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EXHIBIT 10.37
PHARMCHEM LABORATORIES, INC.
1997 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(Incentive Stock Option)
By this Agreement, PharmChem Laboratories, Inc., a California
corporation (the "Company") grants to [_____________], an employee of the
Company (the "Grantee"), an option (the "Option") to purchase shares of the
Company's common stock, no par value ("Stock"), subject to the terms and
conditions set forth below, in the attached Exhibit A hereto and in the
PharmChem Laboratories, Inc. 1997 Equity Incentive Plan, as may from time to
time be amended (as so amended, the "Plan"), all of which are an integral part
of this Agreement. A copy of the Plan may be obtained from the Company upon
request. Capitalized terms used but not defined in this Agreement have the
meaning specified in the Plan.
Grant Date . . . . . . . . . . . . . . . [_________________]
Expiration Date. . . . . . . . . . . . . [_________________]
Number of shares . . . . . . . . . . [_________________]
Option exercise price . . . . . . . . . $[________________]
When first exercisable . . . . . . . . . This Option shall become exercisable
in installments as specified below,
except as the Plan or this Agreement
may allow exercisability at a
different date:
Calendar Quarter Percentage No. of Shares Cumulative
After Grant Date Exercisable Exercisable No. of Shares
---------------- ----------- ----------- -------------
Prior to first day of first 0% 0 0
calendar quarter after grant date
During first calendar quarter 6.25% [________] [________]
after grant date
During second calendar quarter 12.5% [________] [________]
after grant date
During third calendar quarter 18.75% [________] [________]
after grant date
During fourth calendar quarter 25% [________] [________]
after grant date
During fifth calendar quarter 31.25% [________] [________]
after grant date
During sixth calendar quarter 37.5% [________] [________]
after grant date
During seventh calendar quarter 43.75% [________] [________]
after grant date
During eighth calendar quarter 50% [________] [________]
after grant date
During ninth calendar quarter 56.25% [________] [________]
after grant date
Employee Non-Qual.
Option Agreement 10/97
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Calendar Quarter Percentage No. of Shares Cumulative
After Grant Date Exercisable Exercisable No. of Shares
---------------- ----------- ----------- -------------
During tenth calendar quarter 62.5% [________] [________]
after grant date
During eleventh calendar quarter 68.75% [________] [________]
after grant date
During twelfth calendar quarter 75% [________] [________]
after grant date
During thirteenth calendar 81.25% [________] [________]
quarter after grant date
During fourteenth calendar 87.5% [________] [________]
quarter after grant date
During fifteenth calendar quarter 93.75% [________] [________]
after grant date
During sixteenth calendar quarter 100% [________] [________]
after grant date
Please indicate your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it to the Chief
Financial Officer, within 30 days after the Company's mailing of this Agreement
to you.
PHARMCHEM LABORATORIES, INC.
By: ___________________________________
Xxxxx X. Xxxxxxxxx
Chief Financial Officer
I ACKNOWLEDGE AND AGREE THAT THE VESTING OF SHARES PURSUANT TO
THE SCHEDULE ON THE FIRST PAGE OF THIS AGREEMENT IS EARNED ONLY BY
CONTINUING SERVICE AS AN EMPLOYEE, CONSULTANT OR NON-EMPLOYEE DIRECTOR
AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). I FURTHER
ACKNOWLEDGE AND AGREE THAT THIS OPTION, THE PLAN WHICH IS INCORPORATED
HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR
THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE
WITH MY RIGHT OR THE COMPANY'S RIGHT TO TERMINATE MY EMPLOYMENT OR
Employee Non-Qual.
Option Agreement 10/97
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CONSULTING RELATIONSHIP, IF ANY, AT ANY TIME, WITH OR WITHOUT CAUSE.
I ACKNOWLEDGE RECEIPT OF A COPY OF THE PLAN, A COPY OF WHICH IS
ANNEXED HERETO, REPRESENT THAT I AM FAMILIAR WITH THE TERMS AND
PROVISIONS THEREOF, AND HEREBY ACCEPT THIS OPTION SUBJECT TO ALL OF THE
TERMS AND PROVISIONS THEREOF. I HAVE REVIEWED THE PLAN AND THIS OPTION
IN THEIR ENTIRETY, HAVE HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF
COUNSEL PRIOR TO EXECUTING THIS AGREEMENT AND FULLY UNDERSTAND ALL
PROVISIONS OF THE OPTION. I HEREBY AGREE TO ACCEPT AS BINDING,
CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE BOARD OF
DIRECTORS OR OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN.
ACCEPTED AND AGREED:
_______________________________
Name: _________________________
Dated: __________________, ____
Employee Non-Qual.
Option Agreement 10/97
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EXHIBIT A
TO
EMPLOYEE OPTION AGREEMENT
1. Manner of Exercise. This Option shall be exercised by delivery to
the Company (or its authorized agent), during the period in which such Option is
exercisable, of (i) written notice of your intent to purchase a specific number
of shares of Stock pursuant to this Option and (ii) full payment of the Option
Price for such specific number of shares. Payment may be made by any one or more
of the following means:
(i) certified or cashier's check or wire transfer, or
(ii) shares of Stock with a Fair Market Value on the effective
date of such exercise equal to such Option Price and owned by you for at
least six months (or such longer period as is determined by the Company
required by applicable accounting standards to avoid a charge to the
Company's earnings), or that you purchased on the open market.
Such exercise shall become effective on the earliest date on which both such
notice and full payment have been actually received by the Company (which date
must be before the Expiration Date). You shall not have any rights as a
shareholder of the Company with respect to the shares of Stock deliverable upon
exercise of this Option until a certificate for such shares is delivered to you.
