SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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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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(4) Date Filed:
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SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, New York 10170
(212) 672-9100
May 2, 2005
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
SIGA Technologies, Inc. which will be held at the offices of Kramer Levin
Naftalis & Frankel LLP, 1177 Avenue of the Americas, 29 th Floor, New York, New
York 10036 at 10:30 a.m. (local time) on Thursday, May 26, 2005, and at any
adjournment or postponement thereof. On the following pages you will find the
formal notice of annual meeting and proxy statement.
To assure that you are represented at the Annual Meeting, whether or not
you plan to attend the meeting in person, please read carefully the accompanying
proxy statement, which describes the matters to be voted upon, and please
complete, 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 408
New York, New York 10170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 2005
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 Thursday, May 26, 2005, at 10:30 a.m. (local time), at the
offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas,
29th Floor, New York, New York 10036, and at any adjournment.
At the Annual Meeting, SIGA's stockholders will be voting on proposals to
do the following:
1. To elect ten directors to the Board of Directors of SIGA;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm of SIGA for the fiscal
year ending December 31, 2005;
3. To approve an amendment to the SIGA amended and restated 1996
Incentive and Non-Qualified Stock Option Plan (the "Plan") to
increase the maximum number of shares of common stock available for
issuance under the plan from 10,000,000 to 11,000,000; 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 April 1, 2005 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 related to the Annual Meeting, during the ten
days prior to the Annual Meeting, at SIGA's office, 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
May 2, 2005
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, New York 10170
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 2005
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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 of Directors")
for use in voting at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of
the Americas, 29th Floor, New York, New York 10036, on Thursday, May 26, 2005,
at 10:30 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 May 2, 2005.
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 of Directors has fixed the close of business on April 1, 2005 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 the Record Date will be entitled to vote at
the Annual Meeting or any and all adjournments or postponements thereof. As of
the Record Date, SIGA had issued and outstanding 24,500,648 shares of common
stock, par value $.0001 per share ("Common Stock"), and 68,038 shares of Series
A convertible preferred stock, par value $.0001 per share ("Series A Preferred
Stock"). The Common Stock and the Series A Preferred Stock together comprise all
of SIGA's issued and outstanding voting stock.
Voting at the Annual Meeting
Each share of Common Stock and each share of Series A Preferred Stock
outstanding on the Record Date will be entitled to one vote on each matter
submitted to a vote of the stockholders. 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.
For the election of directors, a plurality of the votes cast is required.
Abstentions and broker "non-votes" are not considered for the purpose of the
election of directors.
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For the ratification of the appointment of PricewaterhouseCoopers LLP as
the independent registered public accounting firm of SIGA for the fiscal year
ending December 31, 2005, the affirmative vote of a majority of the total votes
cast on such proposal in person or by proxy at the Annual Meeting is required.
Abstentions and broker "non-votes" for such proposal are not considered to have
been voted on the proposal.
For the approval of an amendment to the SIGA Plan to increase the maximum
number of shares of Common Stock available for issuance under the Plan from
10,000,000 shares to 11,000,000 shares, the affirmative vote of a majority of
the total votes cast on such proposal in person or by proxy at the Annual
Meeting is required. Abstentions and broker "non-votes" for such proposal are
not considered to have been voted on the proposal.
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;
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 registered public accounting firm of SIGA for the fiscal year ending
December 31, 2005; (iii) FOR the approval of an amendment to the SIGA Plan to
increase the maximum number of shares of Common Stock available for issuance
under the Plan from 10,000,000 shares to 11,000,000 shares 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 that any
other business will be presented for action at the Annual Meeting.
Solicitation
SIGA will pay the costs relating to this proxy statement, the proxy card
and the Annual Meeting. SIGA 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 by telephone, facsimile or other means or in
person. They will not receive any additional payments for the solicitation.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Ten 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. Unless otherwise instructed, the proxy holders will
vote the proxies received by them FOR the election of the ten persons named in
the table below as directors of SIGA. 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 RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION (ITEM 1 OF THE ENCLOSED PROXY CARD) OF MR. DRAPKIN, MR. ANTAL, MR.
CONSTANCE, DR. KASTEN, DR. MJALLI, DR. OZ, DR. ROSE, MR. SAVAS, MS. SLOTKIN AND
DR. WEINER AS DIRECTORS.
Director Nominee Information
The following table sets forth biographical information of each director
nominee, including their ages, 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* 57 Chairman of the Board
James J. Antal* 54 Director
Thomas E. Constance* 68 Director
Bernard L. Kasten Jr. M.D. 58 Director, Chief Executive Officer
Adnan M. Mjalli, Ph.D. 41 Director
Mehmet C. Oz, M.D. * 43 Director
Eric A. Rose, M.D. * 53 Director
Paul G. Savas* 42 Director
Judy S. Slotkin* 52 Director
Michael A. Weiner, M.D. * 59 Director
* Determined by the Board of Directors to be independent pursuant to Rule
4200 of the NASD Marketplace Rules.
Donald G. Drapkin has served as Chairman of the Board and a director of
SIGA since April 19, 2001. Mr. Drapkin has been Vice Chairman and a director 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 (or member of the board of managers, as applicable)
of the following corporations which file reports pursuant to the Securities
Exchange Act of 1934: Allied Security Holdings, LLC, Anthracite Capital, Inc.,
Nephros, Inc, Playboy Enterprises, Inc., Revlon Consumer Products Corporation
and Revlon Inc. Mr. Drapkin is also a director of PharmaCore, Inc. and TransTech
Pharma, Inc.
James J. Antal has served as a director of SIGA since November 2004. Mr.
Antal has been an active consultant and founding investor in several Southern
California based emerging companies, including serving as Chief Financial
Advisor to Black Mountain Gold Coffee Co., since his retirement in 2002. Mr.
Antal was the Chief Financial Officer and Chief Investment Officer from 1996 to
2002 for Experian, a $1.6 billion global information services subsidiary of
UK-based GUS plc. Prior to the GUS acquisition of Experian (the former TRW Inc.
Information Systems and Services businesses), Mr. Antal held various finance
positions with TRW from 1978 to 1996, including Senior VP of Finance for TRW
Information Systems and Services and TRW Inc. Corporate Director of Financial
Reporting and Accounting. He earned his undergraduate degree in accounting from
The Ohio State
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University in 1973, and became a certified public accountant (Ohio) in 1974. He
engaged in active practice as a CPA with Ernst & Ernst until 1978. Mr. Antal has
served as a director of First American Real Estate Solutions, an Experian joint
venture with First American Financial Corp.
Thomas E. Constance has served as a director of SIGA since April 19, 2001.
Mr. Constance is Chairman and, since 1994, a partner of Kramer Levin Naftalis &
Frankel LLP, a law firm in New York City. Mr. Constance was a director of Kroll
Inc., which ceased to file reports pursuant to the Securities Exchange Act of
1934 in August 2004. 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
Directors of Barington Capital, L.P.
Bernard L. Kasten Jr., M.D. has been a director of SIGA since May 23, 2003
and became Chief Executive Officer in the third quarter of 2004. Prior to
becoming Chief Executive Officer of SIGA and since February 2002, Dr. Kasten had
been Vice President, Medical Affairs of MedPlus Inc., a healthcare information
technology company and a wholly-owned subsidiary of Quest Diagnostics, Inc., a
diagnostic testing, information and services company. Since 1975, Dr. Kasten has
been a Diplomat of the American Board of Pathology with a sub-specialty
certification in 1976 in Medical Microbiology. Dr. Kasten's staff appointments
have included service in the Division of Laboratory Medicine at The Cleveland
Clinic; Associate Director of Pathology and Laboratory Services at the Bethesda
Hospital Systems in Cincinnati, Ohio and Chief Laboratory Officer at Quest
Diagnostics Incorporated. Dr. Kasten was a founder of Plexus Vaccine Inc., a
vaccine company of which SIGA acquired substantially all of the assets in May
2003. Dr. Kasten is an author of "Infectious Disease Handbook" 5th Edition,
2003, Lexi-Comp Inc.
