UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________________
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant þ
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))
þ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Pursuant to § 240.14a-12
________________________________________________
BioSante
Pharmaceuticals, Inc.
(Name
of
Registrant as Specified In Its Charter)
________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
þ No
fee
required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of
each class of securities to which transaction applies:
.............................................................
(2) Aggregate
number of securities to which transaction applies:
.............................................................
|
(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):
|
.............................................................
(4) Proposed
maximum aggregate value of transaction:
.............................................................
(5) Total
fee
paid:
.............................................................
¨ 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:
............................................................
(2) Form,
Schedule or Registration Statement No.:
............................................................
(3) Filing
Party:
............................................................
(4) Date
Filed:
............................................................
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 6, 2006
__________________
TO
THE
STOCKHOLDERS OF BIOSANTE PHARMACEUTICALS, INC.:
The
Annual Meeting of Stockholders of BioSante Pharmaceuticals, Inc., a Delaware
corporation, will be held on Tuesday, June 6, 2006, at 12:00 p.m., local time,
at the offices of Stewart & Irwin, 251 E. Ohio Street, Suite 1100,
Indianapolis, Indiana, for the following purposes:
| 1. |
To
elect seven persons to serve as directors until our next annual meeting
of
stockholders or until their respective successors are elected and
qualified.
|
| 2. |
To
consider a proposal to amend the BioSante Pharmaceuticals, Inc. Amended
and Restated 1998 Stock Plan.
|
| 3. |
To
consider a proposal to ratify the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for the fiscal
year
ending December 31, 2006.
|
| 4. |
To
transact such other business as may properly come before the meeting
or
any adjournment of the meeting.
|
Only
stockholders of record at the close of business on April 20, 2006 will be
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
A stockholder list will be available at BioSante’s corporate offices beginning
May 22, 2006 during normal business hours for examination by any stockholder
registered on BioSante’s stock ledger as of the record date, April 20, 2006, for
any purpose germane to the annual meeting.
It
is
important that your shares be represented and voted at the meeting. Please
mark,
sign, date, and mail the enclosed proxy card in the postage-paid envelope
provided.
By
Order
of the Board of Directors,
/s/
Phillip B. Donenberg
Phillip
B. Donenberg
Secretary
April
28,
2006
Lincolnshire,
Illinois
|
Important:
The prompt return of your proxy card will save the company the expense
of
further requests for proxies to ensure a quorum at the meeting. A
self-addressed envelope is enclosed for your convenience. No postage
is
required if mailed within the United States.
|
_____________________
111
Barclay Boulevard
Lincolnshire,
Illinois 60069
_____________________
PROXY
STATEMENT FOR
ANNUAL
MEETING OF STOCKHOLDERS
June
6,
2006
_____________________
The
Board
of Directors of BioSante Pharmaceuticals, Inc. is soliciting your proxy for
use
at the 2006 Annual Meeting of Stockholders on Tuesday, June 6, 2006. The Notice
of Annual Meeting, this proxy statement and the enclosed form of proxy are
being
mailed to stockholders beginning on or about April 28, 2006.
The
Annual Meeting of Stockholders of BioSante Pharmaceuticals, Inc. will be held
on
Tuesday, June 6, 2006, at 12:00 p.m., local time, at the offices of Stewart
& Irwin, 251 E. Ohio Street, Suite 1100, Indianapolis, Indiana, for the
purposes set forth in the Notice of Meeting.
Stockholders
of record at the close of business on April 20, 2006 will be entitled to vote
at
the meeting. As of that date, there were 19,160,694 shares of our common stock
and 391,286 shares of our class C special stock outstanding. Each share of
our
common stock and class C special stock is entitled to one vote on each matter
to
be voted on at the Annual Meeting. Stockholders are not entitled to cumulate
voting rights.
Your
vote
is important. If you are a stockholder whose shares are registered in your
name,
you may vote your shares by completing, signing, dating and mailing the enclosed
proxy card in the envelope provided. No postage is required if your proxy card
is mailed within the United States.
If
your
shares are held in “street name” (through a broker, bank or other nominee), you
may receive a separate voting instruction form with this proxy statement or
you
may need to contact your broker, bank or other nominee to determine how you
will
be able to vote your shares.
If
you
return your signed proxy card, the named proxies will vote your shares as you
direct. You have three choices on each matter to be voted on.
For
the
election of directors, you may vote:
| · |
FOR
all of the nominees for director,
|
| · |
WITHHOLD
your vote from all of the nominees for director
or
|
| · |
WITHHOLD
your vote from one or more of the nominees for
director.
|
For
each
of the other proposals, you may vote:
| · |
FOR
the proposal,
|
| · |
AGAINST
the proposal or
|
| · |
ABSTAIN
from voting on the proposal.
|
If
you
send in your proxy card, but do not specify how you want to vote your shares,
the proxies will vote your shares FOR
all of
the nominees for director and FOR
all of
the other proposals set forth in the Notice of Annual Meeting.
The
Board of Directors unanimously recommends that you vote FOR all of the nominees
for director and FOR the approval of all of the other proposals set forth in
the
Notice of Annual Meeting.
If
you
are a stockholder whose shares are registered in your name, you may revoke
your
proxy at any time before it is voted by one of the following
methods:
| · |
Submitting
another proper proxy with a more recent date than that of the proxy
first
given by completing, signing, dating and returning a proxy card to
us.
|
| · |
Sending
written notice of revocation to our Corporate
Secretary.
|
| · |
Attending
the Annual Meeting and voting by
ballot.
|
The
presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of our common stock (9,580,348 shares) and
a
majority of the outstanding shares of our class C special stock (195,644 shares)
as of the record date will constitute a quorum for the transaction of business
at the Annual Meeting. In general, shares of our common stock and shares of
our
class C special stock represented by a properly signed and returned proxy card
will be counted as shares present and entitled to vote at the Annual Meeting
for
purposes of determining a quorum. Shares represented by proxies marked “Abstain”
or “Withheld” are counted in determining whether a quorum is present. In
addition, a “broker non-vote” is considered in determining whether a quorum is
present. A “broker non-vote” is a proxy returned by a broker on behalf of its
beneficial owner customer that is not voted on a particular matter because
voting instructions have not been received by the broker from the customer,
and
the broker does not have discretionary authority to vote on behalf of such
customer on such matter.
Assuming
a quorum is represented at the Annual Meeting, either in person or by proxy,
(1)
the election of the seven nominees for director requires the affirmative vote
of
a plurality of the shares of common stock and class C special stock, present
in
person or by proxy and entitled to vote, voting together as a single class,
and
(2) the approval of each of the other proposals described in this proxy
statement, requires the affirmative vote of the holders of a majority of the
shares of common stock and class C special stock, present in person or by proxy
and entitled to vote, voting together as a single class.
If
your
shares are held in “street name” and you do not indicate how you wish to vote,
your broker is permitted to exercise its discretion to vote your shares on
certain “routine” matters that include the election of directors (Proposal 1)
and the ratification of the election of our independent registered public
accounting firm (Proposal 3). If you do not direct your broker how to vote
on
the proposal to amend the BioSante Pharmaceuticals, Inc. Amended and Restated
1998 Stock Plan (Proposal 2), which is not considered a routine matter, your
broker may not exercise discretion and may not vote your shares. This is called
a “broker non-vote.” “Broker non-votes” are not considered to be entitled to
vote on Proposal 2, and will therefore not be counted in determining the votes
cast on that matter, although broker non-votes are considered in determining
whether a quorum is present. Abstentions and withheld votes will be counted,
and
will have the effect of a negative vote.
The
presiding officer at the Annual Meeting will determine how business at the
meeting will be conducted. Only matters brought before the Annual Meeting in
accordance with our bylaws will be considered.
Only
a
natural person present at the Annual Meeting who is either a BioSante
stockholder or is acting on behalf of a stockholder may make a motion or second
a motion. A person acting on behalf of a stockholder must present a written
statement executed by the stockholder or the duly authorized representative
of
the stockholder on whose behalf the person purports to act.
AND
MANAGEMENT
_____________________
The
following table sets forth information known to us with respect to the
beneficial ownership of each class of our capital stock as of April 15, 2006
for
(1) each person known by us to beneficially own more than 5% of any class of
our
voting securities, (2) each of the executive officers named in the Summary
Compensation table under the heading “Executive Compensation and Other
Benefits,” (3) each of our directors and (4) all of our executive officers
and directors as a group.
Shares
are deemed to be “beneficially owned” by a person if such person, directly or
indirectly, has sole or shared power to vote or to direct the voting of such
shares or sole or shared power to dispose or direct the disposition of such
shares. Except as otherwise indicated, we believe that each of the beneficial
owners of our capital stock listed below, based on information provided by
these
owners, has sole dispositive and voting power with respect to its shares,
subject to community property laws where applicable. Shares not outstanding
but
deemed beneficially owned by virtue of the right of a person or member of a
group to acquire them within 60 days are treated as outstanding only when
determining the amount and percent owned by such person or group.
|
|
Common
Stock
|
Class
C Special Stock
|
Common
Stock and Common Stock
|
|
|
Percent
of
Total
Voting
|
|
||||||||||||
|
Name
|
|
|
Number
|
|
|
Percent
|
|
|
Number
|
|
|
Percent
|
|
|
Equivalents
|
|
|
Power(1)
|
|
|
Louis
W. Sullivan, M.D.(2)
|
70,398(3)
|
|
*
|
100,000
|
25.6
|
%
|
170,398
|
*
|
|||||||||||
|
Stephen
M. Simes(2)
|
483,848(4)
|
|
2.5
|
%
|
—
|
—
|
483,848
|
2.4
|
%
|
||||||||||
|
Fred
Holubow(2)
|
112,459(5)
|
|
*
|
—
|
—
|
112,459
|
*
|
||||||||||||
|
Peter
Kjaer(2)
|
61,925(6)
|
|
1.0
|
%
|
—
|
—
|
61,925
|
*
|
|||||||||||
|
Ross
Mangano(2)
|
1,974,316(7)
|
|
10.2
|
%
|
—
|
—
|
1,974,316
|
10.0
|
%
|
||||||||||
|
Victor
Morgenstern(2)
|
1,011,733(8)
|
|
5.2
|
%
|
—
|
—
|
1,011,733
|
5.1
|
%
|
||||||||||
|
Edward
C. Rosenow, III, M.D.(2)
|
60,040(9)
|
|
*
|
—
|
—
|
60,040
|
*
|
||||||||||||
|
Steven
J. Bell, Ph.D.(2)
|
59,691(10)
|
|
*
|
—
|
—
|
59,691
|
*
|
||||||||||||
|
Phillip
B. Donenberg(2)
|
178,599(11)
|
|
1.0
|
%
|
—
|
—
|
178,599
|
*
|
|||||||||||
|
JO
& Co
|
1,644,861(12)
|
|
8.5
|
%
|
—
|
—
|
1,644,861
|
8.4
|
%
|
||||||||||
|
William
Harris Investors, Inc.
|
1,753,562(13)
|
|
9.0
|
%
|
—
|
—
|
1,753,562
|
8.9
|
%
|
||||||||||
|
Hans
Michael Jebsen
|
425,000(14)
|
|
2.2
|
%
|
100,000
|
25.6
|
%
|
525,000
|
2.7
|
%
|
|||||||||
|
Marcus
Jebsen
|
125,000(14)
|
|
*
|
50,000
|
12.8
|
%
|
175,000
|
*
|
|||||||||||
|
Angela
Ho
|
77,137(15)
|
|
*
|
100,000
|
25.6
|
%
|
177,137
|
*
|
|||||||||||
|
Avi
Ben-Abraham, M.D.
|
1,042,980(16)
|
|
5.4
|
%
|
—
|
—
|
1,042,980
|
5.3
|
%
|
||||||||||
|
Leah
M. Lehman, Ph.D.
|
91,849
|
*
|
—
|
—
|
91,849
|
*
|
|||||||||||||
|
All
executive officers and
directors
as a group (9 persons)
|
4,013,009(17)
|
|
19.9
|
%
|
100,000
|
25.6
|
%
|
4,113,009
|
20.0
|
%
|
|||||||||
_____________________
*
less
than 1%.
|
(1)
|
In
calculating the percent of total voting power, the voting power of
shares
of our common stock and shares of our class C special stock is
combined.
|
|
(2)
|
Address:
111 Barclay Boulevard, Lincolnshire, IL
60069.
|
|
(3)
|
Dr.
Sullivan’s beneficial ownership includes 42,500 shares of common stock
issuable upon exercise of stock
options.
|
|
(4)
|
Mr.
Simes’ beneficial ownership includes (1) 306,581 shares of common stock
issuable upon exercise of stock options, (2) 500 shares of common
stock
issuable upon exercise of warrants and 176,567 shares of common stock
held
by Mr. Simes’ trust and (3) 200 shares of common stock held by Mr. Simes’
sons.
|
|
(5)
|
Mr.
Holubow’s beneficial ownership includes 42,500 shares of common stock
issuable upon exercise of stock
options.
|
|
(6)
|
Mr.
Kjaer’s beneficial ownership includes 42,500 shares of common stock
issuable upon exercise of stock
options.
|
|
(7)
|
Mr.
Mangano’s beneficial ownership includes: (1) 42,500 shares of common stock
issuable upon exercise of stock options, (2) 146,512 shares of common
stock issuable upon exercise of a warrant and 1,498,349 shares of
common
stock held by JO & Co., of which Mr. Mangano is President,
(3) 30,000 shares of common stock held by Oliver & Co., of which
Mr. Mangano is the trustee, and (4) an aggregate of 199,999 shares
of
common stock held in various accounts, of which Mr. Mangano is an
advisor
and/or a trustee. Mr. Mangano has sole voting and dispositive power
over
these shares. See note (12) below.
|
|
(8)
|
Mr.
Morgenstern’s beneficial ownership includes: (1) 42,500 shares of common
stock issuable upon exercise of stock options, (2) 76,500 shares
of common
stock issuable upon exercise of a warrant, (3) 70,000 shares of
common stock issuable upon exercise of a warrant and 283,881 shares
of
common stock held by Mr. Morgenstern’s wife as trustee of the Morningstar
Trust, as to which Mr. Morgenstern disclaims control, direction or
beneficial ownership, (4) 70,000 shares of common stock held by
Mr. Morgenstern’s wife, as to which Mr. Morgenstern disclaims
control, direction or beneficial ownership, and (5) 63,281 shares of
common stock held by Resolute Partners L.P. Victor Morgenstern is
managing
director of Resolute Partners L.P.
|
|
(9)
|
Dr.
Rosenow’s beneficial ownership includes 42,500 shares of common stock
issuable upon exercise of stock
options.
|
|
(10)
|
Dr.
Bell’s beneficial ownership includes 59,691 shares of common stock
issuable upon exercise of stock
options.
|
|
(11)
|
Mr.
Donenberg’s beneficial ownership includes 143,277 shares of common stock
issuable upon exercise of stock options and 500 shares of common
stock
issuable upon exercise of warrants.
|
|
(12)
|
Includes
146,512 shares of common stock issuable upon exercise of a warrant.
