AMENDMENT TO OPTION AGREEMENT and OPTION AGREEMENT dated as of June 17,
1996 by and between SPARTA PHARMACEUTICALS, INC., with offices at Pennsylvania
Business Campus, 000 Xxxx Xxxx, Xxxxxxx, XX 00000, a Delaware corporation (the
"Company") and XXXXXXX XxXXXXXXX, M.D., an individual residing at 00000 Xxxxx
Xxxx, Xxxxxxx, XX 00000 ("Executive")
W I T N E S S E T H:
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WHEREAS, Executive is the Company's Senior Vice President of Research
and Development, and in that capacity, is a party to an agreement with the
Company dated July 2, 1992 ("XxXxxxxxx Agreement"); and
WHEREAS, in addition to options to purchase up to 500,000 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), which the
Company granted to Executive under the XxXxxxxxx Agreement, in December 1995 the
Company granted to the Executive an additional option to purchase an additional
50,000 shares of Common Stock (the "1995 Options") pursuant to, and on the terms
and conditions contained in, a
Stock Option Agreement between the Company and the Executive (the "1995 Option
Agreement") and the Company's 1991 Stock Option Plan (the "Plan"); and
WHEREAS, on March 11, 1996, the Company took action to grant Executive
additional options, intended to qualify as "incentive stock options" under the
Internal Revenue Code of 1986, as amended, to purchase an aggregate of 40,000
shares of Common Stock, upon the achievement of certain performance milestones
(collectively, the "Milestone Options"), pursuant to the Plan; and
WHEREAS, the Company has determined that some of the relevant dates for
measuring achievement of the Milestone Options and that some of the provisions
of the 1995 Options and the 1995 Option Agreement should be altered; and
WHEREAS, the Executive desires to have the 1995 Options and the
Milestone Options so altered.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Amendment to 1995 Options; Grant of Milestone Options.
(a) Amendment to 1995 Options. The Company's Committee charged with
the obligation to administer the Plan has
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determined that options such as the 1995 Options would serve as a more desirable
incentive to Company employees such as the Executive if the Executive were to
hold options for which vesting would be accelerated upon a "Change of Control"
of the Company and the Executive desires that the 1995 Options be so changed.
Accordingly, the Company and the Executive hereby agree to amend the 1995 Option
Agreement to add the following provisions to the 1995 Option Agreement:
"Notwithstanding the vesting provisions of this Agreement or
any other provision in this Agreement to the contrary, the
Employee may exercise the Option for all of the Shares covered
by the Option immediately upon a "Change of Control" of the
Company while the Employee is an employee of the Company, such
accelerated vesting and right to exercise to commence as of
the time immediately prior to the consummation of such Change
of Control (but subject to the consummation of such Change of
Control) and in the event of a Change of Control as a result
of a tender offer, this Option shall become fully exercisable
in a timely manner such that the Employee may participate in
such tender offer at any stage, for all of the Shares then
remaining subject to purchase under such Option, whether or
not the right to purchase such Shares otherwise shall have
become vested and become exercisable."
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For purposes of this Agreement and the 1995 Option Agreement, a "Change
of Control" shall be deemed to have occurred upon the occurrence of any of the
following:
(i) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company;
(ii) individuals who, as of March 15, 1996, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute at least 50% of the Board of Directors (hereinafter
referred to as a "Board Change"), provided that any individual becoming a
director subsequent to March 15, 1996 whose election or nomination for election
was approved by a vote of at least a majority of the then Incumbent Directors
shall be, for purposes of provision, considered as though such individual were
an Incumbent Director; or
(iii) any consolidation or merger of the Company (including,
without limitation, a triangular merger) where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the
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consolidation or merger, beneficially own, directly or indirectly, Shares
representing in the aggregate more than 50% of the combined voting power of all
the outstanding securities of the Company issuing cash or securities in the
consolidation or merger (or of its ultimate parent Company, if any); or
(iv) any "person," as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (or any successor provision) (the
"Exchange Act") (other than the Company, any employee benefit plan of the
Company or any entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Exchange Act or
any successor provision) of such person, shall become the "beneficial owner" or
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act
or any successor provision), directly or indirectly, of securities of the
Company representing in the aggregate thirty percent (30%) or more of either (a)
the then outstanding shares of Common Stock of the Company or (b) the combined
voting power of all then outstanding securities of the Company having the right
under ordinary circumstances to vote in an election of the
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Board of Directors of the Company ("Voting Securities") (hereafter referred to
as an "Acquisition"); provided, that, notwithstanding the foregoing, an
Acquisition shall not be deemed to have occurred for purposes of this clause
(iv)(1) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Common Stock or other Voting
Securities outstanding, increases (x) the proportionate number of shares of
Common Stock beneficially owned by any person to thirty percent (30%) or more of
the Common Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to thirty
percent (30%) or more of the combined voting power of all then outstanding
Voting Securities or (2) solely as the result of an acquisition of securities
from the Company; except that if any person referred to in clause (1)(x) or
(1)(y) of this sentence or to which clause (2) of this sentence is applicable
shall thereafter become the beneficial owner of any additional shares of Common
Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend or similar transaction or a transaction to which clause (2) applies),
then an Acquisition
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shall be deemed to have occurred for purposes of this clause (iv).
