10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Mark One

[X]  Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.

For the Quarterly Period Ended June 30, 2002

Or

[   ]  Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.

For the Transition Period From _________ to _______

Commission File Number: 0-24274

LA JOLLA PHARMACEUTICAL COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware	33-0361285
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
6455 Nancy Ridge Drive San Diego, CA	92121
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (858) 452-6600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  [X]   No  [   ]

The number of shares of the Registrant’s common stock, $0.01 par value, outstanding at July 31, 2002 was 42,402,685.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		Balance Sheets
		Statements of Operations
		Statements of Cash Flows
		Notes to Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.45
EXHIBIT 99.1

LA JOLLA PHARMACEUTICAL COMPANY
FORM 10-Q
QUARTERLY REPORT

INDEX

PART I.   FINANCIAL INFORMATION
	ITEM 1.   Financial Statements
	Balance Sheets as of June 30, 2002 (Unaudited) and December 31, 2001	1
	Statements of Operations (Unaudited) for the three and six months ended June 30, 2002 and 2001	2
	Statements of Cash Flows (Unaudited) for the six months ended June 30, 2002 and 2001	3
	Notes to Financial Statements (Unaudited)	4
	ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
	ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk	8
PART II.   OTHER INFORMATION
	ITEM 4.   Submission of Matters to a Vote of Security Holders	8
	ITEM 6.   Exhibits and Reports on Form 8-K	9
SIGNATURES		10

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LA JOLLA PHARMACEUTICAL COMPANY

Balance Sheets
(in thousands)

			June 30,			December 31,
			2002			2001
			(Unaudited)			(Note)
Assets:
Current assets:
	Cash and cash equivalents		$	49,202		$	9,932
	Short-term investments			25,676			37,028
	Other current assets			1,358			568
		Total current assets		76,236			47,528
Property and equipment, net				2,958			1,921
Patent costs and other assets, net				2,357			2,237
		Total assets	$	81,551		$	51,686
Liabilities and Stockholders’ Equity:
Current liabilities:
	Accounts payable		$	952		$	743
	Accrued clinical expenses			1,171			703
	Accrued pre-marketing expenses			329			536
	Accrued expenses			902			541
	Accrued payroll and related expenses			548			451
	Current portion of obligations under capital leases			102			167
		Total current liabilities		4,004			3,141
Commitments
Stockholders’ equity:
	Common stock			424			353
	Additional paid-in capital			206,736			158,223
	Other comprehensive income			109			218
	Accumulated deficit			(129,722	)		(110,249	)
		Total stockholders’ equity		77,547			48,545
		Total liabilities and stockholders’ equity	$	81,551		$	51,686

Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete balance sheets.

See accompanying notes.

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LA JOLLA PHARMACEUTICAL COMPANY

Statements of Operations
(Unaudited)
(in thousands, except per share amounts)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2002			2001			2002			2001
Expenses:
	Research and development			9,661			5,949			16,905			12,414
	General and administrative			1,788			1,024			3,201			1,908
		Total expenses		11,449			6,973			20,106			14,322
Loss from operations				(11,449	)		(6,973	)		(20,106	)		(14,322	)
Interest expense				(9	)		(13	)		(15	)		(13	)
Interest income				100			880			648			1,680
Net loss			$	(11,358	)	$	(6,106	)	$	(19,473	)	$	(12,655	)
Basic and diluted net loss per share			$	(.27	)	$	(.17	)	$	(.47	)	$	(.37	)
Shares used in computing basic and diluted net loss per share				42,356			35,150			41,671			33,926

See accompanying notes.

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LA JOLLA PHARMACEUTICAL COMPANY

Statements of Cash Flows
(Unaudited)
(in thousands)

			Six Months Ended
			June 30,
			2002			2001
Operating Activities:
Net loss			$	(19,473	)	$	(12,655	)
Adjustments to reconcile net loss to net cash used for operating activities:
	Depreciation and amortization			656			258
	Accretion of interest income			470			(107	)
	Change in operating assets and liabilities:
		Other current assets		(790	)		(893	)
		Accounts payable and accrued expenses		570			102
		Accrued clinical expenses		468			(801	)
		Accrued pre-marketing expenses		(207	)		—
		Accrued payroll and related expenses		97			109
		Net cash used for operating activities		(18,209	)		(13,987	)
Investing Activities:
Decrease (increase) in short-term investments				10,773			(5,901	)
Additions to property and equipment				(1,537	)		(506	)
Increase in patent costs and other assets				(160	)		(168	)
		Net cash provided by (used for) investing activities		9,076			(6,575	)
Financing Activities:
Net proceeds from issuance of common stock				48,584			33,283
Payments on obligations under capital leases				(181	)		(159	)
		Net cash provided by financing activities		48,403			33,124
Net increase in cash and cash equivalents				39,270			12,562
Cash and cash equivalents at beginning of period				9,932			8,061
Cash and cash equivalents at end of period			$	49,202		$	20,623
Supplemental disclosure of cash flow information:
Interest paid			$	15		$	13
Supplemental schedule of non-cash investing and financing activities:
Capital lease obligations incurred for property and equipment			$	116		$	371
Net unrealized (losses) gains on available-for-sale investments			$	(109	)	$	56

See accompanying notes.

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LA JOLLA PHARMACEUTICAL COMPANY

Notes to Financial Statements
(Unaudited)

June 30, 2002

1. Basis of Presentation

The accompanying unaudited financial statements of La Jolla Pharmaceutical Company (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for other quarters or the year ended December 31, 2002. For more complete financial information, these financial statements, and the notes thereto, should be read in conjunction with the audited financial statements for the year ended December 31, 2001 included in the Company’s Form 10-K filed with the Securities and Exchange Commission.

2. Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ materially from those estimates.

Net Loss Per Share

Basic and diluted net loss per share is computed using the weighted-average number of common shares outstanding during the periods in accordance with Statement of Financial Accounting Standard No. 128, Earnings Per Share. As the Company has incurred a net loss for all periods presented, stock options and warrants are not included in the computation of diluted net loss per share because their effect is anti-dilutive.

Comprehensive Loss

In accordance with Statement of Financial Accounting Standard No. 130, Reporting Comprehensive Income (Loss), unrealized gains and losses on available-for-sale securities are included in other comprehensive income (loss). The Company’s comprehensive net loss totaled $11,201,000 and $6,141,000 for the three-month periods and $19,582,000 and $12,599,000 for the six-month periods ended June 30, 2002 and 2001, respectively.

3. Recent Accounting Pronoucements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard Nos. 141, Business Combinations (“SFAS 141”) and 142, Goodwill and Other Intangible Assets (“SFAS 142”). SFAS 141 replaces Accounting Principles Board Opinion No. 16, Business Combinations, and eliminates pooling-of-interests accounting prospectively. It also provides

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guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. SFAS 141 and SFAS 142 are effective for all business combinations completed after June 30, 2001. Companies are required to adopt SFAS 142 for fiscal years beginning after December 15, 2001. The adoption of these statements had no impact on our financial statements.

In August 2001, FASB issued Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). SFAS 144 supersedes the provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions with regard to discontinued operations and eliminates the provisions of Statement of Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Assets to Be Disposed Of, with regard to the requirement to test the allocation of goodwill to long-lived assets for impairment. SFAS 144 provides guidance on differentiating between assets held and used, held for sale, and held for disposal other than by sale (e.g., abandonment, exchange and distribution). SFAS 144 is effective for fiscal years beginning after December 15, 2001. The adoption of this statement had no impact on our financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

     Except for historical statements, this report contains forward-looking statements involving significant risks and uncertainties, and a number of factors, both foreseen and unforeseen, could cause actual results to differ materially from our current expectations. Our analyses of clinical results of LJP 394, our drug candidate for the treatment of systemic lupus erythematosus (“lupus”), and LJP 1082, our drug candidate for the treatment of antibody-mediated thrombosis (“thrombosis”), are ongoing and future analyses could result in a finding that these drug candidates are not effective in large patient populations, do not provide a meaningful clinical benefit or may reveal a potential safety issue requiring us to develop new candidates. Our blood test to measure the binding affinity for LJP 394 is experimental, has not been validated by independent laboratories, may require regulatory approval and may be necessary for the approval and the commercialization of LJP 394. Our other potential drug candidates are at earlier stages of development and involve comparable risks. Analysis of our clinical trials could have negative or inconclusive results. Any positive results observed to date may not be indicative of future results. Even if results are promising, the U.S. Food and Drug Administration (“FDA”) may require additional clinical trials. The Company’s ability to develop and sell its products in the future may be affected by the intellectual property rights of third parties. Additional risk factors include the uncertainty of: obtaining required regulatory approvals; successfully marketing products; receiving future revenue from product sales or other sources such as collaborative relationships; future profitability; the need for additional financing; our dependence on patents and other proprietary rights; FDA approval of our manufacturing facilities; the increase in capacity of our manufacturing capabilities for possible commercialization; and our lack of marketing experience. Readers are cautioned to not place undue reliance upon forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date hereof. Interested parties are urged to review the risks described in our other reports and registration statements filed with the Securities and Exchange Commission from time to time, including our report on Form 10-K for the year ended December 31, 2001.

Overview

     Since our inception in May 1989, we have devoted substantially all of our resources to the research and development of technology and potential drugs to treat antibody-mediated diseases. We have never generated any revenue from product sales and have relied upon sales of our equity securities

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to private and public investors, revenue from collaborative agreements, equipment lease financings and interest income on invested cash balances for our working capital. We have been unprofitable since inception and we expect to incur substantial additional expenses and net operating losses for at least the next several years as we increase our clinical trial and manufacturing activities including the production of LJP 394 and LJP 1082 for clinical trials, and increase our research and development expenditures on additional drug candidates, as well as general and administrative expenditures to support increased clinical trial, manufacturing and research and development activities. Our activities to date are not as broad in depth or scope as the activities we expect to undertake in the future, and our historical operations and the financial information included in this report are not necessarily indicative of our future operating results or financial condition.

     We expect losses to fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred and potential revenues from collaborative arrangements. Some of these fluctuations may be significant. As of June 30, 2002, our accumulated deficit was approximately $129.7 million.

Results of Operations

     For the three and six months ended June 30, 2002, research and development expenses increased to $9.7 million and $16.9 million, respectively, from $5.9 million and $12.4 million for the same periods in 2001. The increase was due to an increase in expenses associated with our ongoing Phase III clinical trial of our lupus drug candidate, LJP 394, and the Phase I/II clinical trial of our thrombosis drug candidate, LJP 1082, which was initiated in November 2001.

     Research and development expense of $9.7 million for the three months ended June 30, 2002 consisted of $7.5 million for lupus research and development related expense, $1.8 million for thrombosis research and development related expense and $0.4 million for other research and development related expense. Research and development expense of $16.9 million for the six months ended June 30, 2002 consisted of $12.7 million for lupus research and development related expense, $3.2 million for thrombosis research and development related expense and $1.0 million for other research and development related expense. For the three and six months ended June 30, 2002, total lupus research and development expense consisted primarily of clinical trial related costs such as investigator fees, clinical research organization fees, trial enrollment advertising fees, clinical lab fees, regulatory and clinical consulting fees and raw materials for the production of LJP 394 for clinical trials, as well as salaries and other costs related to research, manufacturing and clinical personnel. For the three and six months ended June 30, 2002, total thrombosis research and development expense consisted primarily of salaries and other costs related to research and development personnel, raw materials for the production of LJP 1082 for clinical trials, investigator fees and contract clinical research associate fees. For the three and six months ended June 30, 2002, total other research and development expense primarily consisted of salaries and other costs related to research and development personnel and research supplies.

     Our research and development expenses are expected to increase significantly in the future as clinical trial and manufacturing activities including the production of LJP 394 and LJP 1082 for clinical trials are increased, efforts to develop additional drug candidates are intensified and other potential drug candidates progress into and through clinical trials.

     General and administrative expenses increased to $1.8 million and $3.2 million for the three and six months ended June 30, 2002, respectively, from $1.0 million and $1.9 million for the same periods in 2001. The increase was due to additional administrative expenditures to support our increased clinical, research and development and pre-marketing activities. We expect general and administrative expenses to increase in the future in order to support increased clinical trial, manufacturing scale-up and research and development activities.

     Interest income decreased to $0.1 million and $0.6 million for the three and six months ended June 30, 2002, respectively, from $0.9 million and $1.7 million for the same periods in 2001. The decrease in interest income was due to lower average interest rates on our investments for the three and six months ended June 30, 2002 as compared to the three and six month periods ended June 30, 2001.

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Liquidity and Capital Resources

     From inception through June 30, 2002, we have incurred a cumulative net loss of approximately $129.7 million and have financed our operations through private and public offerings of our securities, revenues from collaborative agreements, equipment lease financings and interest income on invested cash balances. As of June 30, 2002, we had raised approximately $207.2 million in net proceeds since inception from sales of our equity securities.

     At June 30, 2002, we had $74.9 million in cash, cash equivalents and short-term investments, as compared to $47.0 million at December 31, 2001. Our working capital at June 30, 2002 was $72.2 million, as compared to $44.4 million at December 31, 2001. The increase in cash, cash equivalents and short-term investments and working capital resulted from net proceeds of $48.3 million we received from the sale of 7,000,000 shares of our common stock to private investors in January 2002. We invest our cash in United States Government-backed and corporate debt instruments.

     As of June 30, 2002, we had acquired an aggregate of $7.9 million in property and equipment, of which approximately $0.2 million of equipment is financed under capital lease obligations. In addition, we lease our office and laboratory facilities and certain equipment under operating leases. We currently have no material commitments for the acquisition of property and equipment. However, we anticipate increasing our investment in property and equipment in connection with the enhancement of our research and development and manufacturing facilities and capabilities.

     We intend to use our financial resources to fund clinical trials and to increase our manufacturing activities, including the production of LJP 394 and LJP 1082 for clinical trials, research and development efforts, and for working capital and other general corporate purposes. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including the results of clinical trials, the timing of regulatory applications and approvals and technological developments. Expenditures also will depend upon the establishment and progression of collaborative arrangements and contract research as well as the availability of other financings. There can be no assurance that we will generate funds from these sources on acceptable terms, if at all.

     We anticipate that our existing capital and interest earned thereon, will be sufficient to fund our operations as currently planned, assuming that we do not engage a collaborative partner, into the fourth quarter of 2003. Based on our current projections, we estimate that we will end our fiscal year of 2002 with approximately $35 to $40 million in cash and cash equivalents, however actual results could differ materially from this forward-looking estimate. Our future capital requirements will depend on many factors, including continued scientific progress in our research and development programs, the size and complexity of these programs, the scope and results of clinical trials, the analysis of data from the Phase III clinical trial for lupus and the Phase I/II clinical trial for thrombosis, the time and costs involved in applying for any regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims, competing technological and market developments, our ability to establish and maintain collaborative relationships and the cost of manufacturing and effective commercialization activities and arrangements. We expect to incur significant net operating losses each year for at least the next several years as we expand our current research and development programs, including clinical trials and manufacturing activities, and increase our general and administrative expenses to support a larger, more complex corporate organization. It is possible that our cash requirements will exceed current projections and that we will therefore need additional financing sooner than currently expected.

     We have no current means of generating cash flow from operations. Our lead drug candidate, LJP 394, will not generate revenues, if at all, until it has been proven safe and effective, has received regulatory approval and has been successfully commercialized. This process is expected to take at least the next several years. Our other drug candidates are much less developed than LJP 394. There can be no assurance that our product development efforts with respect to LJP 394 or any other drug candidate will be successfully completed, that required regulatory approvals will be obtained or that any product, if introduced, will be successfully marketed or achieve commercial acceptance. Accordingly, we must continue to rely upon outside sources of financing to meet our capital needs for the foreseeable future.

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     We will continue to seek capital through any appropriate means, including issuance of our securities and establishment of collaborative arrangements. However, there can be no assurance that additional financing will be available on acceptable terms and our negotiating position in capital-raising efforts may worsen as we continue to use existing resources. There is no assurance that we will be able to enter into collaborative relationships.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not utilize derivative financial instruments, derivative commodity instruments or other market-risk-sensitive instruments, positions or transactions in any material fashion. We are not subject to any material risks arising from changes in foreign currency exchange rates or commodity prices. We invest a portion of our excess cash in interest bearing investment-grade securities. The investment-grade securities we hold are subject to changes in the financial standing of the issuer of such securities. Due to their short term nature, however, we generally hold such investment-grade securities to their maturity date and therefore realize their face value. The balance of our cash equivalents are on deposit in money market funds and we do not expect fluctuations in interest rates to materially affect our financial results.

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual Meeting of Stockholders was held on May 22, 2002. All of the directors nominated for election by the Company’s Board of Directors and as stated in the Company’s Proxy Statement were elected as follows:

Director Nominee	Term	Votes in Favor		Votes Withheld
William Engbers	Three years		31,247,922		794,383
W. Leigh Thompson, Ph.D.	Three years		31,247,922		794,383

     In addition, Steven Engle, Thomas Adams, Robert Fildes, Stephen Martin and William Ringo continued to serve on the Company’s Board of Directors after the Annual Meeting. All of the Company’s proposals as stated in the Company’s Proxy Statement were approved as follows:

							Broker
Proposal Description	Votes in Favor		Votes Against		Abstaining		Non-Votes
Amendment to the 1994 Stock Incentive Plan to increase by 1,900,000 the number of shares of the Company’s Common Stock available under the Plan		30,053,658		1,955,380		33,267		—
Amendment to the 1995 Employee Stock Purchase Plan to increase by 200,000 the number of shares of the Company’s Common Stock available under the Plan		31,698,291		320,476		23,537		1

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

Exhibit
Number	Description
3.1	Intentionally omitted
3.2	Amended and Restated Bylaws of the Company (1)
3.3	Amended and Restated Certificate of Incorporation of the Company (2)
4.0	Rights Agreement dated as of December 3, 1998 between the Company and American Stock Transfer & Trust Company (3)
4.1	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company (4)
4.2	Amendment to Rights Agreement, effective as of July 21, 2000, between the Company and American Stock Transfer & Trust Company (5)
10.19	La Jolla Pharmaceutical Company 1994 Stock Incentive Plan (Amended and Restated as of May 22, 2002)*
10.20	La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (Amended and Restated as of May 22, 2002)*
10.45	Supplement to employment offer letter for Kenneth R. Heilbrunn, M.D.*
99.1	Certification pursuant to 906 of the Sarbanes-Oxley Act

*	This exhibit is a management contract or compensatory plan or arrangement.
(1)	Previously filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated by reference herein.
(2)	Previously filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated by reference herein.
(3)	Previously filed with the Company’s Registration Statement on Form 8-A (No. 000-24274) as filed with the Securities and Exchange Commission on December 4, 1998.
(4)	Previously filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated by reference herein.
(5)	Previously filed with the Company’s Current Report on Form 8-K filed on January 26, 2001 and incorporated by reference herein. The changes effected by the Amendment are also reflected in the Amendment to Application for Registration on Form 8-A/A filed on January 26, 2001.

