
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Secretary
New York, New York
July 30, 2001
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, New York 10170
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 15, 2001
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This proxy statement is furnished to stockholders of SIGA Technologies,
Inc. ("Siga") in connection with the solicitation of proxies, in the
accompanying form, by the Board of Directors of Siga (the "Board") for use in
voting at the Annual Meeting of Stockholders ("Annual Meeting") to be held at
the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, 37th
Floor, New York, New York 10022, on Wednesday, August 15, 2001, at 9:00 a.m.,
and at any adjournment or postponement thereof.
This proxy statement, and the accompanying form of proxy, are first being
mailed to stockholders on or about July 31, 2001.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Purpose of the Annual Meeting
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this proxy statement.
Record Date and Outstanding Shares
The Board has fixed the close of business on July 11, 2001 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Only stockholders of record at
the close of business on that date will be entitled to vote at the Annual
Meeting or any and all adjournments or postponements thereof. As of July 11,
2001, Siga had issued and outstanding 8,053,808 shares of common stock and
935,521 shares of Series A preferred stock. The common stock and Series A
preferred stock together comprise all of Siga's issued and outstanding voting
stock.
Revocability and Voting of Proxies
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by any of the
following methods:
o by writing a letter delivered to Thomas N. Konatich, Secretary of
Siga, stating that the proxy is revoked;
3
o by submitting another proxy with a later date; or
o by attending the Annual Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by
a broker, bank or other nominee and that stockholder wishes to vote at the
Annual Meeting, the stockholder must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
Unless we receive specific instructions to the contrary or unless such
proxy is revoked, shares represented by each properly executed proxy will be
voted: (i) FOR the election of each of Siga's nominees as a director; (ii) FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as the
independent auditors of Siga for the fiscal year ending December 31, 2001; (iii)
FOR approval of the amendment and restatement of Siga's Amended 1996 Incentive
and Non-Qualified Stock Option Plan; and (iv) with respect to any other matters
that may properly come before the Annual Meeting, at the discretion of the proxy
holders. Siga does not presently anticipate any other business will be presented
for action at the Annual Meeting.
Voting at the Annual Meeting
Each share of common stock outstanding on the Record Date will be entitled
to one vote on each matter submitted to a vote of the stockholders, including
the election of directors. Cumulative voting by stockholders is not permitted.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote at the Annual
Meeting is necessary to constitute a quorum. Abstentions and broker "non-votes"
are counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
A plurality of the votes cast is required for the election of directors.
Abstentions and broker "non-votes" are not counted for the purpose of the
election of directors.
The affirmative vote of a majority of the shares of common stock
represented and voted at the Annual Meeting is required for approval of
Proposals Two and Three. Abstentions will have the same effect as a vote
"against" Proposals Two and Three, whereas broker non-votes are not considered
to have been voted on Proposals Two and Three.
Solicitation
We will pay the costs relating to this proxy statement, the proxy and the
Annual Meeting. We may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to beneficial owners. Directors, officers and regular employees may
also solicit proxies. They will not receive any additional pay for the
solicitation.
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six Directors are to be elected at the Annual Meeting to hold office until
the next annual meeting of stockholders and until their successors have been
duly elected and qualified. It is the intention of the persons named in the
accompanying proxy form to vote FOR the election of the six persons named in the
table below as Directors of Siga, unless authority to do so is withheld. Proxies
cannot be voted for a greater number of persons than the nominees named. In the
event that any of the below listed nominees for Director should become
unavailable for election for any presently unforeseen reason, the persons named
in the accompanying proxy form have the right to use their discretion to vote
for a substitute.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION (ITEM 1 ON THE ENCLOSED PROXY CARD) OF MESSRS. DRAPKIN,
CERRONE, CONSTANCE, OZ, ROSE AND WEINER AS DIRECTORS.
Director Information
The following table sets forth the name and age of each Director,
including data on their business backgrounds and the names of public companies
and other selected entities for which they also serve as directors:
Name Age Position
- ---- --- --------
Donald G. Drapkin 53 Chairman of the Board and Director
Gabriel M. Cerrone 29 Director
Thomas E. Constance 65 Director
Mehmet C. Oz, M.D. 40 Director
Eric A. Rose, M.D. 50 Director
Michael Weiner, M.D. 55 Director
Donald G. Drapkin has served as Chairman of the Board and a Director of
Siga since April 19, 2001. Mr. Drapkin has been a Director and Vice Chairman of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987.
Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP for more than five years. Mr.
Drapkin is also a Director of the following corporations which file reports
pursuant to the Securities Exchange Act of 1934: Anthracite Capital, Inc.; Black
Rock Asset Investors; Genta Inc.; The Molson Companies Limited; Panavision,
Inc.; Playboy Enterprises, Inc.; Playboy.com, Inc.; ProxyMed, Inc.; Revlon
Consumer Products Corporation; Revlon, Inc.; The Warnaco Group, Inc.; and Weider
Nutrition International Inc.
Gabriel M. Cerrone has served as a Director of Siga since April 19, 2001.
Mr. Cerrone has been Senior Vice President of Investments of Fahnestock & Co.,
Inc., a financial services firm since March 1999. From March 1998 to March 1999,
Mr. Cerrone was Managing Director
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of Investments at Barington Capital, L.P., a merchant bank, and, from June 1994
to February 1998, he was Senior Vice President of Investments at Blair &
Company, a financial services firm focusing on microcap companies. Mr. Cerrone
is a Director of the following privately-held companies: Callisto
Pharmaceuticals, Inc. and Macro Holdings, LLC. He is also the sole general
partner of Panetta Partners, Ltd., a firm which acts as an investor in, and
consultant to, primarily emerging technology companies. Mr. Cerrone is a 1994
graduate of New York University's Stern School of Business.
Thomas E. Constance has served as a Director of Siga since April 19, 2001.
Mr. Constance is Chairman and a partner of Kramer Levin Naftalis & Frankel LLP,
a law firm in New York City. Mr. Constance is a Director of the following
corporations which file reports pursuant to the Securities Exchange Act of 1934:
Uniroyal Technology Corp. and The Kroll-O'Gara Company. Mr. Constance is also a
Director of Callisto Pharmaceuticals, Inc., a privately-held company. Mr.
Constance serves as a Trustee of the M.D. Sass Foundation and St. Vincent's
Services. He also serves on the Advisory Board of Barington Capital, L.P.
Mehmet C. Oz, M.D. has served as a Director of Siga since April 19, 2001.
Dr. Oz has been a Cardiac Surgeon at Columbia University Presbyterian Hospital
since 1993 and an Associate Professor of Surgery there since July 2000. Dr. Oz
directs the following programs at Columbia University Presbyterian Hospital: the
mechanical device program, the complementary medicine program, the clinical
profusion program and clinical trials of new surgical technology. Dr. Oz
received his undergraduate degree from Harvard University in 1982, and, in 1986,
he received a joint M.D. and M.B.A. from the University of Pennsylvania Medical
School and the Wharton School of Business.
Eric A. Rose, M.D. has served as a Director of Siga since April 19, 2001.
From April 19, 2001 until June 21, 2001, Dr. Rose served as Interim Chief
Executive Officer of Siga. Dr. Rose is currently Chairman of the Department of
Surgery and Surgeon-in-Chief of the Columbia Presbyterian Center of New York
Presbyterian Hospital, a position he has held since August 1994. Dr. Rose is a
past President of the International Society for Heart and Lung Transplantation.
Dr. Rose was recently appointed as Morris & Rose Milstein Professor of Surgery
at Columbia University's College of Physicians and Surgeons' Department of
Surgery. Dr. Rose is also a Director of the following corporation that files
reports pursuant to the Securities Exchange Act of 1934: Nexell Therapeutics
Inc. (f/k/a VimRx). Dr. Rose is a graduate of both Columbia College and Columbia
University College of Physicians & Surgeons.
Michael Weiner, M.D. has served as a Director of Siga since April 19,
2001. Dr. Weiner has been a Professor of Pediatrics at Columbia University
College of Physicians and Surgeons since 1996. Dr. Weiner is also the Director
of Pediatric Oncology at New York Presbyterian Hospital. Dr. Weiner was formerly
a Director of Nexell Therapeutics, Inc. (f/k/a VimRx) from March 1996 to
February 1999. Dr. Weiner is a 1972 graduate of the New York State Health
Sciences Center at Syracuse, and he was a post graduate student at New York
University and Johns Hopkins.
6
Board Meetings and Committees
During fiscal year 2000, there were three meetings of the Board of
Directors. A quorum of Directors was present, either in person or
telephonically, for all of the meetings. Actions were also taken during the year
by the unanimous written consent of the Directors.
Since June 29, 2001, Siga's audit committee has been composed of Drs.
Mehmet Oz and Michael Weiner, neither of whom is an employee of Siga. Through
its written charter, a copy of which is attached as Appendix 1 hereto, the audit
committee has been delegated the responsibility of reviewing with the
independent auditors the plans and results of the audit engagement, reviewing
the adequacy, scope and results of the internal accounting controls and
procedures, reviewing the degree of independence of the auditors, reviewing the
auditor's fees and recommending the engagement of the auditors to the full Board
of Directors.
Since June 29, 2001, Siga's compensation committee has been composed of
Drs. Mehmet Oz and Michael Weiner, neither of whom is an employee of Siga. The
compensation committee administers Siga's stock option plan and other corporate
benefits programs. The compensation committee also reviews and approves bonuses,
stock option grants, compensation, philosophy and current competitive status,
and executive officer compensation.
Audit Committee Report
The current audit committee was formed on June 29, 2001. The members of
the audit committee during fiscal year 2000 (the "2000 Audit Committee") were
Messrs. Jeffrey Rubin and Thomas N. Lanier, neither of whom was an employee of
Siga. The 2000 Audit Committee, which consisted solely of independent (as that
term is defined in Rule 4200(a)(15) of the National Association of Securities
Dealers' listing standards) members of the Board of Directors, reviewed and
discussed with management the audited financial statements included in Siga's
Annual Report on Form 10-K for fiscal year 2000. Additionally, the 2000 Audit
Committee discussed with the independent auditors the matters required to be
discussed by SAS 61. The 2000 Audit Committee received the written disclosures
and the letter from PricewaterhouseCoopers LLP, the independent accountants,
required by Independence Standards Board Standard No. 1 and discussed with the
independent accountant the independent accountant's independence. Based upon the
above review and discussions, the 2000 Audit Committee recommended to the Board
of Directors that the audited financial statements be included in Siga's Annual
Report on Form 10-K for fiscal year 2000 for filing with the Securities and
Exchange Commission.
The current members of the audit committee are: Dr. Mehmet C. Oz and Dr.
Michael Weiner.
7
MANAGEMENT
Officers
The following table sets forth certain information with respect to the
officers of Siga:
Name Age Position
- ---- --- --------
Philip N. Sussman 49 President and Chief Executive Officer
Thomas N. Konatich 55 Vice President and Chief Financial Officer,
Treasurer and Secretary
Dennis E. Hruby, Ph.D. 49 Chief Scientific Officer
Philip N. Sussman has served as Siga's President and Chief Executive
Officer since June 22, 2001. From September 1999 through June 2001, Mr. Sussman
was the Executive Vice President - Corporate Development of Memory
Pharmaceuticals Corp, a privately held biopharmaceutical company. From September
1993 through September 1999, he was an officer of Cadus Pharmaceutical
Corporation, rising to the position of Senior Vice President - Finance and
Corporate Development and Chief Financial Officer. Prior to that, Mr. Sussman
was Director of Strategy and Business Development for the pharmaceuticals
division of Ciba-Geigy Corp. (now Novartis Corp.). Mr. Sussman has an S.M. in
management from the Sloan School of Management at the Massachusetts Institute of
Technology, an M.S. in biotechnology from Manhattan College and a B.S. in
physics from the State University of New York at Stony Brook.
Thomas N. Konatich has served as Siga's Vice President, Chief Financial
Officer and Treasurer since April 1, 1998 and as our Secretary since June 29,
2001. From November 1996 through March 1998, Mr. Konatich served as Chief
Financial Officer and a Director of Innapharma, Inc., a privately held
pharmaceutical development company. From 1993 through November 1996, Mr.
Konatich served as Vice President and Chief Financial Officer of Seragen, Inc.,
a publicly traded biopharmaceutical development company. From 1988 to 1993, he
was Treasurer of Ohmicron Corporation, a privately held biotechnology company.
Mr. Konatich has an M.B.A. from the Columbia Graduate School of Business.