Adnan M. Mjalli, Ph.D. has served as a director of SIGA since January
2004. Dr. Mjalli founded TransTech Pharma, Inc., a privately held drug discovery
company in High Point, North Carolina, in 1999 and has since served as its
President and Chief Executive Officer. He also serves as Chairman of the Board
of PharmaCore, Inc. where he previously served as President and CEO from
December of 1998 to November 2000. Dr. Mjalli obtained his Ph.D. in medicinal
chemistry in 1989 from the University of Exeter, UK. His postdoctoral work was
carried out at the University of Rochester. Prior to founding TransTech Pharma,
he held various positions of increasing responsibility in research and senior
management at several pharmaceutical and biotechnology companies, including
Merck & Co., Inc.
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 a Professor of Surgery and Vice Chairman for Cardiovascular
Services of the Department of Surgery there since July 2001. Dr. Oz directs the
following programs at New York University Presbyterian Hospital, Columbia
University: the Cardiovascular Institute, 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./M.B.A. degree 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 a director of PharmaCore, Inc., TransTech Pharma, Inc. and
a former director of Nexell Therapeutics Inc. (f/k/a VimRx). Dr. Rose is a
graduate of both Columbia College and Columbia University College of Physicians
& Surgeons.
Paul G. Savas has served as a director of SIGA since January 2004. Mr.
Savas has been a Senior Vice President of Finance at MacAndrews & Forbes
Holdings, Inc. and its affiliates since October 2002, and was Vice President of
MacAndrews & Forbes and its affiliates from 1998 until 2002. He was Director of
Corporate Finance at MacAndrews & Forbes from 1994 until 1998. From December
1988 until April 1994, Mr. Savas served in the Finance Department of NYNEX
Corporation holding the positions of Associate Director of Corporate Finance and
Staff Director of External Reporting.
Judy S. Slotkin has served as a director of SIGA since November 2004. Ms.
Slotkin was Co-Head of the Finance Committee of the Modern Africa Fund, a $120
million private equity fund, from 1998 until 2003. Ms.
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Slotkin was formerly Department Head in the Corporate Finance Division of
Citigroup (Citibank Investment Bank) where she was responsible for various
businesses and the first head of the group's Capital Markets Desk. Prior to
that, Ms. Slotkin held various positions in the Citigroup (Citibank) commercial
bank. Ms. Slotkin is also a founding member of the Food Allergy Initiative, an
organization funding research, legislative initiatives and education regarding
food allergies. Ms. Slotkin received her undergraduate degree in accounting from
Fairleigh Dickinson University in 1976 and, in 1980, she received her MBA in
Finance from Fordham University.
Michael A. Weiner, M.D. has served as a director of SIGA since April 19,
2001. Dr. Weiner is the Hettinger 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 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 was a post graduate student at New York University and Johns
Hopkins University.
Meetings of the Board of Directors
The Board of Directors of SIGA held six meetings during 2004. During 2004,
no director attended fewer than 75% of the aggregate of the meetings of the
Board of Directors and committees thereof, if any, upon which such director
served during the period for which he has been a director or committee member.
In addition, two actions were taken during 2004 by unanimous written consent of
the directors.
Those members of the Board of Directors who are independent as defined by
Rule 4200 of the NASD Marketplace Rules (the "Independent Directors") are also
required, pursuant to Rule 4350(c)(2) of the NASD Marketplace Rules, to
regularly convene executive sessions where only such Independent Directors are
present. Such meetings may be in conjunction with regularly-scheduled meetings
of the Board of Directors. Each member of the Board of Directors is also
expected to attend the annual meeting of stockholders of SIGA. Seven members of
the Board of Directors attended SIGA's 2004 annual meeting of stockholders.
Committees of the Board of Directors
The Board of Directors currently has, and appoints the members of,
standing Audit, Compensation and Nominating and Corporate Governance Committees.
Each member of the Audit, Compensation and Nominating and Corporate Governance
Committees is an Independent Director. Each of these committees has a written
charter approved by the Board of the Directors in March 2004. A copy of each
charter is posted on SIGA's website at www.siga.com under the "Corporate
Governance" section.
Audit Committee. The Audit Committee, which currently consists of
directors Paul G. Savas, Judy S. Slotkin and James J. Antal, held five meetings
during 2004. The Board of Directors has determined that each of the members of
the Audit Committee is "independent" under the applicable laws, rules and
regulations. The Company has determined that Mr. Savas is an "Audit Committee
financial expert" within the meaning of Regulation S-K promulgated by the
Securities and Exchange Commission (the "SEC"). The purpose of the Audit
Committee is to assist the Board of Directors in the oversight of the integrity
of the financial statements of SIGA, SIGA's compliance with legal and regulatory
matters, the independent registered public accounting firm's qualifications and
independence, and the performance of SIGA's independent registered public
accounting firm. The primary responsibilities of the Audit Committee are set
forth in its charter, and include various matters with respect to the oversight
of SIGA's accounting and financial reporting process and audits of the financial
statements of SIGA on behalf of the Board of Directors. The Audit Committee also
selects the independent registered public accounting firm to conduct the annual
audit of the financial statements of SIGA; reviews the proposed scope of such
audit; reviews accounting and financial controls of SIGA with the independent
registered public accounting firm and our financial accounting staff; and
reviews and approves transactions between us and our directors, officers, and
their affiliates. A copy of the Audit Committee charter is available on SIGA's
website (as described above). Also see "Audit Committee Report."
Compensation Committee. The Compensation Committee, which currently
consists of directors Donald G. Drapkin, Paul G. Savas and Mehmet C. Oz, held
three meetings during 2004. In addition, Michael A. Weiner, M.D. served on the
Compensation Committee during 2004. The Board of Directors has determined that
each of the
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members of the Compensation Committee is "independent" within the meaning of the
NASDAQ listing standards. The Compensation Committee functions include reviewing
and approving the compensation and benefits for SIGA's executive officers,
administering SIGA's stock plans and making recommendations to the Board of
Directors regarding these matters. A copy of the Compensation Committee charter
is available on SIGA's website. Also see "Compensation Committee Report."
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee (the "Nominating Committee"), which currently
consists of directors Judy S. Slotkin, James J. Antal and Michael A. Weiner, was
formed in March 2004 and held one meeting in 2004. The Board of Directors has
determined that each of the members of the Nominating Committee is "independent"
within the meaning of the NASDAQ listing standards. The Nominating Committee is
responsible for searching for and recommending to the Board of Directors
potential nominees for director positions, making recommendations to the Board
of Directors regarding the size and composition of the Board of Directors and
its committees, monitoring the Board of Director's effectiveness and developing
and implementing the SIGA's corporate governance procedures and policies. A copy
of the Nominating and Corporate Governance Committee charter is available on
SIGA's website.
In selecting candidates for the Board of Directors, the Nominating
Committee begins by determining whether the incumbent directors whose terms
expire at the annual meeting of stockholders desire and are qualified to
continue their service on the Board of Directors. SIGA is of the view that the
continuing service of qualified incumbents promotes stability and continuity in
the board room, giving SIGA the benefit of the familiarity and insight into the
SIGA's affairs that its directors have accumulated during their tenure, while
contributing to the Board of Director's ability to work as a collective body.
Accordingly, it is the policy of the Nominating Committee, absent special
circumstances, to nominate qualified incumbent directors who continue to satisfy
the Nominating Committee's criteria for membership on the Board of Directors,
whom the Nominating Committee believes will continue to make important
contributions to the Board of Directors and who consent to stand for re-election
and, if re-elected, to continue their service on the Board of Directors. If
there are positions on the Board of Directors for which the Nominating Committee
will not be re-nominating an incumbent director, or if there is a vacancy on the
Board of Directors, the Nominating Committee will solicit recommendations for
nominees from persons whom the Nominating Committee believes are likely to be
familiar with qualified candidates, including members of the Board of Directors
and management of SIGA. The Nominating Committee may also engage a professional
search firm to assist in the identification of qualified candidates, but did not
do so in 2004. As to each recommended candidate that the Nominating Committee
believes merits serious consideration, the Nominating Committee will collect as
much information, including without limitation, soliciting views from other
directors and SIGA's management and having one or more Nominating Committee
members interview each such candidate, regarding each candidate as it deems
necessary or appropriate in order to make an informed decision with respect to
such candidate. Based on all available information and relevant considerations,
the Nominating Committee will select, for each directorship to be filled, a
candidate who, in the view of the Nominating Committee, is most suited for
membership on the Board of Directors. In making its selection, SIGA will
evaluate candidates proposed by stockholders under criteria similar to the
evaluation of other candidates, except that the Nominating Committee may
consider, as one of the factors in its evaluation of stockholder recommended
nominees, the size and duration of the interest of the recommending stockholder
or stockholder group in the equity of SIGA. This consideration may also include
how long the recommending stockholder intends to continue holding its equity
interest in SIGA.