Ross
Mangano, a director of BioSante, has sole voting and dispositive
power
over these shares. See note (7) above. The address for JO & Co. is 112
West Jefferson Boulevard, Suite 613, South Bend, IN
46634.
|
|
(13)
|
On
February 14, 2006, William Harris Investors, Inc. reported in a Schedule
13G/A as filed with the Securities and Exchange Commission that as
of
December 31, 2005, the William Harris Investors, Inc.’s beneficial
ownership included 1,531,562 shares of common stock and an aggregate
of
222,000 shares issuable upon exercise of warrants. William Harris
Investors, Inc.’s address is c/o William Harris Investors, Inc., 191 N.
Wacker Drive, Suite 1500, Chicago, IL
60606.
|
|
(14)
|
Mr.
Jebsen’s address is c/o Jebsen & Co. Ltd., 28/F Caroline Center, 28
Yun Ping Road, Causeway Bay, Hong
Kong.
|
|
(15)
|
Ms.
Ho’s address is c/o Jet Asia Ltd., 39/F Shun Tak Center, 200 Connaught
Road Central, Hong Kong, China.
|
|
(16)
|
Dr.
Ben-Abraham’s address is 22 Maskit Street, Suite MB-12550, Lumir Bldg.,
Herzelya Pituach, 46733, Israel.
|
|
(17)
|
The
amount beneficially owned by all current directors and executive
officers
as a group includes 841,049 shares issuable upon exercise of warrants
and
stock options held by these individuals and 2,362,222 shares issuable
upon
exercise of warrants held by entities and individuals affiliated
with
these individuals. See notes (7), (8) and (12)
above.
|
(Proposal
1)
_____________________
Our
bylaws provide that the Board of Directors will consist of at least one member,
or such other number as may be determined by the Board of Directors or
stockholders at an annual meeting. The Board of Directors has fixed the number
of directors at seven.
The
Board
of Directors has nominated the following individuals to serve as our directors
until the next annual meeting of our stockholders or until their successors
are
elected and qualified. All of the nominees named below are current members
of
the Board of Directors.
| · |
Louis
W. Sullivan, M.D.
|
| · |
Stephen
M. Simes
|
| · |
Fred
Holubow
|
| · |
Peter
Kjaer
|
| · |
Ross
Mangano
|
| · |
Victor
Morgenstern
|
| · |
Edward
C. Rosenow III, M.D.
|
Proxies
can only be voted for the number of persons named as nominees in this proxy
statement, which is seven.
Assuming
a quorum is represented at the Annual Meeting, either in person or by proxy,
the
election of a nominee for director requires the affirmative vote of a plurality
of the shares of common stock and class C special stock represented in person
or
by proxy at the Annual Meeting, voting together as a single class.
The
Board
of Directors recommends a vote FOR
the
election of all of the nominees named above.
If
prior
to the Annual Meeting, the Board of Directors should learn that any nominee
will
be unable to serve for any reason, the proxies that otherwise would have been
voted for this nominee will be voted for a substitute nominee as selected by
the
Board of Directors. Alternatively, the proxies, at the Board’s discretion, may
be voted for that fewer number of nominees as results from the inability of
any
nominee to serve. The Board of Directors has no reason to believe that any
of
the nominees will be unable to serve.
The
following table sets forth the name, age and principal occupation of each
nominee for director, as of April 15, 2006, as well as how long each nominee
has
served as a director of BioSante.
|
Name
of Nominee
|
Age
|
Principal
Occupation
|
Director
Since
|
|
Louis
W. Sullivan, M.D.(1)(2)(3)(4)
|
72
|
President
Emeritus of the Morehouse School of Medicine and Chairman of the
Board of
Directors of BioSante
|
1996
|
|
Stephen
M. Simes
|
54
|
Vice
Chairman, President and Chief Executive Officer of
BioSante
|
1998
|
|
Fred
Holubow
(1)(3)(4)
|
67
|
Vice
President of Pegasus Associates, an operating division of William
Harris
Investors
|
1999
|
|
Peter
Kjaer(1)(3)
|
45
|
President
and Chief Executive Officer of
Jet-Asia
Ltd.
|
1999
|
|
Ross
Mangano(2)(3)
|
60
|
President
of Oliver Estate, Inc.
|
1999
|
|
Victor
Morgenstern(2)(3)
|
63
|
Managing
Director of Resolute Partners L.P.
|
1999
|
|
Edward
C. Rosenow III, M.D.(3)(4)
|
71
|
Master
Fellow of the American College of Physicians and the American College
of
Chest Physicians
|
1997
|
__________________
(1) Member
of
the Audit and Finance Committee
(2) Member
of
the Compensation Committee
(3) Member
of
the Nominating and Corporate Governance Committee
(4) Member
of
the Scientific Review Committee
The
Honorable Louis W. Sullivan, M.D.
has been
our Chairman of the Board of Directors since March 1998 and has been a director
of our company since its formation. Dr. Sullivan served as Secretary of Health
and Human Services in the cabinet of President George H.W. Bush from 1989 to
1993. Since retiring from the Bush Administration, Dr. Sullivan has been
associated with the Morehouse School of Medicine in Atlanta, Georgia. Currently,
he serves as President Emeritus and he previously served as President and Dean
of the School from 1981 to 1985 and as President from 1985 to 1989 and from
1993
to 2002. Dr. Sullivan serves on the board of directors of 3M Corp.,
Bristol-Myers Squibb Company, Henry Schein Inc., United Therapeutics Corporation
and Inhibitex, Inc. Dr. Sullivan will retire from the board of directors of
Bristol-Myers Squibb Company on May 2, 2006.
Stephen
M. Simes
has
served as our Vice Chairman, President and a director of our company since
January 1998 and Chief Executive Officer since March 1998. From October 1994
to
January 1997, Mr. Simes was President, Chief Executive Officer and a
director of Unimed Pharmaceuticals, Inc. (wholly-owned by Solvay Pharmaceuticals
Inc.), a company with a product focus on infectious diseases, AIDS,
endocrinology and oncology. From 1989 to 1993, Mr. Simes was Chairman, President
and Chief Executive Officer of Gynex Pharmaceuticals, Inc., a company
which concentrated on the AIDS, endocrinology, urology and growth disorders
markets. In 1993, Gynex was acquired by Savient Pharmaceuticals, Inc. (formerly
Bio-Technology General Corp.), and from 1993 to 1994, Mr. Simes served as Senior
Vice President and director of Savient Pharmaceuticals Inc. Mr. Simes’
career in the pharmaceutical industry started in 1974 with G.D. Searle & Co.
(now part of Pfizer Inc.).
Fred
Holubow
has been
a director of our company since July 1999. Mr. Holubow has been a Vice President
of Pegasus Associates since he founded Pegasus in 1982. Pegasus Associates
is
currently an operating division of William Harris Investors, a registered
investment advisory firm. He specializes in analyzing and investing in
pharmaceutical and biotechnology companies. Mr Holubow serves on the board
of
directors of Micrus Endovascular Corporation, and has served on the boards
of
ThermoRetec Corporation, Savient Pharmaceuticals, Inc. (formerly Bio-Technology
General Corp.), Gynex Pharmaceuticals, Inc. and Unimed Pharmaceuticals,
Inc.
Peter
Kjaer
has been
a director of our company since July 1999. Mr. Kjaer has been President and
Chief Executive Officer of Jet-Asia Ltd., a Hong Kong-based aircraft and
management company, since April 1996.
Ross
Mangano
has been
a director of our company since July 1999. Mr. Mangano has been the President
and a director of Oliver Estate, Inc., a management company specializing in
investments in public and private companies, since 1971. He serves on the board
of directors of U.S. RealTel Inc., as well as several private
companies.
Victor
Morgenstern
has been
a director of our company since July 1999. Mr. Morgenstern has more than 32
years of investment experience. He serves as managing director of Resolute
Partners L.P. and Chairman and principal of Valor Equity Partners, LLC, a
private equity fund. He is a trustee of the Illinois Institute of
Technology.
Edward
C. Rosenow, III, M.D.
has been
a director of our company since November 1997. Dr. Rosenow is a Master Fellow
of
the American College of Physicians as well as Master Fellow the American College
of Chest Physicians. Dr. Rosenow was the Arthur M. and Gladys D. Gray Professor
of Medicine at the Mayo Clinic from 1988 until his retirement in 1996. Beginning
with his residency in 1960, Dr. Rosenow has worked at the Mayo Clinic in many
professional capacities including as a Consultant in Internal Medicine (Thoracic
Diseases) from 1966 to 1996, an Assistant Professor, Associate Professor and
Professor of Medicine at the Mayo Clinic Medical School, President of the Mayo
Clinic Staff in 1986, and Chair of the Division of Pulmonary and Critical Care
Medicine from 1987 to 1994. Dr. Rosenow has also served as a consultant to
NASA,
space station FREEDOM at the Johnson Space Center in Houston, Texas from 1989
to
1990 and as the President of the American College of Chest Physicians from
1989
to 1990. In 1998, he received the Mayo Distinguished Alumnus Award. Dr. Rosenow
serves on the board of directors of BioVirex, Inc.
The
Board
of Directors has affirmatively determined that each of our directors, except
for
Mr. Simes, is an “independent director” as defined by the listing standards of
the American Stock Exchange. Under these standards, no director qualifies as
independent unless the Board of Directors affirmatively determines that the
director does not have a material relationship with the listed company that
would interfere with the exercise of independent judgment. The American Stock
Exchange’s listing standards provide a non-exclusive list of persons who are not
considered independent. For example, a director who is, or during the past
three
years was, employed by the company or by any parent or subsidiary of the
company, other than prior employment as an interim Chairman or Chief Executive
Officer, would not be considered
independent. In making an affirmative determination that each of our directors,
except for Mr. Simes, is an “independent director,” the Board of Directors
reviewed and discussed information provided by the directors and by BioSante
with regard to each director’s business and personal activities as they may
relate to BioSante and BioSante’s management.
The
Board
of Directors met seven times during 2005. All of our directors attended 75%
or
more of the aggregate meetings of the Board of Directors and all committees
on
which they served during 2005.
The
Board
of Directors has a standing Audit and Finance Committee, Compensation Committee,
Nominating and Corporate Governance Committee and Scientific Review
Committee.
Audit
and Finance Committee.
The
Audit and Finance Committee provides assistance to the Board of Directors in
fulfilling its responsibilities for oversight, for quality and integrity of
the
accounting, auditing, reporting practices, systems of internal accounting and
financial controls, the annual independent audit of our financial statements,
and the legal compliance and ethics programs of BioSante as established by
management. The Audit and Finance Committee’s primary responsibilities
include:
| · |
overseeing
BioSante’s accounting and financial reporting processes, systems of
internal control over financial reporting and disclosure control
and
procedures on behalf of the Board and reporting the results or findings
of
its oversight activities to the
Board;
|
| · |
having
sole authority to appoint, retain and oversee the work of BioSante’s
independent registered public accounting firm and establishing the
compensation to be paid to the independent registered public accounting
firm;
|
| · |
establishing
procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls and/or or auditing
matters and for the confidential, anonymous submission by BioSante’s
employees of concerns regarding questionable accounting or auditing
matters;
|
| · |
reviewing
and pre-approving all audit services and permissible non-audit services
to
be performed for BioSante by BioSante’s independent registered public
accounting firm as provided under the federal securities laws and
rules
and regulations of the Securities and Exchange Commission;
and
|
| · |
overseeing
BioSante’s system to monitor and manage risk, and legal and ethical
compliance programs, including the establishment and administration
(including the grant of any waiver from) a written code of ethics
applicable to each of BioSante’s principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons
performing similar functions.
|
The
Audit
and Finance Committee operates under a written charter adopted by the Board
of
Directors, which can be found on the Investors—Corporate Governance section of
our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
The
Audit
and Finance Committee currently consists of Mr. Holubow, Mr. Kjaer and Dr.
Sullivan. Mr. Holubow is the current chair of our Audit and Finance
Committee.
Each
member of the Audit and Finance Committee qualifies as “independent” for
purposes of membership on audit committees pursuant to the listing standards
of
the American Stock Exchange and the rules and regulations of the Securities
and
Exchange Commission and is “financially literate” as required by American Stock
Exchange’s listing standards. In addition, the Board has determined that
Mr. Holubow qualifies as an “audit committee financial expert” as defined
by the rules and regulations of the Securities and Exchange Commission and
meets
the qualifications of “financial sophistication” under American Stock Exchange’s
listing standards as a result of his MBA in finance, and his experience as
an
investment analyst and portfolio manager for over 38 years and as a member
of an
audit committee of another public company. Stockholders should understand that
these designations related to our Audit and Finance Committee members’
experience and understanding with respect to certain accounting and auditing
matters do not impose upon any of them any duties, obligations or liabilities
that are greater than those generally imposed on a member of the Audit and
Finance Committee or of the Board of Directors.
Additional
information regarding the Audit and Finance Committee and our independent
registered public accounting firm is disclosed under the Audit and Finance
Committee Report and Proposal 3 of this proxy statement. The Audit and Finance
Committee met five times during 2005.
Compensation
Committee.
The
Compensation Committee discharges the responsibilities of the Board of Directors
relating to compensation of our executive officers and reviews, assesses and
approves overall company strategies for attracting, developing, retaining and
motivating management. The primary responsibilities of the Compensation
Committee include to:
| · |
determine,
or recommend to the Board for its determination, the annual salaries,
incentive compensation, long-term compensation and any and all other
compensation applicable to our chief executive officer and other
executive
officers;
|
| · |
establish,
and from time to time review and revise, corporate goals and objectives
with respect to compensation for the our chief executive officer
and other
executive officers and establish and lead a process for the full
Board to
evaluate the performance of our chief executive officer and other
executive officers in light of those goals and
objectives;
|
| · |
administer
our equity compensation plans applicable to any employee of us and
determine specific grants of options or other awards for all executive
officers and general grant levels for other employees, under our
equity
compensation plans; and
|
| · |
administer
our incentive compensation plans applicable to our executive officers,
including the annual establishment of (i) eligible employees, (ii)
performance goals, and (iii) target incentive compensation
levels.
|
The
Compensation Committee operates under a written charter adopted by the Board
of
Directors, which can be found on the Investors—Corporate Governance section of
our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
The
Compensation Committee currently consists of Dr. Sullivan, Mr. Mangano and
Mr.
Morgenstern, each of whom is considered “independent” under the American Stock
Exchange listing standards. Dr. Sullivan is the current chair of our
Compensation Committee. The Compensation Committee met six times during
2005.
Nominating
and Corporate Governance Committee.
The
primary purposes of the Nominating and Corporate Governance Committee are
to:
| · |
identify
individuals qualified to become Board
members;
|
| · |
recommend
director nominees for each annual meeting of BioSante’s stockholders and
director nominees to fill any vacancies that may occur between meetings
of
stockholders;
|
| · |
be
aware of the best practices in corporate governance and develop and
recommend to the Board a set of corporate governance standards to
govern
the Board, its committees, the company and its employees in the conduct
of
the business and affairs of the company;
and
|
| · |
develop
and oversee the annual Board and Board Committee evaluation
process.
|
The
Nominating and Corporate Governance Committee operates under a written charter
adopted by the Board of Directors, which can be found on the Investors—Corporate
Governance section of our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
The
Nominating and Corporate Governance Committee currently consists of Dr.
