EXHIBIT 10.1
EPICEPT CORPORATION
2005 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION.
EpiCept Corporation, a Delaware corporation (together with its
successors and assigns, the "Company"), hereby grants to Xxxx X. Xxxxxx (the
"Optionee"), effective as of January 4, 2006 (the "Grant Date"), an option to
purchase an aggregate of 1,242,655 shares of its Common Stock at a price of
$5.84 per share, exercisable as set forth in, and subject to the terms and
conditions of, this Stock Option Agreement and the Employment Agreement dated as
of October 28, 2004 between the Company and the Optionee (the "Employment
Agreement").
2. EXERCISABILITY OF OPTION.
(a) As of the Grant Date, this option shall be vested, and
exercisable, with respect twenty-five percent (25%) of the shares of Common
Stock that are subject to it; and thereafter, on the last day of each month
(beginning with the month in which the Grant Date falls), and as of 12:01 a.m.
on each such day, the unvested portion of this option shall ratably vest and
become exercisable with respect to the shares of Common Stock that are subject
to this option, and shall become fully exercisable as to all such shares no
later than the last day of August, 2008; provided, that the Optionee has been
continuously employed by the Company through each such vesting date.
(b) In the event that the Term of Employment is terminated in a
termination governed by Section 9(a), 9(b), 9(d) or 9(e) of the Employment
Agreement, this option shall (x) become vested and exercisable as of the
Termination Date with respect to fifty percent (50%) of any securities and other
property for which it is not then vested and exercisable; (y) become vested and
exercisable with respect to the remainder of such securities and other property
ratably and quarterly over the two (2) years immediately following the
Termination Date; and (z) remain exercisable, for all securities and other
property for which it is or becomes exercisable, through the later of the
ninetieth (90th) day following the date upon which it becomes fully vested and
exercisable and the first anniversary of the Termination Date, but in no event
beyond the tenth anniversary of the Grant Date.
(c) In the event that the Term of Employment is terminated in
accordance with Section 9(c) or 9(f) of the Employment Agreement, this option,
to the extent that it is or becomes exercisable as of the Termination Date,
shall remain fully exercisable through the earlier of the thirtieth (30th) day
following such date, and the tenth anniversary of the Grant Date, at which time
it shall expire to the extent that it has not yet been exercised.
(d) In the event that the Term of Employment is terminated, in
anticipation of (or within one year following) a Change in Control, in a
termination that is governed by Section 9(d) or 9(e) of the Employment
Agreement, Section 2(b) above shall not apply and this option shall (x) become
vested and exercisable as of the Termination Date with respect to fifty percent
(50%) of any securities and other property for which it is not then vested and
exercisable; (y) become vested and exercisable with respect to the remainder of
such securities and other property ratably and monthly over the year immediately
following the Termination Date; and (z) remain exercisable, for all securities
and other property for which it is or becomes exercisable, through the later of
the ninetieth (90th) day following the date upon which it becomes fully vested
and exercisable and the first anniversary of the Termination Date, but in no
event beyond the tenth anniversary of the Grant Date.
(e) In the event that the Term of Employment terminates in a
termination governed by Section 9(h) of the Employment Agreement this option
shall: (x) the extent then vested or exercisable (including, without limitation,
pursuant to subsection (y)), be and remain exercisable through the earlier of:
the ninetieth (90th) day following the Termination Date or the tenth anniversary
of the Grant Date, at which time it shall expire to the extent that it has not
yet been exercised and (y) become vested and exercisable as of the Termination
Date to the extent that it is then scheduled to become vested or exercisable on
or before the first anniversary of such date (had the Optionee's employment
continued indefinitely).
(f) Anything elsewhere to the contrary notwithstanding, upon the
occurrence of any Change in Control while the Optionee is employed with the
Company, this option (x) shall become vested and exercisable as of the date of
the Change in Control with respect to fifty percent (50%) of any securities and
other property for which it is not then vested and exercisable; (y) shall become
vested and exercisable with respect to the remainder of such securities and
other property ratably and monthly over the year immediately following the
Change in Control; and (z) shall remain exercisable, for all securities and
other property for which it is or becomes exercisable, through the later of the
first anniversary of the Change in Control and the ninetieth (90th) day after it
becomes fully vested and exercisable, but in no event beyond the tenth
anniversary of the Grant Date.