The Nominating Committee has adopted a policy with regard to the minimum
qualifications that must be met by a Nomination Committee-recommended nominee
for a position on SIGA's Board of Directors, which policy is described in this
paragraph. The Nominating Committee generally requires that all candidates for
the Board of Directors be of high personal integrity and ethical character. The
Nominating Committee requires that candidates not have any interests that would,
in the view of the Nominating Committee, materially impair his or her ability to
(i) exercise independent judgment or (ii) otherwise discharge the fiduciary
duties owed as a director to SIGA and its stockholders. In addition, candidates
must be able to represent fairly and equally all stockholders of SIGA without
favoring or advancing any particular stockholder or other constituency of SIGA.
Candidates must have demonstrated achievement in one or more fields of business,
professional, governmental, communal, scientific or educational endeavor.
Candidates are expected to have sound judgment and a general appreciation
regarding major issues facing public companies of a size and operational scope
similar to SIGA, including contemporary governance concerns, regulatory
obligations of a public issuer, strategic business planning, competition in a
global economy, and basic concepts of corporate finance. Candidates must also
have, and be prepared to devote, adequate time to the
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Board and its committees. It is expected that, taking into account their other
business and professional commitments, including their service on the boards of
other companies, each candidate will be available to attend meetings of the
Board and any committees on which the candidate will serve, as well as SIGA's
annual meeting of stockholders. SIGA also requires that at least a majority of
the directors serving at any time on the Board are independent, as defined under
the rules of the NASDAQ stock market and that at least three of the directors
satisfy the financial literacy requirements required for service on the Audit
Committee under the rules of the NASDAQ stock market.
The Nominating Committee has adopted a policy with regard to the
consideration of director candidates recommended by stockholders, the material
elements of which policy are described in this paragraph. The Nominating
Committee will consider recommendations for nomination for director submitted by
holders of SIGA's shares entitled to vote generally in the election of
directors. The Nominating Committee will give consideration to these
recommendations for positions on the Board where the Nominating Committee has
not determined to re-nominate a qualified incumbent director. While the
Nominating Committee has not established a minimum number of shares that a
stockholder must own in order to present a nominating recommendation for
consideration, or a minimum length of time during which the stockholder must own
its shares, the Nominating Committee may take into account the size and duration
of a recommending stockholder's ownership interest in SIGA. The Nominating
Committee may also consider whether the stockholder making the nominating
recommendation intends to maintain an ownership interest in SIGA of
substantially the same size as at its interest at the time of making the
recommendation. The Nominating Committee may refuse to consider recommendations
of nominees who do not satisfy the minimum qualifications prescribed by the
Nominating Committee for board candidates.
The Nominating Committee has adopted procedures to be followed by
stockholders in submitting recommendations of candidates for director. The
procedures are posted on SIGA's website at www.siga.com under the "Corporate
Governance" section, and described in this paragraph. A stockholder (or group of
stockholders) wishing to submit a nominating recommendation for an annual
meeting of stockholders should try to ensure that it is received by SIGA, as
provided herein, not later than 120 calendar days prior to the first anniversary
of the date of the proxy statement for the prior annual meeting of stockholders.
All stockholder nominating recommendations should be in writing, addressed to
"the Nominating and Corporate Governance Committee" care of SIGA's Chief
Financial Officer at SIGA's principal headquarters, 420 Lexington Avenue, Suite
601, New York, New York 10170. Submissions should be made by mail, courier or
personal delivery. A nominating recommendation should be accompanied by the
following information concerning each recommending stockholder:
o The name and address, including telephone number, of the recommending
stockholder;
o The number and class of SIGA's shares owned (beneficially or of record) by
the recommending stockholder and the time period for which such shares have
been held;
o A statement from the stockholder as to whether the stockholder has a good
faith intention to continue to hold the reported shares through the date of
SIGA's next annual meeting of stockholders;
o Sufficient information about the proposed nominee for the Nominating
Committee to make an informed decision regarding the qualifications of the
proposed nominee;
o Any relationship between the proposed nominee and the recommending
stockholder; and
o Such other information as the Nominating Committee may reasonably request.
The nominating recommendation must be accompanied by the consent of the proposed
nominee to be interviewed by the Nominating Committee, if the Nominating
Committee chooses to do so in its discretion (and the recommending stockholder
must furnish the nominee's contact information for this purpose), and, if
nominated and elected, to serve as a director of SIGA.
7
Compensation Committee Interlocks and Insider Participation
None.
Code of Ethics
SIGA has adopted a code of ethics and business conduct that applies to its
officers, directors and employees, including without limitation, our Chief
Executive Officer, Chief Financial Officer and Chief Scientific Officer. The
Code of Ethics and Business Conduct is available on SIGA's website at
www.siga.com under the "Corporate Governance" section.
Stockholder Communications with the Board of Directors
SIGA stockholders may send communications to the Board, any committee of
the Board or an individual director. The process for so communicating is posted
on SIGA's website at www.siga.com under the "Corporate Governance" section.
8
REPORT OF THE AUDIT COMMITTEE
The members of the Audit Committee have been appointed by the Board of
Directors. During the 2004 fiscal year, the Audit Committee consisted solely of
independent directors, as defined in Rule 4200(a)(15) of the NASD Marketplace
Rules. The Audit Committee operates under a written charter that was amended and
restated by the Board of Directors in March 2004 in order to assure continued
compliance by SIGA with SEC and NASDAQ rules enacted in response to requirements
of the Sarbanes-Oxley Act.
The Audit Committee assists the Board of Directors in monitoring the
integrity of SIGA's financial statements, the independent registered public
accounting firm's qualifications and independence, the performance of the
independent registered public accounting firm, and the compliance by SIGA with
legal and regulatory requirements. Management is responsible for SIGA's internal
controls and the financial reporting process. The independent registered public
accounting firm is responsible for performing an independent audit of SIGA's
financial statements in accordance with generally accepted auditing standards
and for issuing a report on those financial statements. The Audit Committee
monitors and oversees these processes.
In this context, the Audit Committee has reviewed and discussed the
audited financial statements for the year ended December 31, 2004 with
management and with PricewaterhouseCoopers LLP, SIGA's independent registered
public accounting firm. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees), which
includes, among other items, matters related to the conduct of the audit of
SIGA's annual financial statements.
The Audit Committee has also received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with PricewaterhouseCoopers LLP the issue of their independence from
SIGA and management. In addition, the Audit Committee has considered whether the
provision of non-audit services by the independent registered public accounting
firm in 2004 is compatible with maintaining the auditors' independence and has
concluded that it is.
Based on its review of the audited financial statements and the various
discussions noted above, the 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 the year ended December 31, 2004. The Audit Committee
has also recommended, subject to stockholder ratification, the selection of
SIGA's independent registered public accounting firm for the year ending
December 31, 2005.
The members of the Audit Committee are Paul G. Savas, Judy S. Slotkin and
James J. Antal, none of whom is or, during the fiscal year 2004, was, an
employee of SIGA.
Respectfully submitted by the Audit Committee,
Paul G. Savas, Chairman
James J. Antal
Judy S. Slotkin
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the year ended December 31, 2004, the Compensation Committee was
comprised of Donald G. Drapkin, Paul G. Savas and Mehmet C. Oz. In addition,
Michael A. Weiner, M.D. served on the Compensation Committee during 2004. The
Compensation Committee's duties include determination of the Company's
compensation and benefit policies and practices for executive officers and key
managerial employees. In accordance with rules established by the SEC, the
Company is required to provide certain data and information in regard to the
compensation provided to the Company's Chief Executive Officer and the four
other most highly compensated executive officers.
COMPENSATION POLICIES. The overall objectives of the Company's
compensation program are to attract and retain the best possible executive
talent, to motivate these executives to achieve the goals inherent in the
Company's business strategy, to maximize the link between executive and
stockholder interests through a stock option plan and to recognize individual
contributions as well as overall business results. To achieve these objectives,
the Company has developed an overall compensation strategy and specific
compensation plans that tie a substantial portion of an executive's compensation
to performance.