Sullivan, Mr. Holubow, Mr. Kjaer, Mr. Mangano, Mr. Morgenstern, and Dr. Rosenow
each of whom is considered “independent” under the American Stock Exchange
listing standards. Dr. Sullivan is the current chair of our Nominating and
Corporate Governance Committee. The Nominating and Corporate Governance
Committee met once during 2005.
Scientific
Review Committee.
The
Scientific Review Committee assists our Board of Directors in evaluating
potential new licenses or new products and reviewing ongoing activities of
our
current products. The Scientific Review Committee operates under a written
charter adopted by the Board of Directors, which can be found on the
Investors—Corporate Governance section of our corporate website at www.biosantepharma.com.
The
Scientific Review Committee currently consists of Dr. Sullivan,
Mr. Holubow and Dr. Rosenow. The Scientific Review Committee met once
during 2005.
Corporate
Governance Standards.
Our
Board of Directors has adopted Corporate Governance Standards that were
originally developed and recommended by our Nominating and Corporate Governance
Committee. A copy of these Corporate Governance Standards can be found on the
Investors—Corporate Governance section of our corporate website at www.biosantepharma.com.
A
printed copy of such Corporate Governance Standards is also available to any
stockholder upon request to our Corporate Secretary at BioSante Pharmaceuticals,
Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069, telephone: (847)
478-0500 ext. 120. Among the topics addressed in our Corporate Governance
Standards are:
| · |
Board
size, composition and qualifications;
|
| · |
Selection
of directors;
|
| · |
Board
leadership;
|
| · |
Board
committees;
|
| · |
Board
and committee meetings;
|
| · |
Executive
sessions of outside directors;
|
| · |
Meeting
attendance by directors and
non-directors;
|
| · |
Appropriate
information and access;
|
| · |
Ability
to retain advisors;
|
| · |
Conflicts
of interest;
|
| · |
Board
interaction with corporate
constituencies;
|
| · |
Change
of principal occupation and board
memberships;
|
| · |
Retirement
and term limits;
|
| · |
Board
compensation;
|
| · |
Stock
ownership by directors and executive
officers;
|
| · |
Loans
to directors and executive
officers;
|
| · |
CEO
evaluation;
|
| · |
Board
evaluation;
|
| · |
Director
continuing education; and
|
| · |
Succession
planning.
|
Director
Nominations Process.
In
selecting nominees for the Board of Directors, the Nominating and Corporate
Governance Committee first determines whether the incumbent directors whose
terms expire at the meeting are qualified to serve, and wish to continue to
serve, on the Board. The Nominating and Corporate Governance Committee believes
that BioSante and its stockholders benefit from the continued service of
qualified incumbent directors because those directors have familiarity with
and
insight into BioSante’s affairs that they have accumulated during their tenure
with the company. Appropriate continuity of Board membership also contributes
to
the Board’s ability to work as a collective body. Accordingly, it is the
practice of the Nominating and Corporate Governance Committee, in general,
to
re-nominate an incumbent director whose term expires at the upcoming annual
meeting of stockholders if the director wishes to continue his or her service
with the Board, the director continues to satisfy the Nominating and Corporate
Governance Committee’s criteria for membership on the Board, the Nominating and
Corporate Governance Committee believes the director continues to make important
contributions to the Board, and there are no special, countervailing
considerations against re-nomination of the director.
In
identifying and evaluating new candidates for election to the Board, the
Nominating and Corporate Governance Committee will solicit recommendations
for
nominees from persons whom the Nominating and Corporate Governance Committee
believes are likely to be familiar with qualified candidates having the
qualifications, skills and characteristics required for Board nominees from
time
to time. Such persons may include members of the Board and senior management
of
BioSante. In addition, the Nominating and Corporate Governance Committee may
engage a search firm to assist it in identifying qualified candidates. The
Nominating and Corporate Governance Committee will review and evaluate each
candidate whom it believes merits serious consideration, taking into account
available information concerning the candidate, any qualifications or criteria
for Board membership established by the Nominating and Corporate Governance
Committee, the existing composition of the Board, and other factors that it
deems relevant. In conducting its review and evaluation, the Nominating and
Corporate Governance Committee may solicit the views of BioSante’s management,
other Board members, and any other individuals it believes may have insight
into
a candidate. The Nominating and Corporate Governance Committee may designate
one
or more of its members and/or other Board members to interview any proposed
candidate.
The
Nominating and Corporate Governance Committee will consider recommendations
for
the nomination of directors submitted by BioSante stockholders. For more
information, see the information set forth under the heading “Other Matters ─
Stockholder Proposals for 2007 Annual Meeting.” The Nominating and Corporate
Governance Committee will evaluate candidates recommended by stockholders in
the
same manner as those recommended as stated above.
There
are
no formal requirements or minimum qualifications that a candidate must meet
in
order for the Nominating and Corporate Governance Committee to recommend the
candidate to the Board. The Nominating and Corporate Governance Committee
believes that each nominee should be evaluated based on his or her merits as
an
individual, taking into account the needs of BioSante and the Board. However,
in
evaluating candidates, there are a number of criteria that the Nominating and
Corporate Governance Committee generally views as relevant and is likely to
consider. Some of these factors include whether the candidate is an “independent
director” under the rules and regulations of the American Stock Exchange and
meets any other applicable independence tests under the federal securities
laws
and rules and regulations of the Securities and Exchange Commission; whether
the
candidate is “financially sophisticated” and otherwise meets the requirements
for serving as a member of an audit committee under the rules and regulations
of
the American Stock Exchange; whether the candidate is an “audit committee
financial expert” under the federal securities laws and the rules and
regulations of the Securities and Exchange Commission; the needs of BioSante
with respect to the particular talents and experience of its directors; the
personal and professional integrity and reputation of the candidate; the
candidate’s level of education and business experience; the candidate’s
broad-based business acumen; the candidate’s level of understanding of
BioSante’s business and its industry; the candidate’s ability and willingness to
devote adequate time to work of the Board and its committees; the fit of the
candidate’s skills and personality with those of other directors and potential
directors in building a board that is effective, collegial and responsive to
the
needs of BioSante; whether the candidate possesses strategic thinking and a
willingness to share ideas; the candidate’s diversity of experiences, expertise
and background; and the candidate’s ability to represent the interests of all
stockholders and not a particular interest group.
Code
of Conduct and Ethics.
Our
Board of Directors has adopted a Code of Conduct and Ethics, which applies
to
all of our directors, executive officers, including our President and Chief
Executive Officer and our Chief Financial Officer, and other employees, and
meets the requirements of the Securities and Exchange Commission and the
American Stock Exchange. A copy of our Code of Conduct and Ethics can be found
on the Investors—Corporate Governance section of our corporate website at
www.biosantepharma.com.
A
printed copy of such Code of Conduct and Ethics is also available to any
stockholder upon request to our Corporate Secretary at BioSante Pharmaceuticals,
Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069, telephone: (847)
478-0500 ext. 120.
Policy
Regarding Director Attendance at Annual Meetings of
Stockholders.
It is
the policy of the Board of Directors that directors standing for re-election
should attend our annual meeting of stockholders, if their schedules permit.
Last year, all directors attended the annual meeting of
stockholders.
Complaint
Procedures.
The
Audit and Finance Committee has established procedures for the receipt,
retention, and treatment of complaints received by BioSante regarding
accounting, internal accounting controls, or auditing matters, and the
submission by employees of BioSante, on a confidential and anonymous basis,
of
concerns regarding questionable accounting or auditing matters. BioSante
personnel with such concerns are encouraged to discuss their concerns with
their
supervisor first, who in turn will be responsible for informing BioSante’s
Compliance Officer of any concerns raised. If an employee prefers not to discuss
a particular matter with his or her own supervisor, the employee may instead
discuss such matter with BioSante’s Compliance Officer. If an individual prefers
not to discuss a matter with the Compliance Officer or if the Compliance Officer
is unavailable and the matter is urgent, the individual is encouraged to contact
the Chair of the Audit and Finance Committee, Mr. Fred Holubow.
Process
Regarding Stockholder Communications with Board of Directors.
Stockholders may communicate with the Board of Directors or any one particular
director by sending correspondence, addressed to our Corporate Secretary,
BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard, Suite 280, Lincolnshire,
IL 60069, with an instruction to forward the communication to the Board of
Directors or one or more particular directors. Our Corporate Secretary will
promptly forward all such stockholder communications to the Board of Directors
or the one or more particular directors, with the exception of any
advertisements, solicitations for periodical or other subscriptions and other
similar communications.
Except
as
described below, each of our non-employee directors is paid a $20,000 annual
retainer and $1,000 for each board or committee meeting attended in person
and
$500 for each board or committee meeting attended via telephone. The Chairman
of
the Board is paid a $45,000 annual retainer and the Chairman of the Finance
and
Audit Committee is a paid a $25,000 annual retainer. All of our directors are
reimbursed for travel expenses for attending meetings.
Our
inside director, Mr. Simes, was compensated during fiscal 2005 for his service
as an executive officer of BioSante and is not separately compensated for his
services as a director of BioSante. For information relating to compensation
earned by Mr. Simes, see “Executive Compensation and Other
Benefits.”
This
report is furnished by the Audit and Finance Committee of the Board of Directors
with respect to BioSante’s financial statements for the year ended December 31,
2005.
One
of
the purposes of the Audit and Finance Committee is to oversee BioSante’s
accounting and financial reporting processes and the audit of BioSante’s annual
financial statements. BioSante’s management is responsible for the preparation
and presentation of complete and accurate financial statements. BioSante’s
independent registered public accounting firm, Deloitte & Touche LLP, is
responsible for performing an independent audit of BioSante’s financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and for issuing a report on their
audit.
The
Audit
and Finance Committee has reviewed and discussed BioSante’s audited financial
statements for the year ended December 31, 2005 with BioSante’s management.
Management represented to the Audit and Finance Committee that BioSante’s
financial statements were prepared in accordance with generally accepted
accounting principles. The Audit and Finance Committee has discussed with
Deloitte & Touche LLP, BioSante’s independent registered public accounting
firm, the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Audit and Finance Committee
has received the written disclosures and the letter from Deloitte & Touche
LLP required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and the Audit and Finance Committee has
discussed the independence of Deloitte & Touche LLP with them.
Based
on
the review and discussions of the Audit and Finance Committee described above,
in reliance on the unqualified opinion of Deloitte & Touche LLP regarding
BioSante’s audited financial statements, and subject to the limitations on the
role and responsibilities of the Audit and Finance Committee discussed above
and
in the Audit and Finance Committee’s charter, the Audit and Finance Committee
recommended to the Board of Directors that BioSante’s audited financial
statements be included in BioSante’s Annual Report on Form 10-K for the year
ended December 31, 2005 for filing with the SEC.
Audit
and Finance Committee
Fred
Holubow, Chairman
Peter
Kjaer
Louis
W.
Sullivan, M.D.
The
foregoing Audit and Finance Committee Report, the Compensation Committee Report
beginning on page 20 and the Stock Performance Graph on page 24 shall not be
deemed to be “soliciting material” or to be filed with the Securities and
Exchange Commission or subject to Regulation 14A or 14C under the Securities
Exchange Act of 1934, as amended, or to the liabilities of Section 18 of that
act. Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings, including this
proxy statement, in whole or in part, neither of the reports nor the Stock
Performance Graph shall be incorporated by reference into any such
filings.
_____________________
The
following table provides summary information concerning cash and non-cash
compensation paid to or earned by our Chief Executive Officer, our executive
officers and a former executive officer, who received or earned cash and
non-cash salary and bonus of more than $100,000, for the fiscal year ended
December 31, 2005.
SUMMARY
COMPENSATION TABLE
|
Long-Term
Compensation
|
||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($
|
)
|
Bonus
($
|
)
|
Securities
Underlying
Options
#
|
All
Other
Compensation($
|
)
|
||||||||
|
Stephen
M. Simes
Vice
Chairman, President and
Chief
Executive Officer
|
2005
2004
2003
|
$
|
374,400
360,000
323,400
|
$
|
—
120,000
161,700
|
—
126,667(1)
—(1)
|
|
$
|
33,927(2)
34,088(2)
27,239(2)
|
|
||||||
|
Phillip
B. Donenberg
Chief
Financial Officer, Treasurer and Secretary
|
2005
2004
2003
|
198,640
191,000
166,215
|
150,000
51,000
49,865
|
50,000
79,166(1)
—(1)
|
|
14,200(3)
14,807(3)
14,347(3)
|
|
|||||||||
|
Steven
J. Bell, Ph.D.
Vice
President, Research and
Pre-Clinical
Development
|
2005
2004
2003
|
166,400
160,000
140,000
|
35,000
32,000
42,000
|
50,000
25,000
—
|
13,000(4)
12,500(4)
12,000(4)
|
|
||||||||||
|
Leah
M. Lehman, Ph.D.(6)
Former
Vice President, Product Development
|
2005
2004
2003
|
249,600
240,000
199,500
|
—
40,000
59,850
|
300,000(6)
79,167(1)
—(1)
|
|
14,200(5)
13,700(5)
13,200(5)
|
|
__________________________
|
(1)
|
On
May 30, 2003, an option was granted that provided for milestone vesting
and an expiration date of November 30, 2004. On March 22, 2004, the
2003
option was amended to provide for vesting in three equal annual
installments commencing on May 30, 2004 and an expiration date of
May 29,
2013. The exercise price was not amended. The 2004 amendment to the
2003
option resulted in a deemed cancellation of the 2003 option and a
new
option grant in 2004 under the rules and regulations of the Securities
and
Exchange Commission.
|
|
(2)
|
Represents
an auto allowance ($12,000 in 2005, $12,000 in 2004 and $12,000 in
2003),
a 401(k) matching contribution ($9,000 in 2005, $8,000 in 2004, and
$7,000
in 2003) and insurance premiums and taxes associated with the premiums
($12,927 in 2005, $14,088 in 2004, and $8,239 in
2003).
|
|
(3)
|
Represents
an auto allowance ($7,200 in 2005, $7,200 in 2004 and $7,200 in 2003),
a
401(k) matching contribution ($7,000 in 2005, $6,500 in 2004 and
$6,000 in
2003) and insurance premiums paid and taxes associated with the premiums
(0$ in 2005, $1,107 in 2004, and $1,147 in
2003).
|
|
(4)
|
Represents
an auto allowance ($6,000 in 2005, $6,000 in 2004 and $6,000 in 2003)
and
a 401(k) matching contribution ($7,000 in 2005, $6,500 in 2004 and
$6,000
in 2003).
|
|
(5)
|
Represents
an auto allowance of ($7,200 in 2005, $7,200 in 2004 and $7,200 in
2003)
and a 401(k) matching contribution of ($7,000 in 2005, $6,500 in
2004 and
$6,000 in 2003).
|
|
(6)
|
Effective
December 31, 2005, Dr. Lehman’s employment with our company terminated and
her options to purchase 416,389 shares of common stock, including
the
options to purchase 300,000 shares of common stock granted in 2005,
were
subsequently terminated.
|
The
following table summarizes option grants during the fiscal year ended December
31, 2005 to or by each of our named executive officers.
|
Individual
Grants(1)
|
Grant
Date Value
|
||||
|
Name
|
Number
of
Securities
Underlying
Options
Granted
(#)
|
Percent
of
Total
Options
Granted
to
Employees
in
Fiscal
Year
|
Exercise
Price
($
Per Share)
|
Expiration
Date
|
Grant
Date Present Value($)(2)
|
|
Stephen
M. Simes
|
—
|
—
|
—
|
—
|
—
|
|
Phillip
B. Donenberg
|
25,000
(3)
|
5.97%
|
$3.715
|
7/18/2015
|
$75,750
|
|
25,000
(4)
|
5.97%
|
$3.715
|
7/18/2015
|
75,750
|
|
|
Steven
J. Bell, Ph.D.
|
25,000
(3)
|
5.97%
|
$3.715
|
7/18/2015
|
75,750
|
|
25,000
(4)
|
5.97%
|
$3.715
|
7/18/2015
|
75,750
|
|
|
Leah
M. Lehman, Ph.D.(5)
|
150,000
(6)
|
35.80%
|
$3.715
|
7/18/2015
|
454,500
|
|
150,000
(4)
|
35.80%
|
$3.715
|
7/18/2015
|
454,500
|
|
__________________________
|
(1)
|
All
of the options granted to the individuals in this table were granted
under
the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan.