Dennis E. Hruby, Ph.D. has served as Siga's Chief Scientific Officer since
June 2000. From April 1, 1997 until June 2000 Dr. Hruby served as Vice-President
of Research. From January 1996 through March 1997, Dr. Hruby served as a senior
scientific advisor to Siga. Dr. Hruby is a Professor of Microbiology at Oregon
State University, and from 1990 to 1993 was Director of the Molecular and
Cellular Biology Program and Associate Director of the Center for Gene Research
and Biotechnology. Dr. Hruby specializes in virology and cell biology research,
and the use of viral and bacterial vectors to produce recombinant vaccines. He
is a member of the American Society of Virology, the American Society for
Microbiology and a fellow of the American Academy of Microbiology. Dr. Hruby
received a Ph.D. in microbiology from the University of Colorado Medical Center
and a B.S. in microbiology from Oregon State University.
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Summary Compensation Table
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 2000, 1999 and 1998 for Siga's Chief Executive
Officer, its two other most highly compensated individuals who served as
executive officers of Siga and earned compensation in excess of $100,000 during
the fiscal year ended December 31, 2000 and the one other officer who earned
compensation in excess of $100,000 during the fiscal year ended December 31,
2000 (the "Named Officers").
Annual Compensation
Long Term
Compensation Stock
Other Annual Underlying Options/
Name/Principal Position Year Salary ($) Compensation ($) Warrants (#)
----------------------- ---- ---------- ---------------- ------------
Joshua D. Schein, Ph.D., Chief Executive 2000 250,000 -- 500,000
Officer and Director (1) 1999 225,000 -- 150,000
1998 170,940 -- 16,667
Judson A. Cooper, Executive Vice President 2000 250,000 -- 500,000
and Director (1) 1999 225,000 -- 150,000
1998 170,939 -- 16,667
Thomas N. Konatich, Vice President, Chief 2000 170,000 -- 100,000
Financial Officer, Treasurer and Secretary 1999 170,000 -- --
(2) 1998 120,172 -- 95,000
Dennis E. Hruby, Ph.D., Chief Scientific 2000 180,000 -- 125,000
Officer (3) 1999 170,000 -- --
1998 167,148 -- 40,000
- ----------
(1) Resigned as an executive officer and director of Siga effective as of
April 19, 2001.
(2) Assumed position of Secretary of Siga effective as of June 29, 2001.
(3) Not an executive officer.
Option Grants for the Year Ended December 31, 2000
The following table sets forth grants of stock options to each of the
Named Officers for the year ended December 31, 2000. The exercise price per
share of each option was equal to the fair market value at the time of the
grant, except for the grants to Dr. Hruby. The grants to Dr. Hruby were non-Plan
grants at a discount of approximately 50% to market.
9
Option Grants in the Last Fiscal Year
Number of
Securities Percent of Total
Underlying Options Granted to
Options Granted Employees in Fiscal Exercise Price per
Name (#) Year (%) (1) Share ($/SH) Expiration Date
- ---- --- ------------ ------------ ---------------
Joshua D. Schein 500,000 43.8 2.00 1/19/10
Judson A. Cooper 500,000 43.8 2.00 1/19/10
Thomas N. Konatich 100,000 8.7 2.00 1/19/10
Dennis E. Hruby 125,000 (2) 2.00 1/19/10
- ----------
(1) Based on options to purchase an aggregate of 1,144,000 shares of common
stock granted under the Amended 1996 Incentive and Non-Qualified Stock
Option Plan.
(2) Options were granted outside the Amended 1996 Incentive and Non-Qualified
Stock Option Plan.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table provides certain summary information concerning stock
options held as of December 31, 2000 by each of the Named Officers. No options
were exercised during fiscal 1999 by any of the Named Officers.
Value of Unexercised In-The-
Number of Securities Underlying Money-Options at Fiscal
Unexercised Options Year-End ($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Joshua D. Schein 662,501 37,500 735,938 70,313
Judson A. Cooper 662,501 37,500 735,938 70,313
Thomas N. Konatich 85,000 110,000 37,500 62,500
Dennis E. Hruby 52,500 122,500 25,000 100,000
- ----------
(1) Based upon the closing price on December 31, 2000 as reported on the
Nasdaq SmallCap Market and the exercise price per option.
Director Compensation
During fiscal year 2000, no fees were paid to directors, and no directors
were reimbursed for expenses incurred.
Subject to the approval of the amendment and restatement of Siga's Amended
1996 Incentive and Non-Qualified Stock Option Plan (the "Option Plan") by our
stockholders (Proposal 3 to be voted upon at the meeting to which this Proxy
Statement relates), Siga has granted options ("Contingent Options") to purchase
shares of Siga common stock to its directors under that plan. The number of
shares for which each director has been granted Contingent Options is set forth
in parentheses after his name: Donald G. Drapkin (1,125,000), Gabriel M. Cerrone
(1,075,000), Thomas E. Constance (225,000), Mehmet C. Oz (100,000), Eric A. Rose
(600,000) and Michael Weiner (100,000). The exercise price for each Contingent
Option will be
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$2.50, the fair market value at the date of grant, and all Contingent Options
will be immediately exercisable upon approval of the amendment and restatement
of the Option Plan.
Employment Contracts
Philip N. Sussman, Siga's President and Chief Executive Officer, entered
into an employment agreement with Siga on June 22, 2001. This employment
agreement is to expire on June 21, 2003 and may be extended, at Siga's sole
discretion, for periods of one year upon notice by Siga to Mr. Sussman no later
than six months prior to the end of the term. If Siga fails to extend the
initial term of the employment agreement for at least one year, Mr. Sussman will
be eligible to receive certain benefits, including severance pay equal to six
months of base salary and reimbursement for six months of COBRA continuation
medical coverage, upon expiration of the agreement. The annual base salary due
to Mr. Sussman under the employment agreement is $300,000, and Mr. Sussman is
eligible for an annual bonus, based upon his performance and that of Siga, at
Siga's sole discretion. Under the terms of the employment agreement, Siga
granted to Mr. Sussman on June 29, 2001 non-qualified stock options to purchase
420,000 shares of Siga common stock at an exercise price of $3.94 per share. The
options become exercisable on a pro rata basis on the first, second, third and
fourth anniversaries of the agreement.
Dr. Joshua Schein, Siga's former Chief Executive Officer, resigned as
Chief Executive Officer effective as of April 19, 2001. Prior to his
resignation, Dr. Schein was employed under an agreement through December 31,
1999 which had a base annual salary of $225,000 and granted him 16,667 options
per year, exercisable at the fair market value on the date of the grant. In
January 2000 he entered into a new employment agreement with Siga which
agreement was amended and restated as of October 6, 2000, would expire January
2005 and was cancelable by Siga only for cause, as defined in the agreement. The
agreement was renewable for additional one year terms unless cancelled by either
party in writing 180 days prior to cancellation. Dr. Schein received an annual
base salary of $250,000 and he was granted 500,000 fully vested stock options
upon signing the new agreement. The options are exercisable at $2.00 per share,
the fair market value on the date of grant. He was eligible to receive
additional stock options and bonuses at the discretion of the Board of
Directors. Under the amended and restated agreement, in the event of a change of
control, Dr. Schein would be paid his compensation for the remainder of his
employment term and would receive a tax gross-up payment, and all unvested
options held by Dr. Schein would become vested and exercisable. In addition, Dr.
Schein would receive a cash payment equal to 1.5% of the total consideration
received by Siga in a sale of all or substantially all of Siga's assets or
stock, or a transaction where the holders of Siga's voting capital stock
immediately prior to the transaction own less than a majority of the voting
capital stock of the acquiring or surviving entity. In the event of a sale,
merger or public spin-out of any subsidiary or material asset of Siga, Dr.
Schein would receive a fee equal to 1.5% of the value of Siga's shares of the
subsidiary or material assets. Pursuant to the Separation Agreement between Dr.
Schein and Siga, dated as of March 30, 2001, the employment agreement between
Dr. Schein and Siga was terminated.
Judson Cooper, Siga's former Chairman of the Board of Directors and
Executive Vice President, resigned those positions effective as of April 19,
2001. Prior to his resignation, Mr. Cooper was employed under an employment
agreement through December 31, 1999 which had a base annual salary of $225,000
and granted him 16,667 options per year, exercisable at the fair market value on
the date of the grant. In January 2000 he entered into a new employment
11
agreement which agreement was amended and restated October 6, 2000, would expire
January 2005 and was cancelable by Siga only for cause, as defined in the
agreement. The agreement was renewable for additional one year terms unless
cancelled by either party in writing 180 days prior to cancellation. Mr. Cooper
received an annual base salary of $250,000 and he was granted 500,000 fully
vested stock options upon signing the new agreement. The options are exercisable
at $2.00 per share, the fair market value on the date of grant. He is eligible
to receive additional stock options and bonuses at the discretion of the Board
of Directors. Under the amended and restated agreement, in the event of a change
of control, Mr. Cooper would be paid his compensation for the remainder of his
employment term and would receive a tax gross-up payment, and all unvested
options held by Mr. Cooper would become vested and exercisable. In addition, Mr.
Cooper would receive a cash payment equal to 1.5% of the total consideration
received by Siga in a sale of all or substantially all of Siga's assets or
stock, or a transaction where the holders of Siga's voting capital stock
immediately prior to the transaction own less than a majority of the voting
capital stock of the acquiring or surviving entity. In the event of a sale,
merger or public spin-out of any subsidiary or material asset of Siga, Mr.
Cooper would receive a fee equal to 1.5% of the value of Siga's shares of the
subsidiary or material assets. Pursuant to the Separation Agreement between Mr.
Cooper and Siga, dated as of March 30, 2001, the employment agreement between
Mr. Cooper and Siga was terminated.
Thomas Konatich, Siga's Vice President, Chief Financial Officer, Treasurer
and Secretary, is employed by Siga under an employment agreement that was to
expire April 1, 2000. On January 19, 2000 the employment agreement was amended
and in October 2000, the agreement was amended and restated. The amended
agreement expires on April 1, 2002 and is cancelable by Siga only for cause, as
defined in the agreement. Mr. Konatich receives an annual base salary of
$170,000. He received options to purchase 95,000 shares of common stock, at
$4.44 on April 1, 1998. The options vest on a pro rata basis on the first,
second, third and fourth anniversaries of the agreement. On January 19, 2000 he
received an additional grant of options to purchase 100,000 shares of common
stock at an exercise price of $2.00 per share. The options vest on a pro rata
basis each quarter through January 19, 2002. Mr. Konatich is also eligible to
receive additional stock options and bonuses at the discretion of the Board of
Directors. Under the amended and restated agreement, as a result of the change
of control that occurred on April 19, 2001, Mr. Konatich would, upon termination
within 18 months of such change of control, be paid his compensation for the
remainder of his employment term and would receive a tax gross-up payment. Under
the terms of the amended agreement, upon a change of control, Mr. Konatich was
entitled to have funds in the amount of such remaining salary and gross-up
payment placed in escrow in his name, although no such escrow fund has been
established. Additionally, as a result of the change of control, all unvested
options held by Mr. Konatich have become vested and exercisable.
Dr. Dennis Hruby, Siga's Chief Scientific Officer, has an employment
agreement with Siga which was to expire on December 31, 2000. In May 2000 the
employment agreement was amended extending Dr. Hruby's employment until December
31, 2002 (provided, however, that Siga may terminate the agreement upon 180 days
written notice) and changing Dr. Hruby's title from Vice President of Research
to Chief Scientific Officer. Dr. Hruby received options to purchase 40,000
shares of common stock at an exercise price of $4.63 per share on February 1,
1998. The options become exercisable on a pro rata basis on the first, second,
third and fourth anniversaries of the agreement. Dr. Hruby is eligible to
receive additional stock options and bonuses at the discretion of the Board of
Directors. Under the amended agreement, Dr. Hruby
12
was granted options to purchase 125,000 shares of common stock at an exercise
price of $2.00 per share. The options vest ratably over the remaining term of
the amendment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of Siga's voting securities as of July 6, 2001 of (i) each
person known to Siga to beneficially own more than 5% of the applicable class of
voting securities, (ii) each director and director nominee of Siga, (iii) each
Named Officer, and (iv) all directors and officers of Siga as a group. As of
July 11, 2001, a total of 8,053,808 shares of common stock and a total of
935,521 shares of Series A preferred stock were outstanding and entitled to vote
at the annual meeting. Each share of common stock and Series A preferred stock
is entitled to one vote on matters on which common stockholders are eligible to
vote. The column entitled "Percentage of Total Voting Stock" shows the
percentage of total voting stock beneficially owned by each listed party.