The key elements of the Company's compensation program consist of fixed
compensation in the form of base salary, and the discretion to award variable
compensation in the forms of annual incentive compensation and stock option
awards. The Compensation Committee's policies with respect to each of these
elements are discussed below. In addition, while the elements of compensation
described below are considered separately, the Compensation Committee takes into
account the full compensation package afforded by the Company to the individual,
including pension benefits, insurance and other benefits, as well as the
programs described below.
BASE SALARIES. Base salaries for executive officers are determined based
upon the Compensation Committee's evaluation of the responsibilities of the
position held and the experience of the individual, and by reference to
historical levels of salary paid by the Company.
Salary adjustments are based on a periodic evaluation of the performance
of the Company and each executive officer, as well as financial results of the
business. The Compensation Committee takes into account the effect of any
corporate transactions that have been consummated during the relevant year and,
where appropriate, also considers non-financial performance measures. These
include the Company's market share, scientific developments and improvements in
relations with employees.
ANNUAL INCENTIVE COMPENSATION AWARDS. Annual incentive compensation is
payable pursuant to contractual provisions with certain executives which provide
eligibility to receive performance based bonuses and/or discretionary bonuses.
The annual incentive compensation earned by the executives with respect to 2004
was discretionary and determined by the Compensation Committee.
OTHER INCENTIVE COMPENSATION AWARDS. The principal component of executive
compensation is the granting of stock options, which are intended as a tool to
attract, provide incentive to and retain those executives who make the greatest
contribution to the business, and who can have the greatest effect on the
Company's long-term profitability. The exercise price of stock options is set at
a price equal to the market price of the Common Stock at the time of the grant.
The options therefore do not have any value to the executive unless the market
price of the Common Stock rises.
CHIEF EXECUTIVE OFFICER COMPENSATION. Dr. Kasten began service as Chief
Executive Officer on July 2, 2004 and continues to serve in that role. The
compensation of Dr. Kasten continues to be governed by the terms of his
Employment Agreement dated as of July 2, 2004, which is described below under
the heading "Employment Contracts."
10
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. The Compensation Committee
attempts to ensure full deductibility of compensation notwithstanding the
limitation on the deductibility of certain compensation in excess of one million
dollars under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Company's stock option are designed so as to cause stock
options and bonuses granted thereunder to be exempt from the limitations
contained in Section 162(m) of the Code.
Respectfully submitted by the Compensation Committee,
Donald G. Drapkin
Paul G. Savas
Mehmet C. Oz
11
COMMON STOCK PERFORMANCE
The following line graph compares the cumulative total stockholder return
through December 31, 2004, assuming reinvestment of dividends, by an investor
who invested $100 on December 31, 1999 in each of (i) the Common Stock, (ii) the
NASDAQ National Market-US; and (iii) the NASDAQ Pharmaceutical Index.
[LINE GRAPH OMITTED]
Value of Initial Investment 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- ------------------------------ -------- -------- -------- -------- -------- --------
SIGA Technologies, Inc. $ 100.00 $ 193.87 $ 177.91 $ 87.73 $ 140.49 $ 101.84
NASDAQ Composite Index $ 100.00 $ 122.99 $ 103.06 $ 56.35 $ 82.12 $ 87.16
NASDAQ Biotech Composite Index $ 100.00 $ 60.71 $ 47.93 $ 32.82 $ 49.23 $ 53.46
12
MANAGEMENT
Officers
The following table sets forth certain information with respect to the
executive officers of SIGA:
Name Age Position
---- --- --------
Bernard L. Kasten Jr. M.D. (1) 58 Director, Chief Executive Officer
Thomas N. Konatich 59 Vice President, Chief Financial Officer, Secretary and Treasurer
Dennis E. Hruby, Ph.D. 53 Vice President, Chief Scientific Officer
John R. Odden (2) 51 Vice President - Business Development
(1) Dr. Kasten became Chief Executive Officer in the third quarter of 2004.
See Director Nominee Information above for additional information
regarding Dr. Kasten.
(2) Mr. Odden became Vice President - Business Development in the third
quarter of 2004.
Thomas N. Konatich has served as Vice President, Chief Financial Officer
and Treasurer since April 1, 1998. He was named Secretary of SIGA on June 29,
2001 and from October 5, 2001 until July 2, 2004 was our Acting Chief Executive
Officer. 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. Mr. Konatich has an MBA
from the Columbia Graduate School of Business.
Dennis E. Hruby, Ph.D. has served as Vice President - Chief Scientific
Officer since June 2000. From April 1, 1997 through June 2000, Dr. Hruby was our
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.
John R. Odden has served as Vice President - Business Development of SIGA
since the third quarter of 2004. From October 2002 until he became Vice
President - Business Development of SIGA in the third quarter of 2004, he was
Vice President, Business Development for Quest Diagnostics, Inc. and its
MedPlus, Inc. division, the nation's leading provider of diagnostics testing,
information and services, where he was responsible for launching a national
biosurveillance solution for homeland security and managing relationships with
major healthcare information technology companies. From 1996 through October
2002, he held a series of progressive leadership roles at First Consulting
Group, a leading provider of consulting and systems integration services for
life sciences, healthcare and government health services businesses. Mr. Odden
has a B.S. in mathematics from the California Institute of Technology.
Summary Compensation Table
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 2004, 2003 and 2002, for each person who acted as
SIGA's Chief Executive Officer at any time during the year ended December 31,
2004, and its most highly compensated executive officers, other than its Chief
Executive Officer, whose salary and bonus for the fiscal year ended December 31,
2004 were in excess of $100,000 each.
13
Summary Compensation Table
Annual Compensation
Long-Term
Compensation
Securities
Other Annual Underlying
Name and Principal Position Year Salary ($) Comensation ($) Bonus ($) Options (#)
-------------------------------------- ------------------------------
Bernard L. Kasten, M.D. 2004 113,636 -- -- 2,500,000
Chief Executive Officer (1) 2003 -- -- -- --
2002 -- -- -- --
Thomas N. Konatich 2004 218,485 -- 50,000 150,000
Chief Financial Officer (2) 2003 210,000 -- -- --
2002 188,333 -- -- 200,000
Dennis E. Hruby, Ph.D. 2004 213,363 -- 63,000 150,000
Chief Scientific Officer 2003 210,000 -- -- --
2002 195,000 -- -- 300,000
John R. Odden
Vice President Business Development (3) 2004 82,257 -- -- 200,000
2003 -- -- -- --
2002 -- -- -- --
Susan K. Burgess, Ph.D. 2004 78,710 252,000 -- --
Former President(4) 2003 135,692 -- -- 300,000
2002 -- -- -- --
(1) Dr. Kasten became Chief Executive Officer in the third quarter of 2004.
His annual salary is $250,000. See "Employment Contracts" below for
further description.
(2) Mr. Konatich resigned as Acting Chief Executive Officer on July 2, 2004.
(3) Mr. Odden became Vice President - Business Development in the third
quarter of 2004. His annual salary is $230,000. See "Employment Contracts"
below for further description.
(4) Dr. Burgess resigned as President on May 7, 2004. "Other Annual
Compensation" consists of the separation compensation received on the
early termination of her Employment Agreement.
14
Option Grants for the Year Ended December 31, 2004
The following table sets forth grants of stock options during the year ended
December 31, 2004 to anyone who served as Chief Executive Officer and its three
highest paid employees. The exercise price at the time of the grant was equal to
or above the fair market value at the time of the grant.
Common Stock % of Total
Underlying Potential Value Options
Options of Options Granted to Exercise Price
Granted Granted ($) (1) Employees Per Share Expiration Date
Bernard L. Kasten, M.D. 2,500,000 900,000 73.4% 1.30 7/2/2114
Thomas N. Konatich 150,000 39,000 4.4% 1.40 7/29/2114
Dennis E. Hruby, Ph.D. 150,000 39,000 4.4% 1.40 6/29/2114
John R. Odden 200,000 52,000 7.4% 1.40 7/29/2114
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, 2004 by SIGA's Chief Executive Officer and its
three most highly compensated executive officers, other than its Chief Executive
Officer. No options were exercised during fiscal 2004 by any of the officers.
Value of Unexercised
Number of Securities Underlying In-The-Money Options
Unexercised Options # At fiscal Year-End ($) (1)
--------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Bernard L. Kasten, M.D. 500,000 2,000,000 180,000 720,000
Thomas N. Konatich 470,000 75,000 19,500 19,500
Dennis E. Hruby, Ph.D. 400,000 225,000 -- 39,000
John R. Odden 50,000 150,000 13,000 39,000
(1) Based upon the closing price on December 31, 2004, as reported on the
Nasdaq SmallCap Market and the exercise price per option.