Under the plan, all options vest upon a change of control of our
company
and remain exercisable for the remainder of their terms.
|
|
(2)
|
The
grant date present value shown is an estimate only, arrived at using
the
Black-Scholes option pricing model, with the following weighted average
assumptions as of July 19, 2005: risk-free interest rate of 3.96%,
expected life of option of 10 years, expected dividend yield of zero
and
expected stock volatility of
74.48%.
|
|
(3)
|
Options
have a ten-year term and vest with respect to 5,000 shares on each
of
January 19, 2006 and July 19, 2006, and with respect to 7,500 shares
on
each of July 19, 2007 and July 19,
2008.
|
|
(4)
|
Options
have a ten year term and vest upon obtainment of certain performance
criteria.
|
|
(5)
|
Dr.
Lehman’s employment with our company terminated effective December 31,
2005 at which time all of her options granted during the fiscal year
ended
December 31, 2005 were subsequently
terminated.
|
|
(6)
|
This
option has a ten-year term and vests with respect to 30,000 shares
on each
of January 19, 2006 and July 19, 2006, and with respect to 45,000
shares
on each of July 19, 2007 and July 19, 2008. See footnote
(5).
|
The
following table summarizes the number and value of options held by each of
our
named executive officers at December 31, 2005.
|
|
|
|
Shares
Acquired
on Exercise
(#)(1)
|
|
|
Value
Realized
($)(2)
|
|
Number
of Securities
Underlying
Unexercised
Options
at December 31, 2005
|
Value
of Unexercised
In-the-Money
Options
at
December 31, 2005(3)
|
||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||||
|
Stephen
M. Simes
|
—
|
$
|
—
|
449,984
|
42,222
|
$
|
370,753
|
$
|
61,222
|
||||||||||
|
Phillip
B. Donenberg
|
—
|
—
|
164,076
|
76,389
|
147,396
|
38,264
|
|||||||||||||
|
Steven
J. Bell, Ph.D.
|
12,500
|
15,125
|
46,358
|
66,667
|
14,037
|
—
|
|||||||||||||
|
Leah
Lehman, Ph.D.(4)
|
—
|
—
|
181,849
|
326,389
|
82,389
|
38,264
|
|||||||||||||
__________________________
|
(1)
|
The
BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan
generally provides that the exercise price of options must be paid
entirely in cash (including check, bank draft, or money order); provided,
however, that the Compensation Committee, in its sole discretion,
and upon
terms and conditions established by the Compensation Committee, may
allow
such payments to be made, in whole or in part, on a “cashless” basis.
|
|
(2)
|
Value
based on the difference between the fair market value of one share
of our
common stock on the date of exercise and the exercise price of the
option.
|
|
(3)
|
Value
based on the difference between the fair market value of one share
of our
common stock at December 30, 2005 ($3.55), and the exercise price
of the
options ranging from $2.10 to $6.70 per share. Options are in-the-money
if
the market price of the shares exceeds the option exercise
price.
|
|
(4)
|
Effective
December 31, 2005, Dr. Lehman’s employment with our company terminated and
her options to purchase 416,389 shares of common stock were subsequently
terminated.
|
The
following table summarizes outstanding options under the BioSante
Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan as of December 31,
2005. Options granted in the future under the plan are within the discretion
of
our Compensation Committee and therefore cannot be ascertained at this time.
Our
only equity compensation plan under which shares of our common stock may be
issued is the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan.
|
|
(a)
|
(b)
|
|
|
(c)
|
|
||||
|
Plan
Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
|
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
|
|
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plan (excluding securities reflected in column
(a)
|
|
||
|
Equity
compensation plans
approved
by security holders
|
1,425,530
|
$
|
3.41
|
417,530
|
||||||
|
Equity
compensation plans
not
approved by security
holders
|
0
|
N/A
|
0
|
|||||||
|
Total
|
1,425,530
|
$
|
3.41
|
417,530
|
Simes
Employment Agreement
In
January 1998, we entered into a letter agreement with Stephen M. Simes pursuant
to which Mr. Simes serves as our Vice Chairman, President and Chief Executive
Officer. The term of this agreement continues until December 31, 2006, after
which time the term will be automatically extended for three additional years
unless on or before October 1 immediately preceding the extension, either party
gives written notice to the other of the termination of the agreement. Under
the
letter agreement, Mr. Simes is entitled to receive an annual performance bonus
of up to 50% of his then base salary if certain performance criteria are met.
If
appropriate, the Compensation Committee may, at its discretion, grant Mr. Simes
a bonus in excess of 50% of his base salary. If Mr. Simes is terminated without
cause or upon a change in control or if he terminates his employment for good
reason, all of his options will become immediately exercisable and will remain
exercisable for a period of one year (for the remainder of their term in the
event of a change in control), and he will be entitled to a minimum severance
payment of 12 months base salary. In addition, Mr. Simes will receive health
and
dental benefits from BioSante during any severance period. Mr. Simes is also
subject to customary assignment of inventions, confidentiality and
non-competition provisions.
Donenberg
Employment Agreement
In
June
1998, we entered into a letter agreement with Phillip B. Donenberg pursuant
to
which Mr. Donenberg serves as our Chief Financial Officer. The term of this
agreement continues until either party gives 30 days written notice to the
other
of the termination of the agreement. Under the letter agreement, Mr. Donenberg
is entitled to receive an annual performance bonus of up to 30% of his then
base
salary if certain performance criteria are met. If appropriate, the Compensation
Committee may, at its discretion, grant Mr. Donenberg a bonus in excess of
30%
of his base salary. If Mr. Donenberg is terminated without cause or upon a
change in control or if he terminates his employment for good reason, all of
his
options will become immediately exercisable and will remain exercisable for
a
period of one year (for the remainder of their term in the event of a change
in
control), and he will be entitled to a minimum severance payment of 12 months
base salary. In addition, Mr. Donenberg will receive health and dental benefits
from BioSante during any severance period. Mr. Donenberg is also subject to
customary assignment of inventions, confidentiality and non-competition
provisions.
Bell
Employment Agreement
In
October 2000, we entered into an employment agreement with Steven J. Bell,
Ph.D.
This agreement provides for a fixed salary which may be adjusted from time
to
time by the Chief Executive Officer and the Compensation Committee of the Board.
In addition, we may pay Dr. Bell an annual performance bonus of up to 30% of
his
then base salary. If appropriate, the Compensation Committee may, at its
discretion, grant a bonus in excess of 30% of his base salary. The term of
this
employment agreement is for one year and will renew automatically every year
unless either party gives the other party written notice of termination at
least
30 days prior to the end of the then term of the agreement. If Dr. Bell’s
employment is terminated, by us without cause or by Dr. Bell for good reason,
Dr. Bell will be entitled to a severance payment in an amount equal to his
base
salary for the shorter of (a) six months, or (b) the date upon which he obtains
full-time employment or a consulting position with another company. In addition,
Dr. Bell will receive health and dental benefits from us during any severance
period. Dr. Bell is also subject to customary assignment of inventions,
confidentiality and non-competition provisions.
Under
the
BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan, incentive
awards granted under the plan will become fully exercisable following certain
changes in control of our company, such as:
| · |
the
sale, lease, exchange or other transfer of all or substantially all
of the
assets of our company to a corporation that is not controlled by
us;
|
| · |
the
approval by our stockholders of any plan or proposal for the liquidation
or dissolution of our company;
|
| · |
certain
merger or business combination
transactions;
|
| · |
more
than 50% of our outstanding voting shares are acquired by any person
or
group of persons who did not own any shares of common stock on the
effective date of the plan; and
|
| · |
certain
changes in the composition of the Board of
Directors.
|
None
of
our executive officers serve as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
who
serve on our Board of Directors or Compensation Committee. None of the members
of our Compensation Committee have been an officer or employee of us or one
of
our subsidiaries.
Responsibilities
of the Compensation Committee
The
Compensation Committee of our Board of Directors is comprised of Louis W.
Sullivan, M.D., Ross Mangano and Victor Morgenstern. Dr. Sullivan serves as
chair of the Compensation Committee. The primary purpose of the Compensation
Committee is to assist our Board of Directors in discharging its
responsibilities relating to the compensation of our executive officers. The
responsibilities of the Compensation Committee include determining, or
recommending to our Board of Directors for its determination, the annual
salaries, incentive compensation, long-term compensation and any and all other
compensation applicable to our chief executive officer and other executive
officers and administering our equity compensation plans. The Compensation
Committee operates under a formal written charter that has been approved by
our
Board of Directors and reflects these various responsibilities.
The
Compensation Committee generally meets on several occasions during the year
and
also considers and takes action by written consent. The Compensation Committee
reports on committee actions and recommendations at Board of Directors meetings.
The Compensation Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its
duties and responsibilities.
The
decisions of the Compensation Committee and our compensation programs are based
on the following principles:
| · |
We
favor having a significant component of variable compensation tied
to
attainment of company objectives and achievement of individual goals
over
solely fixed compensation.
|
| · |
We
seek to reward achievement of company objectives that are aligned
with the
interests of our stockholders. Our incentive compensation programs
are
designed to provide increased earnings potential for our executives
as
company objectives and individual goals are met or
surpassed.
|
| · |
Individual
differentiation in compensation occurs among executives based on
scope and
nature of responsibility, education and experience, job performance
and
potential.
|
In
discharging its responsibilities, the Compensation Committee considers factors,
such as the attainment of company objectives; individual performance of our
executive officers as measured in isolation and in comparison to certain goals
set by the Compensation Committee and the individual executive officers;
historical compensation levels; the overall competitive environment for
executive talent; and the level of compensation necessary to attract and retain
the talent necessary to achieve our objectives. In analyzing these factors,
the
Compensation Committee from time to time reviews competitive compensation data
gathered in comparative surveys or collected by independent
consultants.
Executive
Compensation Program Elements
Our
executive compensation program is primarily comprised of base salary, annual
cash incentive compensation, and long-term equity-based incentive
compensation.
Base
Salary.
The
Compensation Committee’s determinations regarding the base salary of our
executive officers, including the compensation of our chief executive officer,
are based on a number of factors, including: the level of skill and
responsibility required to fulfill each executive’s responsibilities; each
executive’s experience and qualifications; each executive’s performance and the
impact of such performance on the attainment of company objectives; and
competitive compensation data. Base salaries are reviewed annually. The 2005
base salaries for our named executive officers represented an increase of four
percent over such individuals’ base salaries for 2004. The Compensation
Committee recently established 2006 base salaries for our executive officers,
which represent an increase of zero to five percent over such individuals’ base
salaries for 2005.
Annual
Incentive Compensation.
We
provide the opportunity for annual cash incentive compensation for our executive
officers under a discretionary annual bonus plan. This plan is designed to
provide a direct financial incentive to our executive officers for the
achievement of specific performance objectives of our company and individual
goals of the officers. Each fiscal year, the Compensation Committee determines
the specific company performance objectives for the year and for each executive
officer, individual goals for the year and the target bonus level as a
percentage of base compensation.
The
Compensation Committee awarded a discretionary cash bonus of $150,000 to Mr.
Donenberg and a discretionary cash bonus of $35,000 to Dr. Bell based on their
individual performance and contributions to BioSante during 2005.
Long-Term
Incentive Compensation.
We make
long-term incentive compensation available to our executive officers, as well
as
to all of our employees, in the form of stock options. Through the grant of
stock options, we seek to align the long-term interests of our executives and
other employees with the long-term interests of our stockholders by creating
a
strong and direct linkage between compensation and long-term stockholder return.
We further seek to enable executives and other key employees to achieve
meaningful ownership in our company, thereby improving our ability to retain
executives and other key employees.
Executive
officers and other employees are eligible for option grants upon joining our
company and thereafter on a periodic basis. All stock option grants have an
exercise price equal to 100% of the fair market value of our common stock on
the
date of grant. Incentive stock options within the meaning of Section 422 of
the
Internal Revenue Code of 1986, as amended, are generally granted and typically
vest or become exercisable over a period of three years from the date of grant,
33.3% of the underlying shares in each year on the anniversary of the date
of
grant. Stock options typically remain exercisable for a period of 10 years
from
the date of grant, so long as the individual continues to be employed by
us.
We
review
the total size of our annual equity-based incentive awards against benchmark
data. Individual awards are based on levels of responsibility, the achievement
of performance objectives of our company and individual goals of the officers
and benchmark data. Further information regarding stock options granted to
our
other named executive officers during 2005 is included in the table under the
heading “Executive Compensation and Other Benefits—Option Grants in Last Fiscal
Year” above.
Other
Compensation Arrangements.
All of
our executive officers have employment agreements that contain change in control
provisions and provide for certain cash and other benefits upon the termination
of the executive officer’s employment with us under certain circumstances, as
described in more detail elsewhere in this proxy statement. We maintain the
BioSante 401(k) Savings Plan under which participants, including executive
officers, may voluntarily request that we reduce their pre-tax compensation
by
up to 100% (subject to certain special limitations) and contribute such amounts
to a trust. We contributed an amount equal to 50% of the amount that each
participant contributed under this plan. Our executive officers receive other
benefits received by other employees, including health, dental and life
insurance benefits. Our executive officers also receive an auto allowance.
Stephen M. Simes, our President and Chief Executive Officer, also receives
reimbursement for excess long-term disability and excess life insurance premiums
and taxes associated with the premiums. We do not provide our executive officers
with any other compensation arrangements or personal benefits other than those
described in this proxy statement.