(b)	Reports on Form 8-K
	None.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	La Jolla Pharmaceutical Company
Date: August 13, 2002	By:	/s/   Steven B. Engle
		Steven B. Engle Chairman and Chief Executive Officer On behalf of the Registrant

By:	/s/   Gail A. Sloan
	Gail A. Sloan Secretary and Controller As Principal Financial and Accounting Officer

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LA JOLLA PHARMACEUTICAL COMPANY

INDEX TO EXHIBITS

Exhibit
Number	Description
10.19	La Jolla Pharmaceutical Company 1994 Stock Incentive Plan (Amended and Restated as of May 22, 2002)
10.20	La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (Amended and Restated as of May 22, 2002)
10.45	Supplement to employment offer letter for Kenneth R. Heilbrunn, M.D.
99.1	Certification pursuant to 906 of the Sarbanes-Oxley Act

EX-10.19 3 a83443exv10w19.txt EXHIBIT 10.19 EXHIBIT 10.19 LA JOLLA PHARMACEUTICAL COMPANY 1994 STOCK INCENTIVE PLAN ARTICLE I GENERAL PROVISIONS 1.01 PURPOSE OF THE PLAN. La Jolla Pharmaceutical Company (the "COMPANY"), by action of its Board of Directors and with the consent of its stockholders, has adopted this La Jolla Pharmaceutical Company Stock Incentive Plan (the "PLAN") effective as of June 10, 1994 to advance the interests of the Company and its stockholders by (a) providing Eligible Persons with financial incentives to promote the success of the Company's business objectives, and to increase their proprietary interest in the success of the Company, and (b) giving the Company a means to attract and retain directors of appropriate experience and stature. 1.02 DEFINITIONS. Terms used herein and not otherwise defined shall have the meanings set forth below: (a) "AWARD" means an Incentive Award or a Nonemployee Director's Option. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended. Where the context so requires, a reference to a particular Code section shall also refer to any successor provision of the Code to such section. (d) "COMMISSION" means the Securities and Exchange Commission. (e) "COMMITTEE" means the committee appointed by the Board to administer the Plan. The Committee shall be composed entirely of members who meet the requirements of Section 1.04(a). (f) "COMMON STOCK" means the common stock of the Company, $0.01 par value. (g) "DIVIDEND EQUIVALENT" means a right granted by the Company under Section 2.07 to a holder of a Stock Option, Stock Appreciation Right, or other Incentive Award denominated in shares of Common Stock to receive from the Company during the Applicable Dividend Period (as defined in Section 2.07) payments equivalent to the amount of dividends payable to holders of the number of shares of Common Stock underlying such Stock Option, Stock Appreciation Right, or other Incentive Award. (h) "ELIGIBLE PERSON" means any director, officer or key employee, consultant, or advisor of the Company (as determined by the Committee) including Nonemployee Directors and members of the Committee. (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. Where the context so requires, a reference to a particular section of the Exchange Act or rule thereunder shall also refer to any successor provision to such section or rule. (j) "FAIR MARKET VALUE" of capital stock of the Company shall be determined with reference to the closing price of such stock on the day in question (or, if such day is not a trading day in the U.S. securities markets, on the nearest preceding trading day), as reported with respect to the principal market or trading system on which such stock is then traded; or, if no such closing prices are reported, the mean between the high bid and low asked prices that day on the principal market or national quotation system on which such shares are then quoted; provided, however, that when appropriate, the Committee in determining Fair Market Value of capital stock of the Company may take into account such other factors as may be deemed appropriate under the circumstances. Notwithstanding the foregoing, the Fair Market Value of capital stock for purposes of grants of Incentive Stock Options shall be determined in compliance with applicable provisions of the Code. The Fair Market Value of rights or property other than capital stock of the Company means the fair market value thereof as determined by the Committee on the basis of such factors as it may deem appropriate. (k) "INCENTIVE AWARD" means any Stock Option, Restricted Stock, Stock Appreciation Right, Stock Payment, Performance Award or Dividend Equivalent granted or sold to an Eligible Person under this Plan, but not a Nonemployee Director's Option. (l) "INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an incentive stock option under Section 422 (or any successor section) of the Code and the regulations thereunder. (m) "JUST CAUSE DISMISSAL" shall mean a termination of a Recipient's employment for any of the following reasons: (i) the Recipient violates any reasonable rule or regulation of the Board or the Recipient's superiors or the Chief Executive Officer or President of the Company that results in damage to the Company or which, after written notice to do so, the Recipient fails to correct within a reasonable time; (ii) any willful misconduct or gross negligence by the Recipient in the responsibilities assigned to him or her; (iii) any willful failure to perform his or her job as required to meet Company objectives; (iv) any wrongful conduct of a Recipient which has an adverse impact on the Company or which constitutes a misappropriation of Company assets; (v) the Recipient's performing services for any other person or entity which competes with the Company while he or she is employed by the Company, without the written approval of the Chief Executive Officer or President of the Company; or (vi) any other conduct that the Board or Committee determines constitutes Just Cause for Dismissal. (n) "NONEMPLOYEE DIRECTOR" means a director of the Company who qualifies as a "Nonemployee Director" under Rule 16b-3 under the Exchange Act. (o) "NONEMPLOYEE DIRECTOR'S OPTION" means a Stock Option granted to a Nonemployee Director pursuant to Article III of the Plan. (p) "NONQUALIFIED STOCK OPTION" means a Stock Option other than an Incentive Stock Option. (q) "OPTION" or "STOCK OPTION" means a right to purchase stock of the Company granted under this Plan, and can be an Incentive Stock Option or a Nonqualified Stock Option. (r) "PAYMENT EVENT" means the event or events giving rise to the right to payment of a Performance Award. (s) "PERFORMANCE AWARD" means an award, payable in cash, Common Stock or a combination thereof, which vests and becomes payable over a period of time upon attainment of performance criteria established in connection with the grant of the award. (t) "PERFORMANCE-BASED COMPENSATION" means performance-based compensation as described in Section 162(m) of the Code and the regulations thereunder. If the amount of compensation an Eligible Person will receive under any Incentive Award is not based solely on an increase in the value of Common Stock after the date of grant or award, the Committee, in order to qualify 2 an Incentive Award as performance-based compensation under Section 162(m) of the Code and the regulations thereunder, can condition the grant, award, vesting, or exercisability of such an award on the attainment of a preestablished, objective performance goal. For this purpose, a preestablished, objective performance goal may include one or more of the following performance criteria: (i) cash flow, (ii) earnings per share (including earnings before interest, taxes, and amortization), (iii) return on equity, (iv) total stockholder return, (v) return on capital, (vi) return on assets or net assets, (vii) income or net income, (viii) operating margin, (ix) return on operating revenue, (x) attainment of stated goals related to the Company's research and development or clinical trials programs, (xi) attainment of stated goals related to the Company's capitalization, costs, financial condition, or results of operations, and (xii) any other similar performance criteria contemplated by the regulations under Section 162(m). (u) "PERMANENT DISABILITY" shall mean that the Recipient becomes physically or mentally incapacitated or disabled so that he or she is unable to perform substantially the same services as he or she performed prior to incurring such incapacity or disability (the Company, at its option and expense, being entitled to retain a physician to confirm the existence of such incapacity or disability, and the determination of such physician to be binding upon the Company and the Recipient), and such incapacity or disability continues for a period of three consecutive months or six months in any twelve-month period or such other period(s) as may be determined by the Committee with respect to any Option. (v) "PURCHASE PRICE" means the purchase price (if any) to be paid by a Recipient for Restricted Stock as determined by the Committee (which price shall be at least equal to the minimum price required under applicable laws and regulations for the issuance of Common Stock which is nontransferable and subject to a substantial risk of forfeiture until specific conditions are met). (w) "RECIPIENT" means a person who has received an Award hereunder. (x) "RESTRICTED STOCK" means Common Stock that is the subject of an award made under Section 2.04 and which is nontransferable and subject to a substantial risk of forfeiture until specific conditions are met as set forth in this Plan and in any statement evidencing the grant of such Incentive Award. (y) "SECURITIES ACT" means the Securities Act of 1933, as amended. (z) "STOCK APPRECIATION RIGHT" or "SAR" means a right granted under Section 2.05 to receive a payment that is measured with reference to the amount by which the Fair Market Value of a specified number of shares of Common Stock appreciates from a specified date, such as the date of grant of the SAR, to the date of exercise. (aa) "STOCK PAYMENT" means a payment in shares of the Company's Common Stock to replace all or any portion of the compensation (other than base salary) that would otherwise become payable to a Recipient. 1.03 COMMON STOCK SUBJECT TO THE PLAN. (a) Number of Shares. Subject to Section 1.05(b), the maximum number of shares of Common Stock that may be issued pursuant to Awards under the Plan shall be 7,100,000. (b) Source of Shares. The Common Stock to be issued under this Plan will be made available, at the discretion of the Board or the Committee, either from authorized but unissued shares of Common Stock or from previously issued shares of Common Stock reacquired by the Company, including shares purchased on the open market. (c) Availability of Unused Shares. Shares of Common Stock subject to unexercised portions of any Award granted under this Plan that expire, terminate or are cancelled, and shares of Common Stock issued pursuant to an Award under this Plan that are reacquired by the Company 3 pursuant to the terms of the Award under which such shares were issued, will again become available for the grant of further Awards under this Plan. (d) Grant Limits. Notwithstanding any other provision of this Plan, no Eligible Person shall be granted Awards with respect to more than 600,000 shares of Common Stock in any one calendar year; provided, however, that this limitation shall not apply if it is not required in order for the compensation attributable to Incentive Awards hereunder to qualify as Performance-Based Compensation. The limitation set forth in this Section 1.03(d) shall be subject to adjustment as provided in Section 1.05(b), but only to the extent such adjustment would not affect the status of compensation attributable to Awards hereunder as Performance-Based Compensation. 1.04 ADMINISTRATION OF THE PLAN. (a) The Committee. The Plan will be administered by the Committee, which will consist of two or more members of the Board each of whom must be a Nonemployee Director; provided, however, that the number of members of the Committee may be reduced or increased from time to time by the Board. In addition, if Awards are to be made to persons subject to Section 162(m) of the Code and such awards are intended to constitute Performance-Based Compensation, then each of the Committee's members must also be an "outside director," as such term is defined in the regulations under Section 162(m) of the Code. Notwithstanding the foregoing or any provision of the Plan to the contrary, the Board may, in lieu of the Committee, exercise any authority granted to the Committee pursuant to the provisions of the Plan. (b) Authority of the Committee. The Committee has authority in its discretion to select the Eligible Persons to whom, and the time or times at which, Incentive Awards shall be granted or sold, the nature of each Incentive Award, the number of shares of Common Stock or the number of rights that make up or underlie each Incentive Award, the period for the exercise of each Incentive Award, the performance criteria (which need not be identical) utilized to measure the value of Performance Awards, and such other terms and conditions applicable to each individual Incentive Award as the Committee shall determine. The Committee may grant at any time new Incentive Awards to an Eligible Person who has previously received Incentive Awards or other grants (including other stock options) whether such prior Incentive Awards or such other grants are still outstanding, have previously been exercised in whole or in part, or are cancelled in connection with the issuance of new Incentive Awards. The Committee may grant Incentive Awards singly or in combination or in tandem with other Incentive Awards as it determines in its discretion. The purchase price or initial value and any and all other terms and conditions of the Incentive Awards may be established by the Committee without regard to existing Incentive Awards or other grants. Further, the Committee may, with the consent of an Eligible Person, amend in a manner not inconsistent with the Plan the terms of any existing Incentive Award previously granted to such Eligible Person, provided that neither the Board nor the Committee shall reduce the Exercise Price of any outstanding Option without stockholder approval. (c) Plan Interpretation. Subject to the express provisions of the Plan, the Committee has the authority to interpret the Plan and any agreements defining the rights and obligations of the Company and Recipients, to determine the terms and conditions of Incentive Awards and to make all other determinations necessary or advisable for the administration of the Plan. The Committee has authority to prescribe, amend and rescind rules and regulations relating to the Plan. All interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties. Any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. (d) Special Rules Regarding Article III. Notwithstanding anything herein to the contrary, the Committee shall have no authority or discretion as to the selection of persons eligible to receive Nonemployee Directors' Options granted under the Plan, the number of shares covered by Nonemployee Directors' Options granted under the Plan, the timing of such grants, or the exercise price of Nonemployee Directors' Options granted under the Plan, which matters are specifically governed by the provisions of the Plan. 4 (e) No Liability. No member of the Board or the Committee or any designee thereof will be liable for any action or determination made in good faith by the Board or the Committee with respect to the Plan or any transaction arising under the Plan. 1.05 OTHER PROVISIONS. (a) Documentation. Each Award granted under the Plan shall be evidenced by an award agreement duly executed on behalf of the Company and by the Recipient or, in the Committee's discretion, a confirming memorandum issued by the Company to the Recipient (in either case an "AWARD DOCUMENT") evidencing the Award and setting forth such terms and conditions applicable to the Award as the Committee may in its discretion determine consistent with the Plan, provided that the Committee shall exercise no discretion with respect to Nonemployee Directors' Options, which shall reflect only the terms of the Award as set forth in Article III and certain administrative matters dictated by the Plan. Award Documents shall comply with and be subject to the terms and conditions of the Plan. A copy of the Plan shall be delivered to each Award Recipient together with the Award Document, and shall constitute a part thereof. In case of any conflict between the Plan and any Award Document, the Plan shall control. Various Award Documents covering the same types of Awards may but need not be identical. (b) Adjustment Provisions. If (1) the outstanding shares of Common Stock of the Company are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed in respect of such shares of Common Stock (or any stock or securities received with respect to such Common Stock), through merger, consolidation, sale or exchange of all or substantially all of the properties of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off or other distribution with respect to such shares of Common Stock (or any stock or securities received with respect to such Common Stock), or (2) the value of the outstanding shares of Common Stock of the Company is reduced by reason of an extraordinary cash dividend, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares subject to the Plan as provided in Section 1.03, (y) the number and kind of shares or other securities subject to then outstanding Awards, and (z) the price for each share or other unit of any other securities subject to then outstanding Awards. No fractional interests will be issued under the Plan resulting from any such adjustments. (c) Continuation of Employment. (i) Nothing contained in this Plan (or in Award Documents or in any other documents related to this Plan or to Awards granted hereunder) shall confer upon any Eligible Person or Recipient any right to continue in the employ of the Company or constitute any contract or agreement of employment or engagement, or interfere in any way with the right of the Company to reduce such person's compensation or other benefits or to terminate the employment of such Eligible Person or Recipient, with or without cause. Except as expressly provided in the Plan or in any statement evidencing the grant of an Award pursuant to the Plan, the Company shall have the right to deal with each Recipient in the same manner as if the Plan and any such statement evidencing the grant of an Award pursuant to the Plan did not exist, including, without limitation, with respect to all matters related to the hiring, discharge, compensation and conditions of the employment or engagement of the Recipient. (ii) Any question(s) as to whether and when there has been a termination of a Recipient's employment, the reason (if any) for such termination, and/or the consequences thereof under the terms of the Plan or any statement evidencing the grant of an Award pursuant to the Plan shall be determined by the Committee and the Committee's determination thereof shall be final and binding. (d) Restrictions. All Awards granted under the Plan shall be subject to the requirement that, if at any time the Company shall determine, in its discretion, that the listing, registration or qualification of the shares subject to Awards granted under the Plan upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is 5 necessary or desirable as a condition of, or in connection with, the granting of such an Award or the issuance, if any, or purchase of shares in connection therewith, such Award may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. Unless the shares of stock to be issued upon exercise of an Award granted under the Plan have been effectively registered under the Securities Act, the Company shall be under no obligation to issue any shares of stock covered by any Award unless the person who exercises such Award, in whole or in part, shall give a written representation and undertaking to the Company satisfactory in form and scope to counsel to the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he or she is acquiring the shares of stock issued to him or her pursuant to such exercise of the Award for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares of stock, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act, or any other applicable law, and that if shares of stock are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. (e) Additional Conditions. Any Incentive Award may also be subject to such other provisions (whether or not applicable to any other Award or Recipient) as the Committee determines appropriate including, without limitation, provisions to assist the Recipient in financing the purchase of Common Stock through the exercise of Stock Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Common Stock acquired under any form of benefit, provisions giving the Company the right to repurchase shares of Common Stock acquired under any form of benefit in the event the Recipient elects to dispose of such shares, and provisions to comply with federal and state securities laws and federal and state income tax withholding requirements. (f) Privileges of Stock Ownership. Except as otherwise set forth herein, a Recipient or a permitted transferee of an Award shall have no rights as a shareholder with respect to any shares issuable or issued in connection with the Award until the date of the receipt by the Company of all amounts payable in connection with exercise of the Award and performance by the Recipient of all obligations thereunder. Status as an Eligible Person shall not be construed as a commitment that any Award will be granted under this Plan to an Eligible Person or to Eligible Persons generally. No person shall have any right, title or interest in any fund or in any specific asset (including shares of capital stock) of the Company by reason of any Award granted hereunder. Neither this Plan (or any documents related hereto) nor any action taken pursuant hereto shall be construed to create a trust of any kind or a fiduciary relationship between the Company and any person. To the extent that any person acquires a right to receive an Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. (g) Amendment and Termination of Plan: Amendment of Incentive Awards. (i) The Board or the Committee may, insofar as permitted by law, from time to time suspend or discontinue the Plan or revise or amend it in any respect except that no such amendment shall alter or impair or diminish any rights or obligations under any Award theretofore granted under the Plan without the consent of the person to whom such Award was granted , and except that such amendments shall be subject to stockholder approval to the extent (A) required to comply with the listing requirements imposed by any exchange or trading system upon which the Company's securities trade or applicable provisions of or rules under the Code, or (B) the Board determines in good faith that such amendments are material to stockholders. (ii) The Committee may from time to time, with the consent of a Recipient, make such modifications in the terms and conditions of an Incentive Award as it deems advisable, including to accelerate or extend the vesting or exercise period of any Incentive Award, provided that performance conditions to vesting of Restricted Stock shall not be waived, and provided further that neither the Board nor the Committee shall reduce the Exercise Price of any outstanding Option without stockholder approval. 6 (iii) Except as otherwise provided in this Plan or in the applicable Award Document, no amendment, suspension or termination of the Plan will, without the consent of the Recipient, alter, terminate, impair or adversely affect any right or obligation under any Award previously granted under the Plan. (h) Nonassignability. No Award granted under the Plan shall be assignable or transferable except (i) by will or by the laws of descent and distribution, or (ii) subject to the final sentence of this subsection (h), upon dissolution of marriage pursuant to a qualified domestic relations order or, in the discretion of the Committee and under circumstances that would not adversely affect the interests of the Company. During the lifetime of a Recipient, an Award granted to him or her shall be exercisable only by the Recipient (or the Recipient's permitted transferee) or his or her guardian or legal representative. Notwithstanding the foregoing, Incentive Stock Options (or other Awards subject to transfer restrictions under the Code) may not be assigned or transferred in violation of Section 422(b)(5) of the Code (or any comparable or successor provision) or the Treasury Regulations thereunder, and nothing herein is intended to allow such assignment or transfer. (i) Other Compensation Plans. The adoption of the Plan shall not affect any other stock option, incentive or other compensation plans in effect for the Company, and the Plan shall not preclude the Company from establishing any other forms of incentive or other compensation for employees, directors, or advisors of the Company. (j) Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company. (k) Participation By Foreign Employees. Notwithstanding anything to the contrary herein, the Committee may, in order to fulfill the purposes of the Plan, modify grants of Incentive Awards to Recipients who are foreign nationals or employed outside of the United States to recognize differences in applicable law, tax policy or local custom. (l) Effective Date And Duration of Plan. Awards may be granted under the Plan until the tenth anniversary of the effective date of the Plan, whereupon the Plan shall terminate. No Awards may be granted during any suspension of this Plan or after its termination. Notwithstanding the foregoing, each Award properly granted under the Plan shall remain in effect until such Award has been exercised or terminated in accordance with its terms and the terms of the Plan. ARTICLE II INCENTIVE AWARDS 2.01 GRANTS OF INCENTIVE AWARDS. Subject to the express provisions of this Plan, the Committee may from time to time in its discretion select from the class of Eligible Persons those individuals to whom Incentive Awards may be granted pursuant to its authority as set forth in Section 1.04(b). Each Incentive Award shall be subject to the terms and conditions of the Plan and such other terms and conditions established by the Committee as are not inconsistent with the purpose and provisions of the Plan. One or more Incentive Awards may be granted to any Eligible Person. 