(g) Anything elsewhere to the contrary notwithstanding, this option
shall, to the extent that it has not then yet been exercised, expire at 11:59
p.m. on the tenth anniversary of the Grant Date.
3. EXERCISE OF OPTION.
(a) METHOD OF EXERCISE. Subject to the conditions set forth in this
Stock Option Agreement, this option may, to the extent permitted by applicable
law, be exercised from time to time by delivery of written notice of exercise to
the Company from the Optionee. Such notice shall specify the total number of
shares to be purchased and shall be accompanied by payment in full (or an
arrangement for payment in full) in accordance with Section 3(b) below. Such
exercise shall be effective upon delivery to the Company of such written notice
together with the required payment (or arrangement for payment). This option may
be exercised for less than the full number of shares for which the option is
then exercisable, provided that no such exercise may be for any fractional
share.
(b) METHOD OF PAYMENT. Payment of the purchase price for shares
purchased upon an exercise of this option may, to the extent permitted by
applicable law, be made (i) by delivery to the Company of cash, a wire transfer
of available funds, or a check payable to the order of the Company in an amount
equal to the purchase price of such shares; (ii) by delivery to the Company of
shares of Common Stock then owned by the Optionee for at least six (6) months
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having an aggregate Fair Market Value as of the date of delivery equal to the
purchase price of such shares; (iii) by "net exercise" (i.e., the Optionee's
directing the Company to apply a portion of the option shares, valued at Fair
Market Value on the date of exercise, against the taxes resulting from exercise
and/or the exercise price); (iv) through reasonable cashless exercise procedures
that are from time to time established by the Company and that afford the
Optionee the opportunity to sell immediately some or all of the shares
underlying the exercised portion of this option in order to generate sufficient
cash to pay the option purchase price; or (v) by any combination of (i), (ii),
(iii) or (iv).
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. Payment
by delivery of shares may be effected by delivering one or more stock
certificates or by otherwise delivering shares to the Company's reasonable
satisfaction (including, without limitation, through an "attestation" procedure
that is reasonably acceptable to the Company), in each case accompanied by such
endorsements, stock powers, signature guarantees or other documents or
assurances as may reasonably be required by the Company. If a certificate or
certificates or other documentation representing shares in excess of the amount
required are delivered, a certificate (or other satisfactory evidence of
ownership) representing the excess number of shares shall promptly be returned
by the Company.
(d) DELIVERY OF OPTION SHARES. The Company shall, upon payment in
accordance with Section 3(a) above of the aggregate purchase price for the
number of shares purchased, make prompt delivery of such shares to the Optionee
and pay all original issue and transfer taxes and all other fees and expenses
incident to such delivery. All shares delivered upon any exercise of this option
shall, when delivered, be (i) duly authorized, validly issued, fully paid and
nonassessable, (ii) registered for sale, and for resale, under U.S. state and
federal securities laws to the extent that other shares of the same class are
then so registered or qualified and (iii) listed, or otherwise qualified, for
trading on any securities exchange or securities market on which shares of the
same class are then listed or qualified. To the extent that shares are not
promptly delivered to the Optionee when due, the Company shall promptly make the
Optionee whole for any resulting expense or loss of benefit. The Company shall
deliver cash in lieu of any fractional share.
4. NONTRANSFERABILITY OF OPTION.
This option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process, except that this option may be transferred in
whole or in part by will or the laws of descent and distribution. Any Person to
whom this option has been transferred in whole or in part in accordance with the
first sentence of this Section 4 shall, to the extent of the transfer, succeed
to the rights, and assume the obligations, of the Optionee under Sections 2
through 6 and 9 of this Stock Option Agreement.
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5. ADJUSTMENT PROVISIONS.