Chief
Executive Officer Compensation and Performance
The
compensation for Stephen M. Simes, our President and Chief Executive Officer,
consists primarily of an annual base salary and the opportunity for an annual
discretionary cash bonus and long-term equity-based incentive compensation.
The
Compensation Committee determines the level for each of these compensation
elements using methods consistent with those used for the company’s other
executive officers, including the attainment of company objectives and
individual goals, as well as a review of Mr. Simes’ overall performance and
a review of competitive benchmark data. The Compensation Committee approved
a
four percent increase in Mr. Simes’ base salary for 2005 from $360,000 to
$374,400. The Compensation Committee decided recently that Mr. Simes’ base
salary for 2006 would remain the same as his base salary for 2005. Mr. Simes
did
not receive a discretionary cash bonus for 2005 and was not granted any stock
options during 2005.
Section
162(m)
Section
162(m) of the Internal Revenue Code requires that we meet specific criteria,
including stockholder approval of certain stock and incentive plans, in order
to
deduct, for federal income tax purposes, compensation over $1 million per
individual paid to our chief executive officer and each of our four other most
highly compensated executives. Since none of our named executive officers
received compensation over $1 million during 2005, the compensation committee
believes that all compensation attributable to the period qualified for
deductibility by BioSante.
Compensation
Committee
Louis
W.
Sullivan, M.D., Chairman
Ross
Mangano
Victor
Morgenstern
The
following graph shows the five-year cumulative total stockholder return on
our
common stock from December 31, 2000 until December 31, 2005, with the annual
cumulative total return over the same period of the Russell 3000 Index and
the
Biological Products Index.
The
comparison assumes the investment of $100 in each of our common stock, the
Russell 3000 Index and the Biological Products Index on January 1, 2001, and
the
reinvestment of all dividends.
|
|
Fiscal
Year Ending
|
||||||||||||||||||
|
|
12/31/00
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/30/05
|
|||||||||||||
|
BioSante
Pharmaceuticals
|
100.00
|
113.33
|
44.67
|
55.20
|
73.07
|
48.67
|
|||||||||||||
|
Biological
Products
|
100.00
|
88.63
|
57.91
|
77.65
|
85.82
|
95.99
|
|||||||||||||
|
Russell
3000 Index
|
100.00
|
87.36
|
67.44
|
86.62
|
95.56
|
99.65
|
|||||||||||||
AMENDED
AND RESTATED 1998 STOCK PLAN
(Proposal
2)
_____________________
On
December 8, 1998, our Board of Directors adopted the BioSante Pharmaceuticals,
Inc. 1998 Stock Option Plan, and on July 13, 1999 our stockholders approved
the
plan. On March 19, 2003, the Board of Directors amended and restated the plan
and on May 30, 2003 our stockholders approved the BioSante Pharmaceuticals,
Inc.
Amended and Restated 1998 Stock Plan.
On
April
5, 2006, our Board of Directors again amended the plan, subject to stockholder
approval, to increase the number of shares of common stock reserved for issuance
under the plan by 1,000,000 shares, from 2,000,000 shares to 3,000,000 shares
and to eliminate our ability to reprice outstanding stock options without
obtaining stockholder approval. You are being asked to approve these two
amendments to the BioSante Pharmaceuticals, Inc. Amended and Restated 1998
Stock
Plan, at the Annual Meeting.
Providing
stock incentive awards under our plan is an important element in our overall
success. In general, the Board of Directors believes that equity-based
incentives align the interests of our management and employees with those of
our
stockholders. In addition, providing incentive awards under the plan is an
important strategy for attracting and retaining the type of high-quality
executives, employees and advisors the Board of Directors believes is necessary
for the achievement of our goals. Given the intense competition for such
personnel, the Board of Directors believes that its ability to offer competitive
compensation packages, including those with equity-based incentive components,
such as stock options and stock awards, is particularly important in attracting
and retaining qualified candidates. The purpose of the amendment to increase
the
number of shares of BioSante common stock is to enable BioSante’s Board of
Directors to continue to grant stock options and other stock incentive awards
under the plan.
The
purpose of the amendment to eliminate our ability to reprice outstanding stock
options without stockholder approval is to conform the terms of the plan to
the
current rules of which our company is subject as a result of our common stock
being listed on the American Stock Exchange, which prohibit the repricing of
outstanding stock options without stockholder approval.
A
general
description of the material terms of the plan is set forth below. Unless
otherwise indicated, the following summary of the material provisions of the
plan assumes the approval of the proposed amendments increasing the number
of
shares of common stock reserved for issuance and eliminating our ability to
reprice outstanding stock options without obtaining stockholder approval. This
summary is qualified in its entirety by reference to the actual text of the
plan, a copy of which you may obtain from us at the address set forth at the
beginning of this proxy statement.
Purpose
of the Plan.
The
plan’s purpose is to advance our interests and the interests of our stockholders
by enabling us to attract and retain talented persons by providing an incentive
to these individuals through equity participation in BioSante and also rewarding
individuals who contribute to the achievement of our economic
objectives.
Stock
Subject to the Plan.
The
proposed amendment to the plan would increase the number of shares of common
stock specifically reserved for issuance under the plan from 2,000,000 to
3,000,000 shares.
As
of
April 15, 2006, options to purchase 1,039,312 shares of common stock were
outstanding and 401,602 shares of common stock had been issued upon the exercise
of incentive awards granted under the plan. Accordingly, 559,086 shares remained
available for future grant under the plan as of that date. Assuming approval
of
an increase of 1,000,000 shares to the plan, 1,559,086 shares would be available
for future grants.
The
following points describe how our Compensation Committee determines the number
of shares of common stock available for issuance under our plan at any point
in
time.
| · |
Outstanding
incentive awards, stock units or other awards—
reduces the maximum number of shares available for
issuance.
|
| · |
Shares
issued upon exercise or vesting of outstanding incentive awards,
stock
units or other awards—
reduces the maximum number of shares available for
issuance.
|
| · |
Incentive
awards, stock units or other awards terminate unexercised or
unvested—
shares become available again for
issuance.
|
| · |
We
pay for the incentive awards, stock units or other awards, in cash,
not
common stock—
shares become available again for
issuance.
|
In
the
event of any reorganization, merger, recapitalization, stock dividend, stock
split or similar change in our corporate structure or our shares, appropriate
adjustments will be made to the number and kind of shares reserved under the
plan and under outstanding incentive awards and to the exercise price of
outstanding options.
Administration.
The
Compensation Committee of the Board of Directors administers the plan. The
Compensation Committee has the authority to determine all terms and conditions
of incentive awards as long as they are consistent with the terms of the plan.
The Compensation Committee also has the authority to amend or modify the terms
of any outstanding incentive award in any manner. Any amendment or modification,
however, must be permitted by the plan and may not adversely affect any
participant’s rights without his or her consent. Each determination,
interpretation or other action of the Compensation Committee will be conclusive
and binding for all purposes on all persons.
Except
in
connection with certain specified changes in our corporate structure or shares,
the Compensation Committee may not, without prior approval of our stockholders,
seek to effect any re-pricing of any previously granted, “underwater” option
by:
| · |
amending
or modifying the terms of the underwater option to lower the exercise
price;
|
| · |
canceling
the underwater option and granting replacement options having a lower
exercise price, or other incentive awards in exchange;
or
|
| · |
repurchasing
the underwater options and granting new incentive awards under the
plan.
|
For
purposes of the plan, an option is deemed to be “underwater” at any time when
the fair market value of our common stock is less than the exercise
price.
Eligible
Participants.
All
employees, including officers and directors who are also employees, of BioSante
and any non-employee director, individual consultant and independent contractor
of BioSante, other than consultants and independent contractors providing
services in connection with the offer or sale of securities in a capital raising
transaction or who directly or indirectly promote or maintain BioSante’s
securities, who, in the judgment of the Compensation Committee, have
contributed, are contributing or are expected to contribute to the achievement
of our economic objectives are eligible to participate in the plan. On April
15,
2006, approximately 18 individuals (employees and directors) were eligible
to
receive options under the plan.
Participants
may be granted one or more incentive awards. The incentive awards will always
be
subject to whatever terms and conditions the Compensation Committee determines,
provided such terms and conditions are consistent with the plan. All incentive
awards are deemed granted as of the date specified in the Compensation
Committee’s resolution, which will be the date of the participant’s incentive
award agreement, if any.
Options.
The
plan provides for the grant to employees, officers, directors, consultants
and
independent contractors of our company of options to purchase shares of common
stock that qualify as “incentive stock options” within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, as well as non-statutory
options that do not qualify as incentive stock options. An option provides
the
optionee with the opportunity to purchase a specified number of shares of common
stock at a predetermined price for a specific period of time.
Incentive
options must be granted with an exercise price equal to at least the fair market
value of the common stock on the date of grant. For purposes of the plan, the
fair market value of the common stock is the closing sale price for our common
stock as reported by the American Stock Exchange. On April 21, 2006, the closing
sale price of a share of our common stock on the American Stock Exchange was
$4.11.
Options
will become exercisable at such times and in such installments as may be
determined by the Compensation Committee, provided that options may not be
exercisable after 10 years from their date of grant.
The
exercise price of options must be paid in cash, except that the Compensation
Committee may allow payment to be made (in whole or in part) by tender of a
“broker exercise notice” (pursuant to which the broker or dealer is instructed
to sell enough shares or loan the optionee enough money to pay the exercise
price and to remit such sums to us), a promissory note, a transfer of shares
of
common stock (either previously owned by the participant or previously acquired
upon a partial stock option exercise) and owned for over six months, or by
a
combination of such methods. The aggregate fair market value of shares of common
stock with respect to which incentive stock options may become exercisable
for
the first time by a participant in any calendar year may not exceed $100,000.
Any incentive options in excess of this amount will be treated as non-statutory
options.
Stock
Award.
A stock
award is an award of shares of common stock under the plan that will be subject
to such terms and conditions consistent with the other provisions of the plan
as
may be determined by the Compensation Committee. Generally, the participant
will
have all voting, dividend, liquidation and other rights with respect to the
shares of common stock issued to a participant as a stock award under the
plan.
Stock
Unit.
A stock
unit is a bookkeeping entry representing the equivalent of one share of common
stock that is payable in the form of common stock, cash or any combination
of an
incentive award. The stock unit feature of the plan combined with a new deferred
compensation plan that the Board of Directors is considering to adopt permits
BioSante’s non-employee directors and executive officers to defer the receipt of
their stock compensation for tax purposes.
Effect
of Change in Control.
We
refer you to “Executive Compensation and Other Benefits — Change in Control
Arrangements” for discussion regarding the effects of a “change in control” on
incentive awards granted under the plan.
Effect
of Termination of Employment on Service.
If a
participant’s employment or other service with BioSante terminates by reason of
death or disability, all outstanding options will remain exercisable to the
extent then exercisable for a period of six months after termination, but in
no
event after their original expiration date and all stock awards, to the extent
applicable, will vest and/or continue to vest in the manner determined by the
Compensation Committee and set forth in any agreement evidencing the stock
award. If a participant’s employment or other service with BioSante is
terminated by reason of retirement, all outstanding options will remain
exercisable to the extent then exercisable for a period of three months after
termination, but in no event after their original expiration date and all stock
awards, to the extent applicable, will vest and/or continue to vest in the
manner determined by the Compensation Committee and set forth in any agreement
evidencing the stock award.
If
a
participant’s employment or other service with us is terminated for any other
reason, other than for cause, all outstanding incentive awards will remain
exercisable to the extent then exercisable for a period of three months after
termination.
If
a
participant’s employment or other service with us is terminated for cause, all
outstanding options will immediately terminate without notice and all stock
awards, to the extent applicable, will vest and/or continue to vest in the
manner determined by the Compensation Committee and set forth in any agreement
evidencing such stock award.
The
Board
of Directors may, in our discretion, modify these post-termination provisions,
provided that no incentive award may remain exercisable beyond its expiration
date.
Amendment
of Plan.
The
Board of Directors may suspend or terminate the plan or any portion thereof
at
any time, and may amend the plan from time to time to conform the plan to any
change in applicable laws or regulations or in any other respect the Board
of
Directors may deem to be in the best interests of BioSante.
The
Board
of Directors may not, however, make an amendment to the plan without stockholder
approval if stockholder approval is required under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, Section 422 of the Internal Revenue
Code or the rules of any exchange, Nasdaq or similar regulatory body, if
applicable at that time to BioSante. Furthermore, the Board of Directors cannot
make any modification to the plan that would adversely affect outstanding
incentive awards without the consent of the affected participants.
Termination.
The
plan will terminate at midnight on December 8, 2008, unless terminated earlier
by the Board of Directors. No incentive awards may be granted after such
termination. Incentive awards outstanding upon termination of the plan may
continue to be exercised or become free of restrictions according to their
terms.
The
following description of federal income tax consequences is based on current
statutes, regulations and interpretations. The description does not include
foreign, state or local income tax consequences. In
addition,
the description is not intended to address specific tax consequences applicable
to directors, executive officers or greater than 10% stockholders of BioSante
or
to any individual participant who receives an incentive award under the
plan.
Incentive
Stock Options.
There
will not be any federal income tax consequences to either the participant or
BioSante as a result of the grant to an employee of an incentive stock option
under the plan. The exercise by a participant of an incentive stock option
also
will not result in any federal income tax consequences to BioSante or the
participant, except that:
| · |
an
amount equal to the excess of the fair market value of the shares
acquired
upon exercise of the incentive stock option, determined at the time
of
exercise, over the amount paid for the shares by the participant
will be
includable in the participant’s alternative minimum taxable income for
purposes of the alternative minimum tax,
and
|
| · |
the
participant may be subject to an additional excise tax if any amounts
are
treated as excess parachute payments, as discussed
below.
|
Special
rules will apply if previously acquired shares of common stock are permitted
to
be tendered in payment of an option exercise price.
When
a
participant disposes of shares acquired upon exercise of an incentive stock
option, the federal income tax consequences will depend upon how long the
participant held those shares. If the participant does not dispose of the shares
within two years after the incentive stock option was granted, nor within one
year after the participant exercised the incentive stock option, then the
participant will recognize a long-term capital gain or loss. The amount of
the
long-term capital gain or loss will be equal to the difference
between:
| · |
the
amount the participant realized on disposition of the shares, and
|
| · |
the
option price at which the participant acquired the
shares.
|
We
are
not entitled to any compensation expense deduction under these
circumstances.
If
the
participant does not satisfy both of the above holding period requirements,
then
the participant will be required to report as ordinary income, in the year
the
participant disposes of the shares, the amount by which the lesser of the fair
market value of the shares at the time of exercise of the incentive stock
option, or the amount realized on the disposition of the shares exceeds the
option price for the shares.
We
will
be entitled to a compensation expense deduction in an amount equal to the
ordinary income includable in the taxable income of the participant. This
compensation income may be subject to withholding. The remainder of the gain
recognized on the disposition, if any, or any loss recognized on the
disposition, will be treated as long-term or short-term capital gain or loss,
depending on the holding period.
Non-Statutory
Stock Options.
