Stock Option Agreement
Under the XOMA Corporation
1981 Stock Option Plan
(A) Optionee: (E) Payroll Number:
(B) Grant Date: (F) Expiration Date:
(C) Shares: (G) Exercise Price:
(D) Share Installments: (H) Option Type:
XOMA Corporation (the "Company") has granted you an option to purchase the
number of shares of Common Stock shown in item (C) above (the "Optioned Shares")
at the Exercise Price per share shown in item (G) above. This option is subject
to the terms of the Company's 1981 Stock Option Plan, as amended and restated
through October 30, 1996 (the "Plan") and to the terms and conditions set forth
in this Stock Option Agreement under the XOMA Corporation 1981 Stock Option Plan
(the "Agreement").
The details of your option are as follows:
1. Term; Transfer. The term of this option commences on the Grant Date
shown in item (B) above and, except as provided in Section 3 and Subsection 5(a)
hereof, expires at the close of business on the Expiration Date shown in item
(F) above, which is 10 years from the Grant Date.
If this option is a non-statutory stock option, it may be transferred or
assigned to your spouse or descendent (any such spouse or descendent, your
"Immediate Family Member") or a corporation, partnership, limited liability
company or trust so long as all of the shareholders, partners, members or
beneficiaries thereof, as the case may be, are either you or your Immediate
Family Member, provided that (i) there may be no consideration for any such
transfer and (ii) subsequent transfers of the transferred option will be
prohibited other than by will or the laws of descent and distribution. Following
transfer, the option will continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of this Agreement any references to "you" will refer to the transferee.
The events of termination of employment will continue to be applied with respect
to you,
-2-
following which the option will be exercisable by the transferee only to the
extent, and for the periods specified, in this Agreement.
If this option is an incentive stock option, the option shall be
exercisable during your lifetime only by you and shall not be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
2. Exercise Schedule. Provided that you remain an employee of or consultant
to the Company (as determined in accordance with Subsection 3(e) hereof), the
option granted herein will become exercisable in accordance with the following
schedule:
(a) This option will become exercisable with respect to 20% of the Optioned
Shares after the expiration of one year from the Grant Date;
(b) This option will become exercisable with respect to an additional 20%
of the Optioned Shares after the expiration of two years from the Grant Date;
(c) This option will become exercisable with respect to an additional 20%
of the Optioned Shares after the expiration of three years from the Grant Date;
(d) This option will become exercisable with respect to an additional 20%
of the Optioned Shares after the expiration of four years from the Grant Date;
and,
(e) This option will become exercisable with respect to the remaining 20%
of the Optioned Shares after the expiration of five years from the Grant Date.
Exercisable installments may be exercised in whole or in part in increments
of 25 or more shares and, to the extent not exercised, will accumulate and be
exercisable at any time on or before the Expiration Date or sooner termination
of the option term.
3. Accelerated Termination of Option Term. The option term specified in
Section 1 will terminate (and this option will cease to be exercisable) prior to
the Expiration Date should one of the following provisions become applicable:
(a) Except as otherwise provided in Subsections (b), (c) and (d) below, if
you cease to be an employee of the Company at
-3-
any time during the option term, then the period for exercising this option will
be limited to the three-month period commencing with the date of such cessation
of employee status; provided that, notwithstanding the foregoing, if you cease
to be an employee of the Company and immediately thereafter become a consultant
to the Company at any time during the option term, then the period for
exercising this option will not be limited as aforesaid but will be limited to
the three-month period commencing with the date of cessation of consultant
status, if during the option term; and provided further, that in no event will
this option be exercisable at any time after the Expiration Date. During any
such limited period of exercisability, this option may not be exercised for more
than the number of Optioned Shares (if any) for which it is exercisable at the
date of your cessation of employee or consultant status, as the case may be.
Upon the expiration of any such limited period of exercisability or (if earlier)
upon the Expiration Date, this option will terminate and cease to be
outstanding.
(b) If you die while this option is outstanding, then the personal
representative of your estate or the person or persons to whom the option is
transferred pursuant to your will, in accordance with the laws of descent and
distribution, or pursuant to Section 1 above, will have the right to exercise
this option, but only with respect to the number of Optioned Shares (if any) for
which it is exercisable at the date of your death. Such right will lapse, and
this option will cease to be exercisable, upon the earlier of (i) the expiration
of the one-year period measured from the date of your death or (ii) the
specified Expiration Date of the option term.
