-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AmgxHTCR3jzrXAGqKs8ANe637aRHFGCY/zhIFFVajzNpNVe3ADUzSPqK70Enf48f OeBZ4gc68TMNJ4DouOGj1Q== 0000950153-02-000994.txt : 20020517 0000950153-02-000994.hdr.sgml : 20020517 20020517141258 ACCESSION NUMBER: 0000950153-02-000994 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020517 EFFECTIVENESS DATE: 20020517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIPID SCIENCES INC/ CENTRAL INDEX KEY: 0000071478 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 430433090 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88530 FILM NUMBER: 02656024 BUSINESS ADDRESS: STREET 1: 7068 KOLL CENTER PARKWAY STREET 2: SUITE 401 CITY: PLEASANTON STATE: CA ZIP: 94566 BUSINESS PHONE: 925-249-4000 MAIL ADDRESS: STREET 1: 7068 KOLL CENTER PARKWAY STREET 2: SUITE 401 CITY: PLEASANTON STATE: CA ZIP: 94566 FORMER COMPANY: FORMER CONFORMED NAME: NZ CORP DATE OF NAME CHANGE: 20000810 FORMER COMPANY: FORMER CONFORMED NAME: NEW MEXICO & ARIZONA LAND CO DATE OF NAME CHANGE: 19920703 S-8 1 p66601s-8.htm S-8 s-8
 

As filed with the Securities and Exchange Commission on May 17, 2002

Registration No. 333-         

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

Lipid Sciences, Inc.

(Exact Name of Registrant as Specified in Its Charter)
     
Arizona   43-0433090
 
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or   Identification No.)
Organization)    

7068 Koll Center Parkway, Suite 401
Pleasanton, California 94566

(Address of Principal Executive Offices)

Lipid Sciences, Inc. 2001 Performance Equity Plan
Lipid Sciences, Inc. 2000 Stock Option Plan, as amended
Individual Non-Qualified Stock Option Agreements with certain consultants and a
director, each of which constitutes an employee benefit plan within the meaning
of Rule 405 under the Securities Act of 1933, as amended

(Full Title of the Plan)

Phil Radlick
President and Chief Executive Officer
7068 Koll Center Parkway, Suite 401
Pleasanton, California 94566

(Name and Address of Agent For Service)

(925) 249-4000

(Telephone Number, Including Area Code, of Agent For Service)

Copy to:
Joseph M. Lesko, Esq.
David A. Charapp, Esq.
Heller Ehrman White & McAuliffe LLP
4350 La Jolla Village Drive, Suite 700
San Diego, California 92122
Telephone: (858) 450-8400
Facsimile: (858) 450-8499

CALCULATION OF REGISTRATION FEE

                                 
            Proposed   Proposed        
            Maximum   Maximum        
    Amount   Offering   Aggregate   Amount of
Title of Securities   to be   Price   Offering   Registration
to be Registered   Registered(1)   per Share(2)   Price (2)   Fee
Common Stock, no par value per share
     9,483,302     $2.24 to $6.00   $ 37,808,433     $ 3,478.38  

 

 

(1)   Pursuant to Rule 416(a), this registration statement also covers any additional securities that may be offered or issued in connection with any stock split, stock dividend or similar transaction. Includes 5,500,000 shares to be registered under the Lipid Sciences, Inc. 2001 Performance Equity Plan, 3,118,040 shares to be registered under the Lipid Sciences, Inc. 2000 Stock Option Plan, as amended, and 865,262 shares to be registered under individual Non-Qualified Stock Option Agreements.
(2)   Calculated in accordance with Rule 457(h) under the Securities Act of 1933, as amended, on the basis of the exercise prices of options granted as follows: 2,182,632 shares ($2.25); 908,397 shares ($3.21); 553,453 shares ($4.49); 155,902 shares ($4.59); 84,188 shares ($5.00); 902,394 shares ($6.00) and, with respect to 4,696,336 shares not subject to options granted, estimated solely for the purpose of computing the amount of registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low prices of the Registrant’s Common Stock reported on the Nasdaq National Market on May 14, 2002.