Long-Term Incentive Plans--Awards in Last Fiscal Year
As of January 1, 1996, we adopted our 1996 Incentive and Non-Qualified
Stock Option Plan. An amendment and restatement of such plan, as amended, was
adopted on May 3, 2001 and was further refined by the Board of Directors on June
29, 2001 (the "Plan"). The Plan was approved by our stockholders at an annual
meeting on August 15, 2001. Stock options may be granted to key employees,
consultants and outside directors pursuant to the Plan. The Plan was amended
again at our annual meeting on January 8, 2004, when our stockholders voted to
increase the maximum number of shares of common stock available for issuance
under the Plan from 7,500,000 to 10,000,000.
The Plan is administered by our Compensation Committee which determines
persons to be granted stock options, the amount of stock options to be granted
to each such person, and the terms and conditions of any stock
15
options as permitted under the Plan. The members of the Compensation Committee
are Mehmet C. Oz, M.D., Paul G. Savas and Donald G. Drapkin. See "Committees of
the Board of Directors" above for more information.
Both Incentive Options and Nonqualified Options may be granted under the
Plan. An Incentive Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Any Incentive Option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the shares on
the date on which such option is granted. With respect to an Incentive Option
granted to an employee who owns more than 10% of the total combined voting stock
of SIGA or of any parent or subsidiary of SIGA, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted.
The Plan, as amended, provides for the granting of options to purchase
10,000,000 shares of common stock, of which 9,762,061 options were outstanding
as of December 31, 2004.
During the fiscal year ending December 31, 2004, the named Directors and
Officers of SIGA received long-term incentive compensation under the Plan as
shown in the following table.
Estimated Future Payouts Under
Non-Stock Price Based Plans
---------------------------
(a) (b) (c) (d) (e) (f)
--- --- --- --- --- ---
Number of Performance or
Shares, Units or Other Period Until
Other Rights Maturation or Threshold Target Maximum
Name (#) Payout ($ or #) ($ or #) ($ or #)
- ---- --- ------ -------- -------- --------
Bernard L. Kasten, M.D. 2,500,000 7/2/2014 N/A N/A N/A
Thomas N. Konatich 150,000 7/29/2014 N/A N/A N/A
Dennis E. Hruby, Ph.D. 150,000 6/29/2014 N/A N/A N/A
John R. Odden 200,000 7/29/2014 N/A N/A N/A
James J. Antal 25,000 12/14/2014 N/A N/A N/A
Adnan M. Mjalli, Ph.D. 25,000 12/14/2014 N/A N/A N/A
Paul G. Savas 25,000 12/14/2014 N/A N/A N/A
16
Employment Contracts and Directors Compensation
Directors' Compensation
Directors who are not currently receiving compensation as officers or
employees of the Company or any of its affiliates receive $1,000 per meeting for
board meetings and will be reimbursed for expenses incurred by them in
connection with serving on our Board of Directors. The chairman of the Audit
Committee will receive $1,000 per meeting for meetings of the Audit Committee
and all other members of the Audit Committee will receive $500 per meeting for
meetings of the Audit Committee. Members of Compensation Committee and
Nominating and Corporate Governance Committee will receive $500 per meeting for
meetings of the Compensation Committee and Nominating and Corporate Governance
Committee.
Non-employee directors will receive an initial grant of 25,000 options,
upon such non-employee director's first election to the Board of Directors,
which such options will be granted under SIGA's Amended and Restated 1996
Incentive and Non-Qualified Stock Option Plan. In addition, non-employee
directors will receive an annual grant of 10,000 options under SIGA's Amended
and Restated 1996 Incentive and Non-Qualified Stock Option Plan, made at each
Annual Meeting and commencing with the 2005 Annual Meeting. All such options
have an exercise price equal to the fair market value of the underlying SIGA
shares on the date of grant.
Equity Compensation Plan Information
The following table sets forth certain compensation plan information with
respect to both equity compensation plans approved by security holders and
equity compensation plans not approved by security holders as of December 31,
2004:
Number of securities
remaining available for
Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
(a) (b) (c)
Equity compensation plans
approved by security holders (1) 9,762,061 $1.99 22,898
Equity compensation plans not
approved by security holders 250,000 $2.00 --
Total 10,012,061 $1.99 22,898
(1) SIGA Technologies, inc., Amended and Restated 1996 Incentive and
Non-Qualified Stock Option Plan.
Employment Contracts
Dr. Bernard L. Kasten, SIGA's Chief Executive Officer, is employed by SIGA
under an employment agreement dated July 2, 2004. The initial term of the
employment agreement expires on July 2, 2007. The employment agreement will,
however, automatically renew for an additional three (3) years following the end
of the initial term, unless either Dr. Kasten or SIGA provides at least three
(3) months advance notice of his/its desire not to renew. Dr. Kasten receives an
annual base salary of $250,000 and his employment agreement also provides for
additional bonus payments at the discretion of the Board of Directors. On July
2, 2004, he received options to
17
purchase 2,500,000 shares of common stock with an exercise price of $1.30 per
share, of which 500,000 shares vested on the date of grant; with respect to the
next 1,000,000 shares, an additional 166,666 shares shall vest on the end of
each six (6) month period after date of grant until the end of the sixth six (6)
month period at which time 166,667 shares shall vest. In the event Dr. Kasten's
employment renews as described above, with respect to the balance of 1,000,000
shares of common stock, an additional 166,666 shares shall vest at the end of
each six (6) month period commencing at the beginning of the renewal term until
the end of the sixth six (6) month period at which time 166,667 shares shall
vest. Dr. Kasten also received options to purchase up to 4,800,000 shares of
common stock, with an exercise price of $1.30 per share, if various milestones
set forth in his employment agreement are met. Dr. Kasten is also eligible to
receive additional stock options and bonuses at the discretion of the Board of
Directors. SIGA may terminate the employment agreement for cause (as such term
is defined in the employment agreement) or for any other reason, provided that
upon any termination for any other reason (other than cause), Dr. Kasten shall
receive his salary due and payable through the date of termination plus a
severance amount (as defined in the employment agreement) to be paid through a
specified period during which his time vested options shall continue to vest. If
within 90 days prior to or 12 months after a change of control (as such term is
defined in the employment agreement) of SIGA either Dr. Kasten's employment is
terminated or Dr. Kasten is no longer Chief Executive Officer of the surviving
organization and elects to terminate his employment as a result of the change of
control, Dr. Kasten will receive payments as specified in the employment
agreement.
Thomas N. Konatich, SIGA's Vice President, Chief Financial Officer,
Secretary and Treasurer, is employed by SIGA under an employment agreement dated
April 1, 1998, as amended on January 19, 2000, as amended and restated on
October 6, 2000, as amended as of January 31, 2002, as amended on November 5,
2002 and as amended on July 29, 2004. This employment agreement expires on
December 31, 2005. Mr. Konatich was also formerly employed as SIGA's Acting
Chief Executive Officer, which duties concluded on July 2, 2004. Mr. Konatich
receives an annual base salary of $230,000 and received a one-time payment of
$50,000 for his prior service as Acting Chief Executive Officer. His employment
agreement also provides for an additional bonus payment at the discretion of the
Board of Directors and not to exceed 25% of his annual base salary amount. He
received options to purchase 95,000 shares of common stock, at $4.44 on April 1,
1998. The options vested 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 to purchase 100,000 shares at an exercise price of $2.00 per
share. These options vest on a pro rata basis each quarter through January 19,
2002. On January 31, 2002, Mr. Konatich was granted an "Incentive Stock Option"
to purchase 50,000 shares at an exercise price of $3.94 per share. Such options
vest in eight equal quarterly installments beginning on April 20, 2002. On
November 5, 2002, Mr. Konatich was granted an Incentive Stock Option to purchase
150,000 shares at an exercise price of $2.50 per share. 75,000 of these options
vested immediately and 75,000 options vested on September 1, 2003. On July 29,
2004, Mr. Konatich was granted an Incentive Stock Option to purchase 150,000
shares at an exercise price of $1.40 per share. 75,000 of these options vested
immediately and with the remaining 75,000 options vesting on a pro rata basis
from January 1, 2005 through December 31, 2005 with no provision for
acceleration under any circumstances. Mr. Konatich is also eligible to receive
additional stock options and bonuses at the discretion of the Board of
Directors. SIGA may terminate the employment agreement with or without cause (as
such term is defined in the employment agreement), provided that upon any
termination without cause, SIGA will be obligated to continue to pay Mr.