Ownership of Common Stock
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- ------------- ----------- -----------------
Judson Cooper 1,152,117(3) 13.1% 11.9%
Howard Gittis 826,851(4) 9.7% 9.0%
35 East 62nd Street
New York, NY 10021
Panetta Partners, Ltd.(5) 817,700(6) 9.4% 8.5%
265 E. 66th Street,
Suite 16G
New York, NY 10021
Joshua D. Schein, Ph.D 1,178,517(3) 13.4% 12.1%
Richard B. Stone 556,615 6.9% 6.2%
135 East 57th Street
11th Floor
New York, NY 10022
Philip N. Sussman 0 * *
Thomas N. Konatich 195,000(7) 2.4% 2.2%
Dennis E. Hruby 90,000(7) 1.1% 1.0%
13
Donald G. Drapkin 1,652,945(8)(9)(10) 19.6% 19.2%
35 East 62nd Street
New York, NY 10021
Gabriel M. Cerrone(5) 817,700(6) 9.4% 8.5%
265 E. 66th Street,
Suite 16G
New York, NY 10021
Thomas E. Constance 0(11) * *
919 Third Avenue
41st Floor
New York, NY 10022
Mehmet C. Oz, M.D 25,000(12) * *
177 Fort Washington Ave
New York, NY 10032
Eric A. Rose, M.D 100,000(13) 1.2% 1.1%
122 East 78th Street
New York, NY 10021
Michael Weiner, M.D 25,000(12) * *
161 Fort Washington Ave
New York, NY 10032
All Officers and 2,905,645(14) 31.8% 30.0%
Directors as a group
(nine persons)
- ----------
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise indicated the address of each beneficial owner
identified is 420 Lexington Avenue, Suite 620, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and
voting power with respect to the shares indicated. For purposes of
this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such
person has the right to acquire within 60 days after such date.
Unless and until stockholders approve the amendment and restatement
of the Option Plan (as defined below) (see Proposal 3), no person is
deemed to have "beneficial ownership" of any common stock issuable
upon exercise of Contingent Options. For purposes of computing the
percentage of outstanding shares held by each person or group of
persons named above on a given date, any security which such person
or persons has the right to acquire within 60 days after such date
is deemed to be outstanding for the purpose of computing the
percentage ownership of such person or persons, but is not deemed to
be outstanding for the purpose of computing the percentage ownership
of any other person.
(3) Includes currently exercisable options to purchase 700,001 shares of
common stock owned directly and beneficial ownership of options to
purchase 12,500 shares of common
14
stock, held by Prism Ventures LLC, an entity jointly owned by Mr.
Cooper and Dr. Schein.
(4) Includes 243,414 shares issuable upon conversion of preferred stock
and 226,087 shares issuable upon exercise of a warrant.
(5) Mr. Cerrone, as the sole general partner of Panetta Partners, Ltd.,
may be deemed to beneficially own the shares owned by Panetta
Partners, Ltd.
(6) Includes 634,700 shares issuable upon exercise of warrants. Does not
include 1,075,000 shares of common stock issuable upon exercise of
Contingent Options, subject to stockholder approval of the amendment
and restatement of the Option Plan.
(7) Messrs. Konatich and Hruby own no shares of common stock. All shares
listed as beneficially owned by Messrs. Konatich and Hruby are
shares issuable upon exercise of currently exercisable stock
options.
(8) Includes 373,913 shares issuable upon conversion of preferred stock.
Does not include 1,125,000 shares of common stock issuable upon
exercise of Contingent Options, subject to stockholder approval of
the amendment and restatement of the Option Plan.
(9) Mr. Drapkin has entered into a management restructuring agreement,
pursuant to which he has been granted proxies giving him voting
power over an aggregate of 905,632 shares of common stock, included
in the figures in the above table.
(10) Mr. Drapkin holds, inter alia, a warrant (an "Investor Warrant") to
purchase 347,826 shares of common stock. However, the Investor
Warrant provides that, with certain limited exceptions, it is not
exercisable if, as a result of such exercise, the number of shares
of Common Stock beneficially owned by Mr. Drapkin and his affiliates
(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of such
Investor Warrant) would exceed 9.99% of the outstanding shares of
common stock. As a result of the restrictions described in the
immediately preceding sentence and the other securities which Mr.
Drapkin may be deemed beneficially to own, Mr. Drapkin's Investor
Warrant is not presently exercisable. If not for the 9.99% limit,
Mr. Drapkin could be deemed to beneficially own 2,000,771 shares of
common stock, or 22.8% of the outstanding shares of common stock and
21.4% of the total shares of voting stock outstanding.
(11) Does not include 225,000 shares of common stock issuable upon
exercise of Contingent Options, subject to stockholder approval of
the amendment and restatement of the Option Plan.
(12) Includes 12,500 shares issuable upon exercise of warrants. Does not
include 100,000 shares of common stock issuable upon exercise of
Contingent Options, subject to stockholder approval of the amendment
and restatement of the Option Plan.
(13) Includes 50,000 shares issuable upon exercise of warrants. Does not
include 600,000 shares of common stock issuable upon exercise of
Contingent Options, subject to stockholder approval of the amendment
and restatement of the Option Plan.
(14) See footnotes (5), (6), (7), (8), (9), (10), (11), (12) and (13).
15
Ownership of Series A Preferred Stock
Name and Address of Percentage of Series A
Beneficial Owner (1) Amount of Beneficial Ownership (2) Preferred Stock Outstanding
- -------------------- ---------------------------------- ---------------------------
Howard Gittis 243,414(3) 20.6%
Frank J. and Mary Anne Loccisano 56,095 5.7%
50 I.U. Willets Road
Roslyn, NY 11576
Alfons Melohn 262,099 21.9%
1995 Broadway, 14th Floor
New York, NY 10023
Philip N. Sussman 0 *
Thomas N. Konatich 0 *
Dennis E. Hruby 0 *
Donald G. Drapkin 373,913(4) 28.6%
Gabriel M. Cerrone 0 *
Thomas E. Constance 0 *
Mehmet C. Oz, M.D. 0 *
Eric A. Rose, M.D. 0 *
Michael Weiner, M.D. 0 *
All Officers and 373,913 28.6%
Directors as a group
(nine persons)
- ----------
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise indicated the address of each beneficial owner
identified is as set forth in the Ownership of Common Stock table
above.
(2) Unless otherwise indicated, each person has sole investment and
voting power with respect to the shares indicated. For purposes of
this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such
person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, any
security which such person or persons has the right to acquire
within 60 days after such date is deemed to be outstanding for the
purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) On July 16, 2001, these shares of Series A preferred stock, together
with accrued dividends thereon, were converted into 246,719 shares
of common stock.
(4) On July 16, 2001, these shares of Series A preferred stock, together
with accrued dividends thereon, were converted into 379,859 shares
of common stock.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 15, 1998, Siga entered into a consulting agreement with
Prism Ventures LLC pursuant to which Prism had agreed to provide certain
business services to Siga, including business development, operations and other
advisory services, licensing, strategic alliances, merger and acquisition
activity, financings and other corporate transactions. Pursuant to the terms of
the agreement, Prism received an annual fee of $150,000 and 16,667 stock options
per year. The agreement had an initial term of three years and was subject to
successive automatic one-year renewal terms unless either party notified the
other at least 90 days prior to the expiration date of the initial term or any
renewal term. Mr. Cooper and Dr. Schein are the members of Prism. In October of
1998, Siga and Prism agreed to suspend the agreement for as long as the two
principals are employed by Siga under the provisions of their amended employment
agreements. During 1999 and 2000, Prism received no payments pursuant to the
agreement. Pursuant to a management restructuring agreement among Siga, Mr.
Drapkin, Mr. Cerrone, Mr. Constance, Dr. Rose, Mr. Cooper and Dr. Schein, dated
March 30, 2001, the consulting agreement was terminated at no cost to Siga.
Effective September 9, 1999, Siga entered into a consulting agreement with
Stefan Capital, LLC pursuant to which Stefan has agreed to provide certain
business services to Siga. Pursuant to the terms of the agreement, Stefan
received five year warrants to purchase 100,000 shares of Siga's common stock at
an exercise price of $1.00. None of the warrants were exercisable until
September 9, 2000, at which time 50,000 warrants became exercisable. Mr. Jeffrey
Rubin, one of Siga's former directors, is a principal of Stefan.
Effective January 19, 2000, Siga entered into a consulting agreement with
Mr. Scott Eagle, a former director. Mr. Eagle provided consulting services
concerning Siga's strategic review and development of alternate internet and
related technologies. The agreement expired on January 19, 2001. Pursuant to the
terms of the agreement, Mr. Eagle received five year warrants to purchase 50,000
shares of Siga's common stock at an exercise price of $1.00 per share.
Thomas E. Constance is Chairman of Kramer Levin Naftalis & Frankel LLP, a
law firm in New York City, which Siga has retained to provide legal services
during fiscal year 2001.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as Siga's independent auditors to audit the financial statements of Siga for the
fiscal year ending December 31, 2001 and recommends that stockholders vote for
ratification of this appointment. PricewaterhouseCoopers LLP has audited Siga's
financial statements since January 1997. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate questions. The affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy and voting at the Annual Meeting will be required to ratify the
selection of PricewaterhouseCoopers LLP.
17
If the stockholders fail to ratify the selection, the Audit Committee and
the Board of Directors will reconsider its selection of auditors. Even if the
selection is ratified, the Board of Directors in its discretion may direct the
appointment of different independent auditors at any time during the year if it
determines that such change would be in the best interests of Siga and its
stockholders.
Audit Fees
PricewaterhouseCoopers LLP billed Siga $78,500, in the aggregate, for
professional services rendered by them for the audit of Siga's annual financial
statements for the fiscal year ended December 31, 2000, and the reviews of the
interim financial statements included in Siga's form 10-Q filed during the year
ended December 31, 2000.
All Other Fees
PricewaterhouseCoopers LLP billed Siga $55,065, in the aggregate, for all
other services rendered by them (other than those covered above under "Audit
Fees") during the fiscal year ended December 31, 2000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION (ITEM 2 OF THE ENCLOSED PROXY CARD) OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS SIGA'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2001.
PROPOSAL NO. 3
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF SIGA'S AMENDED
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment and restatement of the amended 1996 Incentive and Non-Qualified Stock
Option Plan (the "Option Plan"). The amendment and restatement was adopted on
May 3, 2001 and was further refined by the Board of Directors on June 29, 2001.
The amendment and restatement renames the Option Plan the Amended and Restated
1996 Incentive and Non-Qualified Stock Option Plan, increases the aggregate
number of shares issuable under the Option Plan from 2,500,000 to 7,500,000 and
makes certain other changes to the Option Plan. As of July 11, 2001, there were
2,056,061 options outstanding under the Option Plan. Siga has granted Contingent
Options to purchase a total of 3,225,000 shares of common stock to its
directors. These Contingent Options will vest immediately upon approval of the
amendment and restatement of the Option Plan - see "Director Compensation" under
the heading "Proposal No. 1" above for additional information about the
Contingent Options.
The adoption of the amendment and restatement by the Board of Directors
reflects a determination by the Board that ensuring the continued availability
of a sufficient number of options available for grant under the Option Plan is
important to our ongoing and continuing
18
efforts to attract and retain key senior management personnel and increase the
interest of our executive officers in our continuing success.
The following summary is qualified in its entirety by reference to the
Option Plan, a copy of which is attached hereto as Appendix 2.
Description of the Option Plan
The purposes of the Option Plan are to attract and retain the best
available personnel, to provide an additional incentive to our employees,
consultants and non-employee directors and to promote the success of our
business.
The Option Plan is administered by the compensation committee (the
"Committee") of the Board of Directors comprised of "non-employee directors"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and
"outside directors" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). However, with respect to the non-employee
members of the Board of Directors and any individuals that are not reasonably
expected to be "covered employees" under Code Section 162(m) or in any other
situation that the Board of Directors elects, the entire Board of Directors may
act as the Committee. The Committee designates the persons to receive options,
the number of shares subject to each option and the terms of the options,
including the option's price and period of exercisability, subject to certain
limitations and as permitted by the Option Plan.