(c) If you become permanently disabled and cease by reason thereof to be
either an employee of or a consultant to the Company at any time during the
option term, then you will have a period of twelve months (commencing with the
date of such cessation of employee or consultant status, as the case may be)
during which to exercise this option; provided, however, that in no event shall
this option be exercisable at any time after the Expiration Date. During such
limited period of exercisability, this option may not be exercised for more than
the number of Optioned Shares (if any) for which this option is exercisable at
the date of your cessation of employee or consultant status, as the case may be.
Upon the expiration of such limited period of exercisability or (if earlier)
upon the Expiration Date, this option will terminate and cease to be
outstanding. You will be deemed to be permanently disabled if you are, by reason
of any medically determinable physical or mental impairment expected to result
in death or to be of continuous
-4-
duration of not less than twelve consecutive months or more, unable to perform
your usual duties for the Company or its subsidiaries.
(d) Should (i) your status as either an employee or a consultant be
terminated for cause (including, but not limited to, any act of dishonesty,
willful misconduct, fraud or embezzlement or any unauthorized disclosure or use
of confidential information or trade secrets), or (ii) you make or attempt to
make any unauthorized use or disclosure of confidential information or trade
secrets of the Company or its subsidiaries, then in any such event this option
will terminate and cease to be exercisable immediately upon the date of such
termination of employee or consultant status, as the case may be, or such
unauthorized use or disclosure of confidential or secret information or attempt
thereat.
(e) For purposes of this Agreement, you will be deemed to be an employee of
the Company for so long as you remain in the employ of the Company or one or
more of its subsidiaries, and you will be deemed to be a consultant to the
Company for so long as you are actively rendering consulting services on a
periodic basis to the Company or one or more of its subsidiaries. A corporation
will be deemed to be a subsidiary of the Company if it is a member of an
unbroken chain of corporations beginning with the Company, provided that each
such corporation in the chain (other than the last corporation) owns, at the
time of determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
4. Adjustment in Option Shares.
(a) If any change is made to the Common Stock issuable under the Plan,
whether by reason of any stock dividend, stock split, combination of shares,
recapitalization or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the total number of Optioned Shares subject to this option and (ii)
the Exercise Price payable per share, in order to reflect such change and
thereby preclude the dilution or enlargement of benefits under this Agreement.
The adjustments determined by the plan administrator (the "Plan Administrator")
will be final, binding and conclusive.
(b) If the Company is the surviving entity in any merger or other business
combination, then this option, if outstanding under the Plan immediately after
such merger or other business
-5-
combination, will be appropriately adjusted to apply and pertain to the number
and class of securities which the holder of the same number of shares of Common
Stock as are subject to this option immediately prior to such merger or other
business combination would have been entitled to receive in the consummation of
such merger or other business combination, and an appropriate adjustment will be
made to the Exercise Price payable per share, provided the aggregate Exercise
Price payable hereunder will remain the same.
5. Corporate Transaction.
(a) In the event of one or more of the following transactions ("Corporate
Transaction"):
(i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company, or
(iii) any other corporate reorganization or business combination in
which fifty percent (50%) or more of the Company's outstanding voting stock
is transferred to different holders in a single transaction or a series of
related transactions,
then the exercisability of this option will automatically be accelerated so that
such option may be exercised simultaneously with consummation of such Corporate
Transaction for any or all of the Optioned Shares. No such acceleration of this
option will occur, however, if and to the extent: (x) the terms of the agreement
provide as a prerequisite to the consummation of such Corporate Transaction that
outstanding options under the Plan (including this option) are to be assumed by
the successor corporation or parent thereof or are to be replaced with the
comparable options to purchase shares of capital stock of the successor
corporation or parent thereof, such comparability to be determined by the Plan
Administrator, or (y) the acceleration of this option would, when added to the
present value of certain other payments in the nature of compensation which
become due and payable to you in connection with the Corporate Transaction,
result in the payment to you of excess parachute payments under Section 280G(b)
of the Internal Revenue Code. The existence of such excess parachute payments
will be determined by the Plan Administrator in the exercise of its reason-
-6-
able business judgment and on the basis of tax counsel provided to the Company.
Immediately following consummation of the Corporate Transaction, this option
will, to the extent not previously exercised or assumed by the successor
corporation or its parent company, terminate and cease to be exercisable.
(b) The exercisability of this option as an incentive stock option under
the Federal tax laws (if designated as such above) will be subject to the
applicable dollar limitation of Section 16 hereof.
