CONNETICS CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT
EXHIBIT
10.1
CONNETICS
CORPORATION
Connetics
Corporation, a Delaware corporation (“Connetics” or the “Corporation”), hereby
grants to Xxxxx Xxxxxx (the “Optionee”) an option to purchase 12,000 shares of
Common Stock (the “Option”) subject to the following terms and conditions of
this Non-Qualified Stock Option Agreement (the “Option Agreement”):
I.
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NOTICE
OF STOCK OPTION GRANT
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XXXXX
XXXXXX
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0000
Xxxxxx Xxxxx
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Xxxx
Xxxx, XX 00000
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Date
of Grant
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March
24, 2006
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Vesting
Commencement Date
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March
24, 2006
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Exercise
Price per Share
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$
17.03
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Total
Number of Shares of Common
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Stock
Subject to the Option (the “Shares”)
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12,000
Shares
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Total
Exercise Price
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$
204,360.00
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Type
of Option:
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Nonstatutory
Stock Option
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Term/Expiration
Date:
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March
24, 2016
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Vesting
Schedule:
This
Option may be exercised, in whole or in part, in accordance with the following
schedule:
1/8
of the Shares subject to the Option shall vest six months after the Vesting
Commencement Date, and 1/48 of the Shares subject to the Option shall vest
each
month thereafter, subject to the Optionee continuing to be a Service Provider
on
such dates.
Termination
Period:
This
Option may be exercised for (3)
three months
after
the Optionee ceases to be a Service Provider for any reason other than death
or
Disability. In the event the Optionee ceases to be a Service Provider as the
result of death or Disability, this Option may be exercised for (12)
twelve months after
the
Optionee ceases to be a Service Provider. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above.
II. |
AGREEMENT
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1. Grant
of Option.
The
Corporation hereby grants to the Optionee named in the Notice of Stock Option
Grant (the “Notice”) attached as Part I of this Option Agreement an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice, at the
exercise price per share set forth in the Notice (the “Exercise Price”), subject
to the terms and conditions of the Notice and this Option
Agreement.
This
Option is subject to and conditioned upon Optionee’s acceptance of the Option by
returning to the Corporation an executed original of this Option Agreement.
This
Option shall be null and void and of no force and effect, unless the Optionee
executes and returns to the Corporation this Option Agreement.
This
Option is granted as an inducement material to the Optionee’s entering into
service with the Corporation as an Employee. The Grantee has not previously
been
a Service Provider of the Company or any Parent or Subsidiary of the
Company.
This
Option is not intended to be an incentive stock option under Section 422 of
the
Code.
2. Exercise
of Option.
(a) Right
to Exercise.
This
Option is exercisable during its term in accordance with the Vesting Schedule
set out in the Notice and the applicable provisions of this Option
Agreement.
(b) Method
of Exercise.
This
Option is exercisable by delivery of an exercise notice or by such other
procedure as specified from time to time by the Board, which shall state the
election to exercise the Option and the number of Shares in respect of which
the
Option is being exercised (the “Exercised Shares”). The exercise notice shall be
completed by the Optionee and delivered to Connetics
in person, by certified mail, or by such other method (including electronic
transmission) as determined from time to time by the Board. The exercise notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt
by
Connetics of such fully executed exercise notice accompanied by such aggregate
Exercise Price.
No
Shares
shall be issued pursuant to the exercise of this Option unless such issuance
and
exercise complies with Applicable Laws. Assuming such compliance, for income
tax
purposes the Exercised Shares shall be considered transferred to the Optionee
on
the date the Option is exercised with respect to such Exercised
Shares.
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3. Method
of Payment.
Payment
of the aggregate Exercise Price shall be by any of the following, or a
combination thereof, at the election of the Optionee:
(c) cash;
or
(d) check;
or
(e) consideration
received by Connetics under a cashless exercise program implemented by Connetics
in connection with this Option Agreement; or
(f) surrender
of other Shares which (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the
date
of surrender, and (ii) have a Fair Market Value on the date of surrender equal
to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability
of Option.
This
Option may not be transferred in any manner otherwise than by will or by the
laws of descent or distribution and may be exercised during the lifetime of
Optionee only by the Optionee. The terms of this Option Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of
the
Optionee.
5. No
Obligation to Exercise Option.
The
grant and acceptance of this Option imposes no obligation on the Optionee to
exercise it.
6. No
Obligation to Continue Business Relationship.
The
Corporation and any its’ subsidiaries are not by this Option obligated to
continue to maintain a business relationship with the Optionee.
7. Term
of Option.
This
Option may be exercised only within the term set out in the Notice, and may
be
exercised during such term only in accordance with the terms of this Option
Agreement.
8. Tax
Consequences.
Some of
the federal tax consequences relating to this Option, as of the date of this
Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(g) Exercising
the Option.
The
Optionee may incur regular federal income tax liability upon exercise of the
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the
Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
Connetics will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise,
and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
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(h) Disposition
of Shares.
The
Optionee holds the Shares acquired upon exercise of the Option for at least
one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
9. No
Rights as Stockholder until Exercise.