The maximum number of shares of common stock available for issuance under
the Option Plan is 7,500,000 shares (the previously approved 2,500,000 and
5,000,000 added by this amendment) subject to adjustment in the event of stock
splits, stock dividends, mergers, consolidations and the like. Shares of common
stock subject to options granted under the Option Plan that expire or terminate
are available for options to be issued under the Option Plan. The Option Plan
now provides that no individual may be granted options with respect to more than
4,900,000 shares in any calendar year.
Eligibility
Options may be granted to (i) officers and salaried employees of Siga and
its subsidiaries (including salaried employees who are also directors and
prospective salaried employees conditioned on their becoming salaried
employees), (ii) members of the Board of Directors, (iii) such consultants to
Siga as the Committee shall select in its sole discretion, and (iv) any other
key persons, as determined by the Committee in its sole discretion. For this
purpose, an employee means an individual who is (or is expected to be)
classified as an employee of Siga for purposes of Siga's payroll. The granting
of Options is discretionary, and Siga cannot now determine the number or type of
Options that will be granted in the future to any particular person or group.
While the Option Plan previously had provided that non-employee directors
received automatic annual option grants, the Option Plan now provides that
non-employee directors may be granted options in the discretion of the Board of
Directors.
Options
The Option Plan provides for the grant of (i) stock options not intended
to qualify as incentive stock options within the meaning of Section 422 of the
Code ("NQSOs") and (ii) stock
19
options that are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code ("ISOs"). Each Option shall be evidenced by
an "Option Agreement" containing such terms and conditions as the Committee
shall determine.
Non-Qualified Stock Options. The exercise price-per-share of each NQSO
shall be determined by the Committee on the date of grant, but shall not be less
than that required by law. Each Option Agreement shall set forth the vesting
schedule for the Option. Unless the Option Agreement provides for pre-vesting
exercise, as described below, an NQSO first shall become exercisable when, and
to the extent that, it is vested. Each NQSO shall be exercisable in whole or in
part for a term of ten years. The exercise price shall be paid in cash or,
unless provided otherwise in the applicable Option Agreement, in shares of
common stock valued at their fair market value on the date of exercise or by
means of a "cashless exercise" in which some or all of the shares to be granted
upon the exercise are sold to provide the exercise price, or, at the discretion
of the Committee, by such other provision as the Committee may from time to time
prescribe. In addition, Siga, in its sole discretion, may lend, with full
recourse, the exercise price to the participant or guarantee a loan from a third
party to the participant.
The following treatment now applies to NQSOs in the event of a
participant's termination of employment, unless the Option Agreement provides
otherwise: To the extent that the option was not exercisable at the time of
termination, it shall expire at the close of business (the commencement of
business in the case of a termination for Cause, as defined in the Plan) on the
date of termination. To the extent that the option was exercisable at the time
of termination, it shall expire on the earlier of the expiration of its term and
(i) 90 days after the termination of employment, if the termination was any
reason other than "Cause," "Disability" (as defined in the Option Plan) or death
and (ii) one year after the termination of employment if the termination was by
reason of Disability or death. In the case of a termination of employment for
Cause, the option shall expire as of the commencement of business of the
effective date of the termination.
Incentive Stock Options. Generally, ISOs are options that may provide a
participant with certain federal income tax benefits that are not available with
NQSOs, provided that the participant holds the shares acquired upon exercise of
the ISO for at least two years after the date the ISO is granted and at least
one year after the exercise date. The rules for ISOs under the Option Plan are
the same as with respect to NQSOs, except as follows:
1. ISOs may only be granted to employees.
2. The exercise price-per-share of each ISO must be at least the
fair market value of a share of common stock on the date on
which such ISO is granted.
3. An ISO granted to any individual who owns stock possessing
more than ten percent of the total combined voting power of
all classes of stock of Siga is subject to the following
additional limitations: (i) the exercise price-per-share of
the ISO must be at least 110% of the fair market value of a
share of common stock at the time any such ISO is granted and
(ii) the ISO cannot be exercisable after the expiration of
five years from the grant date.
4. The aggregate fair market value (determined on the grant date)
of shares of common stock with respect to which ISOs are
exercisable for the first time by
20
a participant during any calendar year under the Option Plan
or any other plan of Siga or its subsidiaries may not exceed
$100,000.
Reload Options. The Option Plan now provides that in certain
circumstances, the Committee may include in an Option Agreement evidencing an
option (the "Original Option") a provision that a "reload option" shall be
granted to the participant if such participant delivers shares of common stock
in partial or full payment of the exercise price of the Original Option. The
reload option will relate to a number of shares of common stock equal to the
number of shares of common stock delivered, and will have an exercise
price-per-share equal to the fair market value of a share of common stock on the
date of the exercise of the Original Option.
Pre-Vesting Exercise. The Option Plan now provides that the Committee, in
an Option Agreement, may permit a participant to exercise an ISO or NQSO before
it is vested. The shares of common stock that the participant receives upon such
pre-vesting exercise will be subject to certain restrictions. The participant
may not transfer the shares until they vest and if the participant's employment
with Siga terminates for any reason, any unvested shares will be forfeited and
Siga will repay the exercise price to the participant.
Transferability of Options
Options granted under the Option Plan are exercisable during the
participant's lifetime only by the participant and are not transferable by the
participant, other than by will or the laws of descent and distribution.
Forfeiture of Gain in Certain Events
The Option Plan now provides that if, within one year after a participant
exercises an Option, the Committee determines in its discretion that Siga has
been materially harmed by the participant, whether such harm (a) results in the
participant's termination of employment for Cause or (b) results from any
activity of the participant determined by the Committee to be in competition
with any activity of Siga, or otherwise inimical, contrary or harmful to Siga's
interests (including, but not limited to, accepting employment with or serving
as a consultant, adviser or in any other capacity to an entity that is in
competition with or acting against Siga's interests), then any gain realized by
the participant from the exercise shall be paid by the participant to Siga upon
notice from Siga. Such gain shall be determined as of the date of exercise,
without regard to any subsequent change in the Fair Market Value of a share of
Company Stock. Siga shall have the right to offset such gain against any amounts
otherwise owed to the participant by Siga (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
Certain Corporate Changes
The Option Plan provides for an adjustment in the number of shares of
common stock available to be issued under the Option Plan and the number of
shares of common stock subject to existing options upon any change in Siga's
capitalization, stock dividend or split, reverse stock split, merger,
consolidation, combination or exchange of shares and certain other similar
events.
21
Amendment and Termination
The Board of Directors may suspend, discontinue, revise or amend the
Option Plan at any time and in any respect, subject to stockholder approval to
the extent necessary to comply with applicable law and listing requirements.
Generally, no amendment to the Option Plan may reduce a participant's rights
under any previously granted Option without the participant's prior written
consent.
Limitations Imposed by Section 162(m)
If and to the extent that the Committee determines that Siga's federal tax
deduction in respect of an Option may be limited as a result of Section 162(m)
of the Code, the Committee may delay payments to the participant with respect to
the option and, in exchange, the Committee shall credit to an account on the
books and records of Siga a cash amount equal to the fair market value of the
shares of common stock subject to such option (a "Book Account"). The amounts
credited to the Book Account will be paid to the participant within thirty days
after the date the compensation paid to the participant no longer is subject to
the deduction limitation under Section 162(m) of the Code.
Summary of Federal Tax Consequences
The following description of the principal federal income tax consequences
of Options under the Option Plan is based on present federal tax laws. Federal
tax laws may change from time to time and any legislation that may be enacted in
the future by the United States Congress may significantly affect the federal
income tax consequences described below. No representation is or can be made
regarding whether any such legislation will or may be enacted and/or the impact
of any such legislation. The description below does not purport to be a complete
description of the tax consequences associated with Options under the Option
Plan applicable to any particular award recipient. Differences in each
individual's financial situation may cause federal, state and local tax
consequences of awards to vary.
Non-Qualified Stock Options. In general, an optionee will not be deemed to
receive any income at the time an NQSO is granted, nor will Siga be entitled to
a federal tax deduction at that time.
When an optionee exercises an NQSO, other than a pre-vesting exercise, the
optionee will recognize ordinary compensation income equal to the excess of (a)
the fair market value on the exercise date of the common stock received as a
result of such exercise over (b) the option exercise price, and Siga will be
entitled to a tax deduction in that amount. The shares acquired by the optionee
upon exercise of the NQSO will have a tax basis equal to the fair market value
of the shares on the exercise date. Upon any subsequent sale of the common stock
received on exercise of the NQSO, the optionee will recognize a capital gain (or
loss) in an amount equal to the difference between the amount realized on the
sale and such tax basis. Any such gain (or loss) will be characterized as
long-term capital gain (or loss) if the shares have been held for more than one
year; otherwise, the gain (or loss) will be characterized as a short-term
capital gain (or loss). An optionee's holding period for federal income tax
purposes for such shares will commence on the date following the date of
exercise. Short-term capital gain is subject to tax at the same rate as is
ordinary income. Under current law, the rate at which net long-term capital
22
gain will be taxed will vary depending on the optionee's holding period and the
date the optionee disposes of the shares. The Code currently provides that, in
general, the net long-term capital gain resulting from the sale of shares held
for more than one year will be subject to tax at a maximum rate of 20% (10% for
individuals in the 15% tax bracket). The Code currently provides that net
long-term capital gain shares held for more than five years may be subject to a
reduced rate.
If all or any part of the exercise price of an NQSO is paid by the
optionee with shares of common stock (including, based upon proposed regulations
under the Code, shares previously acquired upon exercise of an ISO), no gain or
loss will be recognized by the optionee on the shares surrendered in payment.
The number of shares received on such exercise of the NQSO equal to the number
of shares surrendered will have the same tax basis and holding period, for
purposes of determining whether subsequent dispositions result in long-term or
short-term capital gain or loss and the applicable tax rates, as the basis and
holding period of the shares surrendered. The balance of the shares received on
such exercise will be treated for federal income tax purposes as described in
the preceding paragraph as though issued upon the exercise of the NQSO for an
exercise price equal to the consideration, if any, paid by the optionee in cash.
The optionee's compensation taxable as ordinary income upon such exercise, and
Siga's deduction, will not be affected by whether the exercise price is paid in
cash or in shares of common stock.
Pre-Vesting Exercise of an NQSO. If an optionee exercises an NQSO before
it is vested, the optionee will not recognize any income and Siga will not
receive a tax deduction until such time as the shares are no longer subject to a
substantial risk of forfeiture or restrictions on transferability (unless, as
described below, the recipient elects otherwise under Section 83(b) of the Code
within 30 days of the date of exercise). Upon lapse or release of such
restrictions (i.e., when the shares vest), the optionee generally will include
in gross income an amount equal to the fair market value of the shares at the
time they vested, less the exercise price paid for them, and Siga will be
entitled to a tax deduction in the same amount. The optionee's tax basis in the
shares will equal their fair market value on the date the shares vested. Any
gain or loss upon a subsequent disposition of the shares will be long-term
capital gain or loss if the shares are held for more than one year and otherwise
will be short-term capital gain or loss. The federal tax rate applicable to any
long-term capital gain will depend upon the holding period of the shares, as
described above.
Pursuant to Section 83(b) of the Code, an optionee who exercises an option
before it is vested may, within 30 days of exercise, elect to be taxed at
ordinary income tax rates on the fair market value at the time of exercise of
the common stock acquired through the pre-vesting exercise. If the election is
made, the optionee will acquire a tax basis in the shares equal to the ordinary
income recognized by the optionee at the time of award plus any amount paid for
the shares, and Siga will be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the optionee. No income will be
recognized upon lapse or release of the restrictions. Any gain or loss upon a
subsequent disposition of the shares will be long-term capital gain or loss if
the shares are held for more than one year and otherwise will be short-term
capital gain or loss. The federal tax rate applicable to any long-term capital
gain will depend upon the holding period of the shares. In the event of a
forfeiture of the shares with respect to which an optionee previously made a
Section 83(b) election, the optionee will not be entitled to a loss deduction,
unless the amount the optionee received upon forfeiture was less than the
exercise price the optionee previously paid for such stock.