(c) The Plan Administrator will use its best efforts to provide you with
written notice of a Corporate Transaction at least ten business days prior to
the effective date.
(d) This Agreement will not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
6. Privilege of Stock Ownership. The holder of this option will not have
any rights of a shareholder with respect to the Optioned Shares until such
individual has exercised the option, paid the Exercise Price and been issued a
stock certificate for the purchased shares.
7. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part of the
Optioned Shares for which this option is at the time exercisable, you (or in the
case of exercise after your death, your executor, administrator, heir, legatee
or transferee as the case may be) must take the following actions:
(i) Provide the Secretary of the Company with written notice of such
exercise, specifying the number of Optioned Shares with respect to which
the option is being exercised.
(ii) Pay the Exercise Price for the purchased Optioned Shares in one
or more of the following alternative forms: (A) full payment in cash or by
check payable to the Company's order; (B) full payment in shares of Common
Stock of the Company valued at fair market value on the exercise date (as
such terms are defined below); (C) full payment in combination of shares of
Common Stock of the Company [held for at least six months1 and] valued at
fair
-7-
market value on the exercise date and cash or check payable to the
Company's order; (D) payment effected through a broker-dealer sale and
remittance procedure pursuant to which you (I) will provide irrevocable
written instructions to the designated broker-dealer to effect the
immediate sale of the purchased shares and remit to the Company, out of the
sale proceeds, an amount equal to the aggregate Exercise Price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company by reason of such
purchase and (II) will provide written directives to the Company to deliver
the certificates for the purchased shares directly to such broker-dealer;
or, to the extent the Plan Administrator specifically authorizes such
method of payment at the time of exercise, (E) payment by a full-recourse
promissory note. Any such promissory note authorized by the Plan
Administrator will be substantially in the form approved by the Plan
Administrator, will bear interest at the minimum per annum rate necessary
to avoid the imputation of interest income to the Company and compensation
income to you under the Federal tax laws and will become due in full (in
one or more consecutive annual installments measured from the execution
date of the note) not later than the Expiration Date of this option.
Payment of the note will be secured by the pledge of the purchased shares,
and the pledged shares will be released only as the note is paid.
(iii) Furnish to the Company appropriate documentation that the person
or persons exercising the option, if other than you, have the right to
exercise this option.
(b) For purposes of Subsection 7(a) hereof, the fair market value per share
of Common Stock on any relevant date will be determined in accordance with
Subsections (i) through (iii) below, and the exercise date will be the date on
which you exercise this option in compliance with the provisions of Subsection
7(a).
(i) If the Common Stock is not listed or admitted to trading on any
stock exchange on the date in question, but is traded in the
over-the-counter market, the fair market value will be the closing selling
price per share of such stock on such date, as such price is reported by
the National Association of Securities Dealers through its Nasdaq National
Market. If there is no reported closing selling price of the stock on the
date in question then the closing selling price on the last preceding date
for
-8-
which such quotation exists will be determinative of fair market value.
(ii) If the Common Stock is listed or admitted to trading on any stock
exchange on the date in question, the fair market value will be the closing
selling price per share of such stock on such date on the stock exchange
determined by the Plan Administrator to be the primary market for such
stock, as such price is officially quoted on such exchange. If there is no
reported closing selling price of such stock on such exchange on the date
in question, the fair market value will be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
(iii) If the Common Stock is neither listed nor admitted to trading on
any stock exchange nor traded in the over-the-counter market on the date in
question or if the Plan Administrator determines that the quotations under
Subsections (i) or (ii) above do not accurately reflect the fair market
value of such stock, the fair market value will be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator may deem appropriate, including one or more independent
professional appraisals.
(c) In no event may this option be exercised for any fractional share.
8. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of Optioned Shares upon
such exercise will be subject to compliance by the Company and by you with all
applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Company's Common Stock
may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, you will execute and
deliver to the Company such representations in writing as may be requested by
the Company in order for it to comply with the applicable requirements of
Federal and State securities laws.
9. Restrictive Legends. If and to the extent any Optioned Shares acquired
under this option are not registered under the Securities Act of 1933, the stock
certificates for such
-9-
Optioned Shares will be endorsed with restrictive legends, including (without
limitation) the following:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be sold or offered for sale in the absence of
(a) an effective registration statement for the shares under such Act,
(b) a 'no action' letter of the Securities and Exchange Commission
with respect to such sale or offer, or (c) an opinion of counsel to
the Company that registration under such Act is not required with
respect to such sale or offer."
