EXHIBIT 10.2
KOS PHARMACEUTICALS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement"), effective
as of June 20, 1996, is made by and between Kos Pharmaceuticals, Inc., a Florida
corporation (the "Company"), and Xxxxxx X. Xxxx, (the "Recipient").
WHEREAS, the Company wishes to grant an option to purchase shares of
the Company's common stock to the Recipient pursuant to the terms of the Kos
Pharmaceuticals, Inc. 1996 Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. GRANT OF OPTION. In consideration of service to the Company and for
other good and valuable consideration, the Company grants to the Recipient an
option to purchase 750,000 shares of the Company's common stock in accordance
with the terms and conditions of the Plan and this Agreement (the "Option").
2. OPTION PRICE. The purchase price of the shares of stock covered
by the Option shall be $0.60 per share.
3. ADJUSTMENTS IN OPTION.
(a) Subject to the limitation of subsection 3(b) below, in the
event that the outstanding shares of stock subject to the Option are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, the shares subject to the Option and the price per share shall be
equitably adjusted to reflect such changes. Such adjustment in the Option shall
be made without change in the total price applicable to the unexercised portion
of the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in the Option price per share. Any such adjustment made by the
Committee shall be final and binding upon the Recipient, the Company and all
other interested persons.
(b) The provisions of subsection 3(a) above shall not result
in any adjustment of either the number of shares subject to the Option or the
price per share in the event of any merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or any
other similar transaction on or before July 15, 1996.
4. PERSON ELIGIBLE TO EXERCISE OPTION. During the lifetime of the
Recipient, only the Recipient may exercise the Option or any portion thereof.
After the death of the Recipient, any exercisable portion of the Option may,
prior to the time when the Option becomes unexercisable under the terms of the
Plan, be exercised by the Recipient's personal representative or by any other
person empowered to do so under the Recipient's will, trust or under then
applicable laws of descent and distribution.
5. MANNER OF EXERCISE. The Option, or any portion thereof, may be
exercised only in accordance with the terms of the Plan and solely by delivery
to the Secretary of the Company of all of the following items prior to the time
when the Option or such portion becomes unexercisable under the terms of the
Plan:
(a) Notice in writing signed by the Recipient or the other
person then entitled to exercise the Option or portion thereof, stating that the
Option or portion thereof is thereby exercised, such notice complying with all
applicable rules (if any) established by the Committee;
(b) Full payment (in cash or by cashiers' or certified check)
for the shares with respect to which the Option or portion thereof is exercised;
(c) Full payment (in cash or by cashiers' or certified check)
upon demand an amount sufficient to satisfy any federal (including FICA and FUTA
amounts), state, and/or local withholding tax requirements at the time the
Recipient or his beneficiary recognizes income for federal, state, and/or local
tax purposes as the result of the receipt of Shares pursuant to the exercise of
the Option or portion thereof;
(d) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Recipient or other person then
entitled to exercise the Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the Recipient or
other person then entitled to exercise such Option or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the shares by
such person is contrary to the representation and agreement referred to above.
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to ensure the observance and performance of such
representations and agreement and to effect compliance with all federal and
state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Act and may issue stop-transfer orders covering such
shares. The written representations and agreement referred to in the first
sentence of this subsection (d), however, shall not be required if the shares to
be issued pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares; and
(e) In the event the Option or any portion thereof shall be
exercised pursuant to Section 4 of the Agreement by any person or persons other
than the Recipient, appropriate proof, satisfactory to the Committee, of the
right of such person or persons to exercise the Option.
6. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued
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shares or issued shares which have been reacquired by the Company. Such shares
shall be fully paid and nonassessable.
7. RIGHTS OF SHAREHOLDERS. The Recipient shall not be, nor have any of
the rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
the Recipient.
8. VESTING AND EXERCISABILITY. The Recipient's interest in the
Option shall be 100 percent vested as of the Date of Grant. Notwithstanding the
vested percentage of the Recipient's interest in the Option, the Option may not
be exercised unless and until an Initial Public Offering occurs.
9. DURATION OF OPTION. Except as specified below, the Option shall
expire on July 1, 2006. Notwithstanding the foregoing, the Option may expire
prior to July 1, 2006, in the following circumstances:
(a) In the case of the Recipient's death or disability, the
Recipient's termination of employment by reason of a change of control pursuant
to an employment agreement (if any) with the Company, the Company's termination
of the Recipient's employment or affiliation with the Company without cause, or
the expiration of the Recipient's employment agreement (if any) with the
Company, the Option shall expire on July 1, 2006.