2. Exercise After Termination of Employment. This Option may be
exercised only while you remain an employee of the Company or a Subsidiary,
except that this Option may also be exercised after the date on which you cease
to be employed by the Company or a Subsidiary ("Termination Date") as follows:
(i) if you cease to be employed by the Company or a Subsidiary
on account of Disability, you may also exercise this Option at any time
during the first 6 months after your Termination Date;
(ii) if you cease to be employed by the Company or a Subsidiary
on account of death, the executor or administrator of your estate, your
heirs or legatees or beneficiary designated in accordance with the Plan,
as applicable, may also exercise this Option at any time during the
first 6 months after your Termination Date; and
(iii) if you cease to be employed by the Company or a Subsidiary
due to (a) your resignation after age 65 or 10 years of employment by
the Company or any Subsidiary, provided after your resignation you are
not employed or engaged by, and do not serve on the board of directors
of, a competitor of the Company or a Subsidiary or (b) elimination of
your position with the Company or a reduction in the Company's work
force, you may exercise this Option to the extent this Option was
exercisable immediately before such termination during the first 3
months after your termination date;
provided, however, that under no circumstances can this Option be exercised
after the Expiration Date.
3. Option Non-Transferable. This Option is not transferable except
by will or the laws of descent and distribution. It is exercisable during your
lifetime only by you or your guardian or legal representative.
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4. Incentive Option. This Option has been designated by the
Committee as an incentive stock option and therefore it shall be subject to the
additional conditions in this paragraph. If the aggregate option exercise price
with respect to a portion of this Option which is exercisable for the first time
during any calendar year ("Current Grant") and all incentive stock options
previously granted under the Plan and other employee stock option plans of your
employer or a parent or subsidiary of your employer which are exercisable for
the first time during a calendar year ("Prior Grants") would exceed $100,000
(the "$100,000 Limit"):
(i) the portion of the Current Grant which would, when added
to any Prior Grants, be exercisable for shares of Stock which would have
an aggregate exercise price in excess of the $100,000 Limit shall,
notwithstanding any term to the contrary herein, be exercisable for the
first time in the first subsequent calendar year or years in which it
could be exercisable for the first time when added to all Prior Grants
without exceeding the $100,000 Limit; and
(ii) if, viewed as of the Grant Date, any portion of this
Option could not be exercised under paragraph (i) above during any
calendar year commencing with the calendar year in which it is first
exercisable through and including the last calendar year in which this
Option may be exercised, such portion of this Option shall not be an
incentive stock option, but shall be exercisable as a separate option at
such dates provided herein.
5. Payment of Taxes. The Company is not required to issue shares of
Stock upon the exercise of this Option unless you first pay to the Company such
amount, if any, as may be requested by the Company to satisfy any liability it
may have to withhold federal, state, or local income or other taxes relating to
such exercise.
6. Early Disposition of Stock. If you dispose of any shares of Stock
received under this Option within two (2) years after the date of this Agreement
or within one (1) year after such shares were transferred to you, you will be
treated for federal income tax purposes as having received ordinary income at
the time of such disposition in an amount generally measured as the difference
between the price paid for the shares and the lower of the fair market value of
the shares at the date of exercise or the fair market value of the shares at the
date of disposition. The amount of such ordinary income may be measured
differently if you are an officer, director or 10% shareholder of the Company,
or if the shares were subject to a substantial risk of forfeiture at the time
they were transferred. Any gain recognized on such a premature sale of the
shares in excess of the amount treated as ordinary income will be characterized
as capital gain. You hereby agree to notify the Company in writing within thirty
(30) days after the date of any such early disposition. If you dispose of such
shares at any time after the expiration of such two-year and one-year holding
periods, any gain on such sale will be treated as long-term capital gain.
7. Tax Consequences. The exercise of an incentive stock option may
subject you to the alternative minimum tax ("AMT"). AMT is payable only if it
exceeds your regular tax liability. The AMT is calculated by applying a minimum
tax rate of 26% to your alternative minimum taxable income. To compute
alternative minimum taxable income, you must include the excess of the fair
market value of shares purchased pursuant to the exercise of an incentive stock
option over the purchase price paid for such shares. You understand that any of
the foregoing references to taxation are based on federal income tax laws and
regulations now in effect. By exercising this Option, you will be representing
that you have reviewed with your own tax advisors the federal, state, local and
foreign tax consequences of the transactions contemplated by this Agreement,
that you are relying solely on such advisors and not on any statements or
representations of the Company or any of its agents, and that you understand
that you (and not the Company) shall be responsible for your own tax liability
that may arise as a result of the transactions contemplated by this Agreement.
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8. Amendments. This Agreement may be amended only by a writing
executed by the Company and you which specifically states that it is amending
this Agreement; provided that this Agreement is subject to the power of the
Board (as defined in the Plan) to amend the Plan as provided therein, except
that no such amendment shall adversely affect your rights under this Option
without your consent.
9. Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary. Any
notice to be given to you shall be addressed to you at the address listed in the
Company's records. By a notice given pursuant to this Section, either party may
designate a different address for notices. Any notice shall have been deemed
given when actually delivered.
10. Severability. If any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any part of this Agreement not declared
to be unlawful or invalid. Any part so declared unlawful or invalid shall, if
possible, be construed in a manner which gives effect to the terms of such part
to the fullest extent possible while remaining lawful and valid.
11. Applicable Law. This Agreement shall be governed by the
substantive laws (excluding the conflict of laws rules) of the State of
California.
12. Headings. Headings are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Agreement.
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