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EXHIBIT 10.56
COMBICHEM, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Plan pursuant to which eligible non-employee members of the
Board will automatically receive special option grants at periodic intervals
over their period of Board service in order to provide such individuals with a
meaningful incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes
of, the Plan in connection with the automatic grant of an option to purchase
shares of Common Stock under the Plan.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, a Non-Statutory Option to purchase up to the
number of Option Shares specified in the Grant Notice. The Option Shares shall
be purchasable from time to time during the option term specified in Paragraph
2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY. This option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during Optionee's lifetime to one or more members of the Optionee's immediate
family or to a trust established for the exclusive benefit of one or more such
family members. The assigned portion shall be exercisable only by the person or
persons who acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment. Should
the Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee's will or the laws of descent and
distribution.
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4. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable
for any or all of the Option Shares, whether or not the Option Shares are at
the time vested in accordance with the Vesting Schedule, and shall remain so
exercisable until the Expiration Date or sooner termination of the option term
under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the
Vesting Schedule set forth in the Grant Notice, vest in the Option Shares in
one or more installments over his or her period of Board service. Vesting in
the Option Shares may be accelerated pursuant to the provisions of Paragraph 5,
6 or 7. In no event, however, shall any additional Option Shares vest
following Optionee's cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's
service as a Board member cease while this option remains outstanding, then the
option term specified in Paragraph 2 shall terminate (and this option shall
cease to be outstanding) prior to the Expiration Date in accordance with the
following provisions:
(a) Should Optionee cease to serve as a Board
member for any reason (other than death or Permanent Disability) while this
option is outstanding, then the period for exercising this option shall be
reduced to a twelve (12)-month period (commencing with the date of such
cessation of Board service), but in no event shall this option be exercisable
at any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares (if any) in which Optionee is vested on the date of
his or her cessation of Board service. Upon the earlier of (i) the expiration
of such twelve (12)- month period or (ii) the specified Expiration Date, the
option shall terminate and cease to be exercisable with respect to any vested
Option Shares for which the option has not been exercised.
(b) Should Optionee die during the twelve
(12)-month period following his or her cessation of Board service and hold this
option, at the time of his or her death, then the personal representative of
Optionee's estate or the person or persons to whom the option is transferred
pursuant to Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option for any or all of the
Option Shares in which Optionee is vested at the time of Optionee's cessation
of Board service (less any Option Shares purchased by Optionee after such
cessation of Board service but prior to death). Such right of exercise shall
terminate, and this option shall accordingly cease to be exercisable for such
vested Option Shares, upon the earlier of (i) the expiration of the twelve
(12)- month period measured from the date of Optionee's cessation of Board
service or (ii) the specified Expiration Date.
(c) Should Optionee cease service as a Board
member by reason of death or Permanent Disability, then all Option Shares at
the time subject to this option but not otherwise vested shall vest in full so
that this option may be exercised for any or all of the Option Shares as fully
vested shares of Common Stock at any time prior to the earlier of (i) the
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expiration of the twelve (12)-month period measured from the date of Optionee's
cessation of Board service or (ii) the specified Expiration Date, whereupon
this option shall terminate and cease to be outstanding.
(d) Upon Optionee's cessation of Board service
for any reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and all
Option Shares in which Optionee is not otherwise at that time vested in
accordance with the normal Vesting Schedule or the special vesting acceleration
provisions of Paragraph 6 or 7 below.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all
Option Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the
specified effective date for the Corporate Transaction, become exercisable for
all of the Option Shares at the time subject to this option and may be
exercised for all or any portion of such shares as fully vested shares of
Common Stock. Immediately following the consummation of the Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation or its parent company.
(b) All outstanding repurchase rights shall also
terminate automatically, and the unvested shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction.
(c) If this option is assumed in connection with
a Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Exercise Price, provided the aggregate Exercise Price shall remain the
same.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at
the time of a Change in Control but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the effective date of such
Change in Control, become exercisable for all of the Option Shares at the time
subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. This option shall remain
exercisable for such fully-vested Option Shares until the earliest to occur of
(i) the specified Expiration Date, (ii) the sooner termination of this option
in accordance with Paragraph 5 or 6 or (iii) the surrender of this option under
Paragraph 7(b).
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(b) All outstanding repurchase rights shall also
terminate automatically, and the unvested shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Change in Control.