Konatich's salary and all other amounts due under the employment agreement for
the remainder of the term. If Mr. Konatich is terminated due to a change of
control (as such term is defined in the employment agreement), SIGA shall pay
Mr. Konatich a change in control amount (as such term is defined in the
employment agreement) plus his accrued and unpaid base salary, and, upon the
first event constituting a change of control, all stock options and other
stock-based grants to Mr. Konatich shall immediately and irrevocably vest and
become exercisable upon the date of such event.
Dr. Dennis E. Hruby, Chief Scientific Officer, is employed by SIGA under
an employment agreement dated January, 1, 1998, as amended on June 16, 2000, as
amended on January 31, 2002, as amended on October 3, 2002 and as amended on
July 29, 2004. This employment agreement expires on December 31, 2007. Dr. Hruby
receives a base salary of $225,000 per year and his employment agreement also
provides for additional bonus payments at the discretion of the Board of
Directors and not to exceed 50% of his base salary amount. Dr. Hruby received
options to purchase 10,000 shares of common stock at an exercise price of $5.00
per share on April 1, 1997 and 40,000 shares of common stock at an exercise
price of $4.63 per share on April 1, 1998. The options became exercisable on a
pro rata basis on the first, second, third and fourth anniversaries of the
agreement. Under the June 16, 2000 amendment, Dr. Hruby was granted options to
purchase 125,000 shares of SIGA's common stock at $2.00 per share. The options
vest ratably over the remaining term of the amendment. The January 31, 2002
amendment
18
changed the terms of the lock-up agreed to in the June 16, 2000 amendment to the
employment agreement limiting Hruby's ability to sell SIGA stock. On January 31,
2002, Dr. Hruby was granted an "Incentive Stock Option" to purchase 50,000
shares at an exercise price of $3.94 per share. Such options vest in four equal
annual installments beginning on August 15, 2002. As part of the October 3, 2002
amendment, Dr. Hruby was granted an option to purchase 300,000 shares of common
stock. Options with respect to 75,000 shares vested upon the signing of the
amendment and an additional 75,000 shares shall vest on a pro rata basis on
September 1 of each 2003, 2004 and 2005. The options have an exercise price of
$2.50 per share. Dr. Hruby surrendered his option to purchase up to 50,000
shares of common stock of SIGA at an exercise price of $3.94 that he was granted
under an earlier amendment. On July 29, 2004, Dr. Hruby was granted an Incentive
Stock Option to purchase 150,000 shares at an exercise price of $1.40 per share,
which options shall vest in 75,000 share increments on December 31 of each year,
commencing December 31, 2005. Dr. Hruby is eligible to receive additional stock
options and bonuses at the discretion of the Board of Directors. SIGA may
terminate the employment agreement with or without cause (as such term is
defined in the employment agreement), provided that upon any termination without
cause SIGA will be obligated to continue to pay Dr. Hruby's salary for the
remainder of the term. In addition, SIGA shall have the right to terminate Dr.
Hruby's employment upon one (1) year written notice with such termination being
treated as a termination for cause. If Dr. Hruby is terminated due to a change
of control (as such term is defined in the employment agreement), SIGA shall pay
Dr. Hruby a change in control amount (as such term is defined in the employment
agreement) plus his accrued and unpaid base salary, and, upon the first event
constituting a change of control, all stock options and other stock-based grants
to Dr. Hruby shall immediately and irrevocably vest and become exercisable upon
the date of such event.
John L. Odden, Vice-President - Business Development, is employed by SIGA
under an employment agreement dated July 29, 2004 and which became effective on
August 23, 2004. The initial term of the employment agreement expires on July
29, 2007. The employment agreement will, however, automatically renew for an
additional one (1) year following the end of the initial term unless either Mr.
Odden or SIGA provides at least three (3) months advance notice of his/its
desire not to renew. Mr. Odden receives an annual base salary of $230,000. In
addition, upon achieving certain milestones, Mr. Odden may receive bonus
payments. Mr. Odden was granted an Incentive Stock Option to purchase 200,000
shares at an exercise price of $1.40 per share, which options shall vest with
respect to the first 50,000 shares, on July 29, 2004 and thereafter in 50,000
share increments on July 29, 2005, 2006 and 2007. In addition upon the formation
of each strategic relationship (as defined in the employment agreement),
resulting substantially from Mr. Odden's efforts, Mr. Odden may be granted an
option to purchase additional shares of common stock at the discretion of the
Board of Directors and not to exceed 25,000 shares. SIGA may terminate the
employment agreement for cause (as such term is defined in the employment
agreement), or otherwise, provided that upon any termination without cause, SIGA
will be obligated to continue to pay Mr. Odden's base salary and all other
amounts due under the employment agreement for a period of six (6) months
following the date of termination or the remainder of the current term (be it
the initial term or the renewal term, if applicable), whichever period is
shorter. If within 90 days prior to or 12 months after a change of control (as
such term is defined in the employment agreement) of SIGA either Mr. Odden's
employment is terminated or Mr. Odden is no longer Vice President - Business
Development of the surviving organization and elects to terminate his employment
as a result of the change of control, Mr. Odden will receive the base salary due
and payable through such date of termination and, on the date that corporate
action approving an event that constitutes a change of control, all stock
options and other stock-based grants to Mr. Odden shall immediately and
irrevocably vest and become exercisable as of that date.
19
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 March 31, 2005 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 executive officers of SIGA
as a group. As of March 31, 2005, a total of 24,500,648 shares of Common Stock
and a total of 68,038 shares of Series A Preferred Stock were outstanding. Each
share of Common Stock and Series A Preferred Stock is entitled to one vote on
matters on which holders of Common Stock are eligible to vote. The column
entitled "Percentage of Total Voting Stock Outstanding" shows the percentage of
total voting stock beneficially owned by each listed party.
The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days of March 31, 2005,
through the exercise or conversion of any stock option, convertible security,
warrant or other right. Unless otherwise indicated, each person or entity named
in the table has sole voting power and investment power (or shares that power
with that person's spouse) with respect to all shares of capital stock listed as
owned by that person or entity.
Ownership of Common Stock
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of March 31, 2005 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 March 31, 2005, a total of 24,500,648 shares of common stock and a
total of 68,038 shares of Series A preferred stock were outstanding. 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.
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- -------------------- ------------- -------------------
Beneficial Holders
MacAndrews & Forbes Inc. (3)
35 East 62nd Street
New York, NY 10021 ................ 5,036,458(4) 19.2% 19.2%
TransTech Pharma, Inc. ............ 5,208,333(5) 19.9% 19.8%
Officers and Directors
Donald G. Drapkin (6)
35 East 62nd Street
New York, NY 10021 ................ 1,798,326(7) 6.9% 6.9%
James J. Antal
30952 Steeplechase Dr.
San Juan Capistrano, CA
94704 ...................... 36,154(8) * *
Judy S. Slotkin (21)
888 Park Avenue
NY, NY 10021 ...................... 25,000(9) * *
Thomas E. Constance
1177 Avenue of the Americas,
New York, NY 10036 ................ 253,467(10) * *
Bernard L. Kasten Jr., M.D.(11) ... 1,129,027(12) 4.5% 4.5%
20
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- -------------------- ------------- -------------------
Adnan M. Mjalli, Ph.D
4170 Mendenhall Oaks Parkway, Suite 110
High Point, NC 27265 .................... 25,000(13) * --
Mehmet C. Oz, M.D
177 Fort Washington Ave
New York, NY 10032 ...................... 125,000(14) * *
Eric A. Rose, M.D. (15)
122 East 78th Street
New York, NY 10021 ...................... 790,090(16) 3.3% 3.3%
Paul G. Savas
35 East 62nd Street
New York, NY 10021 ...................... 51,222(17) * *
Michael A. Weiner, M.D
161 Fort Washington Ave.
New York, NY 10032 ...................... 125,000(14) * *
John R. Odden (18) ...................... 105,240(19) * *
Thomas N. Konatich ...................... 501,250(20) 2.0% 2.0%
Dennis E. Hruby, Ph.D ................... 400,000(20) 1.6% 1.6%
All Executive Officers and Directors as a
group (thirteen persons) ................ 5,352,276(22) 18.4% 18.4%
- ---------------
* Less than 1%
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 408, 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. 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) MacAndrews & Forbes Inc. is a direct wholly-owned subsidiary of MacAndrews
& Forbes Holdings Inc., a holding company whose sole stockholder is Ronald
O. Perelman.
(4) Includes 1,678,820 shares of common stock issuable upon exercise of
warrants.