(b) If the Recipient's employment or affiliation with the
Company terminates as a result of his retirement at age sixty-five, the Option
will expire on July 1, 2006.
(c) If the Recipient voluntarily ceases employment or
affiliation with the Company for any reason other than death, disability, a
change of control pursuant to an employment agreement (if any) with the Company,
or retirement (as described in subsection 9(b) above), the Option shall expire
thirty days following the last day that the Recipient is employed by or
affiliated with the Company. After the last day that the Recipient is employed
by or affiliated with the Company, the Option may be exercised only for the
number of Shares for which it could have been exercised on such last day
pursuant to Section 8 of the Agreement, subject to any adjustment under Section
3 of the Agreement.
(d) Notwithstanding any provisions set forth above in this
Section 9, if the Recipient shall (i) commit any act of malfeasance or
wrongdoing affecting the Company or its affiliates, (ii) breach any covenant not
to compete or employment agreement with the Company or any affiliate, or (iii)
engage in conduct that would warrant the Recipient's discharge for cause, any
unexercised part of the Option shall expire immediately upon the earlier of the
occurrence of such event or the last day the Recipient is employed by the
Company.
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10. CHANGE IN CONTROL. Contingent upon the occurrence of a Change in
Control, the Board of Directors of the Company may, but is not required to, take
one or more of the following actions:
(a) terminate the Option effective upon the date of the Change
in Control and make, within ninety days after the date of the Change in Control,
a cash payment to the Recipient equal to the difference between the exercise
price of the Option and the fair market value of the shares that would have been
subject to the terminated Option on the date of the Change in Control; or
(b) accelerate the expiration of the Option to a date not
earlier than the fifteenth day after the Change in Control.
11. ADMINISTRATION. The Committee shall have the power to interpret
this Agreement and to adopt such rules for the administration, interpretation
and application of the Agreement as are consistent herewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Recipient, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Agreement or any similar
agreement to which the Company is a party.
12. OPTIONS NOT TRANSFERABLE. Neither the Option nor any interest or
right therein or part thereof shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition is voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 12 shall
not prevent transfers by will or by the applicable laws of descent and
distribution.
13. OPTION SHARE TRANSFER RESTRICTIONS.
(a) Without the prior written consent of the Company, for a
period of 180 days following the date of an Initial Public Offering, an Option
Holder may not (i) directly or indirectly offer, sell, assign, transfer,
encumber, pledge, contract to sell, grant an option to purchase or otherwise
dispose of, other than by operation of law, any Option Shares, or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Option Shares, whether
any such transaction described in this subsection clauses (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The Company may place legends and/or stop-transfer orders with the
transfer agent of any Option Shares in order to give effect to this subsection
13(a).
(b) Subject to subsection 13(a) above, an Option Shareholder
may Dispose Of Option Shares only if either (i) a registration statement
pertaining to such Option Shares has been
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filed with and declared effective by the Securities and Exchange Commission and
remains effective on the date the Option Shareholder Disposes Of such Option
Shares, or (ii) an exemption from the registration requirements of applicable
securities laws is available.
14. SHARES TO BE RESERVED. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of stock as
will be sufficient to satisfy the requirements of this Agreement.
15. 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 and
any notice to be given to the Recipient shall be addressed to him at the address
given beneath his signature below. By a notice given pursuant to this Section
15, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Recipient shall,
if the Recipient is then deceased, be given to the Recipient's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 15. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, deposited (with postage prepaid) in a United States
postal receptacle.
16. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
17. INCORPORATION OF PLAN BY REFERENCE. The Option is granted in
accordance with the terms and conditions of the Plan, the terms of which are
incorporated herein by reference, and the Agreement shall in all respects be
interpreted in accordance with the Plan. Any term used in the Agreement that is
not otherwise defined in the Agreement shall have the meaning assigned to it by
the Plan.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the date first written above.
KOS PHARMACEUTICALS, INC.
By: /s/ XXXXXXX XXXXXXX
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Title: CHAIRMAN
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RECIPIENT
/s/ XXXXXX X. XXXX
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Xxxxxx X. Xxxx
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