23
Incentive Stock Options. In general, an optionee will not be deemed to
receive any income at the time an ISO is granted or exercised if the optionee
does not dispose of the shares acquired on exercise of the ISO within two years
after the grant of the ISO and one year after the exercise of the ISO (discussed
more fully in the next paragraph). In such a case, the gain (if any) on a
subsequent sale (the excess of the amount received over the exercise price) or
loss (if any) on a subsequent sale (the excess of the exercise price over the
amount received) will be a long-term capital gain or loss and will be subject to
tax based on the holding period of the shares, as described in the discussion of
NQSOs above. However, for purposes of computing the "alternative minimum tax"
applicable to an optionee, the optionee will include in the optionee's
alternative minimum taxable income the amount the optionee would have included
in income if the ISO were an NQSO. Such amount may be subject to an alternative
minimum tax of 26% or 28%. Similarly, for purposes of making alternative minimum
tax calculations, the optionee's basis in the stock received on the exercise of
an ISO will be determined as if the ISO were an NQSO.
If an optionee sells the shares acquired on exercise of an ISO within two
years after the date of grant of the ISO or within one year after the exercise
of the ISO, the disposition is a "disqualifying disposition," and the optionee
will recognize income in the year of the disqualifying disposition equal to the
excess of the amount received for the shares over the exercise price. Of that
income, the portion equal to the excess of the fair market value of the shares
at the time the ISO was exercised over the exercise price will be treated as
compensation to the optionee, taxable as ordinary income, and the balance (if
any) will be long- or short-term capital gain depending on whether the shares
were sold more than one year after the ISO was exercised. If the shares were
acquired through a pre-vesting exercise of the ISO, the portion of the income
that is treated as compensation to the optionee, taxable as ordinary income, is
the excess of the fair market value of the shares at the time they vested over
the exercise price and the balance (if any) will be long- or short-term capital
gain. The federal tax rate applicable to any long-term capital gain will depend
upon the holding period of the shares, as described above. If the optionee sells
the shares in a disqualifying disposition at a price that is below the exercise
price, the loss will be a short-term capital loss if the optionee has held the
shares for one year or less and otherwise will be a long-term capital loss.
If an optionee uses shares acquired upon the exercise of an ISO to
exercise an ISO, and the sale of the shares so surrendered for cash on the date
of surrender would be a disqualifying disposition of such shares, the use of
such shares also would constitute a disqualifying disposition. In such case,
proposed regulations under the Code appear to provide that the tax consequences
described above with respect to disqualifying dispositions would apply, except
that no capital gain would be recognized with respect to such disqualifying
disposition. In addition, the basis of the surrendered shares would be allocated
to the shares acquired upon exercise of the ISO, and the holding period of the
shares so acquired would be determined, in a manner prescribed in proposed
regulations under the Code.
Siga is not entitled to a deduction as a result of the grant or exercise
of an ISO. If the optionee has compensation taxable as ordinary income as a
result of a disqualifying disposition, Siga will be entitled to a deduction in
an amount equal to the compensation income resulting from the disqualifying
disposition in the taxable year of Siga in which the disqualifying disposition
occurs.
24
Deduction Limit under Section 162(m) of the Code. In general, Section
162(m) of the Code (the "Million-Dollar Limit") provides that, subject to
certain exceptions, remuneration in excess of $1 million that is paid to certain
"covered employees" of a publicly held corporation (generally, the corporation's
Chief Executive Officer and its four most highly compensated employees other
than the Chief Executive Officer) will not be deductible by the corporation.
Grants of options generally will be eligible for an exception to the
Million-Dollar Limit applicable to certain qualified "performance-based
compensation." In addition, the Option Plan permits the Committee to defer
payments to covered employees until such individuals are no longer covered
employees with respect to the Section 162(m) limitations. Consequently, it would
appear that Siga's deduction for such amounts would be preserved.
Withholding of Taxes. Whenever a participant is required to recognize
compensation income taxable as ordinary income in connection with an Option,
Siga may be obligated to withhold amounts for the payment of federal, state and
local taxes. Siga may withhold (i) an amount in cash sufficient to satisfy its
withholding obligations (when the income is recognized through the receipt of
cash) or (ii) a number of shares, the fair market value of which is sufficient
to satisfy such withholding requirements. Additionally, Siga may require that
the participant remit to Siga an amount in cash sufficient to satisfy Siga's
withholding obligations. At the election of the participant and subject to the
approval of the Committee, the participant may satisfy any such withholding
obligations by remitting to Siga shares of common stock with a fair market value
sufficient to satisfy the withholding obligations.
Other Tax Matters. Tax consequences different from or in addition to those
described above may result in the event of an exercise of an option after the
termination of a participant's employment by reason of death. In addition,
various state laws may provide for tax consequences that vary significantly from
those described above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
(ITEM 3 ON THE ENCLOSED PROXY CARD) OF THE AMENDMENT AND RESTATEMENT OF SIGA'S
AMENDED 1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN.
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2002 Annual Meeting of
Stockholders, for inclusion in Siga's proxy statement and form of proxy relating
to that meeting, must be received by Siga at its offices in New York, New York,
addressed to the Secretary, not later than April 1, 2002. Such proposals must
comply with Siga's By-Laws and the requirements of Regulation 14A of the 1934
Act.
In addition, Rule 14a-4 of the 1934 Act governs Siga's use of its
discretionary proxy voting authority with respect to a stockholder proposal that
is not addressed in the proxy statement. With respect to Siga's 2002 Annual
Meeting of Stockholders, if Siga is not provided notice of a stockholder
proposal prior to June 17, 2002, Siga will be allowed to use its discretionary
voting authority when the proposal is raised at the meeting, without any
discussion of the matter in the proxy statement.
25
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the 1934 Act and the rules thereunder, Siga's
executive officers and directors and persons who own more than 10% of a
registered class of Siga's equity securities are required to file with the
Securities and Exchange Commission and The Nasdaq Stock Market, Inc. reports of
their ownership of, and transactions in, Siga's common stock. Based solely on a
review of copies of such reports furnished to Siga, and written representations
that no reports were required, Siga believes that during the fiscal year ended
December 31, 2000 its executive officers and directors complied with the Section
16(a) requirements.
OTHER MATTERS
At the date of this proxy statement, management was not aware that any
matters not referred to in this proxy statement would be presented for action at
the Annual Meeting. If any other matters should come before the Annual Meeting,
the persons named in the accompanying proxy will have discretionary authority to
vote all proxies in accordance with their best judgment, unless otherwise
restricted by law.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Secretary
Dated: July 30, 2001
26
APPENDIX 1
SIGA Technologies, Inc.
Amended and Restated Audit Committee Charter
(as approved by the Board of Directors as of July 25, 2001)
This Audit Committee Charter ("Charter") has been adopted by the Board of
Directors (the "Board") of SIGA Technologies, Inc. (the "Company"). The Audit
Committee of the Board (the "Committee") shall review and reassess the adequacy
of this charter annually and recommend any proposed changes to the Board for
approval.
Role and Independence; Organization
The members of the Committee shall meet the independence, experience and
other requirements of the Nasdaq Stock Market, Inc., as amended from time to
time, that are applicable to the Company.
The Committee shall maintain free and open communication (including
private executive sessions at least annually) with the independent auditors, the
internal auditors, and Company management. In discharging its oversight role,
the Committee shall have full access to all Company books, records, facilities,
personnel and outside professionals. The Committee may retain special legal,
accounting or other consultants as advisors. Each member of the Committee shall
be entitled to rely on (i) the integrity of those persons and organizations
within and outside the Company from which it receives information, (ii) the
accuracy of the financial and other information provided by such persons or
organizations absent actual knowledge to the contrary (which shall be promptly
reported to the Board), and (iii) representations made by management as to all
audit and non-audit services provided by the auditors to the Company.
The Board, with the assistance of the Committee, has the ultimate
authority and responsibility to select, evaluate and, where appropriate, replace
the outside auditors (or to nominate the outside auditors to be proposed for
stockholder approval in the proxy statement). The outside auditors of the
Company are ultimately accountable to the Board (as assisted by the Committee)
as representatives of the stockholders.
The Committee shall meet at least two times annually. One member of the
Committee may be appointed as chair, who shall be responsible for leadership of
the Committee, including scheduling and presiding over meetings, preparing
agendas, making regular reports to the Board, and maintaining regular liaison
with the CEO, CFO, the lead independent audit partner and the director of
internal audit.
Responsibilities
The Committee's job is one of oversight. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements.
Management and the internal auditing department are responsible for maintaining
appropriate accounting and financial reporting principles and practices and
internal controls and procedures designed to assure
1-1
compliance with accounting standards and applicable laws and regulations. The
independent auditors are responsible for auditing the annual financial
statements, reviewing the Company's quarterly financial statements prior to the
filing of each quarterly report on Form 10-Q, and other procedures.
The Committee and the Board recognize that management (including the
internal audit staff) and the independent auditors have more resources and time
and more detailed knowledge and information regarding the Company's accounting,
financial and auditing practices than do Committee members; accordingly the
Committee's oversight role does not provide any expert or special assurance as
to the Company's financial statements or any certification as to the work of the
independent auditors. Nor is it the duty of the Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent auditors, or to assure compliance with laws and regulations.
Although the Board and the Committee may wish to consider other duties
from time to time, the general recurring activities of the Committee in carrying
out its oversight role are described below. The Committee shall be responsible
for:
o Recommending to the Board the independent auditors to be retained
(or nominated for shareholder approval) to audit the annual
financial statements of the Company and review the quarterly
financial statements of the Company.
o Evaluating, together with the Board, the performance of the
independent auditors and, where appropriate, recommending the
replacement of such auditors.
o Annually obtaining from the independent auditors a formal written
statement describing all relationships between the auditors and the
Company, addressing the matters set forth in Independence Standards
Board Standard No. 1. The Committee shall actively engage in a
dialogue with the independent auditors with respect to any disclosed
relationships that may impact the objectivity and independence of
the auditors, and shall consider whether the independent auditors'
provision of information technology consulting and other non-audit
services to the Company, if any, is compatible with the auditors'
independence. The Committee shall recommend that the Board take
appropriate actions to satisfy itself as to the auditors'
independence.
o Reviewing the audited financial statements and discussing them with
management and the independent auditors. These discussions shall
include the matters required to be discussed under Statement of
Auditing Standards No. 61, as modified or supplemented, and
consideration of the quality of the Company's accounting principles
as applied in its financial reporting. Such discussions may include
a review of particularly sensitive accounting estimates, reserves
and accruals, review of judgmental areas, review of audit
adjustments, review of risk exposures that may have a material
impact on the Company's financial statements and the steps
management has taken to monitor and control such exposures, and
other such inquiries as the Committee or the independent auditors
shall deem appropriate. Based on its review, the Committee shall
make its recommendation to the Board as to the inclusion of the
Company's audited financial statements in
1-2
the Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders, if distributed prior to the filing of the Form 10-K).
o Preparing annually a report to be included in the Company's proxy
statement as required by the rules of the Securities and Exchange
Commission, and submitting such report to the Board for approval.
o Overseeing the relationship with the independent auditors, including
discussing with the auditors the planning and staffing of the audit
and the nature and rigor of the audit process, receiving and
reviewing audit reports, reviewing with the auditors any problems or
difficulties the auditors may have encountered in carrying out their
responsibilities and any management letters provided by the auditors
and the Company's response to such letters, and providing the
auditors full access to the Committee and the Board to report on all
appropriate matters.
o Providing oversight of the Company's auditing, accounting and
financial reporting principles, policies, controls, procedures and
practices, and reviewing significant changes to the foregoing as
suggested by the independent auditors, internal auditors or
management.
o Annually obtaining from the independent auditors a formal written
statement of the fees billed for audit services, information
technology consulting services, and other non-audit services
rendered by the independent auditors for the most recent fiscal
year.
o Reviewing with management and the independent auditors the interim
financial information prior to the Company's filing of each Form
10-Q; this review shall be done by the Committee as a whole or
through the Committee chair.
o Discussing with management, the internal auditors and the
independent auditors the quality and adequacy of the Company's
internal audit controls and procedures and the internal audit
function's organization, responsibilities, plans, results, budget
and staffing, as well as providing oversight to internal audit
activities, including review of significant reports prepared by the
internal auditors, and management's response.
o Discussing with management and/or the Company's general counsel any
legal matters (including the status of pending litigation) that may
have a material impact on the Company's financial statements, and
any material reports or inquiries from regulatory or governmental
agencies.
o Reporting its activities to the full Board and making such
recommendations with respect to the above and any other matters as
the Committee may deem necessary or appropriate.
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APPENDIX 2
SIGA Technologies, Inc.
Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan
1. The Plan
The SIGA Technologies, Inc. 1996 Incentive and Non-Qualified Stock Option Plan
(the "Plan") was initially adopted in 1996. The Plan subsequently was amended in
1998, 1999 and 2000 to increase the number of shares of Company Stock with
respect to which awards may be granted under the Plan. The Plan was amended and
restated in its entirety and renamed the SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan on May 3, 2001, by
the Board of Directors, subject to approval by the stockholders of the Company.