2.02 STOCK OPTIONS. (a) Nature of Stock Options. Stock Options may be Incentive Stock Options or Nonqualified Stock Options. (b) Option Price. The exercise price per share for each Option (other than a Nonemployee Director's Option) (the "EXERCISE PRICE") shall be determined by the Committee at the date such Option is granted and shall not be less than the Fair Market Value of a share of Common Stock (or other securities, as applicable) at the time of grant, except that the Exercise Price for a Nonqualified Stock Option may reflect a discount of up to 15% of the Fair Market Value at the time of grant if the 7 amount of such discount is expressly in lieu of a reasonable amount of salary or cash bonus. Notwithstanding the foregoing, however, in no event shall the exercise price be less than the par value of the shares of Common Stock subject to the Option, and the exercise price of an Incentive Stock Option shall be not less than such amount as is necessary to enable such Option to be treated as an "incentive stock option" within the meaning of Section 422 of the Code. (c) Option Period and Vesting. Options (other than Nonemployee Directors' Options) hereunder shall vest and may be exercised as determined by the Committee, except that exercise of such Options after termination of the Recipient's employment shall be subject to Section 2.02(g). Each Option granted hereunder (other than a Nonemployee Directors Option) and all rights or obligations thereunder shall expire on such date as shall be determined by the Committee, but not later than ten years after the date the Option is granted and shall be subject to earlier termination as herein provided. The Committee may in its discretion at any time and from time to time after the grant of an Option (other than a Nonemployee Director's Option) accelerate vesting of such Option in whole or part by increasing the number of shares then purchasable, provided that the total number of shares subject to such Option may not be increased. (d) Exercise of Options. Except as otherwise provided herein, an Option may become exercisable, in whole or in part, on the date or dates specified by the Committee (or, in the case of Nonemployee Directors' Options, the Plan) at the time the Option is granted and thereafter shall remain exercisable until the expiration or earlier termination of the Option. No Option shall be exercisable except in respect of whole shares, and fractional share interests shall be disregarded. Not less than 100 shares of stock (or such other amount as is set forth in the applicable option agreement) may be purchased at one time unless the number purchased is the total number at the time available for purchase under the terms of the Option. An Option shall be deemed to be exercised when the Secretary of the Company receives written notice of such exercise from the Recipient, together with payment of the exercise price made in accordance with Section 2.02(e). Upon proper exercise, the Company shall deliver to the person entitled to exercise the Option or his or her designee a certificate or certificates for the shares of stock for which the Option is exercised. Notwithstanding any other provision of this Plan, the Committee may impose, by rule and in option agreements, such conditions upon the exercise of Options (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including without limitation Rule 16b-3 (or any successor rule) under the Exchange Act and any applicable section of or rule under the Internal Revenue Code. (e) Exercise Price. The Exercise Price shall be payable upon the exercise of an Option by delivery of legal tender of the United States or payment of such other consideration as the Committee may from time to time deem acceptable in any particular instance, including without limitation delivery of capital stock of the Company (delivered by or on behalf of the person exercising the Option or retained by the Company from the Common Stock otherwise issuable upon exercise and valued at Fair Market Value as of the exercise date) or surrender of other Awards previously granted to the Recipient exercising the Option; provided, however, that the Committee may, in the exercise of its discretion, (i) allow exercise of an Option in a broker-assisted or similar transaction in which the Exercise Price is not received by the Company until immediately after exercise, and/or (ii) allow the Company to loan the Exercise Price to the person entitled to exercise the Option, if the exercise will be followed by an immediate sale of some or all of the underlying shares and a portion of the sales proceeds is dedicated to full payment of the Exercise Price. Any shares of Company stock or other non-cash consideration assigned and delivered to the Company in payment or partial payment of the Exercise Price will be valued at Fair Market Value on the exercise date. No fractional shares will be issued pursuant to the exercise of an Option. (f) Limitation on Exercise of Incentive Stock Options. The aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more options granted to any Recipient under the Plan (or any other option plan of the Company or any of its subsidiaries or affiliates) may for the first time become exercisable as Incentive Stock Options under the federal tax laws during any one calendar year shall not exceed $100,000. Any Options granted as 8 Incentive Stock Options pursuant to the Plan in excess of such limitation shall be treated as Nonqualified Stock Options. (g) Termination of Employment. (i) Termination for Cause. Except as otherwise provided in a written agreement between the Company and the Recipient, which may be entered into at any time before or after termination, in the event of a Just Cause Dismissal of a Recipient all of the Recipient's unexercised Options, whether or not vested, shall expire and become unexercisable as of the date of such Just Cause Dismissal. (ii) Termination other than for Cause. Subject to subsection (i) above and subsection (iii) below, and except as otherwise provided in a written agreement between the Company and the Recipient, which may be entered into at any time before or after termination, in the event of a Recipient's termination of employment for: (A) any reason other than for Just Cause Dismissal, death, or Permanent Disability, or normal retirement, the Recipient's Options shall, whether or not vested, expire and become unexercisable as of the earlier of (1) the date such Options would expire in accordance with their terms if the Recipient remained employed or (2) three calendar months after the date of termination in the case of Incentive Stock Options, or six months after the date of termination, in the case of Nonqualified Stock Options. (B) death or Permanent Disability, the Recipient's unexercised Options shall, whether or not vested, expire and become unexercisable as of the earlier of (1) the date such Options would expire in accordance with their terms if the Recipient remained employed or (2) twelve (12) months after the date of termination. (C) normal retirement, the Recipient's unexercised Options shall, whether or not vested, expire and become unexercisable as of the earlier of (A) the date such Options expire in accordance with their terms or (B) twenty-four (24) months after the date of retirement. (iii) Alteration of Exercise Periods. Notwithstanding anything to the contrary in subsections (i) or (ii) above, the Committee may in its discretion designate such shorter or longer periods to exercise Options (other than Nonemployee Directors' Options) following a Recipient's termination of employment; provided, however, that any shorter periods determined by the Committee shall be effective only if provided for in the instrument that evidences the grant to the Recipient of such Options or if such shorter period is agreed to in writing by the Recipient. Notwithstanding anything to the contrary herein, Options shall be exercisable by a Recipient (or his successor in interest) following such Recipient's termination of employment only to the extent that installments thereof had become exercisable on or prior to the date of such termination; provided, however, that the Committee, in its discretion, may elect to accelerate the vesting of all or any portion of any Options that had not become exercisable on or prior to the date of such termination. 2.03 PERFORMANCE AWARDS. (a) Grant of Performance Award. The Committee shall determine the performance criteria (which need not be identical and may be established on an individual or group basis) governing Performance Awards, the terms thereof, and the form and time of payment of Performance Awards. (b) Payment of Award; Limitation. Upon satisfaction of the conditions applicable to a Performance Award, payment will be made to the Recipient in cash or in shares of Common Stock valued at Fair Market Value or a combination of Common Stock and cash, as the Committee in its discretion may determine. Notwithstanding any other provision of this Plan, no Eligible Person shall be 9 paid a Performance Award in excess of $1,000,000 in any one calendar year; provided, however, that this limitation shall not apply if it is not required in order for the compensation attributable to the Performance Award hereunder to qualify as Performance-Based Compensation. (c) Expiration of Performance Award. If any Recipient's employment with the Company is terminated for any reason other than normal retirement, death, or Permanent Disability prior to the time a Performance Award or any portion thereof becomes payable, all of the Recipient's rights under the unpaid portion of the Performance Award shall expire and terminate unless otherwise determined by the Committee. In the event of termination of employment by reason of death, Permanent Disability or normal retirement, the Committee, in its discretion, may determine what portions, if any, of the Performance Award should be paid to the Recipient. 2.04 RESTRICTED STOCK. (a) Award of Restricted Stock. The Committee may grant awards of Restricted Stock to Eligible Participants. The Committee shall determine the Purchase Price (if any), the terms of payment of the Purchase Price, the restrictions upon the Restricted Stock, and when such restrictions shall lapse, provided that the restriction period shall be at least one year for performance-based grants and three years for non-performance-based grants. (b) Requirements of Restricted Stock. All shares of Restricted Stock granted or sold pursuant to the Plan will be subject to the following conditions: (i) No Transfer. The shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered until the restrictions are removed or expire; (ii) Certificates. The Committee may require that the certificates representing Restricted Stock granted or sold to a Recipient pursuant to the Plan remain in the physical custody of an escrow holder or the Company until all restrictions are removed or expire; (iii) Restrictive Legends. Each certificate representing Restricted Stock granted or sold to a Recipient pursuant to the Plan will bear such legend or legends making reference to the restrictions imposed upon such Restricted Stock as the Committee in its discretion deems necessary or appropriate to enforce such restrictions; and (iv) Other Restrictions. The Committee may impose such other conditions on Restricted Stock as the Committee may deem advisable including, without limitation, restrictions under the Securities Act, under the Exchange Act, under the requirements of any stock exchange upon which such Restricted Stock or shares of the same class are then listed and under any blue sky or other securities laws applicable to such shares. (c) Rights of Recipient. Subject to the provisions of Section 2.04(b) and any restrictions imposed upon the Restricted Stock, the Recipient will have all rights of a stockholder with respect to the Restricted Stock granted or sold to such Recipient under the Plan, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. (d) Termination of Employment. Unless the Committee in its discretion determines otherwise, upon a Recipient's termination of employment for any reason, all of the Recipient's Restricted Stock remaining subject to restrictions imposed pursuant to the Plan on the date of such termination of employment shall be repurchased by the Company at the Purchase Price (if any). 10 2.05 STOCK APPRECIATION RIGHTS. (a) Granting of Stock Appreciation Rights. The Committee may approve the grant to Eligible Persons of Stock Appreciation Rights, related or unrelated to Options, at any time. (b) SARs Related to Options. (i) A Stock Appreciation Right granted in connection with an Option granted under this Plan will entitle the holder of the related Option, upon exercise of the Stock Appreciation Right, to surrender such Option, or any portion thereof to the extent unexercised, with respect to the number of shares as to which such Stock Appreciation Right is exercised, and to receive payment of an amount computed pursuant to Section 2.05(b)(iii). Such Option will, to the extent surrendered, then cease to be exercisable. (ii) A Stock Appreciation Right granted in connection with an Option hereunder will be exercisable at such time or times, and only to the extent that, the related Option is exercisable, and will not be transferable except to the extent that such related Option may be transferable. (iii) Upon the exercise of a Stock Appreciation Right related to an Option, the Holder will be entitled to receive payment of an amount determined by multiplying: (i) the difference obtained by subtracting the Exercise Price of a share of Common Stock specified in the related Option from the Fair Market Value of a share of Common Stock on the date of exercise of such Stock Appreciation Right (or as of such other date or as of the occurrence of such event as may have been specified in the instrument evidencing the grant of the Stock Appreciation Right), by (ii) the number of shares as to which such Stock Appreciation Right is exercised. (c) SARs Unrelated to Options. The Committee may grant Stock Appreciation Rights unrelated to Options to Eligible Persons. Section 2.05(b)(iii) shall be used to determine the amount payable at exercise under such Stock Appreciation Right, except that in lieu of the Option Exercise Price specified in the related Option the initial base amount specified in the Incentive Award shall be used. (d) Limits. Notwithstanding the foregoing, the Committee, in its discretion, may place a dollar limitation on the maximum amount that will be payable upon the exercise of a Stock Appreciation Right under the Plan. (e) Payments. Payment of the amount determined under the foregoing provisions may be made solely in whole shares of Common Stock valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right or, alternatively, at the sole discretion of the Committee, in cash or in a combination of cash and shares of Common Stock as the Committee deems advisable. The Committee has full discretion to determine the form in which payment of a Stock Appreciation Right will be made and to consent to or disapprove the election of a Recipient to receive cash in full or partial settlement of a Stock Appreciation Right. If the Committee decides to make full payment in shares of Common Stock, and the amount payable results in a fractional share, payment for the fractional share will be made in cash. (f) Rule 16b-3. The Committee may, at the time a Stock Appreciation Right is granted, impose such conditions on the exercise of the Stock Appreciation Right as may be required to satisfy the requirements of Rule 16b-3 under the Exchange Act (or any other comparable provisions in effect at the time or times in question). (g) Termination of Employment. Section 2.02(g) will govern the treatment of Stock Appreciation Rights upon the termination of a Recipient's employment with the Company. 11 2.06 STOCK PAYMENTS. The Committee may approve Stock Payments of the Company's Common Stock to any Eligible Person for all or any portion of the compensation (other than base salary) or other payment that would otherwise become payable by the Company to the Eligible Person in cash. 2.07 DIVIDEND EQUIVALENTS. The Committee may grant Dividend Equivalents to any Recipient who has received a Stock Option, SAR, or other Incentive Award denominated in shares of Common Stock. Such Dividend Equivalents shall be effective and shall entitle the recipients thereof to payments during the "APPLICABLE DIVIDEND PERIOD," which shall be (i) the period between the date the Dividend Equivalent is granted and the date the related Stock Option, SAR, or other Incentive Award is exercised, terminates, or is converted to Common Stock, or (ii) such other time as the Committee may specify in the written instrument evidencing the grant of the Dividend Equivalent. Dividend Equivalents may be paid in cash, Common Stock, or other Incentive Awards; the amount of Dividend Equivalents paid other than in cash shall be determined by the Committee by application of such formula as the Committee may deem appropriate to translate the cash value of dividends paid to the alternative form of payment of the Dividend Equivalent. Dividend Equivalents shall be computed as of each dividend record date and shall be payable to recipients thereof at such time as the Committee may determine. Notwithstanding the foregoing, if it is intended that an Incentive Award qualify as Performance-Based Compensation and the amount of the compensation the Eligible Person could receive under the award is based solely on an increase in value of the underlying stock after the date of grant or award (i.e., the grant, vesting, or exercisability of the award is not conditioned upon the attainment of a preestablished, objective performance goal described in Section 1.02(t)), then the payment of any Dividend Equivalents related to the award shall not be made contingent on the exercise of the award. ARTICLE III NONEMPLOYEE DIRECTOR'S OPTIONS 3.01 GRANTS OF INITIAL OPTIONS. Each Nonemployee Director shall, upon first becoming a Nonemployee Director, receive a one-time grant of a Nonemployee Director's Option to purchase up to 40,000 shares of the Company's Common Stock at an exercise price per share equal to the Fair Market Value of the Company's Common Stock on the date of grant, subject to (i) vesting as set forth in Section 3.04, and (ii) adjustment as set forth in Section 1.05(b). Options granted under this Section 3.01 are "INITIAL OPTIONS" for purposes hereof. 3.02 GRANTS OF ADDITIONAL OPTIONS. Immediately following the annual meeting of stockholders of the Company next following a Nonemployee Director becoming such, and immediately following each subsequent annual meeting of stockholders of the Company, in each case if the Nonemployee Director has served as a director since his or her election or appointment and has been re-elected as a director at such annual meeting or is continuing as a director without being re-elected due to the classification of the Board, such Nonemployee Director shall automatically receive an option to purchase up to 10,000 shares of the Company's Common Stock at an exercise price per share equal to the Fair Market Value of the Company's Common Stock on the date of grant, subject to (a) vesting as set forth in Section 3.04, and (b) adjustment as set forth in Section 1.05(b). Options granted under this Section 3.02 are "ADDITIONAL OPTIONS" for purposes hereof. 12 3.03 EXERCISE PRICE. The exercise price for Nonemployee Directors' Options shall be payable as set forth in Section 2.02(e). Neither the Board nor the Committee shall reduce the exercise price of any outstanding Initial Option or Additional Option without stockholder approval. 3.04 VESTING AND EXERCISE. Initial Options shall vest and become exercisable with respect to 25% of the underlying shares on the grant date and with respect to an additional 25% of the underlying shares on the dates of each of the first three annual meetings of the Company's stockholders following the grant date, but only if on the date of each such annual meeting, the Recipient is continuing as a director of the Company for the ensuing year, provided, however, that if the grant date is within six months of the ensuing annual meeting of the Company's stockholders, then after vesting of the Option with respect to 25% of the underlying shares on the grant date, the Option will vest with respect to an additional 25% of the underlying shares on the dates of each of the second, third, and fourth annual meetings of the Company's stockholders following the grant date, but only if, on the date of each such annual meeting, the Recipient is continuing as a director for the ensuing year. Additional Options shall vest and become exercisable upon the earlier of (a) the first anniversary of the grant date or (b) immediately prior to the annual meeting of stockholders of the Company next following the grant date, if the optionee has remained a director for the entire period from the date of grant to such earlier date. Notwithstanding the foregoing, however, Initial Options and Additional Options that have not vested and become exercisable at the time the optionee ceases to be a director shall terminate. 3.05 TERM OF OPTIONS AND EFFECT OF TERMINATION. No Nonemployee Directors' Option shall be exercisable after the expiration of ten years from the effective date of its grant. In the event that the Recipient of a Nonemployee Director's Option shall cease to be a director of the Company, all Nonemployee Directors' Options granted to such Recipient shall be exercisable, to the extent already exercisable at the date such Recipient ceases to be a director and regardless of the reason the Recipient ceases to be a director, for a period of five (5) years after that date (or, if sooner, until the expiration of the option according to its terms). In the event of the death of a Recipient of a Nonemployee Director's Option while such Recipient is a director of the Company or within the period after termination of such status during which he or she is permitted to exercise such Option, such Option may be exercised by any person or persons designated by the Recipient on a Beneficiary Designation Form adopted by the Company for such purpose or, if there is no effective Beneficiary Designation Form on file with the Company, by the executors or administrators of the Recipient's estate or by any person or persons who shall have acquired the option directly from the Recipient by his or her will or the applicable laws of descent and distribution. ARTICLE IV RECAPITALIZATIONS AND REORGANIZATIONS 4.01 CORPORATE TRANSACTIONS. If the Company shall be the surviving corporation in any merger or consolidation, each outstanding Option shall pertain and apply to the securities to which a holder of the same number of shares of Common Stock that are subject to that Option would have been entitled. In the event of a Change in Control (as defined below), all Nonemployee Directors' Options and any Incentive Awards specified by the Committee or the Board shall immediately vest and become exercisable, and all conditions thereto shall be deemed to have been met. For purposes hereof, a "Change in Control" means the following and shall be deemed to occur if any of the following events occur: (i) Except as provided by subsection (iii) hereof, the acquisition (other than from the Company) by any person, entity or "group," within the meaning of 13 Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) Individuals who, as of the effective date of the Plan, constitute the Board of Directors of the Company (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, is or was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Approval by the stockholders of the Company of a reorganization, merger or consolidation with any other person, entity or corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company and such other entity outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires forty percent (40%) or more of the combined voting power of the Company's then outstanding voting securities; or (iv) Approval by the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or other disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the preceding provisions of this Section 4.01, a Change in Control shall not be deemed to have occurred (l) if the "person" described in the preceding provisions of this Section 4.01 is an underwriter or underwriting syndicate that has acquired the ownership of 50% or more of the combined voting power of the Company's then outstanding voting securities solely in connection with a public offering of the Company's securities, or (2) if the "person" described in the preceding provisions of this Paragraph is an employee stock ownership plan or other employee benefit plan maintained by the Company that is qualified under the provisions of the Employee Retirement Income Security Act of 1974, as amended. 4.02 DETERMINATION BY THE COMMITTEE. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. The grant of an Option pursuant to the Plan shall not affect in any way the right 14 or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all of any part of its business or assets. 15 EX-10.20 4 a83443exv10w20.txt EXHIBIT 10.20 EXHIBIT 10.20 LA JOLLA PHARMACEUTICAL COMPANY 1995 EMPLOYEE STOCK PURCHASE PLAN The following constitutes the provisions of the La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (as amended and restated effective May 22, 2002) (the "PLAN"). 1. PURPOSE. The purpose of the Plan is to maintain competitive equity compensation programs and to provide employees of La Jolla Pharmaceutical Company (the "COMPANY") with an opportunity and incentive to acquire a proprietary interest in the Company through the purchase of the Company's Common Stock, thereby more closely aligning the interests of the Company's employees and stockholders. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended ("SECTION 423"). Accordingly, the provisions of the Plan shall be construed to extend and limit participation consistent with the requirements of Section 423. 2. DEFINITIONS. Capitalized terms used in this Plan and not otherwise defined have the meanings set forth below. "ADMINISTRATOR" means the Committee, or the Board if the Board asserts administrative authority over the Plan pursuant to Section 13. "BOARD" means the Board of Directors of the Company. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITTEE" means a committee of members of the Board meeting the qualifications described in Section 13 and appointed by the Board to administer the Plan. "COMMON STOCK" shall mean the Common Stock of the Company. "COMPENSATION" means base salary or hourly compensation and any cash bonus paid to a participant. "ELIGIBLE EMPLOYEE" means any employee of the Company whose customary employment is for more than five months per calendar year and for more than 20 hours per week. For purposes of the Plan, the employment relationship shall be treated as continuing while the individual is on sick leave or other leave of absence approved by the Company, except that when the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the 91st day of such leave. "ENROLLMENT DATE" means the first day of each Offering Period. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXERCISE DATE" means the last day of each Purchase Period. "FAIR MARKET VALUE" of the Common Stock as of the time of any determination thereof means the value of Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange or trades on the Nasdaq National Market, its Fair Market Value shall be the most recent closing sales price for such stock (or the closing bid, if no sales were reported), as quoted on such exchange or system (or the exchange or system with the greatest volume of trading in the Common Stock) as of the time of such determination as reported in the Wall Street Journal or such other source as the Administrator deems reliable; or (2) If the Common Stock is not listed on any established stock exchange or traded on the Nasdaq National Market its Fair Market Value shall be the mean between the most recent closing high and low asked prices for the Common Stock as of the time of such determination, as reported in the Wall Street Journal or such other source as the Administrator deems reliable; or (3) In the absence of an established market for the Common Stock, the Fair Market Value of the Common Stock shall be determined in good faith by the Administrator. "OFFERING PERIOD" means (i) the period of twenty-three (23) months commencing on August 1, 1996 and terminating on June 30, twenty-three (23) months later; (ii) each period of twenty-four (24) months commencing on January 1, 1997 and each January 1 thereafter for the duration of the Plan and terminating on the December 31 twenty-four (24) months later; (iii) each period of twenty-four (24) months commencing on July 1, 1997 and each July 1 thereafter for the duration of the Plan and terminating on the June 30 twenty-four (24) months later; (iv) each period of twenty-four (24) months commencing on October 1, 2000 and each October 1 thereafter for the duration of the Plan and terminating on the September 30 twenty-four (24) months later; and (v) each period of twenty-four (24) months commencing on April 1, 2001 and each April 1 thereafter for the duration of the Plan and terminating on the March 31 twenty-four (24) months later. The Administrator shall have the power to change the duration of Offering Periods without stockholder approval as set forth in Section 12 or if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected. "OPTION" means the option granted to each participant pursuant to Section 4 upon enrollment in an Offering Period. "PERIODIC EXERCISE LIMIT" has the meaning set forth in Section 4(a). "PLAN ACCOUNT" means an account maintained by the Company for each participant in the Plan, to which are credited the payroll deductions made for such participant pursuant to Section 5 and from which are debited amounts paid for the purchase of shares upon exercise of such participant's Option pursuant to Section 6. "PURCHASE PRICE" as of any Exercise Date means an amount equal to 85% of the Fair Market Value of a share of Common Stock as of the close of business on the Exercise Date or the opening of business on the Enrollment Date for the Offering Period in which such Exercise Date occurs, whichever is lower. 2 "PURCHASE PERIOD" means (i) the period of five (5) months commencing on August 1, 1996 and ending on December 31, 1996; (ii) with respect to the Offering Periods beginning on January and July 1, 1997, January and July 1, 1998, and January 1, 1999, each period of six (6) months within any such Offering Period, commencing January 1, 1997 and each July 1 and January 1 thereafter, and ending on the December 31 or June 30 following such commencement date; (iii) with respect to the Offering Period beginning on July 1, 1999, the period of six (6) months commencing July 1, 1999 and ending on December 31, 1999, the period of six (6) months commencing on January 1, 2000 and ending on June 30, 2000, the period of six (6) months commencing on July 1, 2000 and ending on December 31, 2000, the period of three (3) months commencing on January 1, 2001 and ending on March 31, 2001, and the period of three (3) months commencing on April 1, 2001 and ending on June 30, 2001, (iv) with respect to the Offering Period beginning on January 1, 2000, the period of six (6) months commencing on January 1, 2000 and ending on June 30, 2000, the period of six (6) months commencing on July 1, 2000 and ending on December 31, 2000, and each period of three (3) months commencing on January 1, 2001 and each April 1, July 1, and October 1 thereafter, and ending on the March 31, June 30, September 30 and December 31 following such commencement date; (v) with respect to the Offering Period beginning on July 1, 2000, the period of six (6) months commencing on July 1, 2000 and ending on December 31, 2000, and each period of three (3) months commencing on January 1, 2001 and each April 1, July 1, and October 1 thereafter, and ending on the March 31, June 30, September 30 and December 31 following such commencement date; and (vi) for any Offering Period commencing on or after October 1, 2000, each period of three (3) months within the Offering Period commencing on October 1, 2000 and each January 1, April 1, July 1, and October 1 thereafter, and ending on the December 31, March 31, June 30, and September 30 following such commencement date. "RESERVES" means the number of shares of Common Stock covered by each Option that has not yet been exercised and the number of shares of Common Stock that have been authorized for issuance under the Plan, but not yet placed under any Option. "RULE 16b-3" means Rule 16b-3 under the Exchange Act and any successor provision. "SUBSIDIARY" has the meaning as set forth under Section 424(f) of the Code. "TRADING DAY" means a day on which national stock exchanges and the National Association of Securities Dealers Automated Quotation System are open for trading. 