EXHIBIT 10.4
CELL PATHWAYS, INC.
STOCK OPTION AGREEMENT
Stock Option Agreement ("Agreement") made as of this ___ day of __________,
by and between Cell Pathways, Inc., a Delaware corporation ("Company"), and
____________, a resident of the State of ____________ ("Grantee").
The Parties Hereto Do Hereby Agree As Follows:
1. Grant of Option. The Company considers it desirable and in its best
interest that Grantee (as a consultant to the Company) be given an inducement to
acquire a proprietary interest in the Company and an added incentive to advance
the interests of the Company by being granted an option to purchase share of the
Company's Common Stock, $0.01 par value ("Common Stock"), in accordance with the
Company's 1993 Stock Option Plan, as amended (the "Plan"). In consideration of
Grantee's agreement to perform consulting services for the Company pursuant to a
Consulting Agreement dated as of _______, the Company therefore hereby grants to
Grantee the right, privilege and option ("Option") to purchase an aggregate of
shares of Common Stock (the "Optioned Shares") at the price ("Exercise Price")
of $ ______ per share thereof, in the manner and subject to the conditions
hereinafter provided. This Option shall be treated as a non-qualified stock
option under the Internal Revenue Code of 1986, as amended (the "Code").
2. Option Exercise Period. This Option may be exercised at any time in
whole or in part, subject to the Company's right to repurchase any shares which
have not vested as of the time of the Grantee's termination of service with the
Company and its subsidiaries. The terms of the Company's repurchase rights are
set forth in greater detail in the form of Early Exercise Stock Purchase
Agreement attached as Exhibit B to this form of Stock Option Agreement.
3. Option Vesting Period. The Optioned Shares shall vest based upon the
following schedule:
a. First Anniversary: On the first anniversary of the date of this
Agreement, __________ of the Optioned Shares will vest, provided that
Grantee provides services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
b. Second Anniversary: On the second anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
c. Third Anniversary: On the third anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides
1.
services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
d. Fourth Anniversary: On the fourth anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
Notwithstanding the foregoing, all Optioned Shares shall vest at such time
as there shall have commenced the first regular sales of Company pharmaceutical
products for consumer use in the United States in commercially significant
quantities, whether such sales are effected directly by the Company or
indirectly through a licensee or other intermediary, provided the Grantee
continues to provide services to the Company or a subsidiary of the Company at
such time.
If the Company or its subsidiaries shall terminate Grantee's employment for
any reason (other than the failure of Grantee substantially to perform his
duties pursuant thereto) with the effect that Grantee shall cease to be in the
employ of the Company or its subsidiaries prior to the time that all Optioned
Shares shall have vested, then such number of Optioned Shares shall vest on the
date of termination as would have vested on the next ensuing anniversary of this
Agreement which would have occurred but for such termination of employment.
4. Method of Exercise. As to those Optioned Shares that have vested, the
Option may be exercised by the Grantee executing, dating and delivering to the
Secretary of the Company at the Company's principal place of business a written
Option Exercise Notice in the form of Exhibit A attached hereto, accompanied by
a check made payable to the Company in the amount of the aggregate Exercise
Price for the number of shares for which the Option is then being exercised. If
the Company is required to withhold on account of any present or future tax
imposed as a result of such exercise, the notice of exercise shall be
accompanied by a check made payable to the Company in the amount of such
withholding.
As to those Optioned Shares which have not yet vested, the Option may, but
only during the period of Grantee's employment with the Company or its
subsidiaries, be exercised by the method described in this Section 4 hereof;
provided however, that:
a. a partial exercise of this Option shall be deemed to cover first
any vested Optioned Shares and thereafter the earliest vesting installment
of unvested Optioned Shares;
b. any shares so purchased from installments which have not vested as
of the date of exercise shall be subject to the purchase option in favor of
the Company as described in the Early Exercise Stock Purchase Agreement
(Exhibit B) attached hereto;
c. Grantee agrees to enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto.