The Plan is hereby further amended and restated, subject to stockholder
approval. The terms of the Plan, as amended and restated, shall apply to all
Options granted after the effective date set forth in Section 24 hereof. The
purposes of the Plan are to attract and retain the best available personnel, to
provide an additional incentive to the employees, consultants and non-employee
directors of SIGA Technologies, Inc., a Delaware corporation (the "Company"),
and to promote the success of the Company's business.
1. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Affiliate" shall mean an entity (whether or not incorporated),
controlling, controlled by or under common control with the Company.
(b) "Board of Directors" shall mean the Board of Directors of SIGA
Technologies, Inc.
(c) "Cause" shall have the meaning set forth in any employment agreement
between the Participant and the Company in effect as of the date the
event giving rise to cause occurred. In the absence of such an
employment agreement provision, "Cause" shall mean: (a) the
Participant's conviction of any crime (whether or not involving the
Company) constituting a felony in the jurisdiction involved; (b)
conduct of the Participant related to the Participant's employment
for which either criminal or civil penalties against the Participant
or the Company may be sought; (c) material violation of the
Company's policies, including, without limitation, those relating to
sexual harassment, the disclosure or misuse of confidential
information, or those set forth in Company manuals or statements of
policy; (d) serious neglect or misconduct in the performance of the
Participant's duties for the Company or willful or repeated failure
or refusal to perform such duties; or (e) any material violation by
the Participant of the terms of any agreement between the
Participant and the Company, including, without limitation, any
employment or non-competition agreement.
Any rights the Company may have hereunder in respect of the events
giving rise to Cause shall be in addition to the rights the Company
may have under any other agreement with a Participant or at law or
in equity. Any determination of whether
2-1
a Participant's employment is (or is deemed to have been) terminated
for Cause shall be made by the Committee in its sole discretion,
which determination shall be final and binding on all parties. If,
subsequent to a Participant's termination of employment (whether
voluntary or involuntary) without Cause, it is discovered that the
Participant's employment could have been terminated for Cause, such
Participant's employment shall be deemed to have been terminated for
Cause. A Participant's termination of employment for Cause shall be
effective as of the date of the occurrence of the event giving rise
to Cause, regardless of when the determination of Cause is made.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors to administer the Plan; provided, however, that the
Committee shall at all times consist of two or more persons, all of
whom are "non-employee directors" within the meaning of Rule 16b-3
under the Exchange Act and "outside directors" within the meaning of
Section 162(m) of the Code. With respect to any matters relating to
the grant of Options to non-employee members of the Board of
Directors or to individuals who are not reasonably expected to be
"covered employees" within the meaning of Section 162(m) of the Code
at the time the Option is exercised, the Committee may be the entire
Board of Directors.
(f) "Company" shall mean SIGA Technologies, Inc. or any successor
thereto. References to the Company also shall include the Company's
Affiliates unless the context clearly indicates otherwise.
(g) "Company Stock" shall mean the common stock of the Company, par
value $0.0001 per share.
(h) "Disability" shall mean a disability described in Section 422(c)(6)
of the Code. The existence of a Disability shall be determined by
the Committee in its absolute discretion.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" shall mean, with respect to a share of Company
Stock on an applicable date:
(i) If the principal market for the Company Stock (the "Market")
is a national securities exchange or the National Association
of Securities Dealers Automated Quotation System ("NASDAQ")
National Market, the last sale price or, if no reported sales
take place on the applicable date, the average of the high bid
and low asked price of Company Stock as reported for such
Market on such date or, if no such quotation is made on such
date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made
within the ten (10) business days preceding the applicable
date;
2-2
(ii) If the Market is the NASDAQ National List, the NASDAQ
Supplemental List or another market, the average of the high
bid and low asked price for Company Stock on the applicable
date, or, if no such quotations shall have been made on such
date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made
within the ten (10) business days preceding the applicable
date; or,
(iii) In the event that neither paragraph (i) nor (ii) shall apply,
the Fair Market Value of a share of Company Stock on any day
shall be determined in good faith by the Committee in a manner
consistently applied.
(k) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code and that
is identified as an Incentive Stock Option in the applicable Option
Agreement.
(l) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(m) "Option" shall mean an option to purchase shares of Company Stock
(whether an Incentive Stock Option or a Non-Qualified Stock Option)
that is granted pursuant to the Plan.
(n) "Option Agreement" shall mean an agreement, in such form and
including such terms as the Committee in its sole discretion shall
determine, evidencing an Option.
(o) "Participant" shall mean an individual who is eligible to
participate in the Plan pursuant to Section 5 hereof and to whom an
Option is granted pursuant to the Plan, and, upon his or her death,
the individual's successors, heirs, executors and administrators, as
the case may be.
(p) "Plan" shall mean this SIGA Technologies, Inc. Amended and Restated
1996 Incentive and Non-Qualified Stock Option Plan, as it may be
amended from time to time. Prior to the effective date hereof, the
Plan was referred to as the SIGA Technologies, Inc. 1996 Incentive
and Non-Qualified Stock Option Plan and the SIGA Corporation 1996
Stock Option Plan.
(q) "Reload Option" shall mean an Option granted to a Participant in
accordance with Section 6 hereof upon the exercise of an Option.
(r) References in this Plan to a "termination of employment" or to a
Participant or employee who terminates employment or the like, mean
the Participant's (i) ceasing to be employed by, or to provide
consulting or other services for, the Company or any corporation (or
any of its subsidiaries) which assumes the Participant's award in a
transaction to which Section 424(a) of the Code applies or (ii)
ceasing to be a member of the Board of Directors. For purposes of
the foregoing, if a Participant (a) at the time of reference, is an
employee, consultant or a member of the Board of Directors, or any
two of the three relationships, or (b) ceases to be an employee,
consultant or a member of the Board of Directors
2-3
and immediately is engaged in another of such relationships with the
Company, the Participant shall not be considered to have terminated
employment until he ceases the last of such relationships with the
Company.
2. Stock Subject to the Plan
(a) Plan Limit
Subject to adjustment as provided in Section 9 hereof, the Committee may
grant Options hereunder with respect to shares of Company Stock that in the
aggregate do not exceed 7,500,000 shares. To the extent that any Options
terminate, expire or are cancelled without having been exercised, the shares
covered by such Options shall again be available for grant under the Plan.
Shares of Company Stock issued under the Plan may be either newly issued
shares or treasury shares, at the discretion of the Committee.
(b) Individual Limit
Subject to adjustment as provided in Section 9 hereof, during any calendar
year, the Committee shall not grant any one Participant Options hereunder with
respect to more than 4,900,000 shares of Company Stock, which limit shall
include any shares represented by an Option granted within the same year that
has been cancelled.
3. Administration of the Plan
The Plan shall be administered by the Committee, provided, however, that
in the absence of the appointment of the Committee or for any other reason
determined by the Board of Directors, the Board of Directors may take any action
under the Plan that would otherwise be the responsibility of the Committee. The
Committee shall from time to time designate the individuals who shall be granted
Options and the amount and type of such Options.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Option issued under it, correct any defect or supply any omission or
reconcile any inconsistency in the Plan and any Option Agreement, adopt such
rules and regulations for administering the Plan as it may deem necessary or
appropriate, and delegate such administrative responsibilities as it deems
appropriate, provided, however, that the Committee shall retain the
responsibility to designate the Option recipients and the amount and type of
such Options. Decisions of the Committee shall be final and binding on all
parties. The Committee's determinations under the Plan may, but need not, be
uniform and may be made on a Participant-by-Participant basis (whether or not
two or more Participants are similarly situated).
The Committee may, in its absolute discretion, without amending the Plan,
accelerate the date on which any Option granted under the Plan becomes vested or
otherwise adjust any of the terms of such Option (except that no such adjustment
shall, without the consent of a Participant, reduce the Participant's rights
under any previously granted and outstanding Option unless the Committee
determines that such adjustment is necessary or appropriate to prevent such
Option
2-4
from constituting "applicable employee remuneration" within the meaning of
Section 162(m) of the Code).
Whether an authorized leave of absence, or absence in military or
government service, shall constitute a termination of employment, and the
impact, if any, of any such leave of absence on Options theretofore granted
under the Plan. shall be determined by the Committee in its absolute discretion,
subject to applicable law.
A majority of the Committee shall constitute a quorum at any meeting, and
the acts of a majority of the members present, or acts unanimously approved in
writing by the entire Committee without a meeting, shall be the acts of the
Committee.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
4. Eligibility
The persons who shall be eligible to receive Options pursuant to the Plan
shall be (i) officers and salaried employees of the Company and its subsidiaries
(including employees who are also directors and prospective salaried employees
conditioned on their becoming salaried employees), (ii) members of the Board of
Directors (whether or not they also are employees of the Company), (iii) such
consultants to the Company and its subsidiaries as the Committee shall select in
its discretion, and (iv) any other key persons, as determined by the Committee
in its sole discretion, provided, however, that Incentive Stock Options only may
be granted to employees of the Company. For purposes of the preceding sentence,
an employee means an individual who is (or is expected to be) classified as an
employee of the Company for purposes of the Company's payroll. A director shall
not be considered an employee of the Company as a result of the Company's
payment of a director's fee.
5. Options
The Committee may grant Options pursuant to the Plan. Each Option shall be
evidenced by an Option Agreement in such form and including such terms as the
Committee shall from time to time approve. Options shall comply with and be
subject to the following terms and conditions:
(a) Identification of Options
Each Option granted under the Plan shall be clearly identified in the
applicable Option Agreement as either an Incentive Stock Option or as a
Non-Qualified Stock Option. In the absence of such identification, an Option
shall be deemed to be a Non-Qualified Stock Option.
2-5
(b) Exercise Price
The exercise price-per-share of any Non-Qualified Stock Option granted
under the Plan shall be such price as the Committee shall determine (which may
be equal to, less than or greater than the then Fair Market Value of a share of
Company Stock) on the date on which such Non-Qualified Stock Option is granted;
provided, that such price may not be less than the minimum price required by
law. Subject to Paragraph (d) of this Section 6, the exercise price-per-share of
any Incentive Stock Option granted under the Plan shall be not less than 100% of
the Fair Market Value of a share of Company Stock on the date on which such
Incentive Stock Option is granted (except as permitted in connection with the
assumption or issuance of Options in a transaction to which Section 424(a) of
the Code applies) and, to the extent any compensation payable in respect of an
Option is intended to qualify as performance-based compensation under Section
162(m)(4)(C) of the Code, the exercise price-per-share of such Option shall be
not less than 100% of the Fair Market Value of a share of Company Stock on the
date on which such Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable at such times and under such
conditions as determined by the Committee and set forth in the
applicable Option Agreement, including performance criteria
with respect to the Company and/or the Participant. Except as
provided in Section 7 hereof, an Option shall first be
exercisable as of the date on which it vests, and shall remain
exercisable until the expiration of ten (10) years from the
date such Option was granted; provided, however, that each
Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part. The
partial exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an Option, the Option Agreement
evidencing such Option shall be returned to the Participant
exercising such Option together with the delivery of the
certificates described in Section 6(c)(4) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary,
at such time as the Committee reasonably may require. Such
notice shall be accompanied by the Option Agreement evidencing
the Option, shall specify the number of shares of Company
Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise and shall be
signed by the Participant. The Participant may withdraw such
notice at any time prior to the close of business on the
business day immediately preceding the effective date of the
proposed exercise, in which case such Option Agreement shall
be returned to him. Payment for shares of Company Stock
purchased upon the exercise of an Option shall be made on the
effective date of such exercise either:
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(i) in cash, by certified check, bank cashier's check or wire
transfer; or
(ii) unless provided otherwise in the applicable Option Agreement,
in shares of Company Stock owned by the Participant (which, if
acquired pursuant to the exercise of a stock option, were
acquired at least six months prior to the option exercise
date) and valued at their Fair Market Value on the effective
date of such exercise, or partly in shares of Company Stock
with the balance in cash, by certified check, bank cashier's
check or wire transfer; or
(iii) unless provided otherwise in the applicable Option Agreement,
pursuant to procedures adopted by the Committee whereby the
Participant, by a properly written notice, shall direct (A) an
immediate market sale or margin loan respecting all or a part
of the shares of Company Stock to which the Participant is
entitled upon exercise pursuant to an extension of credit by
the Company to the Participant of the exercise price (B) the
delivery of the shares of Company Stock from the Company
directly to the brokerage firm, and (C) the delivery of the
exercise price from the sale or margin loan proceeds from the
brokerage firm directly to the Company.
