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EXHIBIT 99.7
EXECUTIVE OFFICERS
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreements dated _____________________
_______________________________-- (the "Option Agreement') by and between
TheraTx, Incorporated (the "Corporation") and __________________________________
____________________ ("Optionee") evidencing the stock option (the "Option")
granted on such date to Optionee under the terms of the Corporation's 1996 Stock
Option/Stock Issuance Plan (the "Plan"), and such provisions shall be effective
immediately. All capitalized terms in this Addendum, to the extent not otherwise
defined herein, shall have the meanings assigned to them in the Option
Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION OR CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed or replaced with a comparable option in accordance
with Paragraph 6 of the Option Agreement, the Option shall not accelerate upon
the occurrence of that Corporate Transaction, and the Option shall accordingly
continue, over Optionee's period of Service after the Corporate Transaction, to
become exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, immediately
upon an Involuntary Termination of Optionee's Service within twenty-four (24)
months following such Corporate Transaction, the Option (or replacement grant),
to the extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall immediately become exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares. The Option shall
remain so exercisable until the earlier of (i) the Expiration Date of the option
term or (ii) the expiration of the one (1)-year period measured from the date
of such Involuntary Termination.
2. The Option shall not accelerate upon the occurrence of a Change in
Control, and the Option shall, over Optionee's continued period of Service after
the Change in Control, continue to become exercisable for the Option Shares in
accordance with the provisions of the Option Agreement. However, immediately
upon an Involuntary Termination of Optionee's Service within twenty-four (24)
months following the Change in Control, the Option, to the extent outstanding at
the time but not otherwise fully exercisable, shall automatically accelerate so
that the Option shall immediately become exercisable for all the Option Shares
at the time subject to the Option and may be exercised
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for any or all of those Option Shares as fully vested shares. The Option shall
remain so exercisable until the earlier of (i) the Expiration Date of the option
term or (ii) the expiration of the one (1)-year period measured from the date of
such Involuntary Termination.
3. For purposes of this Addendum, the following definitions shall be in
effect:
- A CHANGE IN CONTROL shall be deemed to occur in the event of a
change in ownership or control of the Corporation effected through either of the
following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were still
in office at the time such election or nomination was approved by the Board.
- An INVOLUNTARY TERMINATION shall mean the termination of
Optionee's Service by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (i) a
change in the Optionee's principal work location which is more than one
hundred (100) miles from Optionee's principal work location prior to the
Corporate Transaction or Change in Control (as applicable) and without the
Optionee's written concurrence; or (ii) a reduction in the Optionee's base
salary from its level immediately prior to the Corporate Transaction or
Change in Control; or (iii) a change in Optionee's duties which are
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inconsistent with, or otherwise result in a reduction of, the powers or
functions associated with, such Optionee's position, duties,
responsibilities and status with the Corporation prior to the Corporate
Transaction or Change in Control. Such determination shall be based on all
relevant facts and circumstances; provided, however, that, with respect to
all Executive Officers other than the President of the Corporation, if there
is any dispute regarding such determination, such determination shall be
made in the good faith judgment of the President of the Corporation
following the Corporate Transaction or Change of Control (but only if such
President is the same individual who was serving as the President of the
Corporation immediately prior to the Corporate Transaction or Change of
Control).
- MISCONDUCT shall mean (i) the Optionee's commission during the
course of his or her employment of any dishonest or fraudulent act; (ii) the
Optionee's conviction of a felony, whether or not committed in the course of
employment; or (iii) the willful and knowing disclosure by the Optionee of any
trade secrets or confidential information of the Corporation to persons not
authorized to receive such confidential information.
4. The provisions of Paragraphs 1 and 2 of this Addendum shall govern
the period for which the Option (or the replacement grant) is to remain
exercisable following the Involuntary Termination of Optionee's Service within
twenty-four (24) months after the Corporate Transaction in which the Option is
assumed or replaced or within twenty-four (24) months after the Change in
Control and shall supersede any provisions to the contrary in the Option
Agreement or the Plan.
FINANCIAL ASSISTANCE IN A
POOLING OF INTEREST
TRANSACTION
To the extent the Option is to terminate in connection with a Corporate
Transaction which is to be accounted for under the Pooling of Interest Method
described in Accounting Principles Board Opinion No. 16, Optionee shall have the
right to exercise his or her Option on a full-recourse deferred payment basis so
that the Exercise Price for the Option Shares acquired under that Option,
together with interest at the minimum per annum required rate to avoid the
imputation of compensation income under the federal tax laws, shall not become
due and payable until sixty (60) days after the end of any applicable
restriction period required under Accounting Series Release Numbers 130 and 135.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
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(a) Should a Hostile Take-Over occur at any time after the Option has
been outstanding for a period of at least six (6) months measured from the
Effective Date of this Addendum indicated below, then Optionee shall have
the unconditional right (exercisable during the thirty (30)-day period
following such Hostile Take-Over) to surrender the Option to the
Corporation, to the extent the Option is at the time exercisable for vested
shares of Common Stock. In return for the surrendered Option, Optionee shall
receive a cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which are at
the time vested under the surrendered Option (or surrendered portion) over
(B) the aggregate Exercise Price payable for such shares.
(b) To exercise this limited stock appreciation right, Optionee must,
during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's
copy of the Option Agreement, together with any written amendments to such
Agreement. Any such surrender of the Option in accordance with the terms of
this Addendum is hereby approved in advance by the Board, and the cash
distribution to which Optionee shall become entitled upon such option
surrender shall be paid to Optionee within five (5) days following the
delivery of the requisite notice. No further approval of the Plan
Administrator or the Board shall be required in connection with such option
surrender and cash distribution. Upon receipt of such cash distribution, the
Option shall be cancelled with respect to the Option Shares for which the
Option has been surrendered, and Optionee shall cease to have any further
right to acquire those Option Shares under the Option Agreement. The Option
shall, however, remain outstanding and exercisable for the balance of the
Option Shares (if any) in accordance with the terms of the Option Agreement,
and the Corporation shall issue a new stock option agreement (substantially
in the same form of the surrendered Option Agreement) for those remaining
Option Shares.
(c) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market Value
of the Option Shares and the aggregate Exercise Price payable for such
shares. This limited stock appreciation right shall in all events terminate
upon the expiration or sooner termination of the option term and may not be
assigned or transferred by Optionee.
2. For purposes of this Addendum, the following definitions shall be in
effect:
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- A HOSTILE TAKE-OVER shall be deemed to occur in the event (A) any
person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act
of 1934, as amended) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, AND (B) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted from
holders other than the officers and directors of the Corporation subject to
the short-swing profit restrictions of Section 16 of the Securities Exchange
Act of 1934, as amended.
- The TAKE-OVER PRICE per share shall be deemed to be equal to the
greater of (A) the Fair Market Value per Option Share on the option
surrender date or (B) the highest reported price per share of Common Stock
paid by the tender offeror in effecting the Hostile Take-Over. However, if
the surrendered Option is designated as an Incentive Option in the Grant
Notice, then the Take-Over Price shall not exceed the clause (A) price per
share.
IN WITNESS WHEREOF, TheraTx, Incorporated has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date specified
below.
THERATX, INCORPORATED
By: ____________________________________
Title: _________________________________
EFFECTIVE DATE: _________________, 199__
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