3. OFFERING PERIODS AND PARTICIPATION. The Plan shall be implemented through a series of consecutive and overlapping Offering Periods. An Eligible Employee may enroll in an Offering Period by delivering a subscription agreement in the form of Exhibit A hereto to the Company's payroll office at least five (5) business days prior to the Enrollment Date for that Offering Period. Eligible Employees shall participate in only one Offering Period at a time, and a subscription agreement in effect for a Plan participant for a particular Offering Period shall continue in effect for subsequent Offering Periods if the participant remains an Eligible Employee and has not withdrawn pursuant to Section 8. 4. OPTIONS. (a) Grants. On the Enrollment Date for each Offering Period, each Eligible Employee participating in such Offering Period shall be granted an Option to purchase (i) on each Exercise Date for any six-month Purchase Period in such Offering Period (at the applicable Purchase 3 Price) up to that number of shares of Common Stock determined by dividing $12,500 by the Fair Market Value of a share of Common Stock as of the opening of business on the Enrollment Date, and (ii) on each Exercise Date for any three-month Purchase Period in such Offering Period (at the applicable Purchase Price) up to that number of shares of Common Stock determined by dividing $6,250 by the Fair Market Value of a share of Common Stock as of the opening of business on the Enrollment Date (such number of shares being the "PERIODIC EXERCISE LIMIT"). The Option shall expire immediately after the last Exercise Date of the Offering Period. (b) Grant Limitations. Any provisions of the Plan to the contrary notwithstanding, no participant shall be granted an Option under the Plan: (i) if, immediately after the grant, such participant (or any other person whose stock would be attributed to such participant pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary; or (ii) which permits such participant's rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries to accrue at a rate that exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value of the shares at the time such Option is granted) in any calendar year. (c) No Rights in Respect of Underlying Stock. The participant will have no interest or voting right in shares covered by an Option until such Option has been exercised. 5. PAYROLL DEDUCTIONS. (a) Participant Designations. The subscription agreement applicable to an Offering Period shall designate payroll deductions to be made on each payday during the Offering Period as a whole number percentage not exceeding ten percent (10%) of such Eligible Employee's Compensation for the pay period preceding such payday, provided that the aggregate of such payroll deductions during the Offering Period shall not exceed ten percent (10%) of the participant's Compensation during said Offering Period. (b) Plan Account Balances. The Company shall make payroll deductions as specified in each participant's subscription agreement on each payday during the Offering Period and credit such payroll deductions to such participant's Plan Account. A participant may not make any additional payments into such Plan Account. No interest will accrue on any payroll deductions. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. (c) Participant Changes. A participant may discontinue his or her participation in the Plan as provided in Section 8, or may increase or decrease (subject to such limits as the Administrator may impose) the rate of his or her payroll deductions during any Purchase Period by filing with the Company a new subscription agreement authorizing such a change in the payroll deduction rate. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement, unless the Company elects to process a given change in participation more quickly. 4 (d) Decreases. Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 4(b) herein, a participant's payroll deductions may be decreased to 0% at such time during any Purchase Period that is scheduled to end during a calendar year (the "CURRENT PURCHASE PERIOD") when the aggregate of all payroll deductions previously used to purchase stock under the Plan in a prior Purchase Period which ended during that calendar year plus all payroll deductions accumulated with respect to the Current Purchase Period equal $21,250. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Purchase Period that is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 8. (e) Tax Obligations. At the time of each exercise of a participant's Option, and at the time any Common Stock issued under the Plan to a participant is disposed of, the participant must adequately provide for the Company's federal, state, or other tax withholding obligations, if any, that arise upon the exercise of the Option or the disposition of the Common Stock. At any time, the Company may, but will not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefit attributable to sale or early disposition of Common Stock by the participant. (f) Statements of Account. The Company shall maintain each participant's Plan Account and shall give each Plan participant a statement of account at least annually. Such statements will set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any, for the period covered. 6. EXERCISE OF OPTIONS. (a) Automatic Exercise on Exercise Dates. Unless a participant withdraws as provided in Section 8, his or her Option for the purchase of shares will be exercised automatically on each Exercise Date within the Offering Period in which such participant is enrolled for the maximum number of shares of Common Stock, including fractional shares, as can then be purchased at the applicable Purchase Price with the payroll deductions accumulated in such participant's Plan Account and not yet applied to the purchase of shares under the Plan, subject to the Periodic Exercise Limit. During a participant's lifetime, a participant's Options to purchase shares hereunder are exercisable only by the participant. (b) Delivery of Shares. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate or book entry transfer representing the shares purchased upon exercise of his or her Option, provided that the Company may in its discretion hold fractional shares for the accounts of the participants pending aggregation to whole shares. (c) Compliance with Law. Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares pursuant thereto comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the participant for whom an Option is exercised to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. Shares issued upon purchase under the Plan may 5 be subject to such transfer restrictions and stop-transfer instructions as the Administrator deems appropriate. (d) Excess Plan Account Balances. If, due to application of the Periodic Exercise Limit, there remains in a participant's Plan Account immediately following exercise of such participant's Option on an Exercise Date any cash accumulated during the Purchase Period immediately preceding such Exercise Date and not applied to the purchase of shares under the Plan, such cash shall promptly be returned to the participant. 7. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. If the Fair Market Value of the Common Stock as of the close of business on any Exercise Date is lower than the Fair Market Value of the Common Stock as of the opening of business on the Enrollment Date for the Offering Period in which such Exercise Date occurs, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their Options on such Exercise Date and automatically re-enrolled in the immediately following Offering Period as of the first day thereof. 8. WITHDRAWAL; TERMINATION OF EMPLOYMENT. (a) Voluntary Withdrawal. A participant may withdraw from an Offering Period by giving written notice to the Company's payroll office at least five (5) business days prior to the next Exercise Date. Such withdrawal shall be effective beginning five business days after receipt by the Company's payroll office of notice thereof. On or promptly following the effective date of any withdrawal, all (but not less than all) of the withdrawing participant's payroll deductions credited to his or her Plan Account and not yet applied to the purchase of shares under the Plan will be paid to such participant, and on the effective date of such withdrawal such participant's Option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made during the Offering Period. If a participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of any succeeding Offering Period unless the participant delivers to the Company a new subscription agreement with respect thereto. (b) Termination of Employment. Promptly after a participant's ceasing to be an Eligible Employee for any reason the payroll deductions credited to such participant's Plan Account and not yet applied to the purchase of shares under the Plan will be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 10, and such participant's Option will be automatically terminated, provided that, if the Company does not learn of such death more than five (5) business days prior to an Exercise Date, payroll deductions credited to such participant's Plan account may be applied to the purchase of shares under the Plan on such Exercise Date. 9. TRANSFERABILITY. Neither payroll deductions credited to a participant's Plan Account nor any rights with regard to the exercise of an Option or to receive shares under the Plan nor any Option itself may be assigned, transferred, pledged or otherwise disposed of by the participant in any way other than by will, the laws of descent and distribution or as provided in Section 10 hereof. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Administrator may treat such act as an election to withdraw from an Offering Period in accordance with Section 8. 6 10. DESIGNATION OF BENEFICIARY. A participant may file a written designation of a beneficiary who is to receive any cash from the participant's Plan Account in the event of such participant's death and any shares purchased for the participant upon exercise of his or her Option but not yet issued. If a participant is married and the designated beneficiary is not the spouse, spousal consent may be required for such designation to be effective. A designation of beneficiary may be changed by a participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 11. STOCK. The maximum number of shares of the Company's Common Stock that shall be made available for sale under the Plan shall be 1,000,000 shares, subject to adjustment upon changes in capitalization of the Company as provided in Section 12. If on a given Enrollment Date or Exercise Date the number of shares with respect to which Options are to be granted or exercised exceeds the number of shares then available under the Plan, the Administrator shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable. Shares of Common Stock subject to unexercised Options that expire, terminate or are cancelled will again become available for the grant of further Options under the Plan. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET SALE. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the Reserves as well as the Purchase Price, Periodic Exercise Limit, and other characteristics of the Options, shall be appropriately and proportionately adjusted for any increase or decrease or exchange in the issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, exchange or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. The Administrator may, if it so determines in the exercise of its sole discretion, provide for adjusting the Reserves, as well as the Purchase Price, Periodic Exercise Limit, and other characteristics of the Options, in the event the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock. (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, all pending Offering Periods will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Administrator, and all Plan Account balances will be paid to participants as appropriate consistent with applicable law. 7 (c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger or other combination (the "TRANSACTION") of the Company with or into another entity, each Option under the Plan shall be assumed or an equivalent option shall be substituted by such successor entity or a parent or subsidiary of such successor entity, unless the Administrator determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the Offering Periods then in progress by setting a new Exercise Date (the "NEW EXERCISE DATE"). If the Administrator shortens the Offering Periods then in progress in lieu of assumption or substitution, the Administrator shall notify each participant in writing, at least ten (10) days prior to the New Exercise Date, that the Exercise Date for such participant's Option has been changed to the New Exercise Date and that such participant's Option will be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 8 (provided that, in such case, the participant's withdrawal shall be effective if notice thereof is delivered to the Company's payroll office at least two (2) business days prior to the New Exercise Date). For purposes of this Section, an Option granted under the Plan shall be deemed to be assumed if, following the Transaction the Option confers the right to purchase at the Purchase Price (provided that for such purposes the Fair Market Value of the Common Stock on the New Exercise Date shall be the value per share of the consideration paid in the Transaction), for each share of stock subject to the Option immediately prior to the Transaction, the consideration (whether stock, cash or other securities or property) received in the Transaction by holders of Common Stock for each share of Common Stock held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in the Transaction was not solely common equity of the successor entity or its parent (as defined in Section 424(e) of the Code), the Administrator may, with the consent of the successor entity and the participant, provide for the consideration to be received upon exercise of the Option to be solely common equity of the successor entity or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the Transaction. 13. ADMINISTRATION. The Plan shall be administered by the Committee, which shall have the authority to construe, interpret and apply the terms of the Plan and any agreements defining the rights and obligations of the Company and participants under the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Administrator may, in its discretion, delegate ministerial responsibilities under the Plan to the Company. Every finding, decision and determination made by the Committee shall, to the full extent permitted by law, be final and binding upon all parties. Any action of the Committee shall be taken pursuant to a majority vote or by the unanimous written consent of its members. The Committee shall consist of three or more members of the Board, each of whom shall be disinterested within the meaning of Rule 16b-3, provided, however, that the number of members of the Committee may be reduced or increased from time to time by the Board to the number required or allowed by Rule 16b-3. The Board may from time to time in its discretion exercise any responsibilities or authority allocated to the Committee under the Plan. No member of the Committee or any designee thereof will be liable for any action or determination made in good faith with respect to the Plan or any transaction arising under the Plan. 14. AMENDMENT OR TERMINATION. (a) Administrator's Discretion. The Administrator may, at any time and for any reason, terminate or amend the Plan. Except as provided in Section 12, no such termination can affect Options previously granted, provided that an Offering Period may be terminated by the 8 Administrator on any Exercise Date if the Administrator determines that such termination is in the best interests of the Company and its stockholders. Except as provided herein, no amendment may make any change in any Option theretofore granted that adversely affects the rights of any participant. To the extent necessary to comply with and qualify under Rule 16b-3 or under Section 423 (or any successor rule or provision or any other applicable law or regulation), the Administrator shall obtain stockholder approval of amendments to the Plan in such a manner and to such a degree as required. (b) Administrative Modifications. Without stockholder consent (except as specifically required by applicable law or regulation) and without regard to whether any participant rights may be considered to have been "adversely affected," the Administrator shall be entitled to amend the Plan to the extent necessary to comply with and qualify under Rule 16b-3 and Section 423, change the Purchase Periods and/or Offering Periods, limit the frequency and/or number of changes in payroll deductions during Purchase Periods and/or Offering Periods, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion to be advisable and which are consistent with the Plan. 15. TERM OF PLAN. The Plan shall become effective upon the first Enrollment Date after its approval by the stockholders of the Company and shall continue in effect for a term of twenty (20) years unless sooner terminated pursuant to Section 14. 16. MISCELLANEOUS. (a) Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. (b) Subsidiaries. The Administrator may from time to time in its discretion permit persons who are employees of any Subsidiary whose customary employment is for more than five months per calendar year and for more than 20 hours per week to participate in the Plan on the same terms as Eligible Employees hereunder. (c) Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve months before or after the date the Board adopts the Plan. If such stockholder approval is not obtained, the Plan and all rights to the Common Stock purchased under the Plan shall be null and void and shall have no effect. (d) Additional Restrictions of Rule 16b-3. The terms and conditions of Options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such Options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. 9 (e) No Employment Rights. The Plan does not, directly or indirectly, create any right for the benefit of an employee or class of employees to purchase any shares under the Plan, or create in any employee or class of employees any right with respect to continuation of employment by the Company, and it shall not be deemed to interfere in any way with the Company's right to terminate, or otherwise modify, an employee's employment at any time. (f) Applicable Law. The laws of the State of California shall govern all matters relating to the Plan, except to the extent (if any) superseded by the laws of the United States. (g) Headings. Headings used herein are for convenience of reference only and do not affect the meaning or interpretation of the Plan. 10 EXHIBIT A LA JOLLA PHARMACEUTICAL COMPANY 1995 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT _____ Original Application Enrollment Date: ___________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) 1. I, ________________________, hereby elect to participate in the La Jolla Pharmaceutical Company 1995 Employee Stock Purchase Plan (the "Plan") and subscribe to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of ____% (not to exceed 10%) of my Compensation (as defined in the Plan) on each payday during the Offering Period in accordance with the Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my Option on each Exercise Date within the Offering Period. 4. I have received a copy of the complete Plan. I understand that my participation in the Plan is in all respects subject to the terms of the Plan, that capitalized terms used herein have the same meanings as ascribed thereto in the Plan, and that in case of any inconsistency between this Subscription Agreement and the Plan, the Plan shall govern. I understand that the grant of the Option by the Company under this Subscription Agreement is subject to stockholder approval of the Plan. 5. Shares purchased for me under the Plan should be issued in the name(s) of (employee and/or spouse only):__________________________ _______________________________________________________. 6. I understand that if I dispose of any shares received by me pursuant to the Plan within two years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or within one year after the Exercise Date (the date I purchased such shares), I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were delivered to me over the price which I paid for the shares, regardless of whether I disposed of the shares at a price less than their fair market value at the Exercise Date. The remainder of the gain or loss, if any, recognized on such disposition will be treated as capital gain or loss. I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares, and I will make adequate provision for Federal, State or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my Compensation or other amounts payable to me the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the one-year and two-year holding periods described above, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (a) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (b) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain or loss, if any, recognized on such disposition will be taxed as capital gain or loss. I understand that this tax summary is only a summary for general information purposes and is subject to change and I agree to consult with my own tax advisors for definitive advice regarding the tax consequences to me of participation in the Plan and sale of shares purchased thereunder. 7. I agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan. 8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive (in proportion to the percentages listed below) all payments and shares due me under the Plan (use additional sheets to add beneficiaries): NAME: (Please print) --------------------------------------------------- (First) (Middle) (Last) ------------------------------ ------------------------------------ Relationship Percentage: ---------- ------------------------------------ (Address) NAME: (Please print) --------------------------------------------------- (First) (Middle) (Last) ------------------------------ ------------------------------------ Relationship Percentage: ---------- ------------------------------------ (Address) Employee's Social Security Number: ------------------------------------ Employee's Address: ------------------------------------ ------------------------------------ ------------------------------------ I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME. Dated: ------------------- ------------------------------------ Signature of Employee ------------------------------------ Spouse's Signature (If beneficiary other than spouse) 2 EX-10.45 5 a83443exv10w45.txt EXHIBIT 10.45 EXHIBIT 10.45 ATTACHMENT A As a supplement to the letter agreement dated April 24, 2002 between La Jolla Pharmaceutical Company ("LJP") and Kenneth R. Heilbrunn, M.D. ("HEILBRUNN") related to Heilbrunn's employment by LJP, Heilbrunn and LJP hereby agree as follows: In connection with Heilbrunn's employment with LJP, LJP's management will recommend to LJP's Board of Directors that LJP grant to Heilbrunn an option to purchase up to 90,000 shares of common stock of LJP. Such option, if granted, shall be the "OPTION" for purposes hereof. If Heilbrunn's employment is terminated by LJP without cause (as defined below), or if a Change in Control of LJP (as defined below) occurs and Heilbrunn's employment with LJP or its successor "terminates in connection with" (as defined below) that Change in Control and in the absence of any event or circumstance constituting Cause, then: (i) Heilbrunn will be entitled to receive from LJP a severance payment equal to his then-current base salary for a period of six full calendar months from the date of termination and an additional three full calendar months if and when after the first six months he has not found suitable employment, payable consistent with LJP's normal payroll practices, provided that such payment will be contingent upon execution and delivery by Heilbrunn and LJP of a mutual release, in form satisfactory to LJP, of all claims arising in connection with Heilbrunn's employment with LJP and termination thereof, and (ii) Heilbrunn will be entitled to receive for a period of six full calendar months from the date of termination and an additional three full calendar months if and when after the first six months he has not found suitable employment, medical and dental benefits coverage for Heilbrunn and/or his dependents through the Company's available plans at the time and LJP will be responsible to continue payment of all applicable deductions for premium costs. After the Company's obligation to pay the premiums for health and dental coverage Heilbrunn and/or his dependents will be eligible to continue plan participation under COBRA. (iii) Notwithstanding anything to the contrary in the option plan (the "PLAN") pursuant to which all of Heilbrunn's existing options were granted, the Options shall automatically vest and become fully exercisable as of the date of termination of Executive's employment (the "TERMINATION DATE"), notwithstanding any vesting or performance conditions applicable thereto, and shall remain exercisable for a period of one year following the Termination Date or such longer period as is provided by the Plan or grant pursuant to which the Options were granted. However, notwithstanding the foregoing, in no case will the Options be exercisable beyond the duration of the original term thereof, and if the Options qualify as an incentive stock option under the Internal Revenue Code and applicable regulations thereunder, the exercise period thereof shall not be extended in such a manner as to cause the Options to cease to qualify as an incentive stock option unless Executive elects to forego incentive stock option treatment and extend the exercise period thereof as provided herein. For purposes hereof, "CHANGE IN CONTROL" of LJP has the meaning set forth in the Plan in its form as the date of grant of the Options. For purposes hereof, "CAUSE" means Heilbrunn has (i) engaged in serious criminal activity or other wrongful conduct that has an adverse impact on LJP, (ii) disregarded instructions given to him under the authority of LJP's Board of Directors, (iii) performed services for any person or entity other than LJP and appropriate civic organizations, or (iv) otherwise materially breached his employment or fiduciary responsibilities to LJP. 1 For purposes hereof, Heilbrunn's employment with LJP or its successor will be deemed to "TERMINATE IN CONNECTION WITH" a Change in Control if, within 180 days after the consummation of the Change of Control, (i) Heilbrunn is removed from Heilbrunn's employment by, or resigns his employment upon the request of, a person exercising practical voting control over LJP or its successor following the Change in Control or a person acting upon authority or at the instruction of such person; or (ii) Heilbrunn's position is eliminated as a result of a reduction in force made to reduce over-capacity or unnecessary duplication of personnel and Heilbrunn is not offered a replacement position with LJP or its successor as a Vice President with compensation and functional duties substantially similar to the compensation and duties in effect immediately before the Change in Control; or (iii) Heilbrunn resigns his employment with the Company or its successor rather than comply with a relocation of his primary work site more than 50 miles from LJP's headquarters. In Witness Whereof, LJP and Heilbrunn have entered into this agreement as of May 8, 2002. La Jolla Pharmaceutical Company By: /s/ Steven B. Engle /s/ Kenneth R. Heilbrunn, M.D. --------------------------- ----------------------------------- Steven B. Engle Kenneth R. Heilbrunn, M.D. Chairman & CEO Vice President of Clinical Development 2 EX-99.1 6 a83443exv99w1.txt EXHIBIT 99.1 LA JOLLA PHARMACEUTICAL COMPANY EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned, in his or her capacity as an officer of La Jolla Pharmaceutical Company (the "Registrant"), hereby certifies, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: o the quarterly report of the Registrant on Form 10-Q for the quarter ended June 30, 2002 ("the Report"), which accompanies this certification, fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and o the information contained in the Report fairly presents, in all material respects, the financial condition of the Registrant at the end of such quarter and the results of operations of the Registrant of such quarter. Dated: August 13, 2002 /s/ Steven B. Engle ----------------------------------- STEVEN B. ENGLE Chairman and Chief Executive Officer /s/ Gail A. Sloan ----------------------------------- GAIL A. SLOAN Secretary and Controller -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.19