 

 

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

         The following documents, which have been filed by Lipid Sciences, Inc., formerly known as NZ Corporation (the “Registrant”), with the Securities and Exchange Commission (the “Commission”), are hereby incorporated by reference in this Registration Statement:

     
(a)   Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001;
(b)   Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002;
(c)   The description of Registrant’s Common Stock contained in the Registrant’s Registration Statement filed with the Commission under Section 12 of the Exchange Act, including any amendment or report filed for the purpose of updating such description.

         All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment to this registration statement which indicates that all securities offered hereby have been sold or which deregisters all securities remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing of such documents.

Item 4.       Description of Securities

                    Not applicable.

Item 5.       Interests of Named Experts and Counsel

                    Not applicable.

Item 6.       Indemnification of Directors and Officers

         The Registrant’s Articles of Incorporation provide that, to the fullest extent permitted by the Arizona Business Corporation Act (the “ABCA”), the Registrant’s directors and former directors will not be liable to the Registrant or its stockholders for money damages for any action taken or any failure to take any action as a director, provided however, that liability shall exist for the following:

  •   the amount of a financial benefit received by a director to which the director is not entitled;
 
  •   an intentional infliction of harm on the corporation or the stockholders;
 
  •   a violation of Section 10-833 of the ABCA pertaining to the authorization of unlawful payments of dividends or other distributions of the corporation’s capital stock or unlawful purchases of its capital stock; and
 
  •   an intentional violation of criminal law.

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This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

         In addition, the Registrant’s Articles of Incorporation and Bylaws provide that the Registrant will indemnify any and all of its existing and former directors and officers to the fullest extent permitted by the ABCA.

         Sections 10-852 and 10-856 of the ABCA require an Arizona corporation, unless limited by its articles of incorporation, to indemnify an officer or director who has prevailed, on the merits or otherwise, in defending any proceeding brought against the officer or director because such person is or was an officer or director of the corporation. The corporation must indemnify the officer or director for reasonable expenses, including attorneys’ fees and all other costs and expenses reasonably related to a proceeding. A “proceeding” includes any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.

         Section 10-851 of the ABCA permits an Arizona corporation to indemnify an officer or director made a party to a proceeding because such person is or was an officer or director of the corporation. The corporation may indemnify the officer or director against liability incurred in the proceeding if all of the following conditions exist:

  •   the officer or director’s conduct was in good faith;
 
  •   the officer or director reasonably believed that his or her conduct was at least not opposed to the best interests of the corporation, or, where the conduct was in an official corporate capacity, that the conduct was in the best interests of the corporation; and
 
  •   in the case of criminal proceedings, the officer or director had no reasonable cause to believe that the conduct was unlawful.

Before discretionary indemnification under section 10-851 may be awarded to a director, the corporation must determine that it is permissible under the circumstances. This determination may be made either:

  •   by majority vote of the directors not parties to the proceeding;
 
  •   by special legal counsel selected by majority vote of the disinterested directors, or by majority vote of the board if there are no disinterested directors; or
 
  •   by the shareholders (but shares owned by or voted under the control of directors who are parties to the proceeding are not to be voted).

         Section 10-854 of the ABCA permits a director of an Arizona corporation who is a party to a proceeding, unless the articles of incorporation provide otherwise, to apply to a court of competent jurisdiction for indemnification or for an advance of expenses. The court may order indemnification or an advance if it determines that indemnification is fair and reasonable, even if the director did not meet the prescribed standard of conduct described in section 10-851.

         The Registrant has a $10,000,000 director and officer liability policy. In addition, the Registrant has entered into indemnification agreements with certain of its directors, executive officers and employees, which provide for the indemnification of such persons by the Registrant against the risk of judgments, settlements and other expenses which may occur as a result of their service to the Registrant. The provisions of these indemnification agreements are consistent with, and are subject to change upon amendment of, Arizona law as described above.

Item 7.       Exemption from Registration Claimed

                    Not applicable.