The
Optionee shall have no rights as a stockholder with respect to the Shares until
a stock certificate has been issued to the Optionee and is fully paid for in
accordance with paragraph 3. With respect to certain changes in the
capitalization of the Corporation, no adjustment shall be made for dividends
or
similar rights for which the record date is prior to the date such stock
certificate is issued.
10. Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale.
(a) Changes
in Capitalization.
Subject
to any required action by the stockholders of Connetics, the number of shares
of
Common Stock covered by the Option as well as the Exercise Price shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by Connetics; provided,
however,
that
conversion of any convertible securities of Connetics shall not be deemed to
have been “effected without receipt of consideration.” Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided in this Option Agreement, no
issuance by Connetics 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.
(b) Dissolution
or Liquidation.
In the
event of the proposed dissolution or liquidation of Connetics, the Board shall
notify the Optionee prior to the effective date of such proposed transaction.
The Board in its discretion may permit the Optionee to exercise the Option
prior
to such transaction as to all of the Shares, including Shares as to which the
Option would not otherwise be vested and exercisable. To the extent it has
not
been previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(i) Merger
or Asset Sale.
In the
event of a merger of Connetics with or into another corporation, or the sale
of
substantially all of the assets of Connetics, the Option shall be assumed or
an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the Shares,
including Shares as to which it would not otherwise be vested and exercisable.
If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the Optionee in writing or electronically that the Option shall be fully vested
and exercisable for a period of time as determined by the Board, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger
or
sale of assets, the option confers the right to purchase or receive, for each
Share subject to the Option immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
share held on the effective date of the transaction (and if 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 merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share subject to the Option,
to be solely common stock of the successor corporation or its Parent equal
in
fair market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
-4-
11. Entire
Agreement; Governing Law.
This
Option Agreement constitutes the entire agreement of the parties with respect
to
the subject matter hereof and supersedes in its entirety all prior undertakings
and agreements of Connetics and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except
by
means of a writing signed by Connetics and Optionee. This agreement is governed
by the internal substantive laws, but not the choice of law rules, of
California.
12. NO
GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
VESTING SCHEDULE OF THIS AGREEMENT IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF CONNETICS (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING
GRANTED AN OPTION OR PURCHASING SHARES UNDER THIS AGREEMENT). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
UNDER
THIS AGREEMENT AND THE VESTING SCHEDULE SET FORTH IN THIS AGREEMENT DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR CONNETICS’ RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
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III. |
DEFINITIONS
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A. “Applicable
Laws”
means
the requirements relating to the administration of stock options under U. S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where the
Optionee may be resident.
B. “Board”
means
the Board of Directors of Connetics.
C. “Code”
means
the Internal Revenue Code of 1986, as amended.
D. “Common
Stock”
means
the common stock of Connetics.
E. “Corporation”
means
Connetics Corporation, a Delaware corporation.
F. “Consultant”
means
any person, including an advisor, engaged by Connetics or a Parent or Subsidiary
to render services to such entity.
G. “Director”
means
a
member of the Board.
H. “Disability”
means
total and permanent disability as defined in Section 22(e)(3) of the
Code.
I. “Employee”
means
any person, including Officers and Directors, employed by Connetics or any
Parent or Subsidiary of Connetics. A Service Provider shall not cease to be
an
Employee in the case of (i) any leave of absence approved by Connetics or
(ii) transfers between locations of Connetics or between Connetics, its
Parent, any Subsidiary, or any successor. Neither service as a Director nor
payment of a director's fee by Connetics shall be sufficient to constitute
“employment” by Connetics.
J. “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
K. “Fair
Market Value”
means,
as of any date, the value of Common Stock determined as follows:
(i) If
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The
Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock (or the closing bid, if no sales
were
reported) as quoted on such exchange or system on the date of determination,
as
reported in The
Wall Street Journal
or such
other source as the Board deems reliable;
(ii) If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the date of determination, as reported in The
Wall Street Journal
or such
other source as the Board deems reliable; or
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(iii) In
the absence of an established market for the Common Stock, the Fair Market
Value
shall be determined in good faith by the Board.
L. “Officer”
means
a
person who is an officer of Connetics within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated under the Exchange
Act.
M. “Parent”
means
a
“parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.
N. “Service
Provider”
means
an Employee, Director or Consultant.
O. “Subsidiary”
means
a
“subsidiary corporation”, whether now or hereafter existing, as defined in
Section 424(f) of the Code.
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By
your
signature and the signature of Connetics’ representative below, you and
Connetics agree that this Option is granted under and governed by the terms
and
conditions of the this Option Agreement. Optionee has reviewed this Option
Agreement in its’ entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of this Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board
upon
any questions relating to this Option Agreement. Optionee further agrees to
notify Connetics upon any change in the residence address indicated
below.
OPTIONEE:
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CONNETICS
CORPORATION
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/s/
Xxxxx Xxxxxx
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/s/
Xxxxxx X. Xxxxxxx
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Signature
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By:
Xxxxxx X. Xxxxxxx
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Xxxxx
Xxxxxx
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Chairman
of the Board & CEO
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Print
Name
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Title
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0000
Xxxxxx Xxxxx
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Xxxxxxxxx
Xxxxxxx
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Xxxx
Xxxx, XX 00000
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