In the event that, at any time after the Grant Date, any merger,
consolidation, reorganization, recapitalization, spin-off, split-up,
combination, modification of securities, exchange of securities, liquidation,
dissolution, share split, share dividend, other distribution of securities or
other property in respect of shares or other securities (other than ordinary
recurring cash dividends), or other change in corporate structure or
capitalization affecting the rights or value of securities of any class then
subject to this option occurs, appropriate adjustment(s) shall promptly be made
in the number and/or kind of securities subject to this option and/or in the
exercise price and/or in other terms and conditions of this option, and/or
appropriate provision(s) shall promptly be made for supplemental distributions
of cash, securities and/or other property, so as to avoid dilution or
enlargement of the rights of the Optionee and the value represented by this
option. If an event occurs that may require an adjustment (or other action)
pursuant to this Section 5, the Company shall promptly deliver to the Optionee a
certificate, signed by an officer of the Company, setting forth in reasonable
detail (x) the event in question and (y) either the adjustment (or other action)
being implemented and the method by which such adjustment (or other action) was
calculated or determined or the reasons why the Company believes no adjustment
(or other action) is needed.
6. CHANGE IN CONTROL.
In the event that holders of securities of any class that is then
subject to this option receive cash, securities or other property in respect of
such securities in connection with a Change in Control transaction, the Company
shall take such steps as are necessary to enable the Optionee (if he so elects)
to exercise this option at a time and in a fashion that will entitle him to
receive in exchange for any securities thus acquired the same consideration as
is received in such Change in Control transaction by other holders of securities
of that class.
7. TAX WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of this
option shall be subject to the Optionee's satisfaction of all applicable
Federal, state and local income, excise, employment and other tax withholding
requirements ("tax obligations"). The Optionee may satisfy any such tax
obligations in any of the manners provided in Section 3(b) above for payment of
the purchase price.
8. THE COMPANY'S REPRESENTATIONS.
The Company represents and warrants that (a) it is fully authorized
by action of its Board (and of any Person or body whose action is required) to
enter into this Stock Option Agreement and to perform its obligations under it;
(b) the execution, delivery and performance of this Stock Option Agreement by
the Company does not violate any applicable law, regulation, order, judgment or
decree or any agreement, plan or corporate governance document (x) to which it
(or, to the best of its knowledge and belief, any of its security holders or
creditors) is a party or (y) by which it (or, to the best of its knowledge and
belief, any of its security holders or creditors) is bound; and (c) upon the
execution and delivery of this Stock Option Agreement by the Company and the
Optionee, this Stock Option Agreement shall be the valid and binding obligation
of the Company, enforceable in accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
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9. MISCELLANEOUS.
(a) Any Claim arising out of or relating to this Stock Option
Agreement shall be resolved by binding arbitration in accordance with Section 15
of the Employment Agreement.
(b) All notices and other communications relating to this Stock
Option Agreement shall be given as provided in Section 16 of the Employment
Agreement.
(c) Sections 17(b), 17(c), 17(d), 17(e) (second sentence only),
17(f), 17(g), 17(i) and 17(j) of the Employment Agreement (relating,
respectively, to amendment or waiver, conflicts, headings,
beneficiaries/references, survivorship, severability, governing law and
counterparts) shall be deemed incorporated herein in full, with the references
to the "Agreement" in such Sections being treated as references to this Stock
Option Agreement, the references to the "Executive" in such Sections being
treated as references to the original Optionee.
(d) All capitalized terms not defined in this Stock Option Agreement
shall have the meanings set forth in the Employment Agreement. "Term of
Employment" shall mean the "Term" as defined in the Employment Agreement.
(e) Nothing contained in this Stock Option Agreement shall be
construed or deemed by any Person under any circumstances to bind the Company to
continue the employment of the Optionee for any particular period of time.
EPICEPT CORPORATION
By:
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Name: Xxxxxx X. Xxxx
Title: SVP & CFO
ACCEPTED
OPTIONEE:
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Xxxx X. Xxxxxx, Xx.
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