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Item 8.       Exhibits

     
Item    
No.   Description of Item
 
5   Opinion of Heller Ehrman White & McAuliffe LLP
23.1   Consent of Deloitte & Touche LLP, Independent Auditors
23.2   Consent of Ernst & Young LLP, Independent Auditors
23.3   Consent of Heller Ehrman White & McAuliffe LLP (filed as part of Exhibit 5)
24   Power of Attorney (See page II-5)
99.1   Lipid Sciences, Inc. 2001 Performance Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed October 30, 2001)
99.2   Lipid Sciences, Inc. 2000 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on August 7, 2001)
99.3   Form of Lipid Sciences, Inc.’s Nonqualified Stock Option Agreement (for Scientific Advisory Board Members) (incorporated by reference to Exhibit 10.22.1 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on October 30, 2001)
99.4   Nonqualified Stock Option Agreement dated as of March 25, 2000 between Lipid Sciences, Inc. and Gary S. Roubin (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on August 7, 2001)
99.5   Nonqualified Stock Option Agreement dated as of October 9, 2000 between Lipid Sciences, Inc. and Joe Markham.

Item 9.       Undertakings

A.   The undersigned registrant hereby undertakes:

                         (1)          To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;

                                       (i)          To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

                                       (ii)          To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and

                                       (iii)          To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

II-3

 

provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

                         (2)          That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

                         (3)          To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

         B.            The undersigned registrant hereby undertakes that, for purposes of determining liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

         C.            Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

 

SIGNATURES

         Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Pleasanton, State of California, on this 16th day of May, 2002.

  Lipid Sciences, Inc.

  By: /s/ Phil Radlick
                                                                
Phil Radlick
President and Chief Executive Officer

POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Phil Radlick, Barry D. Michaels and Sandra Gardiner, and each of them, with full power of substitution, such person’s true and lawful attorneys-in-fact and agents for such person in such person’s name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement on Form S-8 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as he or such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.

II-5

 

         Pursuant to the requirements of the Securities Act, this Registration Statement on Form S-8 has been signed by the following persons in the capacities and on the dates indicated.

         
Signature   Capacity   Date
 
 
/s/ Phil Radlick
Phil Radlick		   President, Chief Executive Officer and Director   May 16, 2002
/s/ Barry D. Michaels
Barry D. Michaels		   Chief Financial Officer   May 16, 2002
/s/ Christopher A. Marlett
Christopher A. Marlett		   Chairman of the Board   May 16, 2002
 
Bill E. Cham, Ph.D.		   Director    
/s/ William A. Pope
William A. Pope		   Director   May 16, 2002
/s/ Frank M. Placenti
Frank M. Placenti		   Director   May 16, 2002
 