Neither
the participant nor BioSante incurs any federal income tax consequences as
a
result of the grant of a non-statutory stock option. Upon exercise of a
non-statutory stock option, a participant will recognize ordinary income,
subject to withholding, on the date of exercise in an amount equal to the
difference between:
| · |
the
fair market value of the shares purchased, determined on the date
of
exercise, and
|
| · |
the
consideration paid for the shares.
|
The
participant may be subject to an additional excise tax if any amounts are
treated as excess parachute payments (see explanation below). Special rules
will
apply if previously acquired shares of common stock are permitted to be tendered
in payment of an option exercise price.
At
the
time of a subsequent sale or disposition of any shares of common stock obtained
upon exercise of a non-statutory stock option, any gain or loss will be treated
as long-term or short-term capital gain or loss, depending on the holding period
from the date of exercise.
In
general, we will be entitled to a compensation expense deduction in connection
with the exercise of a non-statutory stock option for any amounts includable
in
the taxable income of the participant as ordinary income, provided we comply
with any applicable withholding requirements.
Stock
Awards.
With
respect to shares issued pursuant to a stock award, a participant will include
as ordinary income in the year of receipt an amount equal to the fair market
value of the shares received as of the date of receipt. We will receive a
corresponding tax deduction, provided that proper withholding is made. At the
time of a subsequent sale or disposition of any shares of common stock issued
in
connection with a stock award, any gain or loss will be treated as long-term
or
short-term capital gain or loss, depending on the holding period from the date
the shares were received.
Excise
Tax on Parachute Payments.
The
Internal Revenue Code also imposes a 20% excise tax on the recipient of “excess
parachute payments,” as defined in the Internal Revenue Code and denies tax
deductibility to us on excess parachute payments. Generally, parachute payments
are payments in the nature of compensation to employees of a company who are
officers, stockholders or highly compensated individuals, which payments are
contingent upon a change in ownership or effective control of the company,
or in
the ownership of a substantial portion of the assets of the company. For
example, acceleration of the exercisability of options or the vesting of
restricted stock awards upon a change in control of BioSante may constitute
parachute payments, and in certain cases, “excess parachute
payments.”
Section
162(m).
Under
Section 162(m) of the Internal Revenue Code, the deductibility of certain
compensation paid to the chief executive officer and each of the four other
most
highly compensated executives of a publicly held corporation is limited to
$1,000,000. Compensation for this purpose generally includes any items of
compensation expense described above in connection with incentive awards under
the plan. However, certain types of compensation are excepted from this limit,
including compensation that qualifies as “performance-based compensation.” Under
Section 162(m), any compensation expense resulting from the exercise of options
under the plan with exercise prices equal to (or greater than) the fair market
value of the common stock on the date of grant should qualify as
“performance-based compensation” excepted from the limit of Section 162(m).
However, compensation expense in connection with any other incentive awards
under the plan will be subject to this limit.
Section
409A.
The
foregoing discussion of tax consequences of incentive awards assumes that the
incentive award discussed is either not subject to Section 409A of the Internal
Revenue Code, or has been structured to comply with its requirements. Section
409A, as added by the American Jobs Creation Act of 2004, provides tax rules
for
deferred compensation that is deferred or becomes vested after December 31,
2004. In the event an incentive award is a “deferred compensation arrangement”
subject to Section 409A and it fails to comply, in operation or form, with
the
requirements of Section 409A, the affected participant would generally have
immediately taxable income on the amount “deferred,” would be required to pay an
additional 20% income tax, and must pay interest on the tax that would have
been
paid but for the deferral.
Incentive
awards granted in the future under the plan are within the discretion of the
Compensation Committee and therefore cannot be ascertained at this time. No
incentive awards have been granted that are subject to approval by our
stockholders of the amended and restated plan.
The
table
below summarizes outstanding options under our plan as of April 15, 2006 held
by
the persons or groups listed below. The options granted in fiscal year 2005
to
the named executive officers are disclosed in the tables under the heading
“Executive Compensation and Other Benefits—Summary of Cash and Other
Compensation” and “—Option Grants in Last Fiscal Year” above.
New
Plan Benefits
Amended
and Restated 1998 Stock Plan
|
Name
and Position
|
Number
of Shares
Underlying
Options
|
|||
|
Stephen
M. Simes
|
306,581
|
|||
|
Phillip
B. Donenberg
|
250,777
|
|||
|
Leah
M. Lehman, Ph.D.
|
0
|
|||
|
Steve
J. Bell, Ph.D.
|
113,025
|
|||
|
Executive
Group
|
670,383
|
|||
|
Non-Executive
Director Group
|
315,000
|
|||
|
Non-Executive
Employee Group
|
53,929
|
|||
|
Total
|
1,039,312
|
The
Board
of Directors unanimously recommends that you vote FOR
approval
of the amendments to the BioSante Pharmaceuticals, Inc. Amended and Restated
1998 Stock Plan. Unless a contrary choice is specified on the proxy card,
proxies solicited by our Board of Directors will be voted FOR
approval
of the amendments to the BioSante Pharmaceuticals, Inc. Amended and Restated
1998 Stock Plan.
REGISTERED
PUBLIC ACCOUNTING FIRM
(Proposal
3)
_____________________
The
Audit
and Finance Committee of the Board of Directors has selected Deloitte &
Touche LLP to serve as our independent registered public accounting firm for
the
year ending December 31, 2006. Deloitte & Touche LLP has acted as our
independent registered public accounting firm since January 1999. Prior to
that
date, Deloitte & Touche, C.A. in Canada acted as our independent registered
public accounting firm since our inception in August 1996.
Although
it is not required to do so, the Audit and Finance Committee of the Board of
Directors wishes to submit the selection of Deloitte & Touche LLP to the
stockholders for ratification. If our stockholders do not ratify the selection
of Deloitte & Touche LLP, another independent registered public accounting
firm will be considered by the Audit and Finance Committee of the Board of
Directors. Even if the selection is ratified by our stockholders, the Audit
and
Finance Committee may in its discretion change the appointment at any time
during the year, if it determines that such a change would be in the best
interests of BioSante and its stockholders.
Representatives
of Deloitte & Touche LLP will be available via telephone at the Annual
Meeting, and will have an opportunity to make a statement if they so desire
and
will be available to respond to appropriate questions.
The
following table presents fees billed to BioSante for professional services
rendered by Deloitte & Touche LLP for the fiscal years ended December 31,
2005 and December 31, 2004.
|
|
Aggregate
Amount Billed
by
Deloitte & Touche LLP
|
||||||
|
2005
|
2004
|
||||||
|
Audit
Fees(1)
|
$
|
50,000
|
$
|
44,000
|
|||
|
Audit-Related
Fees(2)
|
28,500
|
12,200
|
|||||
|
Tax
Fees
|
0
|
0
|
|||||
|
All
Other Fees
|
0
|
0
|
|||||
__________________________
|
(1)
|
These
fees consisted of the audit of our annual financial statements by
year,
review of financial statements included in our quarterly reports
on Form
10-Q and other services normally provided in connection with statutory
and
regulatory filings or engagements.
|
|
(2)
|
These
fees consisted of review of registration statements and the issuance
of
consents. The Audit and Finance Committee has considered whether
the
provision of these services is compatible with maintaining Deloitte’s
independence and has determined that it
is.
|
Our
Audit
and Finance Committee has adopted procedures pursuant to which all audit,
audit-related and tax services, and all permissible non-audit services provided
by Deloitte & Touche LLP to BioSante, are pre-approved by our Audit and
Finance Committee. All services rendered by Deloitte & Touche LLP to
BioSante during 2005 were permissible under applicable laws and regulations,
and
all such services provided by Deloitte & Touche LLP to BioSante, other than
de minimis non-audit services allowed under applicable law, were approved in
advance by the Audit and Finance Committee in accordance with the rules adopted
by the Securities and Exchange Commission in order to implement requirements
of
the Sarbanes-Oxley Act of 2002.
The
Board
of Directors unanimously recommends a vote FOR
ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31, 2006. Unless
a contrary choice is specified on the proxy card, proxies solicited by our
Board
of Directors will be voted FOR
ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31,
2006.
_____________________
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and all persons who beneficially own more than 10% of
the
outstanding shares of our common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of
our common stock. Executive officers, directors and greater than 10% beneficial
owners are also required to furnish us with copies of all Section 16(a) forms
they file.
To
our
knowledge, based on review of the copies of such reports furnished to us during
the year ended December 31, 2005, and based on representations by our directors
and executive officers, all required Section 16 reports under the Securities
Exchange Act of 1934, as amended, for our directors, executive officers and
beneficial owners of greater than 10% of our common stock were filed on a timely
basis during the fiscal year ended December 31, 2005, except that Mr. Donenberg,
Dr. Bell and Dr. Lehman failed to file timely Form 4 reports reporting option
grants in July 2005. To date, all late Form 4 reports have been
filed.
Stockholder
proposals intended to be presented in the proxy materials relating to the next
Annual Meeting of Stockholders must be received by us on or before December
29,
2006, unless the date of the meeting is delayed by more than 30 calendar days,
and must satisfy the requirements of the proxy rules promulgated by the
Securities and Exchange Commission.
Any
other
stockholder proposals to be presented at the next Annual Meeting of Stockholders
must be given in writing to our Corporate Secretary and received at our
principal executive offices not later than January 30, 2007 nor earlier than
December 29, 2006. The proposal must contain specific information required
by
our Bylaws, a copy of which may be obtained by writing to our Corporate
Secretary or accessing the SEC’s EDGAR filing database at www.sec.gov.
If a
proposal is not timely and properly made in accordance with the procedures
set
forth in our Bylaws, it will be defective and may not be brought before the
meeting. If the proposal is nonetheless brought before the meeting and the
Chairman of the meeting does not exercise the power and duty to declare the
proposal defective, the persons named in the proxy may use their discretionary
voting with respect to the proposal.
In
accordance with procedures set forth in our bylaws, stockholders may propose
nominees for election to the Board of Directors only after providing timely
written notice to our Corporate Secretary. To be timely, a stockholder’s notice
to BioSante’s Corporate Secretary must be delivered to or mailed and received at
BioSante’s principal executive offices not less than 90 days nor more than 120
days prior to the first anniversary of the date that BioSante first released
or
mailed its proxy statement to stockholders in connection with the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after the anniversary date of the immediately preceding annual meeting of
stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the 10th
day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
The
notice must set forth, among other things:
| · |
the
nominee’s name, age, business address and residence
address;
|
| · |
the
nominee’s principal occupation or
employment;
|
| · |
the
class and number of shares of BioSante capital stock which are
beneficially owned by the nominee;
and
|
| · |
any
other information concerning the nominee required under the rules
of the
Securities and Exchange Commission in a proxy statement soliciting
proxies
for the election of directors.
|
Submissions
must be made by mail, courier or personal delivery. E-mailed submissions will
not be considered. The Nominating and Corporate Governance Committee will
consider only those stockholder recommendations whose submissions comply with
these procedural requirements. The Nominating and Corporate Governance Committee
will evaluate candidates recommended by stockholders in the same manner as
those
recommended by others.
The
cost
of soliciting proxies, including the preparation, assembly and mailing of
proxies and soliciting material, as well as the cost of forwarding this material
to the beneficial owners of our capital stock will be borne by us. Our
directors, officers and regular employees may, without compensation other than
their regular compensation, solicit proxies by telephone, facsimile or personal
conversation. We may reimburse brokerage firms and others for expenses in
forwarding proxy materials to the beneficial owners of our capital
stock.
Some
banks, brokers and other nominee record holders may be participating in the
practice of “householding” proxy statements and annual reports. This means that
only one copy of BioSante’s Proxy Statement or Annual Report to Stockholders may
have been sent to multiple stockholders in each household. BioSante will
promptly deliver a separate copy of either document to any stockholder upon
written or oral request to BioSante’s Investor Relations Department, BioSante
Pharmaceuticals, Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069,
telephone: (847) 478-0500 ext. 120. Any stockholder who wants to receive
separate copies of BioSante’s Proxy Statement or Annual Report to Stockholders
in the future, or any stockholder who is receiving multiple copies and would
like to receive only one copy per household, should contact the stockholder’s
bank, broker, or other nominee record holder, or the stockholder may contact
BioSante at the above address and phone number.
Our
management does not intend to present other items of business and knows of
no
items of business that are likely to be brought before the Annual Meeting,
except those described in this proxy statement. However, if any other matters
should properly come before the Annual Meeting, the persons named in the
enclosed proxy will have discretionary authority to vote such proxy in
accordance with their best judgment on the matters.
We
have
sent to each of our stockholders a copy of our Annual Report on Form 10-K
(without exhibits) for the year ended December 31, 2005. The exhibits to our
Form 10-K are available by accessing the SEC’s EDGAR filing database at
www.sec.gov.
We will
furnish a copy of any exhibit to our Form 10-K upon receipt from any such person
of a written request for such exhibits upon the payment of our reasonable
expenses in furnishing the exhibits. This request should be sent to: BioSante
Pharmaceuticals, Inc., 111 Barclay Boulevard, Lincolnshire, IL 60069, Attn:
Stockholder Information.
_____________________
Your
vote
is important. Whether or not you plan to attend the Annual Meeting, please
vote
your shares of common stock and class C special stock by marking, signing,
dating and promptly returning the enclosed proxy card in the envelope provided.
No postage is required for mailing in the United States.
By
Order
of the Board of Directors,
/s/
Stephen M. Simes
Stephen
M. Simes
Vice
Chairman, President and
Chief
Executive Officer
April
28,
2006
BIOSANTE
PHARMACEUTICALS, INC.
AMENDED
AND RESTATED 1998 STOCK PLAN
(As
amended through June 6, 2006)
1. Purpose
of Plan.
The
purpose of the BioSante Pharmaceuticals, Inc. 1998 Stock Plan (the “Plan”) is to
advance the interests of BioSante Pharmaceuticals, Inc. (the “Company”) and its
stockholders by enabling the Company and its Subsidiaries to attract and retain
persons of ability to perform services for the Company and its Subsidiaries
by
providing an incentive to such individuals through equity participation in
the
Company and by rewarding such individuals who contribute to the achievement
by
the Company of its economic objectives.
2. Definitions.
The
following terms will have the meanings set forth below, unless the context
clearly otherwise requires:
2.1 “Board”
means
the Board of Directors of the Company.
2.2 “Broker
Exercise Notice”
means
a
written notice pursuant to which a Participant, upon exercise of an Option,
irrevocably instructs a broker or dealer to sell a sufficient number of shares
or loan a sufficient amount of money to pay all or a portion of the exercise
price of the Option and/or any related withholding tax obligations and remit
such sums to the Company and directs the Company to deliver stock certificates
to be issued upon such exercise directly to such broker or dealer.
2.3 “Change
in Control”
means
an event described in Section 10.1 of the Plan.
2.4 “Code”
means
the Internal Revenue Code of 1986, as amended.
2.5 “Committee”
means
the group of individuals administering the Plan, as provided in Section 3
of the Plan.
2.6 “Common
Stock”
means
the common stock of the Company, par value $0.0001 per share, or the number
and
kind of shares of stock or other securities into which such common stock may
be
changed in accordance with Section 4.3 of the Plan.