2.
5. Termination of Option. Except as otherwise stated in this Agreement or
as the parties may otherwise agree, the Option (to the extent not theretofore
exercised) shall terminate and expire at 5:00 p.m., Chicago time, on the day
immediately prior to the 10th anniversary of the date of this Agreement.
6. Transfer of Option. Grantee may not transfer this Option except by will
or the laws of descent and distribution. This Option shall not be otherwise
sold, assigned, pledged, hypothecated or otherwise transferred or disposed of in
any way, whether by operation of law or otherwise, and during the Grantee's
lifetime shall be exercisable only by the Grantee or his guardian or legal
representative.
7. Capitalization Adjustments. Subject to the provisions of the Plan, if
the outstanding shares of stock or other securities of the class then subject to
the Option are increased or decreased, or are changed into or exchanged for a
different number or kind of Company shares or other Company securities, in any
such case as a result of one or more recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, then appropriate adjustments shall be
made in the number and/or kind of Company shares or other Company securities for
which the unexercised portion of this Option may thereafter be exercised, all
without any change in the aggregate Exercise Price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the Exercise Price
per share of other unit. No fractional share of Company stock shall be issued
under the Option in connection with any such adjustment. Such adjustments shall
be made by or under authority of the Company's Board of Directors or duly
authorized Committee thereof, whose determinations as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
8. Certain Transactions. If at any time while this Option remains
outstanding:
a. any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) other than the Company, FGN, Inc., any affiliate of FGN,
Inc., any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any person acquiring securities from the
Company solely pursuant to written agreement with the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
in the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or
b. during any period of two consecutive years commencing the day
after the first election of directors following termination of the
stockholder voting provisions of the Company's Stockholders' Agreement
dated as of December 10, 1992, as amended, individuals who at the beginning
of such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (a) (c) or (d) of this
Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in
3.
office who either were directors at the beginning off the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof, or
c. the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than 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 the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidating, or
d. the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets,
(each of (a), (b), (c) and (d) above, an "Acceleration Event"), then the Option
shall become vested and may be exercised as to all Optioned Shares for which it
has not previously been exercised and as to all Optioned Shares for which the
Option has been exercised but which have not yet vested such Optioned Shares
shall vest.
Upon the occurrence of an Acceleration Event the Company's Stock Option
Committee shall provide for cancellation of the unexercised portion of the
Option as of the Cancellation Date; provided, however, that if the Option has
been held for less than six months then for purposes of such cancellation the
Acceleration Event and/or Cancellation Date shall be restricted in such manner
as the Company's Stock Option Committee may determine necessary to comply with
the conditions and requirements of Rule 16b-3. "Cancellation Date" shall mean
(i) the 60th day following the occurrence of any Acceleration Event described in
clause (a) or (b) of the first sentence hereof, and (ii) the closing of any
merger, consolidation, liquidation or sale of assets stockholder approval of
which constituted an Acceleration Event under clause (c) or (d) of the first
sentence hereof. Upon such cancellation of the Option, the Company shall make,
in exchange therefor, a cash payment under the Option in an amount equal to the
product of the number of Optioned Shares covered by the unexercised portion of
the Option multiplied by the difference between the Exercise Price and (i) in
the case of a transaction described in clause (a) or (b) of the first sentence
hereof, the highest fair market value of an Optioned Share at any time during
the 60-day period immediately preceding the Cancellation Date, and (ii) in the
case of a transaction described in clause (c) or (d) of the first sentence
hereof, the fair market value of an Optioned Share on the Cancellation Date.
The "fair market value" of Optioned Shares shall be determined by the Company's
Stock Option Committee by reference to any national securities market on which
the Optioned Shares may then be trading, or as otherwise determined by the
Company's Stock Option Committee.