(iv) at the discretion of the Committee and to the extent permitted
by law, by such other provision as the Committee may from time
to time prescribe.
(v) In addition, the Company may, in its sole discretion and at
the request of the Participant, (A) lend to the Participant,
with full recourse, an amount equal to such portion of the
payment for the shares of Company Stock pursuant to the Option
as the Committee may determine; or (B) guarantee a loan
obtained by the Participant from a third-party for the purpose
of tendering such payment.
Any payment in shares of Company Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in blank or accompanied by
stock powers duly executed in blank, together with any other documents and
evidences as the Secretary of the Company shall require from time to time.
(4) Certificates for shares of Company Stock purchased upon the exercise
of an Option shall be issued in the name of the Participant or his
or her beneficiary (or permitted transferee), as the case may be,
and delivered to the Participant or his or her beneficiary (or
permitted transferee), as the case may be, as soon as practicable
following the effective date on which the Option is exercised.
(d) Limitations on Grant of Incentive Stock Options
(1) To the extent that the aggregate Fair Market Value (determined as of
the time the option is granted) of the stock with respect to which
Incentive
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Stock Options granted under this Plan and all other plans of the
Company (and any plans of any "subsidiary corporation" or "parent
corporation" of the Company within the meaning of Section 424 of the
Code) are first exercisable by any employee during any calendar year
shall exceed the maximum limit (currently, $100,000), if any,
imposed from time to time under Section 422 of the Code, such
options shall be treated as Non-Qualified Stock Options. In such an
event, the determination of which Options shall remain Incentive
Stock Options and which shall be treated as Non-Qualified Stock
Options shall be based on the order in which such Options were
granted, with the excess over the first $100,000 granted deemed to
be Non-Qualified Stock Options. All other terms and provisions of
such Options that are deemed to be Non-Qualified Stock Options shall
remain unchanged. Upon the exercise of an Option that, pursuant to
this Section 6(d)(1) is treated in part as an Incentive Stock Option
and in part as a Non-Qualified Stock Option, the Company shall issue
separate stock certificates evidencing the shares of Company Stock
treated as acquired upon exercise of an Incentive Stock Option and
the shares of Company Stock treated as acquired upon exercise of a
Non-Qualified Stock Option and shall identify each such certificate
accordingly in its stock transfer records.
(2) No Incentive Stock Option may be granted to an individual if, at the
time of the proposed grant, such individual owns stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any of its "subsidiary
corporations" or "parent corporations" (within the meaning of
Section 424 of the Code), unless (i) the exercise price of such
Incentive Stock Option is at least one hundred ten percent (110%) of
the Fair Market Value of a share of Company Stock at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock
Option is not exercisable after the expiration of five years from
the date such Incentive Stock Option is granted.
(e) Grants of Reload Options
If provided in the applicable Option Agreement, an additional option (the
"Reload Option") shall be granted to any Participant who, pursuant to Section
6(c)(3)(ii), delivers shares of Company Stock in partial or full payment of the
exercise price of an Option (the "Original Option"). The Reload Option shall be
for a number of shares of Company Stock equal to the number thus delivered,
shall have an exercise price equal to the Fair Market Value of a share of
Company Stock on the date of exercise of the Original Option, and shall have an
expiration date no later than the expiration date of the Original Option. A
Reload Option only may be granted if the exercise price-per-share of the
Original Option is no less than the Fair Market Value of a share of Company
Stock on its date of grant.
(f) Effect of Termination of Employment
(1) Unless otherwise provided in an applicable Option Agreement, in the
event that the employment of a Participant with the Company shall
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terminate for any reason other than Cause, Disability or death (i)
Options granted to such Participant, to the extent that they were
vested at the time of such termination, shall remain exercisable
until the expiration of 90 days after such termination, on which
date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not vested at the time of
such termination, shall expire at the close of business on the date
of such termination; provided, however, that no Option shall be
exercisable after the expiration of its term.
(2) Unless otherwise provided in an applicable Option Agreement, in the
event that the employment of a Participant with the Company shall
terminate on account of the death or Disability of the Participant
(i) Options granted to such Participant, to the extent that they
were vested at the time of such termination, shall remain
exercisable (pursuant to Section 16 hereof) until the expiration of
one year after such termination, on which date they shall expire,
and (ii) Options granted to such Participant, to the extent that
they were not vested at the time of such termination, shall expire
at the close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration of
its term.
(3) Unless otherwise provided in an applicable Option Agreement, in the
event of the termination of a Participant's employment for Cause,
all outstanding Options granted to such Participant shall expire at
the commencement of business on the effective date of such
termination (or deemed termination in accordance with Section 2(c)).
(g) Other Option Grants.
The Committee, in its discretion, may grant Options with terms different
than those set forth herein to the extent such Options are in substitution for
and have terms equivalent to options granted by another company that was merged
into or acquired by the Company or an Affiliate or whose assets or substantially
all of whose assets were acquired by the Company or an Affiliate.
6. Pre-Vesting Exercise
(a) Pre-Vesting Exercise
The Committee, in an Option Agreement, may permit a Participant to
exercise an Option prior to the date on which it vests; provided, however, the
unvested portion of the Company Stock issuable upon exercise of such Option
shall be subject to the nontransferability, forfeiture and repayment provisions
of this Section 7 until such shares vest.
(b) Restrictions on Transferability
Until a share of Company Stock vests, the Participant may not transfer or
assign the Participant's rights to such share of Company Stock or to any cash
payment related thereto. Until a share of Company Stock so vests, no attempt to
transfer or assign such shares or the right
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to any cash payment related thereto, whether by transfer, pledge, hypothecation
or otherwise and whether voluntary or involuntary, by operation of law or
otherwise, shall vest the transferee or assignee with any interest or right in
or with respect to such share of Company Stock or such cash payment, and the
attempted transfer or assignment shall be of no force and effect.
Each such certificate that is issued pursuant to this Section 7 shall bear
the following legend, in addition to any legends or restrictions imposed
pursuant to Section 12 hereof:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the SIGA Technologies, Inc. Amended and Restated 1996
Incentive and Non-Qualified Stock Option Plan and an Agreement
entered into between the registered owner of such shares and SIGA
Technologies, Inc. A copy of the Plan and Agreement is on file in
the office of the Secretary of SIGA Technologies, Inc."
Such legend shall not be removed from the certificates evidencing such
exercised shares of Company Stock until such shares vest, at which time stock
certificates shall be issued pursuant to Section 12 hereof free of such legend.
Each such stock certificate, together with the stock powers relating to
such shares of Company Stock, shall be deposited by the Company with a custodian
designated by the Company (the "Certificate Custodian"). The Company may
designate itself as Certificate Custodian hereunder. The Company shall cause
such Certificate Custodian to issue to the Participant a receipt evidencing the
certificates that are registered in the name of the Participant and are held by
the Certificate Custodian.
(c) Dividends
Unless the Committee in its absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
Participant with respect to a share of Company Stock issued pursuant to this
Section 7, as a result of any dividend, stock split, reverse stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
otherwise, will not vest until such share of Company Stock vests, and shall be
promptly deposited with the Certificate Custodian designated pursuant to Section
7(b) hereof until such share vests, at which time such property shall be
delivered to the Participant. Any such cash dividends, prior to the date the
share vests, shall be merely an unfunded, unsecured promise of the Company to
pay a sum of money to the Participant in the future.
(d) Forfeiture and Repayment
Upon termination of a Participant's employment with the Company or an
Affiliate for any reason (including death), all unvested shares of Company Stock
exercised pursuant to any Option hereunder shall be immediately and irrevocably
forfeited. In the event of any such forfeiture, the Certificate Custodian shall
surrender to the Company as soon as practicable after the effective date of such
forfeiture all certificates for such shares issued to Participant by the
Company. As soon as practicable after such surrender, but in no event later than
30 days after
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such surrender, Participant shall be entitled to a payment by the Company in an
amount, in cash equal to the aggregate of the exercise price-per-share paid for
each exercised but unvested share of Company Stock so forfeited.
7. Right of Recapture
If at any time within one year after the date on which a Participant
exercises an Option, the Committee determines in its discretion that the Company
has been materially harmed by the Participant, whether such harm (a) results in
the Participant's termination or deemed termination of employment for Cause or
(b) results from any activity of the Participant determined by the Committee to
be in competition with any activity of the Company, or otherwise inimical,
contrary or harmful to the interests of the Company (including, but not limited
to, accepting employment with or serving as a consultant, adviser or in any
other capacity to an entity that is in competition with or acting against the
interests of the Company), then any gain realized by the Participant from such
exercise shall be paid by the Participant to the Company upon notice from the
Company. Such gain shall be determined as of the date of such exercise, without
regard to any subsequent change in the Fair Market Value of a share of Company
Stock. The Company shall have the right to offset such gain against any amounts
otherwise owed to the participant by the Company (whether as wages, vacation
pay, or pursuant to any benefit plan or other compensatory arrangement).
8. Adjustment Upon Changes in Company Stock
(a) Shares Available for Grants
Subject to any required action by the stockholders of the Company, in the
event of any change in the number of shares of Company Stock outstanding by
reason of any stock dividend or split, reverse stock split, recapitalization,
merger, consolidation, combination or exchange of shares or similar corporate
change, the maximum number of shares of Company Stock with respect to which the
Committee may grant Options under Section 3 hereof shall be appropriately
adjusted by the Committee. In the event of any change in the number of shares of
Company Stock outstanding by reason of any other event or transaction, the
Committee may, but need not, make such adjustments in the number and class of
shares of Company Stock with respect to which Options may be granted under
Section 3 hereof as the Committee may deem appropriate. Any such adjustment
pursuant to this Section 9(a) shall be made by the Committee, whose
determination shall be final, binding and conclusive.
(b) Outstanding Options -- Increase or Decrease in
Issued Shares Without Consideration
Subject to any required action by the stockholders of the Company, in the
event of any increase or decrease in the number of issued shares of Company
Stock resulting from a subdivision or consolidation of shares of Company Stock
or the payment of a stock dividend (but only on the shares of Company Stock), or
any other increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall proportionally
adjust the number of shares of Company Stock subject to each outstanding Option
and the exercise price-per-share of Company Stock of each such Option. Any such
adjustment
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pursuant to this Section 9(b) shall be made by the Committee, whose
determination shall be final, binding and conclusive.
(c) Outstanding Options -- Certain Mergers
Subject to any required action by the stockholders of the Company, in the
event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Company Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Company
Stock subject to such Option would have received in such merger or
consolidation.
(d) Outstanding Options -- Certain Other Transactions
In the event of (1) a dissolution or liquidation of the Company, (2) a
sale of all or substantially all of the Company's assets, (3) a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or (4) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Company Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each Option outstanding immediately prior to such event
(whether or not then vested), and, in full consideration of
such cancellation, pay to the Participant to whom such Option
was granted an amount in cash, for each share of Company Stock
subject to such Option equal to the excess of (A) the value,
as determined by the Committee in its absolute discretion, of
the property (including cash) received by the holder of a
share of Company Stock as a result of such event over (B) the
exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then vested)
for an option on some or all of the property which a holder of
the number of shares of Company Stock subject to such Option
would have received in such transaction or on shares of the
acquiror or surviving corporation and, incident thereto, make
an equitable adjustment as determined by the Committee in its
absolute discretion in the exercise price of the option, or
the number of shares or amount of property subject to the
option or, if appropriate, provide for a cash payment to the
Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
(e) Outstanding Options -- Other Changes
In the event of any change in the capitalization of the Company or a
corporate change other than those specifically referred to in Sections 9(b), (c)
or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options outstanding on
the date on which such change occurs and in the per-share exercise price of each
such Option as the Committee may consider appropriate to prevent dilution or
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enlargement of rights. In addition, if and to the extent the Committee
determines it is appropriate, the Committee may elect to cancel each Option
outstanding immediately prior to such event (whether or not then vested), and,
in full consideration of such cancellation, pay to the Participant to whom such
Option was granted an amount in cash, for each share of Company Stock subject to
such Option, equal to the excess of (A) the Fair Market Value of Company Stock
on the date of such cancellation over (B) the exercise price of such Option.