                                                                   EXHIBIT 10.19



                         LA JOLLA PHARMACEUTICAL COMPANY
                            1994 STOCK INCENTIVE PLAN


                                    ARTICLE I
                               GENERAL PROVISIONS

        1.01   PURPOSE OF THE PLAN.

               La Jolla Pharmaceutical Company (the "COMPANY"), by action of its
Board of Directors and with the consent of its stockholders, has adopted this La
Jolla Pharmaceutical Company Stock Incentive Plan (the "PLAN") effective as of
June 10, 1994 to advance the interests of the Company and its stockholders by
(a) providing Eligible Persons with financial incentives to promote the success
of the Company's business objectives, and to increase their proprietary interest
in the success of the Company, and (b) giving the Company a means to attract and
retain directors of appropriate experience and stature.

        1.02   DEFINITIONS.

               Terms used herein and not otherwise defined shall have the
meanings set forth below:

               (a) "AWARD" means an Incentive Award or a Nonemployee Director's
Option.

               (b) "BOARD" means the Board of Directors of the Company.

               (c) "CODE" means the Internal Revenue Code of 1986, as amended.
Where the context so requires, a reference to a particular Code section shall
also refer to any successor provision of the Code to such section.

               (d) "COMMISSION" means the Securities and Exchange Commission.

               (e) "COMMITTEE" means the committee appointed by the Board to
administer the Plan. The Committee shall be composed entirely of members who
meet the requirements of Section 1.04(a).

               (f) "COMMON STOCK" means the common stock of the Company, $0.01
par value.

               (g) "DIVIDEND EQUIVALENT" means a right granted by the Company
under Section 2.07 to a holder of a Stock Option, Stock Appreciation Right, or
other Incentive Award denominated in shares of Common Stock to receive from the
Company during the Applicable Dividend Period (as defined in Section 2.07)
payments equivalent to the amount of dividends payable to holders of the number
of shares of Common Stock underlying such Stock Option, Stock Appreciation
Right, or other Incentive Award.

               (h) "ELIGIBLE PERSON" means any director, officer or key
employee, consultant, or advisor of the Company (as determined by the Committee)
including Nonemployee Directors and members of the Committee.

               (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended. Where the context so requires, a reference to a particular section of
the Exchange Act or rule thereunder shall also refer to any successor provision
to such section or rule.



               (j) "FAIR MARKET VALUE" of capital stock of the Company shall be
determined with reference to the closing price of such stock on the day in
question (or, if such day is not a trading day in the U.S. securities markets,
on the nearest preceding trading day), as reported with respect to the principal
market or trading system on which such stock is then traded; or, if no such
closing prices are reported, the mean between the high bid and low asked prices
that day on the principal market or national quotation system on which such
shares are then quoted; provided, however, that when appropriate, the Committee
in determining Fair Market Value of capital stock of the Company may take into
account such other factors as may be deemed appropriate under the circumstances.
Notwithstanding the foregoing, the Fair Market Value of capital stock for
purposes of grants of Incentive Stock Options shall be determined in compliance
with applicable provisions of the Code. The Fair Market Value of rights or
property other than capital stock of the Company means the fair market value
thereof as determined by the Committee on the basis of such factors as it may
deem appropriate.

               (k) "INCENTIVE AWARD" means any Stock Option, Restricted Stock,
Stock Appreciation Right, Stock Payment, Performance Award or Dividend
Equivalent granted or sold to an Eligible Person under this Plan, but not a
Nonemployee Director's Option.

               (l) "INCENTIVE STOCK OPTION" means a Stock Option that qualifies
as an incentive stock option under Section 422 (or any successor section) of the
Code and the regulations thereunder.

               (m) "JUST CAUSE DISMISSAL" shall mean a termination of a
Recipient's employment for any of the following reasons: (i) the Recipient
violates any reasonable rule or regulation of the Board or the Recipient's
superiors or the Chief Executive Officer or President of the Company that
results in damage to the Company or which, after written notice to do so, the
Recipient fails to correct within a reasonable time; (ii) any willful misconduct
or gross negligence by the Recipient in the responsibilities assigned to him or
her; (iii) any willful failure to perform his or her job as required to meet
Company objectives; (iv) any wrongful conduct of a Recipient which has an
adverse impact on the Company or which constitutes a misappropriation of Company
assets; (v) the Recipient's performing services for any other person or entity
which competes with the Company while he or she is employed by the Company,
without the written approval of the Chief Executive Officer or President of the
Company; or (vi) any other conduct that the Board or Committee determines
constitutes Just Cause for Dismissal.

               (n) "NONEMPLOYEE DIRECTOR" means a director of the Company who
qualifies as a "Nonemployee Director" under Rule 16b-3 under the Exchange Act.

               (o) "NONEMPLOYEE DIRECTOR'S OPTION" means a Stock Option granted
to a Nonemployee Director pursuant to Article III of the Plan.

               (p) "NONQUALIFIED STOCK OPTION" means a Stock Option other than
an Incentive Stock Option.

               (q) "OPTION" or "STOCK OPTION" means a right to purchase stock of
the Company granted under this Plan, and can be an Incentive Stock Option or a
Nonqualified Stock Option.

               (r) "PAYMENT EVENT" means the event or events giving rise to the
right to payment of a Performance Award.

               (s) "PERFORMANCE AWARD" means an award, payable in cash, Common
Stock or a combination thereof, which vests and becomes payable over a period of
time upon attainment of performance criteria established in connection with the
grant of the award.

               (t) "PERFORMANCE-BASED COMPENSATION" means performance-based
compensation as described in Section 162(m) of the Code and the regulations
thereunder. If the amount of compensation an Eligible Person will receive under
any Incentive Award is not based solely on an increase in the value of Common
Stock after the date of grant or award, the Committee, in order to qualify



                                       2


an Incentive Award as performance-based compensation under Section 162(m) of the
Code and the regulations thereunder, can condition the grant, award, vesting, or
exercisability of such an award on the attainment of a preestablished, objective
performance goal. For this purpose, a preestablished, objective performance goal
may include one or more of the following performance criteria: (i) cash flow,
(ii) earnings per share (including earnings before interest, taxes, and
amortization), (iii) return on equity, (iv) total stockholder return, (v) return
on capital, (vi) return on assets or net assets, (vii) income or net income,
(viii) operating margin, (ix) return on operating revenue, (x) attainment of
stated goals related to the Company's research and development or clinical
trials programs, (xi) attainment of stated goals related to the Company's
capitalization, costs, financial condition, or results of operations, and (xii)
any other similar performance criteria contemplated by the regulations under
Section 162(m).

               (u) "PERMANENT DISABILITY" shall mean that the Recipient becomes
physically or mentally incapacitated or disabled so that he or she is unable to
perform substantially the same services as he or she performed prior to
incurring such incapacity or disability (the Company, at its option and expense,
being entitled to retain a physician to confirm the existence of such incapacity
or disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three consecutive months or six months in any twelve-month period or
such other period(s) as may be determined by the Committee with respect to any
Option.

               (v) "PURCHASE PRICE" means the purchase price (if any) to be paid
by a Recipient for Restricted Stock as determined by the Committee (which price
shall be at least equal to the minimum price required under applicable laws and
regulations for the issuance of Common Stock which is nontransferable and
subject to a substantial risk of forfeiture until specific conditions are met).

               (w) "RECIPIENT" means a person who has received an Award
hereunder.

               (x) "RESTRICTED STOCK" means Common Stock that is the subject of
an award made under Section 2.04 and which is nontransferable and subject to a
substantial risk of forfeiture until specific conditions are met as set forth in
this Plan and in any statement evidencing the grant of such Incentive Award.

               (y) "SECURITIES ACT" means the Securities Act of 1933, as
amended.

               (z) "STOCK APPRECIATION RIGHT" or "SAR" means a right granted
under Section 2.05 to receive a payment that is measured with reference to the
amount by which the Fair Market Value of a specified number of shares of Common
Stock appreciates from a specified date, such as the date of grant of the SAR,
to the date of exercise.

               (aa) "STOCK PAYMENT" means a payment in shares of the Company's
Common Stock to replace all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Recipient.

        1.03   COMMON STOCK SUBJECT TO THE PLAN.

               (a) Number of Shares. Subject to Section 1.05(b), the maximum
number of shares of Common Stock that may be issued pursuant to Awards under the
Plan shall be 7,100,000.

               (b) Source of Shares. The Common Stock to be issued under this
Plan will be made available, at the discretion of the Board or the Committee,
either from authorized but unissued shares of Common Stock or from previously
issued shares of Common Stock reacquired by the Company, including shares
purchased on the open market.

               (c) Availability of Unused Shares. Shares of Common Stock subject
to unexercised portions of any Award granted under this Plan that expire,
terminate or are cancelled, and shares of Common Stock issued pursuant to an
Award under this Plan that are reacquired by the Company



                                       3


pursuant to the terms of the Award under which such shares were issued, will
again become available for the grant of further Awards under this Plan.

               (d) Grant Limits. Notwithstanding any other provision of this
Plan, no Eligible Person shall be granted Awards with respect to more than
600,000 shares of Common Stock in any one calendar year; provided, however, that
this limitation shall not apply if it is not required in order for the
compensation attributable to Incentive Awards hereunder to qualify as
Performance-Based Compensation. The limitation set forth in this Section 1.03(d)
shall be subject to adjustment as provided in Section 1.05(b), but only to the
extent such adjustment would not affect the status of compensation attributable
to Awards hereunder as Performance-Based Compensation.

        1.04   ADMINISTRATION OF THE PLAN.

               (a) The Committee. The Plan will be administered by the
Committee, which will consist of two or more members of the Board each of whom
must be a Nonemployee Director; provided, however, that the number of members of
the Committee may be reduced or increased from time to time by the Board. In
addition, if Awards are to be made to persons subject to Section 162(m) of the
Code and such awards are intended to constitute Performance-Based Compensation,
then each of the Committee's members must also be an "outside director," as such
term is defined in the regulations under Section 162(m) of the Code.
Notwithstanding the foregoing or any provision of the Plan to the contrary, the
Board may, in lieu of the Committee, exercise any authority granted to the
Committee pursuant to the provisions of the Plan.

               (b) Authority of the Committee. The Committee has authority in
its discretion to select the Eligible Persons to whom, and the time or times at
which, Incentive Awards shall be granted or sold, the nature of each Incentive
Award, the number of shares of Common Stock or the number of rights that make up
or underlie each Incentive Award, the period for the exercise of each Incentive
Award, the performance criteria (which need not be identical) utilized to
measure the value of Performance Awards, and such other terms and conditions
applicable to each individual Incentive Award as the Committee shall determine.
The Committee may grant at any time new Incentive Awards to an Eligible Person
who has previously received Incentive Awards or other grants (including other
stock options) whether such prior Incentive Awards or such other grants are
still outstanding, have previously been exercised in whole or in part, or are
cancelled in connection with the issuance of new Incentive Awards. The Committee
may grant Incentive Awards singly or in combination or in tandem with other
Incentive Awards as it determines in its discretion. The purchase price or
initial value and any and all other terms and conditions of the Incentive Awards
may be established by the Committee without regard to existing Incentive Awards
or other grants. Further, the Committee may, with the consent of an Eligible
Person, amend in a manner not inconsistent with the Plan the terms of any
existing Incentive Award previously granted to such Eligible Person, provided
that neither the Board nor the Committee shall reduce the Exercise Price of any
outstanding Option without stockholder approval.

               (c) Plan Interpretation. Subject to the express provisions of the
Plan, the Committee has the authority to interpret the Plan and any agreements
defining the rights and obligations of the Company and Recipients, to determine
the terms and conditions of Incentive Awards and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee has authority to prescribe, amend and rescind rules and regulations
relating to the Plan. All interpretations, determinations and actions by the
Committee shall be final, conclusive and binding upon all parties. Any action of
the Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote or by the unanimous written consent of its members.

               (d) Special Rules Regarding Article III. Notwithstanding anything
herein to the contrary, the Committee shall have no authority or discretion as
to the selection of persons eligible to receive Nonemployee Directors' Options
granted under the Plan, the number of shares covered by Nonemployee Directors'
Options granted under the Plan, the timing of such grants, or the exercise price
of Nonemployee Directors' Options granted under the Plan, which matters are
specifically governed by the provisions of the Plan.



                                       4


               (e) No Liability. No member of the Board or the Committee or any
designee thereof will be liable for any action or determination made in good
faith by the Board or the Committee with respect to the Plan or any transaction
arising under the Plan.

        1.05   OTHER PROVISIONS.

               (a) Documentation. Each Award granted under the Plan shall be
evidenced by an award agreement duly executed on behalf of the Company and by
the Recipient or, in the Committee's discretion, a confirming memorandum issued
by the Company to the Recipient (in either case an "AWARD DOCUMENT") evidencing
the Award and setting forth such terms and conditions applicable to the Award as
the Committee may in its discretion determine consistent with the Plan, provided
that the Committee shall exercise no discretion with respect to Nonemployee
Directors' Options, which shall reflect only the terms of the Award as set forth
in Article III and certain administrative matters dictated by the Plan. Award
Documents shall comply with and be subject to the terms and conditions of the
Plan. A copy of the Plan shall be delivered to each Award Recipient together
with the Award Document, and shall constitute a part thereof. In case of any
conflict between the Plan and any Award Document, the Plan shall control.
Various Award Documents covering the same types of Awards may but need not be
identical.

               (b) Adjustment Provisions.

               If (1) the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), through merger,
consolidation, sale or exchange of all or substantially all of the properties of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (2) the value of the outstanding shares of Common Stock
of the Company is reduced by reason of an extraordinary cash dividend, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares subject to the Plan as provided in Section 1.03, (y) the
number and kind of shares or other securities subject to then outstanding
Awards, and (z) the price for each share or other unit of any other securities
subject to then outstanding Awards. No fractional interests will be issued under
the Plan resulting from any such adjustments.

               (c) Continuation of Employment.

                      (i) Nothing contained in this Plan (or in Award Documents
or in any other documents related to this Plan or to Awards granted hereunder)
shall confer upon any Eligible Person or Recipient any right to continue in the
employ of the Company or constitute any contract or agreement of employment or
engagement, or interfere in any way with the right of the Company to reduce such
person's compensation or other benefits or to terminate the employment of such
Eligible Person or Recipient, with or without cause. Except as expressly
provided in the Plan or in any statement evidencing the grant of an Award
pursuant to the Plan, the Company shall have the right to deal with each
Recipient in the same manner as if the Plan and any such statement evidencing
the grant of an Award pursuant to the Plan did not exist, including, without
limitation, with respect to all matters related to the hiring, discharge,
compensation and conditions of the employment or engagement of the Recipient.

                      (ii) Any question(s) as to whether and when there has been
a termination of a Recipient's employment, the reason (if any) for such
termination, and/or the consequences thereof under the terms of the Plan or any
statement evidencing the grant of an Award pursuant to the Plan shall be
determined by the Committee and the Committee's determination thereof shall be
final and binding.