Gary S. Roubin, M.D., Ph.D.		   Director    

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Index to Exhibits

     
Item    
No.   Description of Item
 
5   Opinion of Heller Ehrman White & McAuliffe LLP
23.1   Consent of Deloitte & Touche LLP, Independent Auditors
23.2   Consent of Ernst & Young LLP, Independent Auditors
23.3   Consent of Heller Ehrman White & McAuliffe LLP (filed as part of Exhibit 5)
24   Power of Attorney (See page II-5)
99.1   Lipid Sciences, Inc. 2001 Performance Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on October 30, 2001)
99.2   Lipid Sciences, Inc. 2000 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on August 7, 2001)
99.3   Form of Lipid Sciences, Inc.’s Nonqualified Stock Option Agreement (for Scientific Advisory Board Members) (incorporated by reference to Exhibit 10.22.1 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on October 30, 2001)
99.4   Nonqualified Stock Option Agreement dated as of March 25, 2000 between Lipid Sciences, Inc. and Gary S. Roubin (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement No. 333-67012 on Form S-4 filed on August 7, 2001)
99.5   Nonqualified Stock Option Agreement dated as of October 9, 2000 between Lipid Sciences, Inc. and Joe Markham.
EX-5 3 p66601ex5.txt EX-5 Exhibit 5 [HELLEREHRMAN LOGO] May 16, 2002 Lipid Sciences, Inc. 7068 Koll Center Parkway, Suite 401 Pleasanton, California 94566 REGISTRATION STATEMENT ON FORM S-8 Ladies and Gentlemen: We have acted as counsel to Lipid Sciences, Inc., an Arizona corporation (the "Company"), in connection with the Registration Statement on Form S-8 (the "Registration Statement") which the Company proposes to file with the Securities and Exchange Commission on or about May 16, 2002 for the purpose of registering under the Securities Exchange Act of 1933, as amended, (i) 5,500,000 shares of its common stock, no par value ("Common Stock"), issuable under the Company's 2001 Performance Equity Plan (the "2001 Plan"), (ii) 3,118,040 shares of its Common Stock, issuable under the Company's 2000 Stock Option Plan (the "2000 Plan," and together with the 2001 Plan, the "Plans"), and (iii) 865,262 shares of its Common Stock, issuable under individual Non-Qualified Stock Option Agreements (each an "Option Agreement," and together the "Option Agreements"). All shares of the Company's Common Stock registered on the Registration Statement are herein referred to as the "Shares." In connection with this opinion, we have assumed the authenticity of all records, documents and instruments submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all records, documents and instruments submitted to us as copies. In rendering our opinion, we have examined the following records, documents and instruments: (a) The Amended and Restated Articles of Incorporation of the Company, certified by the Secretary of State of the State of Arizona as of May 7, 2002, and certified to us by an officer of the Company as being complete and in full force as of the date of this opinion; Lipid Sciences, Inc. May 16, 2002 Page 2 (b) The Amended and Restated Bylaws of the Company certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion; (c) A Certificate of officers of the Company (i) attaching records certified to us as constituting all records of proceedings and actions of the Board of Directors and shareholders of the Company relating to the adoption of the Plans, the authorization of the Option Agreements and the reservation of the Shares for issuance pursuant to the Plans and the Option Agreements, and (ii) certifying as to certain factual matters; (d) The Registration Statement; (e) The 2001 Plan; (f) The 2000 Plan; (g) The Form of the Company's Nonqualified Stock Option Agreement for Scientific Advisory Board Members; (h) Nonqualified Stock Option Agreement dated as of March 25, 2000 between the Company and Gary S. Roubin; (i) Nonqualified Stock Option Agreement dated as of October 9, 2000 between the Company and Joe Markham; and (h) A report from American Stock Transfer & Trust Company, the Company's transfer agent, dated May 14, 2002, as to the number of shares of the Company's common stock outstanding as of May 14, 2002. This opinion is limited to the federal laws of the United States of America and the Arizona Business Corporation Act, and we disclaim any opinion as to the laws of any other jurisdiction. We further disclaim any opinion as to any other statute, rule, regulation, ordinance, order or other promulgation of any other jurisdiction or any regional or local governmental body or as to any related judicial or administrative opinion. Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion, and assuming that (i) the Shares to be sold are issued in accordance with the terms of the applicable Plan or Option Agreement, (ii) the full consideration stated in the applicable Plan or Option Agreement is paid for each Share, and (iii) all applicable securities laws are complied with, it is our opinion that when issued and sold by the Company, after payment therefor in the manner provided in Lipid Sciences, Inc. May 16, 2002 Page 3 the applicable Plan or Option Agreement and the Registration Statement, the Shares will be legally issued, fully paid and nonassessable. This opinion is rendered to you in connection with the Registration Statement and is solely for your benefit. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm, corporation or other entity for any purpose, without our prior written consent. We disclaim any obligation to advise you of any change of law that occurs, or any facts of which we may become aware, after the date of this opinion. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Heller Ehrman White & McAuliffe LLP EX-23.1 4 p66601ex23-1.txt EX-23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated February 28, 2002 (March 22, 2002 as to Note 17), appearing in the Annual Report on Form 10-K of Lipid Sciences, Inc. for the year ended December 31, 2001. /s/ DELOITTE & TOUCHE LLP San Francisco, California May 15, 2002 EX-23.2 5 p66601ex23-2.txt EX-23.2 Exhibit 23.2 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Lipid Sciences, Inc. 2001 Performance Equity Plan, the Lipid Sciences, Inc. 2000 Stock Option Plan, as amended, and Individual Non-Qualified Stock Option Agreements with certain consultants and a director of Lipid Sciences, Inc., of our report dated March 13, 2001, with respect to the financial statements of Lipid Sciences, Inc. for the year ended December 31, 2000, included in its Annual Report (Form 10-K) for the year ended December 31, 2001 filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Palo Alto, California May 15, 2002 EX-99.5 6 p66601ex99-5.txt EX-99.5 Exhibit 99.5 LIPID SCIENCES, INC. NONQUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT made and entered into as of the 9th day of October, 2000 (the "Grant Date"), by Lipid Sciences, Inc., a Delaware corporation (the "Company"), and Joe Markham ("Participant"). RECITALS WHEREAS, the Participant is a non-employee member of the Board of Directors of the Company (the "Board") or a consultant or advisor to the Company and has been selected by the Board to receive an option. AGREEMENT NOW, THEREFORE, in consideration of the promises and of the covenants and agreements herein set forth, the parties hereby mutually covenant and agree as follows: 1. Option. (a) Grant. Subject to the terms and conditions of this Agreement, the Company hereby grants to Participant a Non-Qualified Stock Option (the "Option") to purchase all or any part of the Company's shares of common stock (the "Shares") set forth on the signature page hereof, at the exercise price set forth on the signature page hereof. (b) Term. The term of the Option shall expire at 11:59 p.m. on the date immediately preceding the fifth anniversary of the date of grant of the Option. (c) Vesting. The Option shall be immediately vested and fully exercisable as of the Grant Date. 2. Exercise. The Option may not be exercised prior to the date it is vested or after the expiration date. Participant may, subject to the limitations of this Agreement, exercise all or any portion of the Option that has vested pursuant to Section 1 hereof by providing written notice of exercise to the Company specifying the number of Shares with respect to which the Option is being exercised. The exercise price shall be paid in cash, by the surrender of a whole number of Shares (free of all adverse claims and duly endorsed in blank by Participant or accompanied by stock powers duly endorsed in blank) having a fair market value as determined by the Board ("Fair Market Value") on the date of exercise equal to the exercise price, or by the surrender of the unexercised, vested portion of the Option as to which the Spread (as hereinafter defined) is equal to the exercise price, or any combination of the foregoing. "Spread" means the Fair Market Value on the date of exercise of the underlying Shares less the exercise price. No portion of the Option may be exercised after it has expired pursuant to Section 1 hereof. 3. Withholding. The Company may deduct and withhold from any cash payable to Participant such amount as may be required for the purpose of satisfying the Company's obligation to withhold federal, state or local taxes in connection with any exercise of this Option. The Participant may elect to satisfy such withholding obligation, in whole or in part, (a) by causing the Company to withhold Shares otherwise issuable pursuant to the exercise of the Option or (b) by delivering to the Company Shares already owned by the Participant. The Shares so delivered or withheld shall be a whole number, have a Fair Market Value equal to such withholding obligation as of the date that the amount of tax to be withheld is to be determined, shall be free of all adverse claims, and shall be duly endorsed in blank by Participant or accompanied by stock powers duly endorsed in blank. 4. Non-transferability. Participant shall have no rights to sell, assign, transfer, pledge, assign or otherwise alienate the Option under this Agreement, except by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, and any such attempted sale, assignment, transfer, pledge or other conveyance shall be null and void. The Option shall be exercisable during the Participant's lifetime only by the Participant (or his or her legal representative). 5. Beneficiary. The person whose name appears on the signature page hereof after the caption "Beneficiary" or any successor designated by Participant in accordance herewith (the person who is Participant's Beneficiary at the time of his or her death is referred to as the "Beneficiary") shall be entitled to exercise the Option, to the extent it is exercisable, after the death of Participant. Participant may from time to time revoke or change his or her Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Board. The last such designation received by the Board shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Board prior to Participant's death, and in no event shall any designation be effective as of a date prior to such receipt. If no Beneficiary designation is in effect at the time of Participant's death, or if no designated Beneficiary survives Participant or if such designation conflicts with law, Participant's estate shall be entitled to exercise the Option, to the extent it is exercisable after the death of Optionee. If the Board is in doubt as to the right of any person to exercise the Option, the Company may refuse to recognize such exercise, without liability for any interest or dividends on the underlying Shares, until the Board determines the person entitled to exercise the Option, or the Company may apply to any court of appropriate jurisdiction and such application shall be a complete discharge of the liability of the Company therefor. 