(f) Effect of Loss of Affiliate Status
If an entity ceases to be an Affiliate because the Company sells its
interest in such entity to another party or parties, such event shall constitute
a termination of employment from the Company and its Affiliates by Participants
employed by such entity as of the date it ceases to be an Affiliate. The
Committee may, but need not, adjust the provisions of the Plan related to the
expiration of any Options not yet vested at termination of employment, as it
considers appropriate in connection with the specific event resulting in loss of
Affiliate status.
(g) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend, any increase or decrease in the number of
shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Company Stock subject to an Option or the exercise price of
any Option.
9. Rights as a Stockholder
No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Option granted pursuant to
this Plan until the date that the Participant becomes the registered owner of
such shares. Except as otherwise expressly provided in Section 9 hereof, no
adjustment to any Option shall be made for dividends or other rights for which
the record date occurs prior to the date such stock certificate is issued.
10. No Special Employment Rights; No Right to Option
Nothing contained in the Plan or any Option Agreement shall confer upon
any Participant any right with respect to the continuation of his or her
employment by or other relationship with the Company or interfere in any way
with the right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Option.
No person shall have any claim or right to receive an Option hereunder.
The Committee's granting of an Option to a Participant at any time shall neither
require the Committee to grant an Option to such Participant or any other
Participant or other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or other person.
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11. Securities Matters
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933, as amended from time to
time, of any interests in the Plan or any shares of Company Stock to
be issued hereunder or to effect similar compliance under any state
laws. Notwithstanding anything herein to the contrary, the Company
shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan
unless and until the Company is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Company
Stock are traded. The Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Company
Stock pursuant to the terms hereof, that the recipient of such
shares make such covenants, agreements and representations, and that
such certificates bear such legends, as the Committee, in its sole
discretion, deems necessary or desirable. The Company shall not
permit any shares of Company Stock to be issued pursuant to the Plan
unless such shares of Company Stock are fully paid and
non-assessable, within the meaning of Section 152 of the Delaware
General Corporation Law, except as otherwise permitted by Section
153(c) of the Delaware General Corporation Law.
(b) The exercise of any Option granted hereunder shall be effective only
at such time as counsel to the Company shall have determined that
the issuance and delivery of shares of Company Stock pursuant to
such exercise is in compliance with all applicable laws, regulations
of governmental authority and the requirements of any securities
exchange on which shares of Company Stock are traded. The Committee
may, in its sole discretion, defer the effectiveness of any exercise
of an Option granted hereunder in order to allow the issuance of
shares of Company Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The
Committee shall inform the Participant in writing of its decision to
defer the effectiveness of the exercise of an Option granted
hereunder. During the period that the effectiveness of the exercise
of an Option has been deferred, the Participant may, by written
notice, withdraw such exercise and obtain a refund of any amount
paid with respect thereto.
12. Withholding Taxes
(a) Cash Remittance
Whenever shares of Company Stock are to be issued upon the exercise of an
Option, the Company shall have the right to require the Participant to remit to
the Company, in cash, an amount sufficient to satisfy the federal, state and
local withholding tax requirements, if any, attributable to such exercise prior
to the delivery of any certificate or certificates for such shares.
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(b) Stock Remittance
At the election of the Participant, subject to the approval of the
Committee, when shares of Company Stock are to be issued upon the exercise of an
Option, in lieu of the remittance required by Section 13(a) hereof, the
Participant may tender to the Company a number of shares of Company Stock, the
Fair Market Value of which at the tender date the Committee determines to be
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise and not greater than the Participant's
estimated total federal, state and local tax obligations associated with such
exercise.
(c) Stock Withholding
The Company shall have the right, when shares of Company Stock are to be
issued upon the exercise of an Option in lieu of requiring the remittance
required by Section 13(a) hereof, to withhold a number of such shares, the Fair
Market Value of which at the exercise date the Committee determines to be
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise and is not greater than the Participant's
estimated total federal, state and local tax obligations associated with such
exercise.
13. Amendment or Termination of the Plan
The Board of Directors may, at any time, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however, that if and
to the extent required under Section 422 of the Code (if and to the extent that
the Board of Directors deems it appropriate to comply with Section 422) and if
and to the extent required to treat some or all of the Options as
"performance-based compensation" within the meaning of Section 162(m) of the
Code (if and to the extent that the Board of Directors deems it appropriate to
meet such requirements), no amendment shall be effective without the approval of
the stockholders of the Company, that (i) except as provided in Section 9
hereof, increases the number of shares of Company Stock with respect to which
Options may be issued under the Plan, (ii) modifies the class of individuals
eligible to participate in the Plan or (iii) materially increases the benefits
accruing to individuals pursuant to the Plan. Nothing herein shall restrict the
Committee's ability to exercise its discretionary authority hereunder pursuant
to Section 4 hereof, which discretion may be exercised without amendment to the
Plan. No action under this Section 14 may, without the consent of a Participant,
reduce the Participant's rights under any previously granted and outstanding
Option except to the extent that the Board of Directors determines that such
amendment is necessary or appropriate to prevent such Options from constituting
"applicable employee remuneration" within the meaning of Section 162(m) of the
Code.
14. No Obligation to Exercise
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
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15. Transferability of Options
(a) Except as otherwise provided in this Section 16, during the lifetime
of a Participant each Option granted to a Participant shall be
exercisable only by the Participant and no Option shall be
assignable or transferable otherwise than by will or by the laws of
descent and distribution.
(b) Upon the death of a Participant, outstanding Options granted to such
Participant that have not been transferred pursuant to Section 16(a)
hereof may be exercised only by the executors or administrators of
the Participant's estate or by any person or persons who shall have
acquired such right to exercise by will or by the laws of descent
and distribution. No transfer by will or the laws of descent and
distribution of any Option, or the right to exercise any Option,
shall be effective to bind the Company unless the Committee shall
have been furnished with written notice thereof and with a copy of
the will and/or such evidence as the Committee may deem necessary to
establish the validity of the transfer.
(c) Any permissible transfer of an Option only shall be effective after
the Committee shall have been furnished with an agreement by the
transferee to comply with all the terms and conditions of the Option
that are or would have been applicable to the Participant and to be
bound by the acknowledgments made by the Participant in connection
with the grant of the Option.
(d) In the event that at any time any doubt exists as to the right of
any person to exercise or receive a payment under an Option, the
Committee shall be entitled, in its discretion, to delay such
exercise or payment until it is satisfied that such right has been
confirmed (which may, but need not be, by order of a court of
competent jurisdiction), or to permit such exercise or make payment
only upon receipt of a bond or similar indemnification (in such
amount and in such form as is satisfactory to the Committee).
16. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Option will be used for general
corporate purposes.
17. Limitations Imposed by Section 162(m)
Notwithstanding any other provision hereunder, if and to the extent that
the Committee determines the Company's federal tax deduction in respect of an
Option may be limited as a result of Section 162(m) of the Code, the Committee
may delay the payment in respect of such Option until a date that is within 30
days after the date that compensation paid to the Participant no longer is
subject to the deduction limitation under Section 162(m) of the Code. In the
event that a Participant exercises an Option at a time when the Participant is a
"covered employee," and the Committee determines to delay the payment in respect
of any such Option, the Committee shall credit cash or, in the case of an amount
payable in Company Stock, the Fair Market Value of the Company Stock, payable to
the Participant to a book account. The Participant shall have no rights in
respect of such book account and the amount credited thereto shall not be
transferable by the Participant other than by will or laws of descent and
distribution.
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The Committee may credit additional amounts to such book account as it may
determine in its sole discretion. Any book account created hereunder shall
represent only an unfunded unsecured promise by the Company to pay the amount
credited thereto to the Participant in the future.
18. Mitigation of Excise Tax
If any payment or right accruing to a Participant under this Plan (without
the application of this Section), either alone or together with other payments
or rights accruing to the Participant from the Company or an affiliate ("Total
Payments") would constitute a "parachute payment" (as defined in Section 280G of
the Code and regulations thereunder), the Committee may in each particular
instance determine to (i) reduce such payment or right to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under the Plan being subject to an excise tax under Section 4999 of the
Code or being disallowed as a deduction under Section 280G of the Code, or (ii)
take such other actions, or make such other arrangements or payments with
respect to any such payment or right as the Committee may determine in the
circumstances. Any such determination shall be made by the Committee in the
exercise of its sole discretion, and such determination shall be conclusive and
binding on the Participant. The Participant shall cooperate as may be requested
by the Committee in connection with the Committee's determination, including
providing the Committee with such information concerning such Participant as the
Committee may deem relevant to its determination.
19. Participant Obligation to Notify
In the event that the Participant (a) disposes of any shares of Company
Stock acquired upon the exercise of an Incentive Stock Option (i) prior to the
expiration of two years after the date such Incentive Stock Option was granted
or prior to one year after the date the shares were acquired or (ii) under any
other circumstances described in Section 422(a) of the Code or any successor
provision, or (b) makes an election under Section 83(b) of the Code or any
successor provision, with respect to Company Stock acquired pursuant to Section
7 hereof, the Participant shall notify the Company of such disposition or
election within 10 days thereof.
20. Information to Participants
To the extent required by applicable law, the Company shall provide to
each Participant, during the period for which such Participant has one or more
Options outstanding, copies of all annual reports and other information which
are provided to all stockholders of the Company. Except as otherwise noted in
the foregoing sentence, the Company shall have no obligation or duty to
affirmatively disclose to any Participant, and no Participant shall have any
right to be advised of, any material information regarding the Company or any
Affiliate at any time prior to, upon or otherwise in connection with, the
exercise of an Option.
21. Funding
All benefits payable under this Plan shall be paid directly by the
Company. The Company shall not be required to fund or otherwise segregate assets
to be used for payment of benefits under this Plan.
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22. Failure to Comply
In addition to the remedies of the Company elsewhere provided for herein,
a failure by a Participant (or beneficiary or permitted transferee) to comply
with any of the terms and conditions of the Plan or the agreement executed by
such Participant (or beneficiary or permitted transferee) evidencing an Option,
unless such failure is remedied by such Participant (or beneficiary or permitted
transferee) within 10 days after having been notified of such failure by the
Committee, shall be grounds for the cancellation and forfeiture of such Option,
in whole or in part, as the Committee, in its absolute discretion, may
determine.
23. Effective Date of Plan
The Plan was initially adopted by the Board of Directors in 1996 and was
approved by shareholders of the Company. The Plan was subsequently amended in
1998, 1999 and 2000 to increase the number of shares with respect to which
Options may be granted under the Plan and each of the amendments was approved by
the shareholders of the Company. An amendment and restatement to the Plan was
approved by the Board of Directors, on May 3, 2001, subject to approval by the
stockholders of the Company, and the Plan as further amended and restated was
approved by the Board of Directors, as of June 29, 2001, subject to approval by
the stockholders of the Company. Options that were not previously authorized by
the stockholders of the Company under the provisions of the Plan as in effect
prior to May 3, 2001 that have not yet been approved by the stockholders may be
granted under the Plan at any time prior to the receipt of such stockholder
approval; provided, however, that each such grant shall be subject to such
approval. Without limitation on the foregoing, no Option may be exercised prior
to the receipt of such approval. If the amended and restated Plan is not so
approved on or before May 3, 2002, then the May 3, 2001 and the June 29, 2001
amendments and restatements of the Plan and all Options granted pursuant to such
amendments and restatements shall forthwith automatically terminate and be of no
force or effect.
24. Term of the Plan
The right to grant Options under the Plan will terminate on January 1,
2006 with respect to the 2,500,000 shares of Company Stock authorized under the
provisions of the Plan in effect prior to this amendment and restatement, and on
May 3, 2011 with respect to the additional 5,000,000 shares of Company Stock
authorized pursuant to the May 3, 2001 amendment and restatement.
25. Applicable Law
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of law.
26. Severability
If any provision of the Plan shall hereafter be held to be invalid,
unenforceable or illegal in whole or in part, in any jurisdiction under any
circumstances for any reason, (a) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal while preserving the intent expressed by the Plan or (b) if such provision
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cannot be so reformed, such provision shall be severed from the Plan and, in the
discretion of the Committee, an equitable adjustment shall be made to the Plan
(including, without limitation, addition of necessary further provisions to the
Plan) so as to give effect to the intent as so expressed and the benefits so
provided. Such holding shall not affect or impair the validity, enforceability
or legality of such provision in any other jurisdiction or under any other
circumstances. Neither such holding nor such reformation or severance shall
affect or impair the legality, validity or enforceability of any other provision
of the Plan.
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