               (d) Restrictions. All Awards granted under the Plan shall be
subject to the requirement that, if at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to Awards granted under the Plan upon any securities exchange or under
any state or federal law, or the consent or approval of any government
regulatory body, is



                                       5


necessary or desirable as a condition of, or in connection with, the granting of
such an Award or the issuance, if any, or purchase of shares in connection
therewith, such Award may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock to be issued upon exercise of an Award granted under
the Plan have been effectively registered under the Securities Act, the Company
shall be under no obligation to issue any shares of stock covered by any Award
unless the person who exercises such Award, in whole or in part, shall give a
written representation and undertaking to the Company satisfactory in form and
scope to counsel to the Company and upon which, in the opinion of such counsel,
the Company may reasonably rely, that he or she is acquiring the shares of stock
issued to him or her pursuant to such exercise of the Award for his or her own
account as an investment and not with a view to, or for sale in connection with,
the distribution of any such shares of stock, and that he or she will make no
transfer of the same except in compliance with any rules and regulations in
force at the time of such transfer under the Securities Act, or any other
applicable law, and that if shares of stock are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued.

               (e) Additional Conditions. Any Incentive Award may also be
subject to such other provisions (whether or not applicable to any other Award
or Recipient) as the Committee determines appropriate including, without
limitation, provisions to assist the Recipient in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Common
Stock acquired under any form of benefit, provisions giving the Company the
right to repurchase shares of Common Stock acquired under any form of benefit in
the event the Recipient elects to dispose of such shares, and provisions to
comply with federal and state securities laws and federal and state income tax
withholding requirements.

               (f) Privileges of Stock Ownership. Except as otherwise set forth
herein, a Recipient or a permitted transferee of an Award shall have no rights
as a shareholder with respect to any shares issuable or issued in connection
with the Award until the date of the receipt by the Company of all amounts
payable in connection with exercise of the Award and performance by the
Recipient of all obligations thereunder. Status as an Eligible Person shall not
be construed as a commitment that any Award will be granted under this Plan to
an Eligible Person or to Eligible Persons generally. No person shall have any
right, title or interest in any fund or in any specific asset (including shares
of capital stock) of the Company by reason of any Award granted hereunder.
Neither this Plan (or any documents related hereto) nor any action taken
pursuant hereto shall be construed to create a trust of any kind or a fiduciary
relationship between the Company and any person. To the extent that any person
acquires a right to receive an Award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.

               (g) Amendment and Termination of Plan: Amendment of Incentive
Awards.

                      (i) The Board or the Committee may, insofar as permitted
by law, from time to time suspend or discontinue the Plan or revise or amend it
in any respect except that no such amendment shall alter or impair or diminish
any rights or obligations under any Award theretofore granted under the Plan
without the consent of the person to whom such Award was granted , and except
that such amendments shall be subject to stockholder approval to the extent (A)
required to comply with the listing requirements imposed by any exchange or
trading system upon which the Company's securities trade or applicable
provisions of or rules under the Code, or (B) the Board determines in good faith
that such amendments are material to stockholders.

                      (ii) The Committee may from time to time, with the consent
of a Recipient, make such modifications in the terms and conditions of an
Incentive Award as it deems advisable, including to accelerate or extend the
vesting or exercise period of any Incentive Award, provided that performance
conditions to vesting of Restricted Stock shall not be waived, and provided
further that neither the Board nor the Committee shall reduce the Exercise Price
of any outstanding Option without stockholder approval.



                                       6


                      (iii) Except as otherwise provided in this Plan or in the
applicable Award Document, no amendment, suspension or termination of the Plan
will, without the consent of the Recipient, alter, terminate, impair or
adversely affect any right or obligation under any Award previously granted
under the Plan.

               (h) Nonassignability. No Award granted under the Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this subsection (h), upon
dissolution of marriage pursuant to a qualified domestic relations order or, in
the discretion of the Committee and under circumstances that would not adversely
affect the interests of the Company. During the lifetime of a Recipient, an
Award granted to him or her shall be exercisable only by the Recipient (or the
Recipient's permitted transferee) or his or her guardian or legal
representative. Notwithstanding the foregoing, Incentive Stock Options (or other
Awards subject to transfer restrictions under the Code) may not be assigned or
transferred in violation of Section 422(b)(5) of the Code (or any comparable or
successor provision) or the Treasury Regulations thereunder, and nothing herein
is intended to allow such assignment or transfer.

               (i) Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option, incentive or other compensation plans in effect
for the Company, and the Plan shall not preclude the Company from establishing
any other forms of incentive or other compensation for employees, directors, or
advisors of the Company.

               (j) Plan Binding on Successors. The Plan shall be binding upon
the successors and assigns of the Company.

               (k) Participation By Foreign Employees. Notwithstanding anything
to the contrary herein, the Committee may, in order to fulfill the purposes of
the Plan, modify grants of Incentive Awards to Recipients who are foreign
nationals or employed outside of the United States to recognize differences in
applicable law, tax policy or local custom.

               (l) Effective Date And Duration of Plan. Awards may be granted
under the Plan until the tenth anniversary of the effective date of the Plan,
whereupon the Plan shall terminate. No Awards may be granted during any
suspension of this Plan or after its termination. Notwithstanding the foregoing,
each Award properly granted under the Plan shall remain in effect until such
Award has been exercised or terminated in accordance with its terms and the
terms of the Plan.

                                   ARTICLE II
                                INCENTIVE AWARDS

        2.01 GRANTS OF INCENTIVE AWARDS. Subject to the express provisions of
this Plan, the Committee may from time to time in its discretion select from the
class of Eligible Persons those individuals to whom Incentive Awards may be
granted pursuant to its authority as set forth in Section 1.04(b). Each
Incentive Award shall be subject to the terms and conditions of the Plan and
such other terms and conditions established by the Committee as are not
inconsistent with the purpose and provisions of the Plan. One or more Incentive
Awards may be granted to any Eligible Person.

        2.02 STOCK OPTIONS.

               (a) Nature of Stock Options. Stock Options may be Incentive Stock
Options or Nonqualified Stock Options.

               (b) Option Price. The exercise price per share for each Option
(other than a Nonemployee Director's Option) (the "EXERCISE PRICE") shall be
determined by the Committee at the date such Option is granted and shall not be
less than the Fair Market Value of a share of Common Stock (or other securities,
as applicable) at the time of grant, except that the Exercise Price for a
Nonqualified Stock Option may reflect a discount of up to 15% of the Fair Market
Value at the time of grant if the



                                       7


amount of such discount is expressly in lieu of a reasonable amount of salary or
cash bonus. Notwithstanding the foregoing, however, in no event shall the
exercise price be less than the par value of the shares of Common Stock subject
to the Option, and the exercise price of an Incentive Stock Option shall be not
less than such amount as is necessary to enable such Option to be treated as an
"incentive stock option" within the meaning of Section 422 of the Code.

               (c) Option Period and Vesting. Options (other than Nonemployee
Directors' Options) hereunder shall vest and may be exercised as determined by
the Committee, except that exercise of such Options after termination of the
Recipient's employment shall be subject to Section 2.02(g). Each Option granted
hereunder (other than a Nonemployee Directors Option) and all rights or
obligations thereunder shall expire on such date as shall be determined by the
Committee, but not later than ten years after the date the Option is granted and
shall be subject to earlier termination as herein provided. The Committee may in
its discretion at any time and from time to time after the grant of an Option
(other than a Nonemployee Director's Option) accelerate vesting of such Option
in whole or part by increasing the number of shares then purchasable, provided
that the total number of shares subject to such Option may not be increased.

               (d) Exercise of Options. Except as otherwise provided herein, an
Option may become exercisable, in whole or in part, on the date or dates
specified by the Committee (or, in the case of Nonemployee Directors' Options,
the Plan) at the time the Option is granted and thereafter shall remain
exercisable until the expiration or earlier termination of the Option. No Option
shall be exercisable except in respect of whole shares, and fractional share
interests shall be disregarded. Not less than 100 shares of stock (or such other
amount as is set forth in the applicable option agreement) may be purchased at
one time unless the number purchased is the total number at the time available
for purchase under the terms of the Option. An Option shall be deemed to be
exercised when the Secretary of the Company receives written notice of such
exercise from the Recipient, together with payment of the exercise price made in
accordance with Section 2.02(e). Upon proper exercise, the Company shall deliver
to the person entitled to exercise the Option or his or her designee a
certificate or certificates for the shares of stock for which the Option is
exercised. Notwithstanding any other provision of this Plan, the Committee may
impose, by rule and in option agreements, such conditions upon the exercise of
Options (including, without limitation, conditions limiting the time of exercise
to specified periods) as may be required to satisfy applicable regulatory
requirements, including without limitation Rule 16b-3 (or any successor rule)
under the Exchange Act and any applicable section of or rule under the Internal
Revenue Code.

               (e) Exercise Price. The Exercise Price shall be payable upon the
exercise of an Option by delivery of legal tender of the United States or
payment of such other consideration as the Committee may from time to time deem
acceptable in any particular instance, including without limitation delivery of
capital stock of the Company (delivered by or on behalf of the person exercising
the Option or retained by the Company from the Common Stock otherwise issuable
upon exercise and valued at Fair Market Value as of the exercise date) or
surrender of other Awards previously granted to the Recipient exercising the
Option; provided, however, that the Committee may, in the exercise of its
discretion, (i) allow exercise of an Option in a broker-assisted or similar
transaction in which the Exercise Price is not received by the Company until
immediately after exercise, and/or (ii) allow the Company to loan the Exercise
Price to the person entitled to exercise the Option, if the exercise will be
followed by an immediate sale of some or all of the underlying shares and a
portion of the sales proceeds is dedicated to full payment of the Exercise
Price. Any shares of Company stock or other non-cash consideration assigned and
delivered to the Company in payment or partial payment of the Exercise Price
will be valued at Fair Market Value on the exercise date. No fractional shares
will be issued pursuant to the exercise of an Option.

               (f) Limitation on Exercise of Incentive Stock Options. The
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Common Stock for which one or more options granted to any
Recipient under the Plan (or any other option plan of the Company or any of its
subsidiaries or affiliates) may for the first time become exercisable as
Incentive Stock Options under the federal tax laws during any one calendar year
shall not exceed $100,000. Any Options granted as



                                       8


Incentive Stock Options pursuant to the Plan in excess of such limitation shall
be treated as Nonqualified Stock Options.

               (g) Termination of Employment.

                      (i) Termination for Cause. Except as otherwise provided in
a written agreement between the Company and the Recipient, which may be entered
into at any time before or after termination, in the event of a Just Cause
Dismissal of a Recipient all of the Recipient's unexercised Options, whether or
not vested, shall expire and become unexercisable as of the date of such Just
Cause Dismissal.

                      (ii) Termination other than for Cause. Subject to
subsection (i) above and subsection (iii) below, and except as otherwise
provided in a written agreement between the Company and the Recipient, which may
be entered into at any time before or after termination, in the event of a
Recipient's termination of employment for:

                             (A) any reason other than for Just Cause Dismissal,
        death, or Permanent Disability, or normal retirement, the Recipient's
        Options shall, whether or not vested, expire and become unexercisable as
        of the earlier of (1) the date such Options would expire in accordance
        with their terms if the Recipient remained employed or (2) three
        calendar months after the date of termination in the case of Incentive
        Stock Options, or six months after the date of termination, in the case
        of Nonqualified Stock Options.

                             (B) death or Permanent Disability, the Recipient's
        unexercised Options shall, whether or not vested, expire and become
        unexercisable as of the earlier of (1) the date such Options would
        expire in accordance with their terms if the Recipient remained employed
        or (2) twelve (12) months after the date of termination.

                             (C) normal retirement, the Recipient's unexercised
        Options shall, whether or not vested, expire and become unexercisable as
        of the earlier of (A) the date such Options expire in accordance with
        their terms or (B) twenty-four (24) months after the date of retirement.

                      (iii) Alteration of Exercise Periods. Notwithstanding
anything to the contrary in subsections (i) or (ii) above, the Committee may in
its discretion designate such shorter or longer periods to exercise Options
(other than Nonemployee Directors' Options) following a Recipient's termination
of employment; provided, however, that any shorter periods determined by the
Committee shall be effective only if provided for in the instrument that
evidences the grant to the Recipient of such Options or if such shorter period
is agreed to in writing by the Recipient. Notwithstanding anything to the
contrary herein, Options shall be exercisable by a Recipient (or his successor
in interest) following such Recipient's termination of employment only to the
extent that installments thereof had become exercisable on or prior to the date
of such termination; provided, however, that the Committee, in its discretion,
may elect to accelerate the vesting of all or any portion of any Options that
had not become exercisable on or prior to the date of such termination.

        2.03   PERFORMANCE AWARDS.

               (a) Grant of Performance Award. The Committee shall determine the
performance criteria (which need not be identical and may be established on an
individual or group basis) governing Performance Awards, the terms thereof, and
the form and time of payment of Performance Awards.

               (b) Payment of Award; Limitation. Upon satisfaction of the
conditions applicable to a Performance Award, payment will be made to the
Recipient in cash or in shares of Common Stock valued at Fair Market Value or a
combination of Common Stock and cash, as the Committee in its discretion may
determine. Notwithstanding any other provision of this Plan, no Eligible Person
shall be



                                       9


paid a Performance Award in excess of $1,000,000 in any one calendar year;
provided, however, that this limitation shall not apply if it is not required in
order for the compensation attributable to the Performance Award hereunder to
qualify as Performance-Based Compensation.

               (c) Expiration of Performance Award. If any Recipient's
employment with the Company is terminated for any reason other than normal
retirement, death, or Permanent Disability prior to the time a Performance Award
or any portion thereof becomes payable, all of the Recipient's rights under the
unpaid portion of the Performance Award shall expire and terminate unless
otherwise determined by the Committee. In the event of termination of employment
by reason of death, Permanent Disability or normal retirement, the Committee, in
its discretion, may determine what portions, if any, of the Performance Award
should be paid to the Recipient.

        2.04   RESTRICTED STOCK.

               (a) Award of Restricted Stock. The Committee may grant awards of
Restricted Stock to Eligible Participants. The Committee shall determine the
Purchase Price (if any), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions shall lapse,
provided that the restriction period shall be at least one year for
performance-based grants and three years for non-performance-based grants.

               (b) Requirements of Restricted Stock. All shares of Restricted
Stock granted or sold pursuant to the Plan will be subject to the following
conditions:

                      (i) No Transfer. The shares may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, alienated or
encumbered until the restrictions are removed or expire;

                      (ii) Certificates. The Committee may require that the
certificates representing Restricted Stock granted or sold to a Recipient
pursuant to the Plan remain in the physical custody of an escrow holder or the
Company until all restrictions are removed or expire;

                      (iii) Restrictive Legends. Each certificate representing
Restricted Stock granted or sold to a Recipient pursuant to the Plan will bear
such legend or legends making reference to the restrictions imposed upon such
Restricted Stock as the Committee in its discretion deems necessary or
appropriate to enforce such restrictions; and

                      (iv) Other Restrictions. The Committee may impose such
other conditions on Restricted Stock as the Committee may deem advisable
including, without limitation, restrictions under the Securities Act, under the
Exchange Act, under the requirements of any stock exchange upon which such
Restricted Stock or shares of the same class are then listed and under any blue
sky or other securities laws applicable to such shares.

               (c) Rights of Recipient. Subject to the provisions of Section
2.04(b) and any restrictions imposed upon the Restricted Stock, the Recipient
will have all rights of a stockholder with respect to the Restricted Stock
granted or sold to such Recipient under the Plan, including the right to vote
the shares and receive all dividends and other distributions paid or made with
respect thereto.

               (d) Termination of Employment. Unless the Committee in its
discretion determines otherwise, upon a Recipient's termination of employment
for any reason, all of the Recipient's Restricted Stock remaining subject to
restrictions imposed pursuant to the Plan on the date of such termination of
employment shall be repurchased by the Company at the Purchase Price (if any).



                                       10


        2.05   STOCK APPRECIATION RIGHTS.

               (a) Granting of Stock Appreciation Rights. The Committee may
approve the grant to Eligible Persons of Stock Appreciation Rights, related or
unrelated to Options, at any time.

               (b) SARs Related to Options.

                      (i) A Stock Appreciation Right granted in connection with
an Option granted under this Plan will entitle the holder of the related Option,
upon exercise of the Stock Appreciation Right, to surrender such Option, or any
portion thereof to the extent unexercised, with respect to the number of shares
as to which such Stock Appreciation Right is exercised, and to receive payment
of an amount computed pursuant to Section 2.05(b)(iii). Such Option will, to the
extent surrendered, then cease to be exercisable.

                      (ii) A Stock Appreciation Right granted in connection with
an Option hereunder will be exercisable at such time or times, and only to the
extent that, the related Option is exercisable, and will not be transferable
except to the extent that such related Option may be transferable.

                      (iii) Upon the exercise of a Stock Appreciation Right
related to an Option, the Holder will be entitled to receive payment of an
amount determined by multiplying: (i) the difference obtained by subtracting the
Exercise Price of a share of Common Stock specified in the related Option from
the Fair Market Value of a share of Common Stock on the date of exercise of such
Stock Appreciation Right (or as of such other date or as of the occurrence of
such event as may have been specified in the instrument evidencing the grant of
the Stock Appreciation Right), by (ii) the number of shares as to which such
Stock Appreciation Right is exercised.

               (c) SARs Unrelated to Options. The Committee may grant Stock
Appreciation Rights unrelated to Options to Eligible Persons. Section
2.05(b)(iii) shall be used to determine the amount payable at exercise under
such Stock Appreciation Right, except that in lieu of the Option Exercise Price
specified in the related Option the initial base amount specified in the
Incentive Award shall be used.

               (d) Limits. Notwithstanding the foregoing, the Committee, in its
discretion, may place a dollar limitation on the maximum amount that will be
payable upon the exercise of a Stock Appreciation Right under the Plan.

               (e) Payments. Payment of the amount determined under the
foregoing provisions may be made solely in whole shares of Common Stock valued
at their Fair Market Value on the date of exercise of the Stock Appreciation
Right or, alternatively, at the sole discretion of the Committee, in cash or in
a combination of cash and shares of Common Stock as the Committee deems
advisable. The Committee has full discretion to determine the form in which
payment of a Stock Appreciation Right will be made and to consent to or
disapprove the election of a Recipient to receive cash in full or partial
settlement of a Stock Appreciation Right. If the Committee decides to make full
payment in shares of Common Stock, and the amount payable results in a
fractional share, payment for the fractional share will be made in cash.

               (f) Rule 16b-3. The Committee may, at the time a Stock
Appreciation Right is granted, impose such conditions on the exercise of the
Stock Appreciation Right as may be required to satisfy the requirements of Rule
16b-3 under the Exchange Act (or any other comparable provisions in effect at
the time or times in question).

               (g) Termination of Employment. Section 2.02(g) will govern the
treatment of Stock Appreciation Rights upon the termination of a Recipient's
employment with the Company.



                                       11


        2.06   STOCK PAYMENTS.

               The Committee may approve Stock Payments of the Company's Common
Stock to any Eligible Person for all or any portion of the compensation (other
than base salary) or other payment that would otherwise become payable by the
Company to the Eligible Person in cash.

        2.07   DIVIDEND EQUIVALENTS.

               The Committee may grant Dividend Equivalents to any Recipient who
has received a Stock Option, SAR, or other Incentive Award denominated in shares
of Common Stock. Such Dividend Equivalents shall be effective and shall entitle
the recipients thereof to payments during the "APPLICABLE DIVIDEND PERIOD,"
which shall be (i) the period between the date the Dividend Equivalent is
granted and the date the related Stock Option, SAR, or other Incentive Award is
exercised, terminates, or is converted to Common Stock, or (ii) such other time
as the Committee may specify in the written instrument evidencing the grant of
the Dividend Equivalent. Dividend Equivalents may be paid in cash, Common Stock,
or other Incentive Awards; the amount of Dividend Equivalents paid other than in
cash shall be determined by the Committee by application of such formula as the
Committee may deem appropriate to translate the cash value of dividends paid to
the alternative form of payment of the Dividend Equivalent. Dividend Equivalents
shall be computed as of each dividend record date and shall be payable to
recipients thereof at such time as the Committee may determine. Notwithstanding
the foregoing, if it is intended that an Incentive Award qualify as
Performance-Based Compensation and the amount of the compensation the Eligible
Person could receive under the award is based solely on an increase in value of
the underlying stock after the date of grant or award (i.e., the grant, vesting,
or exercisability of the award is not conditioned upon the attainment of a
preestablished, objective performance goal described in Section 1.02(t)), then
the payment of any Dividend Equivalents related to the award shall not be made
contingent on the exercise of the award.