(5) Includes 1,736,111 shares of common stock issuable upon exercise of
warrants.
(6) Mr. Drapkin is a director and Vice Chairman of MacAndrews & Forbes
Holdings Inc. and MacAndrews & Forbes Inc. and a director of TransTech
Pharma.
(7) Includes 1,125,000 shares of common stock issuable upon exercise of
options, shares of common stock underlying a warrant to purchase up to
347,826 shares of common stock and shares of common stock underlying a
warrant to purchase up to 30,500 shares of common stock (the "Drapkin
September 2001 Investor Warrant"). However, the Drapkin September 2001
Investor Warrant provides that, with certain limited
21
exceptions, such warrant 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 the Drapkin September 2001 Investor Warrant) would exceed 9.99% of the
outstanding shares of common stock. Does not include shares of common
stock that Mr. Drapkin, as a director and Vice Chairman of Mafco Holdings
Inc. and MacAndrews & Forbes or as director of TransTech Pharma, may be
deemed to beneficially own and as to which Mr. Drapkin disclaims
beneficial ownership.
(8) Includes 25,000 shares of common stock issuable upon exercise of options.
(9) Includes 25,000 shares of common stock issuable upon exercise of options.
(10) Includes 12,200 shares issuable upon exercise of warrants and 225,000
shares of common stock issuable upon exercise of options.
(11) Dr. Kasten became our Chief Executive Officer in the third quarter of
2004.
(12) Includes 1,350 shares of common stock issuable upon exercise of warrants
and 766,667 shares of common stock issuable upon exercise of options.
(13) Includes 25,000 shares of common stock issuable upon exercise of options.
Does not include shares of common stock that Dr. Mjalli, as a director of
TransTech Pharma, may be deemed to beneficially own and as to which Dr.
Mjalli disclaims beneficial ownership.
(14) Includes 12,500 shares issuable upon exercise of warrants and 100,000
shares issuable upon exercise of options.
(15) Dr. Rose is a director of TransTech Pharma.
(16) Includes 88,610 shares of common stock issuable upon exercise of warrants
and 600,000 shares of common stock issuable upon exercise of options. Does
not include shares of common stock that Dr. Rose, as a director of
TransTech Pharma, may be deemed to beneficially own and as to which Dr.
Rose disclaims beneficial ownership.
(17) Includes 8,681 shares of common stock issuable upon exercise of warrants
and 25,000 shares issuable upon exercise of options.
(18) Mr. Odden became our Vice President - Business Development in the third
quarter of 2004.
(19) Includes 50,000 shares of common stock issuable upon exercise of Options.
(20) Neither of Messrs. Konatich and Hruby own shares of common stock. All
shares listed as beneficially owned by each of Messrs. Konatich and Hruby
are shares issuable upon exercise of stock options.
(21) Does not include 34,722 shares of common stock owned by Ms. Slotkin's
spouse to which she disclaims beneficial ownership.
(22) See footnotes (6)-(21).
22
Ownership of Series A Preferred Stock
Name and Address of Percentage of Series A Preferred
Beneficial Owner (1) Amount of Beneficial Ownership Shares Outstanding(2)
- ------------------------------ ----------------------------------- ------------------------------------
Frank J. and Mary Ann Loccisano 68,038 100%
- -----------
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 408, New York, NY 10170.
(2) Percentage of beneficial ownership of Series A Preferred Stock is
calculated based on the assumption that there were 68,038 shares of Series
A Preferred Stock outstanding on March 31, 2005.
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas E. Constance, a director of SIGA, is Chairman of Kramer Levin
Naftalis & Frankel LLP, a law firm in New York City, which SIGA has retained to
provide legal services.
Adnan M. Mjalli, a director of SIGA, is also President and Chief Executive
Officer of TransTech Pharma.
24
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the firm of
PricewaterhouseCoopers LLP as SIGA's independent registered public accounting
firm to audit the financial statements of SIGA for the fiscal year ending
December 31, 2005, 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 a majority of the
total votes cast on such proposal in person or by proxy at the Annual Meeting
will be required to ratify the selection of PricewaterhouseCoopers LLP.
If the stockholders fail to ratify the selection, the Audit Committee will
reconsider its selection of auditors. Even if the selection is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different
independent registered public accounting firm 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 $213,300 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, 2004, reviews of the interim
financial statements included in SIGA's Forms 10-QSB filed during the year ended
December 31, 2004 and consents and reviews of various documents filed with the
SEC during the year ended December 31, 2004.
PricewaterhouseCoopers LLP billed SIGA $203,150 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, 2003, and the reviews of the
interim financial statements included in SIGA's Forms 10-QSB filed during the
year ended December 31, 2003.
Audit Related Fees
PricewaterhouseCoopers LLP billed SIGA $62,700 in the aggregate for audit
and related services rendered with regard to its acquisition of substantially
all the assets of Plexus Vaccine Inc. during the fiscal year ended December 31,
2003.
There were no Audit Related Fees in 2004.
Tax Fees
PricewaterhouseCoopers LLP did not render any professional services for
tax compliance, tax advice or tax planning during either of the fiscal years
ended December 31, 2004 or December 31, 2003.
All Other Fees
PricewaterhouseCoopers LLP did not provide any products or render any
professional services (other than those covered above under "Audit Fees,"
"Audited Related Fees," and "Tax Fees") during either of the fiscal years ended
December 31, 2004 or December 31, 2003.
25
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent registered public accounting
firm. These services may include audit services, audit-related services, tax
services, and other services.
SIGA did not make use in fiscal year 2004 of the rule that waives
pre-approval requirements for non-audit services in certain cases if the fees
for these services constitute less than 5% of the total fees paid to the auditor
during the year.
THE BOARD OF DIRECTORS 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 REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
26
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 10,000,000 SHARES TO
11,000,000 SHARES
The SIGA Technologies, Inc. 1996 Incentive and Non-Qualified Stock Option
Plan was initially adopted in 1996 and was subsequently amended in 1998, 1999,
2000 and 2004 to increase the number of shares of Company Stock with respect to
which awards may be granted thereunder.
An aggregate of 10,000,000 shares of Common Stock have been reserved for
issuance under the Plan. As of December 31, 2004, options to purchase an
aggregate of 9,762,061 shares of Common Stock had been issued under the Plan. As
of December 31, 2004, 22,898 shares remained available for issuance under the
Plan.
In April 2005, the Board of Directors approved an amendment to the Plan to
increase the maximum number of shares of Common Stock available for issuance
thereunder from 10,000,000 shares to 11,000,000 shares. Such amendment shall
become effective upon approval of this Proposal No. 3 by SIGA's stockholders.
The Board of Directors believes that increasing the maximum number of
shares of Common Stock available for issuance under the Plan from 10,000,000
shares to 11,000,000 is in the best interests of SIGA and its stockholders. The
proposed amendment to the Plan reflects the Board of Directors' determination
that ensuring the continued availability of a sufficient number of options
available for grant under the Plan is important to SIGA's ongoing and continuing
efforts to attract and retain key senior management personnel and to increase
the interest of executive officers of SIGA in the success of SIGA's business.
The following summary is qualified in its entirety by reference to the
Plan, a copy of which is attached hereto as Appendix A.
Description of the Plan
The purposes of the Plan are to attract and retain the best available
personnel, to provide an additional incentive to SIGA's employees, consultants
and non-employee directors and to promote the success of SIGA's business.
The Plan provides that it is to be administered by a committee appointed
by 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 Code. The Board of
Directors has appointed the Compensation Committee to administer the Plan.
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
Section 162(m) of the Code or in any other situation that the Board of Directors
elects, the entire Board of Directors may act as the Compensation Committee. The
Compensation 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 Plan.
The maximum number of shares of Common Stock currently available for
issuance under the Plan is 10,000,000 shares, 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 Plan that expire or
terminate are available for options to be issued under the Plan.
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 Compensation Committee shall select in its sole discretion and (iv)
any other key persons, as determined by the Compensation 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
27
determine the number or type of Options that will be granted in the future to
any particular person or group. The Plan provides that non-employee directors
may be granted options in the discretion of the Board of Directors.