(c) Optionee shall have an unconditional right,
exercisable at the time during the thirty (30)-day period immediately following
the consummation of a Hostile Take-Over to surrender this option to the
Corporation in exchange for a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the Option Shares at
the time subject to the surrendered option (whether or not those Option Shares
are otherwise at the time vested) over (ii) the aggregate Exercise Price
payable for such shares. This Paragraph 7(b) 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.
(d) To exercise the Paragraph 7(b) 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 this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five
(5) business days following such delivery date. The exercise of such limited
stock appreciation right in accordance with the terms of this Paragraph 7 has
been pre-approved pursuant to the express provisions of the Automatic Option
Grant Program, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required at the time of the actual option
surrender and cash distribution. Upon receipt of the cash distribution, this
option shall be cancelled with respect to the shares subject to the surrendered
option (or the surrendered portion), and Optionee shall cease to have any
further right to acquire those Option Shares under this Agreement. The option
shall, however, remain outstanding for the balance of the Option Shares (if
any) in accordance with the terms and provisions of this Agreement, and the
Corporation shall accordingly issue a replacement stock option agreement
(substantially in the same form as this Agreement) for those remaining Option
Shares.
8. ADJUSTMENT IN OPTION SHARES. Should any change be
made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.
9. STOCKHOLDER RIGHTS. The holder of this option shall
not have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become a
holder of record of the purchased shares.
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10. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect
to all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) To the extent the option is
exercised for vested Option Shares, execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which the
option is exercised. To the extent this option is exercised for
unvested Option Shares, execute and deliver to the Corporation a
Purchase Agreement for those unvested Option Shares.
(ii) Pay the aggregate Exercise
Price for the purchased shares in one or more of the following forms:
(A) cash or check made payable to
the Corporation,
(B) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(C) to the extent the option is
exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) have the right to exercise this
option.
(b) Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice
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of Exercise (or the Purchase Agreement) delivered to the Corporation in
connection with the option exercise.
(c) As soon after the Exercise Date as practical,
the Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
(d) In no event may this option be exercised for
any fractional shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in
any way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the
right of the Corporation or the stockholders to remove Optionee from the Board
at any time in accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance
of the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be listed
for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
13. SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraph 3 or 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and Optionee, Optionee's assigns and the legal
representatives, heirs and legatees of Optionee's estate.
14. NOTICES. Any notice required to be given or
delivered to the Corporation under the terms of this Agreement shall be in
writing and addressed to the Corporation at its principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated below Optionee's signature
line on the
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Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
15. CONSTRUCTION. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the terms of the Plan.
16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify CombiChem, Inc. (the "Corporation") that I
elect to purchase __________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $___________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1997 Stock Incentive Plan on ____________________,
199___.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the
Exercise Price for any Purchased Shares in which I am vested at the time of
exercise of the Option.
_______________________, 199__
Date
___________________________________
Optionee
Address:___________________________
___________________________________
Print name in exact manner
it is to appear on the
stock certificate: ___________________________________
Address to which certificate
is to be sent, if different
from address above: ___________________________________
___________________________________
Social Security Number: ___________________________________
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean 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 0000 Xxx) 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 the Board approved such election or nomination.
D. COMMON STOCK shall mean shares of the Corporation's common
stock.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
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G. CORPORATION shall mean CombiChem, Inc., a Delaware
corporation.
H. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 10 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option
expires as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange which serves as the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date
for which such quotation exists.
X. XXXXX DATE shall mean the date of grant of the option as
specified in the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Automatic Stock
Option accompanying the Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.
N. HOSTILE TAKEOVER shall mean 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 0000 Xxx) 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.
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O. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
P. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the
form of Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
S. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.
T. PERMANENT DISABILITY shall mean the inability of Optionee to
perform his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1997 Stock Incentive Plan.
V. PURCHASE AGREEMENT shall mean the stock purchase agreement (in
form and substance satisfactory to the Corporation) which grants the
Corporation the right to repurchase, at the Exercise Price, any and all
unvested Option Shares held by Optionee at the time of Optionee's cessation of
Board service and which precludes the sale, transfer or other disposition of
any purchased Option Shares while those shares are unvested and subject to such
repurchase right.
W. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
X. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
Y. VESTING SCHEDULE shall mean the vesting schedule specified in
the Grant Notice, pursuant to which the Option Shares will vest in one or more
installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
A-4.