                                   ARTICLE III
                         NONEMPLOYEE DIRECTOR'S OPTIONS

        3.01   GRANTS OF INITIAL OPTIONS.

               Each Nonemployee Director shall, upon first becoming a
Nonemployee Director, receive a one-time grant of a Nonemployee Director's
Option to purchase up to 40,000 shares of the Company's Common Stock at an
exercise price per share equal to the Fair Market Value of the Company's Common
Stock on the date of grant, subject to (i) vesting as set forth in Section 3.04,
and (ii) adjustment as set forth in Section 1.05(b). Options granted under this
Section 3.01 are "INITIAL OPTIONS" for purposes hereof.

        3.02   GRANTS OF ADDITIONAL OPTIONS.

               Immediately following the annual meeting of stockholders of the
Company next following a Nonemployee Director becoming such, and immediately
following each subsequent annual meeting of stockholders of the Company, in each
case if the Nonemployee Director has served as a director since his or her
election or appointment and has been re-elected as a director at such annual
meeting or is continuing as a director without being re-elected due to the
classification of the Board, such Nonemployee Director shall automatically
receive an option to purchase up to 10,000 shares of the Company's Common Stock
at an exercise price per share equal to the Fair Market Value of the Company's
Common Stock on the date of grant, subject to (a) vesting as set forth in
Section 3.04, and (b) adjustment as set forth in Section 1.05(b). Options
granted under this Section 3.02 are "ADDITIONAL OPTIONS" for purposes hereof.



                                       12


        3.03   EXERCISE PRICE.

               The exercise price for Nonemployee Directors' Options shall be
payable as set forth in Section 2.02(e). Neither the Board nor the Committee
shall reduce the exercise price of any outstanding Initial Option or Additional
Option without stockholder approval.

        3.04   VESTING AND EXERCISE.

               Initial Options shall vest and become exercisable with respect to
25% of the underlying shares on the grant date and with respect to an additional
25% of the underlying shares on the dates of each of the first three annual
meetings of the Company's stockholders following the grant date, but only if on
the date of each such annual meeting, the Recipient is continuing as a director
of the Company for the ensuing year, provided, however, that if the grant date
is within six months of the ensuing annual meeting of the Company's
stockholders, then after vesting of the Option with respect to 25% of the
underlying shares on the grant date, the Option will vest with respect to an
additional 25% of the underlying shares on the dates of each of the second,
third, and fourth annual meetings of the Company's stockholders following the
grant date, but only if, on the date of each such annual meeting, the Recipient
is continuing as a director for the ensuing year. Additional Options shall vest
and become exercisable upon the earlier of (a) the first anniversary of the
grant date or (b) immediately prior to the annual meeting of stockholders of the
Company next following the grant date, if the optionee has remained a director
for the entire period from the date of grant to such earlier date.
Notwithstanding the foregoing, however, Initial Options and Additional Options
that have not vested and become exercisable at the time the optionee ceases to
be a director shall terminate.

        3.05   TERM OF OPTIONS AND EFFECT OF TERMINATION.

               No Nonemployee Directors' Option shall be exercisable after the
expiration of ten years from the effective date of its grant. In the event that
the Recipient of a Nonemployee Director's Option shall cease to be a director of
the Company, all Nonemployee Directors' Options granted to such Recipient shall
be exercisable, to the extent already exercisable at the date such Recipient
ceases to be a director and regardless of the reason the Recipient ceases to be
a director, for a period of five (5) years after that date (or, if sooner, until
the expiration of the option according to its terms). In the event of the death
of a Recipient of a Nonemployee Director's Option while such Recipient is a
director of the Company or within the period after termination of such status
during which he or she is permitted to exercise such Option, such Option may be
exercised by any person or persons designated by the Recipient on a Beneficiary
Designation Form adopted by the Company for such purpose or, if there is no
effective Beneficiary Designation Form on file with the Company, by the
executors or administrators of the Recipient's estate or by any person or
persons who shall have acquired the option directly from the Recipient by his or
her will or the applicable laws of descent and distribution.

                                   ARTICLE IV
                      RECAPITALIZATIONS AND REORGANIZATIONS

        4.01   CORPORATE TRANSACTIONS.

               If the Company shall be the surviving corporation in any merger
or consolidation, each outstanding Option shall pertain and apply to the
securities to which a holder of the same number of shares of Common Stock that
are subject to that Option would have been entitled. In the event of a Change in
Control (as defined below), all Nonemployee Directors' Options and any Incentive
Awards specified by the Committee or the Board shall immediately vest and become
exercisable, and all conditions thereto shall be deemed to have been met. For
purposes hereof, a "Change in Control" means the following and shall be deemed
to occur if any of the following events occur:

                      (i) Except as provided by subsection (iii) hereof, the
               acquisition (other than from the Company) by any person, entity
               or "group," within the meaning of



                                       13


               Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for
               this purpose, the Company or its subsidiaries, or any employee
               benefit plan of the Company or its subsidiaries which acquires
               beneficial ownership of voting securities of the Company), of
               beneficial ownership (within the meaning of Rule 13d-3
               promulgated under the Exchange Act) of forty percent (40%) or
               more of either the then outstanding shares of Common Stock or the
               combined voting power of the Company's then outstanding voting
               securities entitled to vote generally in the election of
               directors; or

                      (ii) Individuals who, as of the effective date of the
               Plan, constitute the Board of Directors of the Company (the
               "INCUMBENT BOARD") cease for any reason to constitute at least a
               majority of the Board of Directors of the Company, provided that
               any person becoming a director subsequent to the date hereof
               whose election, or nomination for election by the Company's
               shareholders, is or was approved by a vote of at least a majority
               of the directors then comprising the Incumbent Board (other than
               an election or nomination of an individual whose initial
               assumption of office is in connection with an actual or
               threatened election contest relating to the election of the
               directors of the Company, as such terms are used in Rule 14a-11
               of Regulation 14A promulgated under the Exchange Act) shall be,
               for purposes of this Agreement, considered as though such person
               were a member of the Incumbent Board; or

                      (iii) Approval by the stockholders of the Company of a
               reorganization, merger or consolidation with any other person,
               entity or corporation, other than

                             (A) a merger or consolidation which would result in
                      the voting securities of the Company outstanding
                      immediately prior thereto continuing to represent (either
                      by remaining outstanding or by being converted into voting
                      securities of another entity) more than fifty percent
                      (50%) of the combined voting power of the voting
                      securities of the Company and such other entity
                      outstanding immediately after such merger or
                      consolidation, or

                             (B) a merger or consolidation effected to implement
                      a recapitalization of the Company (or similar transaction)
                      in which no person acquires forty percent (40%) or more of
                      the combined voting power of the Company's then
                      outstanding voting securities; or

                      (iv) Approval by the stockholders of the Company of a plan
               of complete liquidation of the Company or an agreement for the
               sale or other disposition by the Company of all or substantially
               all of the Company's assets.

Notwithstanding the preceding provisions of this Section 4.01, a Change in
Control shall not be deemed to have occurred (l) if the "person" described in
the preceding provisions of this Section 4.01 is an underwriter or underwriting
syndicate that has acquired the ownership of 50% or more of the combined voting
power of the Company's then outstanding voting securities solely in connection
with a public offering of the Company's securities, or (2) if the "person"
described in the preceding provisions of this Paragraph is an employee stock
ownership plan or other employee benefit plan maintained by the Company that is
qualified under the provisions of the Employee Retirement Income Security Act of
1974, as amended.

        4.02   DETERMINATION BY THE COMMITTEE.

               To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive. The
grant of an Option pursuant to the Plan shall not affect in any way the right



                                       14


or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge or to consolidate or
to dissolve, liquidate or sell, or transfer all of any part of its business or
assets.



                                       15

EX-10.20

                                                                   EXHIBIT 10.20



                         LA JOLLA PHARMACEUTICAL COMPANY

                        1995 EMPLOYEE STOCK PURCHASE PLAN


               The following constitutes the provisions of the La Jolla
Pharmaceutical Company 1995 Employee Stock Purchase Plan (as amended and
restated effective May 22, 2002) (the "PLAN").

1.      PURPOSE.

               The purpose of the Plan is to maintain competitive equity
compensation programs and to provide employees of La Jolla Pharmaceutical
Company (the "COMPANY") with an opportunity and incentive to acquire a
proprietary interest in the Company through the purchase of the Company's Common
Stock, thereby more closely aligning the interests of the Company's employees
and stockholders. It is the intention of the Company to have the Plan qualify as
an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code
of 1986, as amended ("SECTION 423"). Accordingly, the provisions of the Plan
shall be construed to extend and limit participation consistent with the
requirements of Section 423.

2.      DEFINITIONS.

               Capitalized terms used in this Plan and not otherwise defined
have the meanings set forth below.

               "ADMINISTRATOR" means the Committee, or the Board if the Board
asserts administrative authority over the Plan pursuant to Section 13.

               "BOARD" means the Board of Directors of the Company.

               "CODE" means the Internal Revenue Code of 1986, as amended.

               "COMMITTEE" means a committee of members of the Board meeting the
qualifications described in Section 13 and appointed by the Board to administer
the Plan.

               "COMMON STOCK" shall mean the Common Stock of the Company.

               "COMPENSATION" means base salary or hourly compensation and any
cash bonus paid to a participant.

               "ELIGIBLE EMPLOYEE" means any employee of the Company whose
customary employment is for more than five months per calendar year and for more
than 20 hours per week. For purposes of the Plan, the employment relationship
shall be treated as continuing while the individual is on sick leave or other
leave of absence approved by the Company, except that when the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the 91st day of such leave.

               "ENROLLMENT DATE" means the first day of each Offering Period.



               "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

               "EXERCISE DATE" means the last day of each Purchase Period.

               "FAIR MARKET VALUE" of the Common Stock as of the time of any
determination thereof means the value of Common Stock determined as follows:

                      (1) If the Common Stock is listed on any established stock
exchange or trades on the Nasdaq National Market, its Fair Market Value shall be
the most recent closing sales price for such stock (or the closing bid, if no
sales were reported), as quoted on such exchange or system (or the exchange or
system with the greatest volume of trading in the Common Stock) as of the time
of such determination as reported in the Wall Street Journal or such other
source as the Administrator deems reliable; or

                      (2) If the Common Stock is not listed on any established
stock exchange or traded on the Nasdaq National Market its Fair Market Value
shall be the mean between the most recent closing high and low asked prices for
the Common Stock as of the time of such determination, as reported in the Wall
Street Journal or such other source as the Administrator deems reliable; or

                      (3) In the absence of an established market for the Common
Stock, the Fair Market Value of the Common Stock shall be determined in good
faith by the Administrator.

               "OFFERING PERIOD" means (i) the period of twenty-three (23)
months commencing on August 1, 1996 and terminating on June 30, twenty-three
(23) months later; (ii) each period of twenty-four (24) months commencing on
January 1, 1997 and each January 1 thereafter for the duration of the Plan and
terminating on the December 31 twenty-four (24) months later; (iii) each period
of twenty-four (24) months commencing on July 1, 1997 and each July 1 thereafter
for the duration of the Plan and terminating on the June 30 twenty-four (24)
months later; (iv) each period of twenty-four (24) months commencing on October
1, 2000 and each October 1 thereafter for the duration of the Plan and
terminating on the September 30 twenty-four (24) months later; and (v) each
period of twenty-four (24) months commencing on April 1, 2001 and each April 1
thereafter for the duration of the Plan and terminating on the March 31
twenty-four (24) months later. The Administrator shall have the power to change
the duration of Offering Periods without stockholder approval as set forth in
Section 12 or if such change is announced at least fifteen (15) days prior to
the scheduled beginning of the first Offering Period to be affected.

               "OPTION" means the option granted to each participant pursuant to
Section 4 upon enrollment in an Offering Period.

               "PERIODIC EXERCISE LIMIT" has the meaning set forth in Section
4(a).

               "PLAN ACCOUNT" means an account maintained by the Company for
each participant in the Plan, to which are credited the payroll deductions made
for such participant pursuant to Section 5 and from which are debited amounts
paid for the purchase of shares upon exercise of such participant's Option
pursuant to Section 6.

               "PURCHASE PRICE" as of any Exercise Date means an amount equal to
85% of the Fair Market Value of a share of Common Stock as of the close of
business on the Exercise Date or the opening of business on the Enrollment Date
for the Offering Period in which such Exercise Date occurs, whichever is lower.



                                       2


               "PURCHASE PERIOD" means (i) the period of five (5) months
commencing on August 1, 1996 and ending on December 31, 1996; (ii) with respect
to the Offering Periods beginning on January and July 1, 1997, January and July
1, 1998, and January 1, 1999, each period of six (6) months within any such
Offering Period, commencing January 1, 1997 and each July 1 and January 1
thereafter, and ending on the December 31 or June 30 following such commencement
date; (iii) with respect to the Offering Period beginning on July 1, 1999, the
period of six (6) months commencing July 1, 1999 and ending on December 31,
1999, the period of six (6) months commencing on January 1, 2000 and ending on
June 30, 2000, the period of six (6) months commencing on July 1, 2000 and
ending on December 31, 2000, the period of three (3) months commencing on
January 1, 2001 and ending on March 31, 2001, and the period of three (3) months
commencing on April 1, 2001 and ending on June 30, 2001, (iv) with respect to
the Offering Period beginning on January 1, 2000, the period of six (6) months
commencing on January 1, 2000 and ending on June 30, 2000, the period of six (6)
months commencing on July 1, 2000 and ending on December 31, 2000, and each
period of three (3) months commencing on January 1, 2001 and each April 1, July
1, and October 1 thereafter, and ending on the March 31, June 30, September 30
and December 31 following such commencement date; (v) with respect to the
Offering Period beginning on July 1, 2000, the period of six (6) months
commencing on July 1, 2000 and ending on December 31, 2000, and each period of
three (3) months commencing on January 1, 2001 and each April 1, July 1, and
October 1 thereafter, and ending on the March 31, June 30, September 30 and
December 31 following such commencement date; and (vi) for any Offering Period
commencing on or after October 1, 2000, each period of three (3) months within
the Offering Period commencing on October 1, 2000 and each January 1, April 1,
July 1, and October 1 thereafter, and ending on the December 31, March 31, June
30, and September 30 following such commencement date.

               "RESERVES" means the number of shares of Common Stock covered by
each Option that has not yet been exercised and the number of shares of Common
Stock that have been authorized for issuance under the Plan, but not yet placed
under any Option.

               "RULE 16b-3" means Rule 16b-3 under the Exchange Act and any
successor provision.

               "SUBSIDIARY" has the meaning as set forth under Section 424(f) of
the Code.

               "TRADING DAY" means a day on which national stock exchanges and
the National Association of Securities Dealers Automated Quotation System are
open for trading.

3.      OFFERING PERIODS AND PARTICIPATION.

               The Plan shall be implemented through a series of consecutive and
overlapping Offering Periods. An Eligible Employee may enroll in an Offering
Period by delivering a subscription agreement in the form of Exhibit A hereto to
the Company's payroll office at least five (5) business days prior to the
Enrollment Date for that Offering Period. Eligible Employees shall participate
in only one Offering Period at a time, and a subscription agreement in effect
for a Plan participant for a particular Offering Period shall continue in effect
for subsequent Offering Periods if the participant remains an Eligible Employee
and has not withdrawn pursuant to Section 8.

4.      OPTIONS.

               (a) Grants. On the Enrollment Date for each Offering Period, each
Eligible Employee participating in such Offering Period shall be granted an
Option to purchase (i) on each Exercise Date for any six-month Purchase Period
in such Offering Period (at the applicable Purchase



                                       3


Price) up to that number of shares of Common Stock determined by dividing
$12,500 by the Fair Market Value of a share of Common Stock as of the opening of
business on the Enrollment Date, and (ii) on each Exercise Date for any
three-month Purchase Period in such Offering Period (at the applicable Purchase
Price) up to that number of shares of Common Stock determined by dividing $6,250
by the Fair Market Value of a share of Common Stock as of the opening of
business on the Enrollment Date (such number of shares being the "PERIODIC
EXERCISE LIMIT"). The Option shall expire immediately after the last Exercise
Date of the Offering Period.

               (b) Grant Limitations. Any provisions of the Plan to the contrary
notwithstanding, no participant shall be granted an Option under the Plan:

                      (i) if, immediately after the grant, such participant (or
               any other person whose stock would be attributed to such
               participant pursuant to Section 424(d) of the Code) would own
               stock and/or hold outstanding options to purchase stock
               possessing five percent (5%) or more of the total combined voting
               power or value of all classes of stock of the Company or of any
               Subsidiary; or

                      (ii) which permits such participant's rights to purchase
               stock under all employee stock purchase plans of the Company and
               its Subsidiaries to accrue at a rate that exceeds Twenty-Five
               Thousand Dollars ($25,000) worth of stock (determined at the Fair
               Market Value of the shares at the time such Option is granted) in
               any calendar year.

               (c) No Rights in Respect of Underlying Stock. The participant
will have no interest or voting right in shares covered by an Option until such
Option has been exercised.

5.      PAYROLL DEDUCTIONS.

               (a) Participant Designations. The subscription agreement
applicable to an Offering Period shall designate payroll deductions to be made
on each payday during the Offering Period as a whole number percentage not
exceeding ten percent (10%) of such Eligible Employee's Compensation for the pay
period preceding such payday, provided that the aggregate of such payroll
deductions during the Offering Period shall not exceed ten percent (10%) of the
participant's Compensation during said Offering Period.

               (b) Plan Account Balances. The Company shall make payroll
deductions as specified in each participant's subscription agreement on each
payday during the Offering Period and credit such payroll deductions to such
participant's Plan Account. A participant may not make any additional payments
into such Plan Account. No interest will accrue on any payroll deductions. All
payroll deductions received or held by the Company under the Plan may be used by
the Company for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.

               (c) Participant Changes. A participant may discontinue his or her
participation in the Plan as provided in Section 8, or may increase or decrease
(subject to such limits as the Administrator may impose) the rate of his or her
payroll deductions during any Purchase Period by filing with the Company a new
subscription agreement authorizing such a change in the payroll deduction rate.
The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company's receipt of the new
subscription agreement, unless the Company elects to process a given change in
participation more quickly.



                                       4


               (d) Decreases. Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 4(b) herein,
a participant's payroll deductions may be decreased to 0% at such time during
any Purchase Period that is scheduled to end during a calendar year (the
"CURRENT PURCHASE PERIOD") when the aggregate of all payroll deductions
previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period that is scheduled to end
in the following calendar year, unless terminated by the participant as provided
in Section 8.

               (e) Tax Obligations. At the time of each exercise of a
participant's Option, and at the time any Common Stock issued under the Plan to
a participant is disposed of, the participant must adequately provide for the
Company's federal, state, or other tax withholding obligations, if any, that
arise upon the exercise of the Option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefit attributable to sale or
early disposition of Common Stock by the participant.

               (f) Statements of Account. The Company shall maintain each
participant's Plan Account and shall give each Plan participant a statement of
account at least annually. Such statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any, for the period covered.

6.      EXERCISE OF OPTIONS.

               (a) Automatic Exercise on Exercise Dates. Unless a participant
withdraws as provided in Section 8, his or her Option for the purchase of shares
will be exercised automatically on each Exercise Date within the Offering Period
in which such participant is enrolled for the maximum number of shares of Common
Stock, including fractional shares, as can then be purchased at the applicable
Purchase Price with the payroll deductions accumulated in such participant's
Plan Account and not yet applied to the purchase of shares under the Plan,
subject to the Periodic Exercise Limit. During a participant's lifetime, a
participant's Options to purchase shares hereunder are exercisable only by the
participant.