Options
The 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 options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs" and together with
NQSOs, the "Options"). Each Option shall be evidenced by an "Option Agreement"
containing such terms and conditions as the Compensation Committee shall
determine.
Non-Qualified Stock Options. The exercise price-per-share of each NQSO
shall be determined by the Compensation 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, and shall remain
exercisable until the tenth anniversary of the date the NQSO was granted. 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 Compensation Committee, by such
other provision as the Compensation 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 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 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 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 a participant during any
calendar year under the Plan or any other plan of SIGA or its
subsidiaries may not exceed $100,000.
Reload Options. The Plan provides that in certain circumstances, the
Compensation Committee may include in an Option Agreement evidencing an option
(the "Original Option") a provision that a "reload option" shall be
28
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 Plan provides that the Compensation 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 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 Plan provides that if, within one year after a participant exercises
an Option, the Compensation 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 Compensation 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 Plan provides for an adjustment in the number of shares of Common
Stock available to be issued under the 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.
Amendment and Termination
The Board of Directors may suspend, discontinue, revise or amend the 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 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 Compensation 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 Compensation Committee may delay payments to
the participant with respect to the option and, in exchange, the Compensation
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.
29
Summary of Federal Tax Consequences
The following description of the principal federal income tax consequences
of Options under the 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 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 gain
will be taxed will vary depending on how long the optionee held the Shares after
exercising the option. The Code currently provides that, in general, the net
long-term capital gain resulting from the sale of shares held for more than 12
months is subject to tax at a maximum rate of 15% (5% for individuals in the 10%
or 15% tax bracket). The Code currently provides that the tax rate on net
long-term capital gain will change in future years: The 15% rate will increase
to 20% in 2009 and the 5% rate will decrease to 0% in 2008 and then increase to
10% in 2009.
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
30
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.
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.
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 Plan permits the Compensation Committee to defer
payments to covered employees until such individuals are no longer covered
employees with respect to the
31
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 Compensation 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.
- --------------------------------------------------------------------------------------------
New Plan Benefits (1)
- --------------------------------------------------------------------------------------------
Name and Position Additional Stock Options Granted Dollar Value ($)
- ----------------- -------------------------------- ----------------
- ----------------------------------------------------------------------- --------------------
Non-Executive Director Group 90,000 (2) 105,300 (3)
- ----------------------------------------------------------------------- --------------------
(1) All other future benefits under the Plan will be made at the discretion of
SIGA's Compensation Committee and, accordingly, are not determinable at
this time.
(2) The option grants reflected in the table above will be made in accordance
with SIGA's previously disclosed Director Compensation Program.
(3) Current market price on the April 25, 2005.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL (ITEM 3 OF THE
ENCLOSED PROXY CARD) OF THE AMENDMENT TO THE PLAN TO INCREASE THE MAXIMUM NUMBER
OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 10,000,000
SHARES TO 11,000,000 SHARES.
32
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2006 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 January 2, 2006. Such proposals must
comply with SIGA's By-Laws and the requirements of Regulation 14A of the
Securities Exchange Act of 1934 (the "Exchange Act").
In addition, Rule 14a-4 of the Exchange 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 2006 Annual
Meeting of Stockholders, if SIGA is not provided notice of a stockholder
proposal prior to March 17, 2006, 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.
SECTION 16 BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires SIGA's officers and directors,
and persons who own more than ten percent of a registered class of SIGA's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent stockholders are required by Securities and Exchange Commission
regulation to furnish SIGA with copies of all Section 16(a) reports that they
file.
Based solely upon review of the copies of such reports furnished to SIGA
and written representations from certain of SIGA's executive officers and
directors that no other such reports were required, SIGA believes that during
the fiscal year ended December 31, 2004, each of the following individuals
failed to file on a timely basis one report relating to one transaction as
required by Section 16 of the Exchange Act: Bernard L. Kasten Jr. M.D., Thomas
N. Konatich, Dennis E. Hruby, Ph.D., John R. Odden, James J. Antal, Judy S.
Slotkin, Adnan M. Mjalli, Ph.D., and Paul G. Savas. All reports were
subsequently filed.
AVAILABILITY OF ANNUAL REPORT AND FORM 10-K TO STOCKHOLDERS
SIGA's Annual Report to Stockholders for the year ended December 31, 2004
accompanies this proxy statement. SIGA will provide to any stockholder, upon
written request and without charge, a copy of its most recent Report on Form
10-K, including the financial statements, as filed with the Securities and
Exchange Commission. All requests for such reports should be directed to the
Chief Financial Officer, 420 Lexington Avenue, Suite 408, New York, New York
10170, telephone number (212) 672-9100.
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: May 2, 2005
33
SIGA TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 2005
The undersigned hereby appoints Bernard L. Kasten and Thomas N. Konatich,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of SIGA Technologies, Inc.
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of SIGA Technologies, Inc. to be held at the offices of Kramer
Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, 29th floor, New York,
New York 10036, on Thursday, May 26, 2005 at 10:30 a.m. (local time), and at any
and all postponements, continuations and adjournments thereof, with all powers
that the undersigned would possess if personally present, upon and in respect of
the following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL NO. 1, FOR THE SELECTION OF PRICEWATERHOUSECOOPERS
LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF SIGA TECHNOLOGIES,
INC. FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005, AND FOR THE APPROVAL OF THE
AMENDMENT TO THE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 10,000,000 SHARES TO 11,000,000
SHARES. AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTOR NOMINEES LISTED
BELOW, "FOR" THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM OF SIGA TECHNOLOGIES, INC. FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2005 AND "FOR" THE APPROVAL OF THE AMENDMENT TO THE PLAN TO
INCREASE THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE
UNDER THE PLAN FROM 10,000,000 SHARES TO 11,000,000 SHARES.
PLEASE VOTE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: |X|
1. To elect ten directors.
|_| FOR ALL NOMINEES
|_| WITHHOLD AUTHORITY FOR ALL NOMINEES
|_| FOR ALL EXCEPT (See instructions below)
NOMINEES: |_| Donald G. Drapkin
|_| Bernard L. Kasten Jr. M.D.
|_| Thomas E. Constance
|_| Adnan M. Mjalli, Ph.D.
|_| Mehmet C. Oz, M.D.
|_| Eric A. Rose, M.D.
|_| Paul G. Savas
|_| Michael A. Weiner, M.D.
|_| Judy S. Slotkin
|_| James J. Antal
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in circle next to each nominee you wish to
withhold, as shown here: |X|
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of SIGA Technologies, Inc. for the
fiscal year ending December 31, 2005.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To approve an amendment to the SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan")
to increase the maximum number of shares of Common Stock available for
issuance under the Plan from 10,000,000 shares to 11,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT MAY BE REVOKED
PRIOR TO ITS EXERCISE.
RECEIPT OF NOTICE OF THE ANNUAL MEETING AND PROXY STATEMENT IS HEREBY
ACKNOWLEDGED, AND THE TERMS OF THE NOTICE AND PROXY STATEMENT ARE HEREBY
INCORPORATED BY REFERENCE INTO THIS PROXY. THE UNDERSIGNED HEREBY REVOKES ALL
PROXIES HERETOFORE GIVEN FOR SAID MEETING OR ANY AND ALL ADJOURNMENTS,
POSTPONEMENTS AND CONTINUATIONS THEREOF.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
- ------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this
method. |_|
Signature of Stockholder: ______________________________________________________
Date: ________________
Signature of Stockholder: ______________________________________________________
Date: ________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. WHERE SHARES ARE HELD
JOINTLY, EACH HOLDER SHOULD SIGN. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR,
ATTORNEY-IN-FACT, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SIGNER
IS A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER,
GIVING FULL TITLE AS SUCH. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN FULL
PARTNERSHIP NAME BY AUTHORIZED PERSON.
-2-
APPENDIX A
SIGA Technologies, Inc.
Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan
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 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
A-1
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 $0.000l 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; (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.
A-2
(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 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 fill 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
A-3
adjustment is necessary or appropriate to prevent such Option 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.
(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
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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:
(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.
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(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 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
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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 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 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.
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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 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
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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 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
A-9
(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
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
Exceptas 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
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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.
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.
(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
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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.
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.
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(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.
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
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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.
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, 2000 and 2004 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
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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 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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