(b) Busulfan, RII and 5FP Option Grants. The Company hereby agrees
to grant to Executive, without any further action required with respect to such
grant, the following Milestone Options, on the terms and conditions hereinafter
set forth, and as set forth in any applicable option agreement with respect
thereto to be issued upon such grant pursuant to this Agreement and the terms of
the Plan, and notwithstanding any prior determination of different triggering
dates for any Milestone Option, to purchase all or any part of an aggregate of
40,000 shares of the Company's Common Stock, at an option exercise price equal
to the Fair Market Value of a share of Common Stock on the date of grant (for
purposes of this Agreement, "Fair Market Value" of a share of Common Stock is
defined as the closing bid price for the Common Stock on the Nasdaq Stock Market
for such date if the Common Stock is then listed for trading on the Nasdaq
National Market System or the Nasdaq Small Cap Market, or the closing sales
price for the Common Stock if then listed on any other national securities
exchange):
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(i) A Milestone Option to purchase all or any part of 10,000 shares
of Common Stock, to be granted to the Executive if and only if human clinical
trials with respect to the Company's Spartaject Busulfan product shall have
begun by the close of business on December 1, 1996 (the "Busulfan Option");
(ii) A Milestone Option to purchase all or any part of 10,000
shares of Common Stock, to be granted to the Executive if and only if human
clinical trails with respect to the Company's RII Retinamide product shall have
begun by the close of business on August 1, 1996 (the "RII Option"); and
(iii) A Milestone Option to purchase all or any part of 20,000
shares of Common Stock, to be granted to the Executive if and only if human
clinical trials with respect to the Company's 5-fluoro-2(1H)-pyrimidone product
shall have begun by the close of business on December 1, 1996 (the "5FP Option")
(the Busulfan Option, the RII Option and the 5FP Option collectively constitute
the Milestone Options).
(c) Exercisability and Vesting of Milestone Options. (i) Upon the grant
of each of the Busulfan Option, the RII Option and the 5FP Option, if any such
grant occurs, the Executive's right to exercise each such Milestone Option shall
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vest in increments of 25% of the aggregate amount of each Milestone Option on
the anniversary date of the respective dates of grant and if at any time prior
to the fourth anniversary of such respective dates thereof, the Executive shall
not be employed by the Company, then, subject to the terms and conditions of the
Plan and any relevant option agreement with respect to any Milestone Option
affecting the Executive's ability to exercise any Milestone Option after a
termination of employment, all then unexercised and unvested Milestone Options
shall terminate and be of no further force or effect, without any additional
action required by the Company or by Executive; provided, however,
notwithstanding the foregoing, that upon a Change of Control (as defined in
Paragraph 1(a)), the Executive shall be entitled to exercise all of the
Milestone Options granted prior to such Change of Control and all such prior
Milestone Options shall thereupon become fully vested.
(ii) The Company shall issue to the Executive an option agreement
with respect to each Milestone Option granted, if any, containing such terms as
are then included in the Company's standard form of such option agreement, so
long as such
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terms include matters consistent with the terms of this Agreement.
(iii) The Milestone Options shall be exercisable, subject to
vesting, until the close of business on the tenth anniversary of their
respective dates of grant, subject also, in each case, to earlier termination as
described above and to the terms of the Plan and the applicable option agreement
under which each Milestone Option is granted.
(c) Mechanics of Grant. Upon achievement of a Milestone Option, each
Milestone Option may be exercised by the Executive by written notice to the
Company specifying the number of shares to be issued upon exercise of the
Milestone Option and on such other terms as shall be set forth in the applicable
option agreement.
2. Withholding of Taxes. Whenever the Company proposes or is required
to deliver or transfer shares of Common Stock pursuant to this Agreement, the
Company shall have the right to (a) require Executive to remit to the Company
amounts sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such shares of Common Stock or
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(b) take whatever action it deems necessary to protect its interest with respect
to tax liabilities.
3. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SPARTA PHARMACEUTICALS, INC.
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx, Ph.D.
President and Chief Executive Officer
/s/ Xxxxxxx XxXxxxxxx (Seal)
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Xxxxxxx XxXxxxxxx, M.D.
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