               (b) Delivery of Shares. As promptly as practicable after each
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to each participant, as appropriate, of a certificate or book entry
transfer representing the shares purchased upon exercise of his or her Option,
provided that the Company may in its discretion hold fractional shares for the
accounts of the participants pending aggregation to whole shares.

               (c) Compliance with Law. Shares shall not be issued with respect
to an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance. As a condition to the exercise of an Option,
the Company may require the participant for whom an Option is exercised to
represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned applicable provisions of
law. Shares issued upon purchase under the Plan may



                                       5


be subject to such transfer restrictions and stop-transfer instructions as the
Administrator deems appropriate.

               (d) Excess Plan Account Balances. If, due to application of the
Periodic Exercise Limit, there remains in a participant's Plan Account
immediately following exercise of such participant's Option on an Exercise Date
any cash accumulated during the Purchase Period immediately preceding such
Exercise Date and not applied to the purchase of shares under the Plan, such
cash shall promptly be returned to the participant.

7.      AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD.

               If the Fair Market Value of the Common Stock as of the close of
business on any Exercise Date is lower than the Fair Market Value of the Common
Stock as of the opening of business on the Enrollment Date for the Offering
Period in which such Exercise Date occurs, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their Options on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of the
first day thereof.

8.      WITHDRAWAL; TERMINATION OF EMPLOYMENT.

               (a) Voluntary Withdrawal. A participant may withdraw from an
Offering Period by giving written notice to the Company's payroll office at
least five (5) business days prior to the next Exercise Date. Such withdrawal
shall be effective beginning five business days after receipt by the Company's
payroll office of notice thereof. On or promptly following the effective date of
any withdrawal, all (but not less than all) of the withdrawing participant's
payroll deductions credited to his or her Plan Account and not yet applied to
the purchase of shares under the Plan will be paid to such participant, and on
the effective date of such withdrawal such participant's Option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of any succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement with respect thereto.

               (b) Termination of Employment. Promptly after a participant's
ceasing to be an Eligible Employee for any reason the payroll deductions
credited to such participant's Plan Account and not yet applied to the purchase
of shares under the Plan will be returned to such participant or, in the case of
his or her death, to the person or persons entitled thereto under Section 10,
and such participant's Option will be automatically terminated, provided that,
if the Company does not learn of such death more than five (5) business days
prior to an Exercise Date, payroll deductions credited to such participant's
Plan account may be applied to the purchase of shares under the Plan on such
Exercise Date.

9.      TRANSFERABILITY.

               Neither payroll deductions credited to a participant's Plan
Account nor any rights with regard to the exercise of an Option or to receive
shares under the Plan nor any Option itself may be assigned, transferred,
pledged or otherwise disposed of by the participant in any way other than by
will, the laws of descent and distribution or as provided in Section 10 hereof.
Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Administrator may treat such act as an election
to withdraw from an Offering Period in accordance with Section 8.



                                       6


10.     DESIGNATION OF BENEFICIARY.

               A participant may file a written designation of a beneficiary who
is to receive any cash from the participant's Plan Account in the event of such
participant's death and any shares purchased for the participant upon exercise
of his or her Option but not yet issued. If a participant is married and the
designated beneficiary is not the spouse, spousal consent may be required for
such designation to be effective. A designation of beneficiary may be changed by
a participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

11.     STOCK.

               The maximum number of shares of the Company's Common Stock that
shall be made available for sale under the Plan shall be 1,000,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 12. If on a given Enrollment Date or Exercise Date the number of
shares with respect to which Options are to be granted or exercised exceeds the
number of shares then available under the Plan, the Administrator shall make a
pro rata allocation of the shares remaining available for purchase in as uniform
a manner as shall be practicable and as it shall determine to be equitable.
Shares of Common Stock subject to unexercised Options that expire, terminate or
are cancelled will again become available for the grant of further Options under
the Plan.

12.     ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
        SALE.

               (a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves as well as the Purchase Price,
Periodic Exercise Limit, and other characteristics of the Options, shall be
appropriately and proportionately adjusted for any increase or decrease or
exchange in the issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, exchange or any other increase or decrease in the number of shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option. The Administrator may, if it so
determines in the exercise of its sole discretion, provide for adjusting the
Reserves, as well as the Purchase Price, Periodic Exercise Limit, and other
characteristics of the Options, in the event the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock.

               (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all pending Offering Periods will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Administrator, and all Plan Account balances will be
paid to participants as appropriate consistent with applicable law.



                                       7


               (c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger or other
combination (the "TRANSACTION") of the Company with or into another entity, each
Option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor entity or a parent or subsidiary of such successor
entity, unless the Administrator determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Periods then in progress by setting a new Exercise Date (the "NEW
EXERCISE DATE"). If the Administrator shortens the Offering Periods then in
progress in lieu of assumption or substitution, the Administrator shall notify
each participant in writing, at least ten (10) days prior to the New Exercise
Date, that the Exercise Date for such participant's Option has been changed to
the New Exercise Date and that such participant's Option will be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 8
(provided that, in such case, the participant's withdrawal shall be effective if
notice thereof is delivered to the Company's payroll office at least two (2)
business days prior to the New Exercise Date). For purposes of this Section, an
Option granted under the Plan shall be deemed to be assumed if, following the
Transaction the Option confers the right to purchase at the Purchase Price
(provided that for such purposes the Fair Market Value of the Common Stock on
the New Exercise Date shall be the value per share of the consideration paid in
the Transaction), for each share of stock subject to the Option immediately
prior to the Transaction, the consideration (whether stock, cash or other
securities or property) received in the Transaction by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
Transaction was not solely common equity of the successor entity or its parent
(as defined in Section 424(e) of the Code), the Administrator may, with the
consent of the successor entity and the participant, provide for the
consideration to be received upon exercise of the Option to be solely common
equity of the successor entity or its parent equal in fair market value to the
per share consideration received by holders of Common Stock in the Transaction.

13.     ADMINISTRATION.

               The Plan shall be administered by the Committee, which shall have
the authority to construe, interpret and apply the terms of the Plan and any
agreements defining the rights and obligations of the Company and participants
under the Plan, to prescribe, amend, and rescind rules and regulations relating
to the Plan, to determine eligibility and to adjudicate all disputed claims
filed under the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The Administrator may, in its
discretion, delegate ministerial responsibilities under the Plan to the Company.
Every finding, decision and determination made by the Committee shall, to the
full extent permitted by law, be final and binding upon all parties. Any action
of the Committee shall be taken pursuant to a majority vote or by the unanimous
written consent of its members. The Committee shall consist of three or more
members of the Board, each of whom shall be disinterested within the meaning of
Rule 16b-3, provided, however, that the number of members of the Committee may
be reduced or increased from time to time by the Board to the number required or
allowed by Rule 16b-3. The Board may from time to time in its discretion
exercise any responsibilities or authority allocated to the Committee under the
Plan. No member of the Committee or any designee thereof will be liable for any
action or determination made in good faith with respect to the Plan or any
transaction arising under the Plan.

14.     AMENDMENT OR TERMINATION.

               (a) Administrator's Discretion. The Administrator may, at any
time and for any reason, terminate or amend the Plan. Except as provided in
Section 12, no such termination can affect Options previously granted, provided
that an Offering Period may be terminated by the



                                       8


Administrator on any Exercise Date if the Administrator determines that such
termination is in the best interests of the Company and its stockholders. Except
as provided herein, no amendment may make any change in any Option theretofore
granted that adversely affects the rights of any participant. To the extent
necessary to comply with and qualify under Rule 16b-3 or under Section 423 (or
any successor rule or provision or any other applicable law or regulation), the
Administrator shall obtain stockholder approval of amendments to the Plan in
such a manner and to such a degree as required.

               (b) Administrative Modifications. Without stockholder consent
(except as specifically required by applicable law or regulation) and without
regard to whether any participant rights may be considered to have been
"adversely affected," the Administrator shall be entitled to amend the Plan to
the extent necessary to comply with and qualify under Rule 16b-3 and Section
423, change the Purchase Periods and/or Offering Periods, limit the frequency
and/or number of changes in payroll deductions during Purchase Periods and/or
Offering Periods, establish the exchange ratio applicable to amounts withheld in
a currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Administrator determines in its sole discretion to be advisable and which
are consistent with the Plan.

15.     TERM OF PLAN.

               The Plan shall become effective upon the first Enrollment Date
after its approval by the stockholders of the Company and shall continue in
effect for a term of twenty (20) years unless sooner terminated pursuant to
Section 14.

16.     MISCELLANEOUS.

               (a) Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

               (b) Subsidiaries. The Administrator may from time to time in its
discretion permit persons who are employees of any Subsidiary whose customary
employment is for more than five months per calendar year and for more than 20
hours per week to participate in the Plan on the same terms as Eligible
Employees hereunder.

               (c) Stockholder Approval. The Plan shall be subject to approval
by the stockholders of the Company within twelve months before or after the date
the Board adopts the Plan. If such stockholder approval is not obtained, the
Plan and all rights to the Common Stock purchased under the Plan shall be null
and void and shall have no effect.

               (d) Additional Restrictions of Rule 16b-3. The terms and
conditions of Options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and
such Options shall contain, and the shares issued upon exercise thereof shall be
subject to, such additional conditions and restrictions as may be required by
Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.



                                       9


               (e) No Employment Rights. The Plan does not, directly or
indirectly, create any right for the benefit of an employee or class of
employees to purchase any shares under the Plan, or create in any employee or
class of employees any right with respect to continuation of employment by the
Company, and it shall not be deemed to interfere in any way with the Company's
right to terminate, or otherwise modify, an employee's employment at any time.

               (f) Applicable Law. The laws of the State of California shall
govern all matters relating to the Plan, except to the extent (if any)
superseded by the laws of the United States.

               (g) Headings. Headings used herein are for convenience of
reference only and do not affect the meaning or interpretation of the Plan.



                                       10


                                    EXHIBIT A

                         LA JOLLA PHARMACEUTICAL COMPANY
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                             SUBSCRIPTION AGREEMENT

_____ Original Application                          Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1.      I, ________________________, hereby elect to participate in the La Jolla
        Pharmaceutical Company 1995 Employee Stock Purchase Plan (the "Plan")
        and subscribe to purchase shares of the Company's Common Stock in
        accordance with this Subscription Agreement and the Plan.

2.      I hereby authorize payroll deductions from each paycheck in the amount
        of ____% (not to exceed 10%) of my Compensation (as defined in the Plan)
        on each payday during the Offering Period in accordance with the Plan.
        (Please note that no fractional percentages are permitted.)

3.      I understand that said payroll deductions shall be accumulated for the
        purchase of shares of Common Stock at the applicable Purchase Price
        determined in accordance with the Plan. I understand that if I do not
        withdraw from an Offering Period, any accumulated payroll deductions
        will be used to automatically exercise my Option on each Exercise Date
        within the Offering Period.

4.      I have received a copy of the complete Plan. I understand that my
        participation in the Plan is in all respects subject to the terms of the
        Plan, that capitalized terms used herein have the same meanings as
        ascribed thereto in the Plan, and that in case of any inconsistency
        between this Subscription Agreement and the Plan, the Plan shall govern.
        I understand that the grant of the Option by the Company under this
        Subscription Agreement is subject to stockholder approval of the Plan.

5.      Shares purchased for me under the Plan should be issued in the name(s)
        of (employee and/or spouse only):__________________________
        _______________________________________________________.

6.      I understand that if I dispose of any shares received by me pursuant to
        the Plan within two years after the Enrollment Date (the first day of
        the Offering Period during which I purchased such shares) or within one
        year after the Exercise Date (the date I purchased such shares), I will
        be treated for federal income tax purposes as having received ordinary
        income at the time of such disposition in an amount equal to the excess
        of the fair market value of the shares at the time such shares were
        delivered to me over the price which I paid for the shares, regardless
        of whether I disposed of the shares at a price less than their fair
        market value at the Exercise Date. The remainder of the gain or loss, if
        any, recognized on such disposition will be treated as capital gain or
        loss. I hereby agree to notify the Company in writing within 30 days
        after the date of any disposition of my shares, and I will make adequate
        provision for Federal, State or other tax withholding obligations, if
        any, which arise upon the disposition of the Common Stock. The Company
        may, but will not be obligated to, withhold from my Compensation or
        other amounts payable to me the amount necessary to meet any applicable
        withholding obligation including any withholding necessary to make
        available to the Company any tax deductions or benefits attributable to
        sale or early disposition of



        Common Stock by me. If I dispose of such shares at any time after the
        expiration of the one-year and two-year holding periods described above,
        I understand that I will be treated for federal income tax purposes as
        having received income only at the time of such disposition, and that
        such income will be taxed as ordinary income only to the extent of an
        amount equal to the lesser of (a) the excess of the fair market value of
        the shares at the time of such disposition over the purchase price which
        I paid for the shares, or (b) 15% of the fair market value of the shares
        on the first day of the Offering Period. The remainder of the gain or
        loss, if any, recognized on such disposition will be taxed as capital
        gain or loss. I understand that this tax summary is only a summary for
        general information purposes and is subject to change and I agree to
        consult with my own tax advisors for definitive advice regarding the tax
        consequences to me of participation in the Plan and sale of shares
        purchased thereunder.

7.      I agree to be bound by the terms of the Plan. The effectiveness of this
        Subscription Agreement is dependent upon my eligibility to participate
        in the Plan.

8.      In the event of my death, I hereby designate the following as my
        beneficiary(ies) to receive (in proportion to the percentages listed
        below) all payments and shares due me under the Plan (use additional
        sheets to add beneficiaries):

        NAME: (Please print)
                             ---------------------------------------------------
                                 (First)           (Middle)             (Last)

        ------------------------------      ------------------------------------
        Relationship

        Percentage:
                     ----------             ------------------------------------
                                            (Address)

        NAME: (Please print)
                             ---------------------------------------------------
                                 (First)           (Middle)             (Last)

        ------------------------------      ------------------------------------
        Relationship

        Percentage:
                     ----------             ------------------------------------
                                                   (Address)

Employee's Social
Security Number:
                                            ------------------------------------
Employee's Address:
                                            ------------------------------------

                                            ------------------------------------

                                            ------------------------------------

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:
       -------------------                  ------------------------------------
                                            Signature of Employee

                                            ------------------------------------
                                            Spouse's Signature (If beneficiary
                                            other than spouse)



                                       2

EX-10.45

                                                                   EXHIBIT 10.45



                                  ATTACHMENT A

        As a supplement to the letter agreement dated April 24, 2002 between La
Jolla Pharmaceutical Company ("LJP") and Kenneth R. Heilbrunn, M.D.
("HEILBRUNN") related to Heilbrunn's employment by LJP, Heilbrunn and LJP hereby
agree as follows:

        In connection with Heilbrunn's employment with LJP, LJP's management
will recommend to LJP's Board of Directors that LJP grant to Heilbrunn an option
to purchase up to 90,000 shares of common stock of LJP. Such option, if granted,
shall be the "OPTION" for purposes hereof.

        If Heilbrunn's employment is terminated by LJP without cause (as defined
below), or if a Change in Control of LJP (as defined below) occurs and
Heilbrunn's employment with LJP or its successor "terminates in connection with"
(as defined below) that Change in Control and in the absence of any event or
circumstance constituting Cause, then:

               (i)    Heilbrunn will be entitled to receive from LJP a severance
                      payment equal to his then-current base salary for a period
                      of six full calendar months from the date of termination
                      and an additional three full calendar months if and when
                      after the first six months he has not found suitable
                      employment, payable consistent with LJP's normal payroll
                      practices, provided that such payment will be contingent
                      upon execution and delivery by Heilbrunn and LJP of a
                      mutual release, in form satisfactory to LJP, of all claims
                      arising in connection with Heilbrunn's employment with LJP
                      and termination thereof, and

               (ii)   Heilbrunn will be entitled to receive for a period of six
                      full calendar months from the date of termination and an
                      additional three full calendar months if and when after
                      the first six months he has not found suitable employment,
                      medical and dental benefits coverage for Heilbrunn and/or
                      his dependents through the Company's available plans at
                      the time and LJP will be responsible to continue payment
                      of all applicable deductions for premium costs. After the
                      Company's obligation to pay the premiums for health and
                      dental coverage Heilbrunn and/or his dependents will be
                      eligible to continue plan participation under COBRA.

               (iii)  Notwithstanding anything to the contrary in the option
                      plan (the "PLAN") pursuant to which all of Heilbrunn's
                      existing options were granted, the Options shall
                      automatically vest and become fully exercisable as of the
                      date of termination of Executive's employment (the
                      "TERMINATION DATE"), notwithstanding any vesting or
                      performance conditions applicable thereto, and shall
                      remain exercisable for a period of one year following the
                      Termination Date or such longer period as is provided by
                      the Plan or grant pursuant to which the Options were
                      granted. However, notwithstanding the foregoing, in no
                      case will the Options be exercisable beyond the duration
                      of the original term thereof, and if the Options qualify
                      as an incentive stock option under the Internal Revenue
                      Code and applicable regulations thereunder, the exercise
                      period thereof shall not be extended in such a manner as
                      to cause the Options to cease to qualify as an incentive
                      stock option unless Executive elects to forego incentive
                      stock option treatment and extend the exercise period
                      thereof as provided herein.

        For purposes hereof, "CHANGE IN CONTROL" of LJP has the meaning set
        forth in the Plan in its form as the date of grant of the Options.

        For purposes hereof, "CAUSE" means Heilbrunn has (i) engaged in serious
        criminal activity or other wrongful conduct that has an adverse impact
        on LJP, (ii) disregarded instructions given to him under the authority
        of LJP's Board of Directors, (iii) performed services for any person or
        entity other than LJP and appropriate civic organizations, or (iv)
        otherwise materially breached his employment or fiduciary
        responsibilities to LJP.



                                       1


        For purposes hereof, Heilbrunn's employment with LJP or its successor
        will be deemed to "TERMINATE IN CONNECTION WITH" a Change in Control if,
        within 180 days after the consummation of the Change of Control, (i)
        Heilbrunn is removed from Heilbrunn's employment by, or resigns his
        employment upon the request of, a person exercising practical voting
        control over LJP or its successor following the Change in Control or a
        person acting upon authority or at the instruction of such person; or
        (ii) Heilbrunn's position is eliminated as a result of a reduction in
        force made to reduce over-capacity or unnecessary duplication of
        personnel and Heilbrunn is not offered a replacement position with LJP
        or its successor as a Vice President with compensation and functional
        duties substantially similar to the compensation and duties in effect
        immediately before the Change in Control; or (iii) Heilbrunn resigns his
        employment with the Company or its successor rather than comply with a
        relocation of his primary work site more than 50 miles from LJP's
        headquarters.

               In Witness Whereof, LJP and Heilbrunn have entered into this
        agreement as of May 8, 2002.



        La Jolla Pharmaceutical Company

        By: /s/ Steven B. Engle              /s/ Kenneth R. Heilbrunn, M.D.
            ---------------------------      -----------------------------------
            Steven B. Engle                  Kenneth R. Heilbrunn, M.D.
            Chairman & CEO                   Vice President of Clinical
                                             Development



                                       2

EX-99.1

                        LA JOLLA PHARMACEUTICAL COMPANY
                                  EXHIBIT 99.1


                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned, in his or her capacity as an officer of La Jolla
Pharmaceutical Company (the "Registrant"), hereby certifies, for purposes of 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

   o the quarterly report of the Registrant on Form 10-Q for the quarter ended
     June 30, 2002 ("the Report"), which accompanies this certification, fully
     complies with the requirements of Section 13(a) or 15 (d) of the Securities
     Exchange Act of 1934; and

   o the information contained in the Report fairly presents, in all material
     respects, the financial condition of the Registrant at the end of such
     quarter and the results of operations of the Registrant of such quarter.

Dated:  August 13, 2002

                                            /s/ Steven B. Engle
                                            -----------------------------------
                                            STEVEN B. ENGLE
                                            Chairman and Chief Executive Officer



                                            /s/ Gail A. Sloan
                                            -----------------------------------
                                            GAIL A. SLOAN
                                            Secretary and Controller