10. Successors and Assigns. Except to the extent otherwise provided in
Section 1 and Subsection 5(a), the provisions of this Agreement will inure to
the benefit of, and be binding upon your successors, administrators, heirs,
legal representatives and assigns and the successors and assigns of the Company.
11. Liability of the Company.
(a) If the Optioned Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option will be void with respect to
such excess shares unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of the Plan.
(b) The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option will relieve the
Company of any liability in respect of the non-issuance or sale of such stock as
to which such approval will not have been obtained.
12. No Employment or Consulting Contract. Nothing in this Agreement or in
the Plan will confer upon you any right to continue in the employ or service of
the Company for any period of time or interfere with or otherwise restrict in
any way the rights of the Company (or any subsidiary of the Company employing or
retaining you) or you, which rights are hereby expressly reserved by each, to
terminate your employee or consultant
-10-
status as the case may be, at any time for any reason whatsoever, with or
without cause.
13. Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement will be in writing and addressed to the
Company in care of its Secretary at its corporate offices. Any notice required
to be given or delivered to you will be in writing and addressed to you at the
address indicated below your signature line herein. All notices will be deemed
to be given or delivered upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
14. Construction. This Agreement and the option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the express terms and provisions of the Plan. Any dispute regarding the
interpretation of this Agreement will be submitted to the Plan Administrator for
resolution. The decision of the Plan Administrator will be final, binding and
conclusive. Questions regarding this option or the Plan should be referred to
the Paralegal Assistant in the Legal Department.
15. Governing Law. The interpretation, performance, and enforcement of this
Agreement will be governed by the laws of the State of California.
16. Additional Terms Applicable to an Incentive Stock Option. In the event
this option is an incentive stock option, the following terms and conditions
will apply to the grant:
(a) This option will cease to qualify for favorable tax treatment as an
incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for Optioned Shares: (i) more than three months after the
date you cease to be an employee for any reason other than death or permanent
disability (as defined in Section 3) or (ii) more than one (1) year after the
date you cease to be an employee by reason of permanent disability.
(b) Except in the event of a Corporate Transaction under Section 5, this
option will not become exercisable in the calendar year in which granted if (and
to the extent) the aggregate fair market value (determined at the Grant Date) of
the Company's Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate fair market
value (determined as of the
-11-
respective date or dates of grant) of the Company's Common Stock for which this
option or one or more other post-1986 incentive stock options granted to you
prior to the Grant Date (whether under the Plan or any other option plan of the
Company or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Section 16(b) would not be
contravened.
(c) Should the exercisability of this option be accelerated upon a
Corporate Transaction in accordance with Section 5, then this option will
qualify for favorable tax treatment as an incentive stock option under the
Federal tax laws only to the extent the aggregate fair market value (determined
at the Grant Date) of the Company's Common Stock for which this option first
becomes exercisable in the calendar year in which the Corporate Transaction
occurs does not, when added to the aggregate fair market value (determined as of
the respective date or dates of grant) of the Company's Common Stock for which
this option or one or more other post-1986 incentive stock options granted to
you prior to Grant Date (whether under the Plan or any other option plan of the
Company or any parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate.
(d) To the extent that this option fails to qualify as an incentive stock
option under the Federal tax laws, you will recognize compensation income in
connection with the acquisition of one or more Optioned Shares hereunder, and
you must make appropriate arrangements for the satisfaction of all Federal,
State or local income tax withholding requirements and Federal social security
employee tax requirements applicable to such compensation income.
17. Additional Terms Applicable to a Non-Statutory Stock Option. In the
event this option is a non-statutory stock option, you hereby agree to make
appropriate arrangements with the Company or subsidiary thereof by which you are
employed or retained for the satisfaction of all Federal, State or local income
tax withholding requirements and Federal social security employee tax
requirements applicable to the exercise of this option.
-12-
XOMA CORPORATION
By:
Xxxx X. Xxxxxxxx
Chairman of the Board,
President & Chief Executive
Officer
Dated:
I hereby agree to be bound by the terms and conditions of this Agreement
and the Plan.
By:
Dated:
If the optionee resides in California or another community property
jurisdiction, I, as the optionee's spouse, also agree to be bound by the terms
and conditions of this Agreement and the Plan.
By:
Dated:
