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EXHIBIT 10.4
CELL PATHWAYS, INC.
INCENTIVE STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Agreement") made as of this day of , 1998 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 an employee and/or director of 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 shares of the Company's Common Stock, $0.01 par value ("Common Stock"),
in accordance with the Company's 1997 Equity Incentive Plan, as amended (the
"Plan"). In consideration of Grantee's rendering services ("Services") as an
employee and/or director of the Company during the requisite vesting periods,
and in further consideration of the agreements set forth herein, 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
an incentive stock option under the Internal Revenue Code of 1986, as amended
(the "Code").
2. Option Exercise Period. This Option may be exercised, with respect to
vested shares, from the time such shares have vested pursuant to Section 3
hereof until the termination of the option pursuant to Section 5 hereof. This
option shall not be exercisable under this Section 2 to the extent such exercise
would cause the aggregate fair market value of any shares subject to incentive
stock options granted you by the Company or any affiliate (valued as of their
grant date) which would become exercisable for the first time during any
calendar year to exceed $100,000.
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, one quarter of the Optioned Shares will vest, provided that
Grantee continues to render Services to the Company or a subsidiary of the
Company on such date.
b. Second Anniversary: On the second anniversary date of this
Agreement, another quarter of the Optioned Shares will vest provided that
Grantee continues to render Services to the Company or a subsidiary of the
Company on such date.
c. Third Anniversary: On the third anniversary date of this Agreement,
an additional quarter of the Optioned Shares will vest provided that
Grantee continues to render Services to the Company or a subsidiary of the
Company on such date.
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d. Fourth Anniversary: On the fourth anniversary date of this
Agreement, an additional quarter of the Optioned Shares will vest provided
that Grantee continues to render Services to the Company or a subsidiary of
the Company on such date.
If the Company and its subsidiaries shall terminate Grantee's Services for any
reason (other than the failure of Grantee substantially to perform his duties)
with the effect that Grantee shall cease to render Services to the Company and
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 (or other vesting date) of
this Agreement which would have occurred but for such termination.
4. Method of Exercise. (a) 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.
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; provided, that this sentence shall not be operative
with respect to the anticipated filing of the Company's Sixth Amended and
Restated Certificate of Incorporation, as the effect of
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such filing is already provided for in Section 1 of this Agreement. 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 (including, in particular, any investor purchasing from the
Company in a private placement before the Company's shares have become
publicly traded), 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%
(which percentage shall be 50% prior to the completion of the Company's
first public offering of securities) 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 office who
either were directors at the beginning of 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 (i) where no person within the meaning of
subsection (a) above becomes the "beneficial owner" (as defined above)
of 20% or more of the resulting voting power and where the voting
securities of the Company outstanding immediately prior thereto
continue to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or controlling
entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving or controlling entity
outstanding immediately after such merger or consolidation or
(ii)(without derogating from the power of the Committee in other
situations) which the Committee determines should not, because of the
nature and purpose of the transaction, qualify as an Acceleration Event
under this subsection, or
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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 all Optioned Shares for which the Option
has been exercised but which have not yet vested 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 cancellation of the Option pursuant an Acceleration Event
under clause (a), (b) or (d) of the first sentence hereof, the Company shall
make, and upon cancellation of the Option following an Acceleration Event under
clause (c) of the first sentence hereof, the Company may 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 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.
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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 11, 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
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 issued upon exercise.
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
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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 of 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__________________________________________________
Senior Vice President, General Counsel and Secretary
ACCEPTED:
____________________________________________________
____________________________________________________
Street Address
____________________________________________________
City and State
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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.
_________________________________________
Signature
_________________________________________
Print Name
_________________________________________
Date
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