2.7 “Disability”
means
the disability of the Participant such as would entitle the Participant to
receive disability income benefits pursuant to the long-term disability plan
of
the Company or Subsidiary then covering the Participant or, if no such plan
exists or is applicable to the Participant, the permanent and total disability
of the Participant within the meaning of Section 22(e)(3) of the
Code.
2.8 “Eligible
Recipients”
means
all employees (including officers and directors who are also employees) of
the
Company or any Subsidiary and any non-employee directors and officers and
individual consultants and independent contractors of the Company or any
Subsidiary, other than consultants or independent contractors providing services
in connection with the offer or sale of securities in a capital raising
transaction or who directly or indirectly promote or maintain a market for
the
Company’s securities.
2.9 “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
2.10 “Fair
Market Value”
means,
with respect to the Common Stock, as of any date (or, if no shares were traded
or quoted on such date, as of the next preceding date on which there was such
a
trade or quote) (a) the mean between the reported high and low sale prices
of
the Common Stock if the Common Stock is listed, admitted to unlisted trading
privileges or reported on any foreign or national securities exchange or on
the
Nasdaq National Market or SmallCap Market or an equivalent foreign market on
which sale prices are reported; (b) if the Common Stock is not so listed,
admitted to unlisted trading privileges or reported, the closing bid price
as
reported by the OTC Bulletin Board or the National Quotation Bureau, Inc. or
other comparable service; or (c) if the Common Stock is not so listed or
reported, such price as the Committee determines in good faith in the exercise
of its reasonable discretion.
2.11 “Incentive
Award”
means
an Option or Stock Award granted to an Eligible Recipient pursuant to the
Plan.
2.12 “Incentive
Stock Option”
means
a
right to purchase Common Stock granted to an Eligible Recipient pursuant to
Section 6 of the Plan that qualifies as an “incentive stock option” within
the meaning of Section 422 of the Code.
2.13 “Non-Statutory
Stock Option”
means
a
right to purchase Common Stock granted to an Eligible Recipient pursuant to
Section 6 of the Plan that does not qualify as an Incentive Stock
Option.
2.14 “Option”
means
an Incentive Stock Option or a Non-Statutory Stock Option.
2.15 “Participant”
means
an Eligible Recipient who receives one or more Incentive Awards under the Plan.
2.16 “Previously
Acquired Shares”
means
shares of Common Stock or any other shares of capital stock of the Company
that
are already owned by the Participant or, with respect to any Option, that are
to
be issued upon the exercise of such Option.
2.17 “Retirement”
means
termination of employment or service pursuant to and in accordance with the
regular (or, if approved by the Board for purposes of the Plan, early)
retirement/pension plan or practice of the Company or Subsidiary then covering
the Participant, provided that if the Participant is not covered by any such
plan or practice, the Participant will be deemed to be covered by the Company’s
plan or practice for purposes of this determination.
2.18 “Securities
Act”
means
the Securities Act of 1933, as amended.
2.19 “Stock
Award”
means
an award of Common Stock granted to an Eligible Recipient pursuant to Section
7
of the Plan.
2.20 “Stock
Unit”
means
a
bookkeeping entry representing the equivalent of one share of Common Stock
that
is payable in the form of Common Stock, cash or any combination of the
foregoing.
2.21 “Subsidiary”
means
any entity that is directly or indirectly controlled by the Company or any
entity in which the Company has a significant equity interest, as determined
by
the Committee.
2.22 “Tax
Date”
means
the date any withholding tax obligation arises under the Code or other
applicable tax statute for a Participant with respect to an Incentive Award.
3. Plan
Administration.
3.1 The
Committee.
The
Plan will be administered by the Board or by a committee of the Board. So long
as the Company has a class of its equity securities registered under Section
12
of the Exchange Act, any committee administering the Plan will consist solely
of
two or more members of the Board who are “non-employee directors” within the
meaning of Rule 16b-3 under the Exchange Act and, if the Board so determines
in
its sole discretion, who are “outside directors” within the meaning of Section
162(m) of the Code. Such a committee, if established, will act by majority
approval of the members (but may also take action with the written consent
of
all of the members of such committee), and a majority of the members of such
a
committee will constitute a quorum. As used in the Plan, “Committee” will refer
to the Board or to such a committee, if established;
provided, however, that with respect to the grant of any Incentive Award to
a
Participant who is then a Committee Member, and to any action that may be taken
hereunder by the Committee regarding any such Incentive Award for so long as
such Participant is a Committee Member, such action may be taken only by the
Board.
To the
extent consistent with applicable corporate law, the Committee may delegate
to
any officers of the Company the duties, power and authority of the Committee
under the Plan pursuant to such conditions or limitations as the Committee
may
establish; provided, however, that only the Committee may exercise such duties,
power and authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act and Section 162(m) of the Code. The Committee
may
exercise its duties, power and authority under the Plan in its sole and absolute
discretion without the consent of any Participant or other party, unless the
Plan specifically provides otherwise. Each determination, interpretation or
other action made or taken by the Committee pursuant to the provisions of the
Plan will be final, conclusive and binding for all purposes and on all persons,
including, without limitation, the Company, the stockholders of the Company,
the
participants and their respective successors-in-interest. No member of the
Committee will be liable for any action or determination made in good faith
with
respect to the Plan or any Incentive Award granted under the Plan.
3.2 Authority
of the Committee.
(a) In
accordance with and subject to the provisions of the Plan, the Committee will
have the authority to determine all provisions of Incentive Awards as the
Committee may deem necessary or desirable and as consistent with the terms
of
the Plan, including, without limitation, the following: (i) the Eligible
Recipients to be selected as Participants; (ii) the nature and extent of the
Incentive Awards to be made to each Participant (including the number of shares
of Common Stock to be subject to each Incentive Award, any exercise price,
the
manner in which Incentive Awards will vest or become exercisable and whether
Incentive Awards will be granted in tandem with other Incentive Awards) and
the
form of written agreement, if any, evidencing such Incentive Award; (iii) the
time or times when Incentive Awards will be granted; (iv) the duration of each
Incentive Award; and (v) the restrictions and other conditions to which the
payment or vesting of Incentive Awards may be subject. In addition, the
Committee will have the authority under the Plan in its sole discretion to
pay
the economic value of any Incentive Award in the form of cash, shares of Common
Stock, shares of any capital stock of the Company, Stock Units or any
combination of the foregoing.
(b) The
Committee will have the authority under the Plan to amend or modify the terms
of
any outstanding Incentive Award in any manner, including, without limitation,
the authority to modify the number of shares or other terms and conditions
of an
Incentive Award, extend the term of an Incentive Award, accelerate the
exercisability or vesting or otherwise terminate any restrictions relating
to an
Incentive Award, accept the surrender of any outstanding Incentive Award or,
to
the extent not previously exercised or vested, authorize the grant of new
Incentive Awards in substitution for surrendered Incentive Awards; provided,
however that the amended or modified terms are permitted by the Plan as then
in
effect and that any Participant adversely affected by such amended or modified
terms has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to this Section
3.2 or any other provisions of the Plan, will be deemed to be a re-grant of
such
Incentive Award for purposes of this Plan.
(c) In
the
event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture (including a
spin-off) or any other similar change in corporate structure or shares,
(ii) any purchase, acquisition, sale or disposition of a significant amount
of assets or a significant business, (iii) any change in accounting
principles or practices, or (iv) any other similar change, in each case
with respect to the Company or any other entity whose performance is relevant
to
the grant or vesting of an Incentive Award, the Committee (or, if the Company
is
not the surviving corporation in any such transaction, the board of directors
of
the surviving corporation) may, without the consent of any affected Participant,
amend or modify the vesting criteria of any outstanding Incentive Award that
is
based in whole or in part on the financial performance of the Company (or any
Subsidiary or division thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be substantially
the same (in the sole discretion of the Committee or the board of directors
of
the surviving corporation) following such event as prior to such event;
provided, however, that the amended or modified terms are permitted by the
Plan
as then in effect.
(d) The
Committee may permit or require the deferral of any payment, issuance or other
settlement of an Incentive Award subject to such rules and procedures as the
Committee may establish, including the conversion of such payment, issuance
or
other settlement into Stock Units and the payment or crediting of interest,
dividends or dividend equivalents.
(e) Notwithstanding
any other provision of this Plan other than Section 4.3, the Committee may
not,
without prior approval of the Company’s stockholders, seek to effect any
re-pricing of any previously granted, “underwater” Option by: (i) amending or
modifying the terms of the Option to lower the exercise price; (ii) canceling
the underwater Option and granting either replacement Options having a lower
exercise price or other Incentive Awards in exchange; or (iii) repurchasing
the
underwater Options and granting new Incentive Awards under this Plan. For
purposes of this Section 3.2(e), Options will be deemed to be “underwater” at
any time when the Fair Market Value of the Common Stock is less than the
exercise price of the Option.
4. Shares
Available for Issuance.
4.1 Maximum
Number of Shares Available.
Subject
to adjustment as provided in Section 4.3 of the Plan, the maximum number of
shares of Common Stock that will be available for issuance under the Plan will
be 3,000,000 shares of Common Stock, plus any shares of Common Stock which,
as
of the date the Plan is approved by the stockholders of the Company, are
reserved for issuance under the Company’s existing Stock Option Plan and which
are not thereafter issued or which have been issued but are subsequently
forfeited and which would otherwise have been available for further issuance
under such plan. The Committee may use shares available for issuance under
the
Plan as the form of payment for compensation, awards or rights earned or due
under deferred or any other compensation plans or arrangements of the Company
or
any Subsidiary. The shares available for issuance under the Plan may, at the
election of the Committee, be either treasury shares or shares authorized but
unissued, and, if treasury shares are used, all references in the Plan to the
issuance of shares will, for corporate law purposes, be deemed to mean the
transfer of shares from treasury.
4.2 Calculation
of Shares Available.
Shares
of Common Stock (a) that are issued under the Plan or under any deferred or
other compensation plan or arrangement of the Company or any Subsidiary or
(b)
that are subject to outstanding Incentive Awards, Stock Units or other awards
or
rights earned or due under the Plan or under any deferred or other compensation
plan or arrangement of the Company or any Subsidiary, will be applied to reduce
the maximum number of shares of Common Stock remaining available for issuance
under the Plan. To the extent that any shares of Common Stock that are subject
to an Incentive Award, Stock Unit or other award or right earned or due under
the Plan or under any deferred or other compensation plan or arrangement of
the
Company or any Subsidiary (a) are not issued to a Participant under the Plan
or
a participant under any deferred or other compensation plan or arrangement
of
the Company or any Subsidiary due to the fact that such Incentive Award, Stock
Unit or other award or right earned or due under the Plan or under any deferred
or other compensation plan or arrangement of the Company or any Subsidiary
lapses, expires, is forfeited or for any reason is terminated unexercised or
unvested, or is settled or paid in cash or (b) are used to satisfy any exercise
price or withholding obligations, such shares will automatically again become
available for issuance under the Plan. In addition, to the extent that a
Participant tenders (either by actual delivery or by attestation) shares of
Common Stock already owned by the Participant to the Company in satisfaction
of
any exercise price or withholding tax obligations, such shares will
automatically again become available for issuance under the Plan.
4.3 Adjustments
to Shares and Incentive Awards.
In the
event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other similar change in the corporate structure or shares
of
the Company, the Committee (or, if the Company is not the surviving corporation
in any such transaction, the board of directors of the surviving corporation)
will make appropriate adjustment (which determination will be conclusive) as
to
the number and kind of securities or other property (including cash) available
for issuance or payment under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, (a) the number and kind of securities
or other property (including cash) subject to outstanding Options, and (b)
the
exercise price of outstanding Options.
5. Participation.
Participants
in the Plan will be those Eligible Recipients who, in the judgment of the
Committee, have contributed, are contributing or are expected to contribute
to
the achievement of economic objectives of the Company or its Subsidiaries.
Eligible Recipients may be granted from time to time one or more Incentive
Awards, singly or in combination or in tandem with other Incentive Awards,
as
may be determined by the Committee in its sole discretion. Incentive Awards
will
be deemed to be granted as of the date specified in the grant resolution of
the
Committee, which date will be the date of any related agreement with the
Participant.
6. Options.
6.1 Grant.
An
Eligible Recipient may be granted one or more Options under the Plan, and such
Options will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion. The Committee may designate whether an Option is to be considered
an
Incentive Stock Option or a Non-Statutory Stock Option. To the extent that
any
Incentive Stock Option granted under the Plan ceases for any reason to qualify
as an “incentive stock option” for purposes of Section 422 of the Code, such
Incentive Stock Option will continue to be outstanding for purposes of the
Plan
but will thereafter be deemed to be a Non-Statutory Stock Option.
6.2 Exercise
Price.
The per
share price to be paid by a Participant upon exercise of an Option will be
determined by the Committee in its discretion at the time of the Option grant;
provided, however, that such price will not be less than 100% of the Fair Market
Value of one share of Common Stock on the date of grant with respect to an
Incentive Stock Option (110% of the Fair Market Value if, at the time the
Incentive Stock Option is granted, the Participant owns, directly or indirectly,
more than 10% of the total combined voting power of all classes of stock of
the
Company or any parent or subsidiary corporation of the Company).
6.3 Exercisability
and Duration.
An
Option will become exercisable at such times and in such installments as may
be
determined by the Committee in its sole discretion at the time of grant;
provided, however, that no Incentive Stock Option may be exercisable after
10
years from its date of grant (five years from its date of grant if at the time
the Incentive Stock Option is granted, the Participant owns, directly or
indirectly, more than 10% of the total combined voting power of all classes
of
stock of the Company or any parent or subsidiary corporation of the
Company).
6.4 Payment
of Exercise Price.
The
total purchase price of the shares to be purchased upon exercise of an Option
must be paid entirely in cash (including check, bank draft or money order);
provided, however, that the Committee, in its sole discretion and upon terms
and
conditions established by the Committee, may allow such payments to be made,
in
whole or in part, by tender of a Broker Exercise Notice, Previously Acquired
Shares (including through delivery of a written attestation of ownership of
such
Previously Acquired Shares if permitted, and on terms acceptable, to the
Committee in its sole discretion), a promissory note (on terms acceptable to
the
Committee in its sole discretion) or by a combination of such
methods.
6.5 Manner
of Exercise.
An
Option may be exercised by a Participant in whole or in part from time to time,
subject to the conditions contained in the Plan and in the agreement evidencing
such Option, by delivery in person, by facsimile or electronic transmission
or
through the mail of written notice of exercise to the Company (Attention: Chief
Financial Officer) at its principal executive office in Lincolnshire, Illinois
and by paying in full the total exercise price for the shares of Common Stock
to
be purchased in accordance with Section 6.4 of the Plan.
6.6 Aggregate
Limitation of Stock Subject to Incentive Stock Options.
To the
extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect
to
which incentive stock options (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or
any
subsidiary or parent corporation of the Company (within the meaning of the
Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code
from time to time), such excess Options will be treated as Non-Statutory Stock
Options. The determination will be made by taking incentive stock options into
account in the order in which they were granted. If such excess only applies
to
a portion of an Incentive Stock Option, the Committee, in its discretion, will
designate which shares will be treated as shares to be acquired upon exercise
of
an Incentive Stock Option.