6. Securities Law Restrictions. Participant acknowledges that he is acquiring the Option and the Shares purchasable pursuant to the Option for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the "Act"). Participant agrees and acknowledges with respect to any Shares that have not been registered under the Act, that (i) Participant will not sell or otherwise dispose of such Shares except pursuant to an effective registration statement under the Act and any applicable state securities laws, or in a transaction which in the opinion of counsel for the Company, is exempt from such registration, and (ii) a legend will be placed on the certificates for the Shares to such effect. As a further condition to the issuance of the Shares, the Participant agrees for himself, and his heirs, legatees and legal representatives, prior to such issuance to execute and deliver to the Company such investment representations and warranties, and to take such other actions, as counsel for the Company determines may be necessary or appropriate for compliance with the Act and any applicable securities laws. -2- Participant has had the opportunity to ask questions of, and to receive answers from, appropriate executive officers of the Company with respect to the terms and conditions of this option and with respect to the business, affairs, financial condition and results of operations of the Company. Participant has had access to such financial and other information as is necessary in order for Participant to make a fully informed decision as to investment in the Company, and has had the opportunity to obtain any additional information necessary to verify any of the information to which Participant has had access. Participant further represents and warrants that the Participant is an accredited investor as that term is defined in Rule 501 of Regulation D under the Securities Act of 1933. Unless otherwise determined by the Board, the Participant agrees that any certificate representing shares of Stock acquired upon exercise of the Option shall bear the following legend: The shares of Stock represented by this certificate are restricted securities as that term is defined under Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act"). These shares may not be sold, transferred or disposed of unless they are registered under the Act, or sold in a transaction that is exempt from registration under the Act and any applicable state securities laws. 7. One-Year Market Stand-Off Agreement. (a) Participant may not, without the prior written consent of the Company's Board of Directors, or managing underwriter (if any), during the period commencing on the date (1) the Company issues its stock in an initial public offering; (2) the Company's stock begins trading on Nasdaq or any other securities exchange or quotation system; or (3) of the closing of a merger, stock exchange or similar transaction in which the Company is a party and the stock held or received by the Company's stockholders is trading on Nasdaq or any other securities exchange or quotation system at the closing, if one or two above has not occurred, and ending on the date specified by the Company's Board of Directors, or managing underwriter (if any) (the period may not exceed one year), (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock (whether such shares or any such securities are then owned by the Participant or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The prohibitions in this section apply to any stock received by the Company's stockholders under subsection three above. In connection with the Company's initial public offering, if any, the underwriters are intended third party beneficiaries of this section and will have the right, power and authority to enforce the provisions hereof as though they were a party hereto. -3- (b) In order to enforce the covenant in this section, the Company may impose stop-transfer instructions with respect to the securities of each Participant (and the shares or securities of every other person subject to the foregoing restriction) until the end of the relevant period. 8. Limited Interest. (a) The grant of the Option shall not be construed as giving Participant any interest other than as provided in this Agreement. (b) Participant shall have no rights as a stockholder as a result of the grant of the Option, until the Option is exercised, the exercise price is paid, and the Shares issued thereunder. (c) The grant of the Option shall not affect in any way the right or power of the Company to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure or its business, or any merger, consolidation or business combination of the Company, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Shares or the rights of the holders thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business or any other Company act or proceeding, whether of a similar character or otherwise. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 10. Amendment. This Agreement may not be amended, modified, terminated or otherwise altered except by the written consent of the parties thereto. 11. Counterparts. This Non-Qualified Stock Option Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. [SIGNATURES ON FOLLOWING PAGE] -4- IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers and its corporate seal hereunto affixed, and the Participant has hereunto affixed his hand the day and year first above written. LIPID SCIENCES, INC. By: /s/ Christopher A. Marlett ----------------------------------------- Christopher A. Marlett, Chairman ("Company") By: /s/ Joe Markham ---------------------------------------- Joe Markham ("Participant") No. of Shares: 5,000 Grant Date: October 9, 2000 Exercise Price Per Share: $5.00 Initial Exercise Date: October 9, 2000 Option Expiration Date:October 9, 2005 Date of Agreement: October 9, 2000 Beneficiary: Address of Beneficiary: --------------------- ----------------------------------- Beneficiary Tax Identification No.: ----------------------------------- - --------------------------------- ----------------------------------- -5- -----END PRIVACY-ENHANCED MESSAGE-----