9. Securities Laws. Grantee hereby represents and agrees for himself, and
for his transferees by will or the laws of descent and distribution, that unless
a registration statement under the Securities Act of 1933, as amended, is in
effect as to shares purchased upon any
4.
exercise of the Option, (i) any and all shares so purchased shall be acquired
for his personal account and not with a view to or for sale in connection with
any distribution, and (ii) each notice of the exercise of any portion of the
Option shall be accompanied by a representation and warranty in writing, signed
by the person entitled to exercise the same, that the shares are being so
acquired in good faith for his personal account and not with a view to or for
sale in connection with any distribution. Notwithstanding anything else
contained in this Agreement, no share of stock or other securities shall be
issued pursuant to any exercise of the Option unless and until, in the opinion
of counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any
federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
10. Stock Restrictions. No shares of stock or other securities issued
upon exercise of the Option may be sold, assigned, pledged, hypothecated or
otherwise transferred or disposed of in any way unless and until, in the opinion
of counsel for the Company, such securities may be so transferred or disposed of
without causing the Company to be in violation of or incur any liability under
any federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
11. Restrictive Legends. Unless and until otherwise permitted by this
Section 10, each certificate for stock or other securities issued pursuant to
exercise of this Option shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, ARE HELD FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR DISTRIBUTED AT ANY TIME
UNLESS A REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933 COVERING
SUCH SHARES OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
A REGISTRATION STATEMENT IN NOT REQUIRED".
The Company may order its stock transfer agents to stop the transfer of any
shares of stock or other securities bearing the legend set forth in this Section
11 until the conditions of Section 10 hereof with respect to the transfer of
such stock or other securities have been satisfied.
12. Stock Option Plan. The Option is subject to, and the Company and
Grantee agree to be bound by, all of the terms and conditions of the Plan, as
the same shall have been amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive Grantee, without his
consent, of this Option or any of his rights hereunder. Pursuant to the Plan,
the Company's Stock Option Committee is vested with final authority to interpret
and construe the Plan and the Option, and is authorized to adopt rules and
5.
regulations for carrying out the Plan. A copy of the Plan in its present form
is available for inspection during business hours by Grantee or other persons
entitled to exercise this Option at the Company's principal office.
13. No Employment or Stockholder Rights. Neither this Agreement nor the
establishment of the Plan shall be construed to (i) give Grantee any right to
become employed by, or continue to be a director of, or consultant to, the
Company or any of its subsidiaries, (ii) give Grantee any benefits not
specifically provided by this Agreement, or (iii) in any manner limit the right
of the Company or any of its subsidiaries to modify, amend or terminate the Plan
or any of its other benefit plans. Grantee shall not have any rights as a
stockholder of the Company with respect to any of the Optioned Shares until such
time as such shares have been delivered to him.
14. Notices. Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to Grantee shall be addressed to him at the address given beneath his
signature hereto or at such other address as Grantee may hereafter designate in
writing to the Company.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, other than its conflict laws provisions.
In Witness Whereof, the Company has entered into this Agreement and granted
the Option as of the date of this Agreement first written above.
Cell Pathways, Inc.
By
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Title
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Accepted:
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Street Address
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City and State
6.
Exhibit A
OPTION EXERCISE NOTICE
To: Cell Pathways, Inc.
Attention: Secretary
The undersigned hereby exercises his/her option to acquire ________ shares
of __________ [e.g., Common Stock] (the "Securities") pursuant to the option
granted to the undersigned in that certain Stock Option Agreement (the
"Agreement") dated _______________, 19__, by and between Cell Pathways, Inc.
(the "Company") and the undersigned, and in connection with this exercise does
hereby tender herewith as provided in the Agreement the full Exercise Price (as
defined in the Agreement) with respect to the Securities, and does hereby
represent and warrant to the Company that the Securities are being acquired in
good faith for the undersigned's own account and not with a view to or for sale
in connection with any distribution.
In Witness Whereof, the undersigned has signed this Option Exercise Notice
as of the date written below.
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Signature
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Print Name
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Date
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