7. Stock
Awards.
An
Eligible Recipient may be granted one or more Stock Awards under the Plan,
and
such Stock Awards will be subject to such terms and conditions, consistent
with
the other provisions of the Plan, as may be determined by the Committee. The
Participant will have all voting, dividend, liquidation and other rights with
respect to the shares of Common Stock issued to a Participant as a Stock Award
under this Section 7 upon the Participant becoming the holder of record of
such
shares; provided, however, that the Committee may impose such restrictions
on
the assignment or transfer of a Stock Award as it deems appropriate; and
provided, further, that if the Participant defers the receipt of the Stock
Award
under any deferred compensation plan or arrangement of the Company or any
Subsidiary and in lieu thereof receives a Stock Unit, such Participant will
not
have all voting, dividend, liquidation and other rights with respect to the
shares of Common Stock issued to the Participant as a Stock Award under this
Section 7.
8. Effect
of Termination of Employment or Other Service.
8.1 Termination
Due to Death, Disability or Retirement.
Unless
otherwise provided by the Committee in its sole discretion in the agreement
evidencing an Incentive Award:
(a) In
the
event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of death or Disability, all outstanding
Options then held by the Participant will remain exercisable, to the extent
exercisable as of the date of such termination, for a period of six months
after
such termination (but in no event after the expiration date of any such Option)
and all Stock Awards then held by a Participant will, to the extent applicable,
vest and/or continue to vest in the manner determined by the Committee and
set
forth in any agreement evidencing such Stock Award.
(b) In
the
event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of Retirement, all outstanding Options
then
held by the Participant will remain exercisable, to the extent exercisable
as of
the date of such termination, for a period of three months after such
termination (but in no event after the expiration date of any such Option)
and
all Stock Awards then held by a Participant will, to the extent applicable,
vest
and/or continue to vest in the manner determined by the Committee and set forth
in any agreement evidencing such Stock Award.
8.2 Termination
for Reasons Other than Death, Disability or Retirement.
(a) Unless
otherwise provided by the Committee in its sole discretion in the agreement
evidencing an Incentive Award, in the event a Participant’s employment or other
service is terminated with the Company and all Subsidiaries for any reason
other
than death, Disability or Retirement, or a Participant is in the employ or
service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Participant continues in the employ or service of the
Company or another Subsidiary), all rights of the Participant under the Plan
and
any agreements evidencing an Option will immediately terminate without notice
of
any kind, and no Options then held by the Participant will thereafter be
exercisable and all Stock Awards then held by a Participant will, to the extent
applicable, vest and/or continue to vest in the manner determined by the
Committee and set forth in any agreement evidencing such Stock Award; provided,
however, that if such termination is due to any reason other than termination
by
the Company or any Subsidiary for “cause,” all outstanding Options then held by
such Participant will remain exercisable, to the extent exercisable as of such
termination, for a period of three months after such termination (but in no
event after the expiration date of any such Option).
(b) For
purposes of this Section 8.2, “cause” (as determined by the Committee) will be
as defined in any employment or other agreement or policy applicable to the
Participant or, if no such agreement or policy exists, will mean (i) dishonesty,
fraud, misrepresentation, embezzlement or deliberate injury or attempted injury,
in each case related to the Company or any Subsidiary, (ii) any unlawful or
criminal activity of a serious nature, (iii) any intentional and deliberate
breach of a duty or duties that, individually or in the aggregate, are material
in relation to the Participant’s overall duties, or (iv) any material breach of
any employment, service, confidentiality or non-compete agreement entered into
with the Company or any Subsidiary.
8.3 Modification
of Rights Upon Termination.
Notwithstanding the other provisions of this Section 8, upon a
Participant’s termination of employment or other service with the Company and
all Subsidiaries, the Committee may, in its sole discretion (which may be
exercised at any time on or after the date of grant, including following such
termination), cause Options (or any part thereof) then held by such Participant
to become or continue to become exercisable and/or remain exercisable following
such termination of employment or service and all Stock Awards then held by
a
Participant will, to the extent applicable, vest and/or continue to vest in
the
manner determined by the Committee and set forth in any agreement evidencing
such Stock Award; provided, however, that no Option may remain exercisable
beyond its expiration date.
8.4 Exercise
of Incentive Stock Options Following Termination.
Any
Incentive Stock Option that remains unexercised more than one year following
termination of employment by reason of Disability or more than three months
following termination for any reason other than death or Disability will
thereafter be deemed to be a Non-Statutory Stock Option.
8.5 Date
of Termination of Employment or Other Service.
Unless
the Committee otherwise determines in its sole discretion, a Participant’s
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the Company
or the Subsidiary for which the Participant provides employment or other
service, as determined by the Committee in its sole discretion based upon such
records.
9. Payment
of Withholding Taxes.
9.1 General
Rules. The
Company is entitled to (a) withhold and deduct from future wages of the
Participant (or from other amounts that may be due and owing to the Participant
from the Company or a Subsidiary), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all foreign,
federal, state and local withholding and employment-related tax requirements
attributable to an Incentive Award, including, without limitation, the grant,
exercise or vesting of, or payment of dividends with respect to, an Incentive
Award or a disqualifying disposition of stock received upon exercise of an
Incentive Stock Option, or (b) require the Participant promptly to remit the
amount of such withholding to the Company before taking any action, including
issuing any shares of Common Stock, with respect to an Incentive
Award.
9.2 Special
Rules.
The
Committee may, in its sole discretion and upon terms and conditions established
by the Committee, permit or require a Participant to satisfy, in whole or in
part, any withholding or employment-related tax obligation described in Section
9.1 of the Plan by electing to tender Previously Acquired Shares, a Broker
Exercise Notice or a promissory note (on terms acceptable to the Committee
in
its sole discretion), or by a combination of such methods.
10. Change
in Control.
10.1 Change
in Control.
For
purposes of this Section 10, a “Change in Control” of the Company will mean the
following:
(a) the
sale,
lease, exchange or other transfer, directly or indirectly, of substantially
all
of the assets of the Company (in one transaction or in a series of related
transactions) to a person or entity that is not controlled by the Company;
(b) the
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;
(c) any
person becomes after the effective date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i)
20% or more, but not 50% or more, of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors, unless the transaction resulting in such ownership has been approved
in advance by the Continuity Directors (as defined in Section 10.2 below),
or
(ii) 50% or more of the combined voting power of the Company’s outstanding
securities ordinarily having the right to vote at elections of directors
(regardless of any approval by the Continuity Directors);
(d) a
merger
or consolidation to which the Company is a party if the stockholders of the
Company immediately prior to effective date of such merger or consolidation
have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
immediately following the effective date of such merger or consolidation, of
securities of the surviving corporation representing (i) more than 50%, but
less
than 80%, of the combined voting power of the surviving corporation’s then
outstanding securities ordinarily having the right to vote at elections of
directors, unless such merger or consolidation has been approved in advance
by
the Continuity Directors, or (ii) 50% or less of the combined voting power
of the surviving corporation’s then outstanding securities ordinarily having the
right to vote at elections of directors (regardless of any approval by the
Continuity Directors);
(e) the
Continuity Directors cease for any reason to constitute at least a majority
of
the Board; or
(f) any
other
change in control of the Company of a nature that would be required to be
reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or not
the
Company is then subject to such reporting requirement.
10.2 Continuity
Directors.
For
purposes of this Section 10, “Continuity Directors” of the Company will mean any
individuals who are members of the Board on the effective date of the Plan
and
any individual who subsequently becomes a member of the Board whose election,
or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the Continuity Directors (either by specific vote or
by
approval of the Company’s proxy statement in which such individual is named as a
nominee for director without objection to such nomination).
10.3 Acceleration
of Vesting.
Without
limiting the authority of the Committee under Sections 3.2 and 4.3 of the Plan,
if a Change in Control of the Company occurs, then, unless otherwise provided
by
the Committee in its sole discretion either in the agreement evidencing an
Incentive Award at the time of grant or at any time after the grant of an
Incentive Award, all outstanding Options will become immediately exercisable
in
full and will remain exercisable for the remainder of their terms, regardless
of
whether the Participant to whom such Options have been granted remains in the
employ or service of the Company or any Subsidiary and all outstanding Stock
Awards then held by a Participant will, to the extent applicable, vest and/or
continue to vest in the manner determined by the Committee and set forth in
any
agreement evidencing such Stock Award.
11. Rights
of Eligible Recipients and Participants; Transferability.
11.1 Employment
or Service.
Nothing
in the Plan will interfere with or limit in any way the right of the Company
or
any Subsidiary to terminate the employment or service of any Eligible Recipient
or Participant at any time, nor confer upon any Eligible Recipient or
Participant any right to continue in the employ or service of the Company or
any
Subsidiary.
11.2 Rights
as a Stockholder.
As a
holder of Options, a Participant will have no rights as a stockholder unless
and
until such Options are exercised for, or paid in the form of, shares of Common
Stock and the Participant becomes the holder of record of such shares. Except
as
otherwise provided in the Plan, no adjustment will be made for dividends or
distributions with respect to such Options as to which there is a record date
preceding the date the Participant becomes the holder of record of such shares,
except as the Committee may determine in its discretion.
11.3 Restrictions
on Transfer.
(a) Except
pursuant to testamentary will or the laws of descent and distribution and except
as expressly permitted by Section 11.3(b) of the Plan, no right or interest
of
any Participant in an Incentive Award prior to the exercise or vesting of such
Incentive Award will be assignable or transferable, or subjected to any lien,
during the lifetime of the Participant, either voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise. A Participant will,
however, be entitled to designate a beneficiary to receive an Incentive Award
upon such Participant’s death. In the event of a Participant’s death, payment of
any amounts due under the Plan will be made to, and exercise of any Options
(to
the extent permitted pursuant to Section 8 of the Plan) will be made by, the
Participant’s designated beneficiary. For purposes of the Plan, a “designated
beneficiary” will be the beneficiary or beneficiaries designated by the
Participant in a writing filed with the Committee in such form and at such
time
as the Committee will require in its sole discretion. If a Participant fails
to
designate a beneficiary, or if the designated beneficiary does not survive
the
Participant or dies before the designated beneficiary’s exercise of all rights
under the Plan, payment of any amounts due under the Plan will be made to,
and
exercise of any Options (to the extent permitted pursuant to Section 8 of the
Plan) may be made by, the Participant’s personal representative.
(b) The
Committee may, in its discretion, authorize all or a portion of the Options
to
be granted to a Participant to be on terms which permit transfer by such
Participant to (i) the spouse, ex-spouse, children, step-children or
grandchildren of the Participant (the “Family Members”), (ii) a trust or trusts
for the exclusive benefit of such Family Members, (iii) a partnership in which
such Family Members are the only partners, or (iv) such other persons or
entities as the Committee, in its discretion, may permit, provided that (1)
there may be no consideration for such a transfer (other than the possible
receipt of an ownership interest in an entity to which such a transfer is made),
(2) the award agreement pursuant to which such Options are granted must be
approved by the Committee and must expressly provide for transferability in
a
manner consistent with this Section 11.3(b), (3) timely written notice of the
transfer must be provided to the Company by the Participant, and (4) subsequent
transfers of the transferred Options shall be prohibited except for those in
accordance with Section 11.3(a). Following transfer, any such Option and the
rights of any transferee with respect thereto will continue to be subject to
the
same terms and conditions as were applicable immediately prior to the transfer,
including that the events of termination of employment or other service as
provided in the Plan and in any applicable award agreement will continue to
be
applied with respect to the original Participant, with the transferee bound
by
the consequences of any such termination of employment or service as specified
in the Plan and the applicable award agreement. The Company will be under no
obligation to provide notice of termination of a Participant’s employment or
other service to any transferee of such Participant’s Options. Notwithstanding
any Option transfer pursuant to this Section 11.3(b), the Participant will
remain subject to and liable for any employment-related taxes in connection
with
the exercise of such Option.
11.4 Breach
of Confidentiality or Non-Compete Agreements.
Notwithstanding anything in the Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality or non-compete
agreement entered into with the Company or any Subsidiary, whether such breach
occurs before or after termination of such Participant’s employment or other
service with the Company or any Subsidiary, the Committee in its sole discretion
may immediately terminate all rights of the Participant under the Plan and
any
agreements evidencing an Incentive Award then held by the Participant without
notice of any kind.
11.5 Non-Exclusivity
of the Plan.
Nothing
contained in the Plan is intended to modify or rescind any previously approved
compensation plans or programs of the Company or create any limitations on
the
power or authority of the Board to adopt such additional or other compensation
arrangements as the Board may deem necessary or desirable.
12. Securities
Law and Other Restrictions.
Notwithstanding
any other provision of the Plan or any agreements entered into pursuant to
the
Plan, the Company will not be required to issue any shares of Common Stock
under
this Plan, and a Participant may not sell, assign, transfer or otherwise dispose
of shares of Common Stock issued pursuant to Incentive Awards granted under
the
Plan, unless (a) there is in effect with respect to such shares a
registration statement under the Securities Act and any applicable state or
foreign securities laws or an exemption from such registration under the
Securities Act and applicable state or foreign securities laws, and
(b) there has been obtained any other consent, approval or permit from any
other regulatory body which the Committee, in its sole discretion, deems
necessary or advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements from the parties
involved, and the placement of any legends on certificates representing shares
of Common Stock, as may be deemed necessary or advisable by the Company in
order
to comply with such securities law or other restrictions.
13. Plan
Amendment, Modification and Termination.
The
Board
may suspend or terminate the Plan or any portion thereof at any time, and may
amend the Plan from time to time in such respects as the Board may deem
advisable in order that Incentive Awards under the Plan will conform to any
change in applicable laws or regulations or in any other respect the Board
may
deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the stockholders
of
the Company if stockholder approval of the amendment is then required pursuant
to Section 422 of the Code or the rules of any stock exchange or Nasdaq or
similar regulatory body. No termination, suspension or amendment of the Plan
may
adversely affect any outstanding Incentive Award without the consent of the
affected Participant; provided, however, that this sentence will not impair
the
right of the Committee to take whatever action it deems appropriate under
Sections 3.2, 4.3 and 10 of the Plan.
14. Effective
Date and Duration of the Plan.
The
Plan
is effective as of December 8, 1998, the date it was adopted by the Board.
The
Plan will terminate at midnight on December 8, 2008 and may be terminated prior
to such time to by Board action, and no Incentive Award will be granted after
such termination. Incentive Awards outstanding upon termination of the Plan
may
continue to be exercised, or become free of restrictions, in accordance with
their terms.
15. Miscellaneous.
15.1 Governing
Law.
The
validity, construction, interpretation, administration and effect of the Plan
and any rules, regulations and actions relating to the Plan will be governed
by
and construed exclusively in accordance with the laws of the State of Delaware,
notwithstanding the conflicts of laws principles of any
jurisdictions.
15.2 Successors
and Assigns.
The
Plan will be binding upon and inure to the benefit of the successors and
permitted assigns of the Company and the Participants.
