<PAGE>
EXHIBIT 99.1
SILUTIA, INC.
1999 STOCK OPTION PLAN
1. Adoption and Purpose of the Plan. This stock option plan, to be known as
--------------------------------
the "SiLutia, Inc. 1999 Stock Option Plan" (but referred to herein as the
"Plan") has been adopted by the board of directors (the "Board") of SiLutia,
Inc., a Delaware corporation (the "Company"), and is subject to the approval of
its stockholders pursuant to section 7 below. The purpose of this Plan is to
advance the interests of the Company and its stockholders by enabling the
Company to attract and retain qualified directors, officers, employees,
independent contractors, consultants and advisers by providing them with an
opportunity for investment in the Company. The options that may be granted
hereunder ("Options") represent the right by the grantee thereof (each,
including any permitted transferee pursuant to section 6.7(c) below, an
"Optionee") to acquire shares of the Company's common stock ("Shares" which if
acquired pursuant to the exercise of an Option will be referred to as "Option
Shares") subject to the terms and conditions of this Plan and a written
agreement between the Company and the Optionee to evidence each such Option (an
"Option Agreement").
2. Certain Definitions. The defined terms set forth in Exhibit A attached
------------------- ---------
hereto and incorporated herein (together with other capitalized terms defined
elsewhere in this Plan) will govern the interpretation of this Plan.
3. Eligibility. The Company may grant Options under this Plan only to (i)
-----------
persons who, at the time of such grant, are directors, officers, and employees
of the Company and/or any of its Subsidiaries, and (ii) natural persons who at
the time of such grant, are independent contractors, consultants or advisers of
the Company and/or any of its Subsidiaries and who perform bona fide services on
its behalf other than in connection with capital-raising transactions
(collectively, "Eligible Participants"). No person will be an Eligible
Participant following his or her Termination of Eligibility Status and no Option
may be granted to any person other than an Eligible Participant. There is no
limitation on the number of Options that may be granted to an Eligible
Participant.
4. Option Pool; Shares Reserved for Options. In no event will the Company
----------------------------------------
issue, in the aggregate, more than 1,500,000 Shares (the "Option Pool") pursuant
to the exercise of all Options granted under this Plan, exclusive of those
Option Shares that may be reacquired by the Company by repurchase or otherwise.
At all times while Options granted under this Plan are outstanding, the Company
will reserve for issuance for the purposes hereof a sufficient number of
authorized and unissued Shares to fully satisfy the Company's obligations under
all such outstanding Options.
5. Administration. This Plan will be administered and interpreted by the
--------------
Board, or by a committee consisting of two or more members of the Board,
appointed by the Board for such purpose (the Board, or such committee, referred
to herein as the "Administrator"). Subject to the express terms and conditions
hereof, the Administrator is authorized to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have full and final authority in its discretion, subject
to the specific limitations on that discretion as are set forth herein and in
the Articles of Incorporation and Bylaws of the Company, at any time:
(a) to select and approve the Eligible Participants to whom Options
will be granted from time to time hereunder;
<PAGE>
(b) to determine the Fair Market Value of the Shares as of the Grant
Date for any Option that is granted hereunder;
(c) with respect to each Option it decides to grant, to determine the
terms and conditions of that Option, to be set forth in the Option
Agreement evidencing that Option (the form of which also being subject to
approval by the Administrator), which may vary from the "default" terms and
conditions set forth in section 6 below, except to the extent otherwise
provided in this Plan, including, without limitation, as follows:
(i) the total number of Option Shares that may be acquired by
the Optionee pursuant to the Option;
(ii) if the Option satisfies the conditions under Section
422(b) of the Code, whether the Option will be treated as an ISO;
(iii) the per share purchase price to be paid to the Company by
the Optionee to acquire the Option Shares issuable upon exercise of
the Option (the "Option Price"), provided that the Option Price will
not be less than 85% of the Fair Market Value of the Shares as of the
Grant Date;
(iv) the maximum period or term during which the Option will be
exercisable (the "Option Term"), provided that in no event may the
Option Term be longer than 10 years from the Grant Date;
(v) the maximum period following any Termination of
Eligibility Status, whether resulting from an Optionee's death,
disability or any other reason, during which period (the "Grace
Period") the Option will be exercisable, subject to Vesting and to the
expiration of the Option Term;
(vi) whether to accept a promissory note or other form of legal
consideration in addition to cash as payment of all or a portion of
the Option Price and/or Tax Withholding Liability to be paid by the
Optionee upon the exercise of an Option granted hereunder;
(vii) the conditions (e.g., the passage of time or the
occurrence of events), if any, that must be satisfied prior to the
vesting of the right to exercise all or specified portions of an
Option (such portions being described as the number of Option Shares,
or the percentage of the total number of Option Shares that may be
acquired by the Optionee pursuant to the Option; the vested portion
being referred to as a "Vested Option" and the unvested portion being
referred to as an "Unvested Option"); and
(viii) in addition, or as an alternative, to imposing conditions
on the right to exercise an Option as provided in section 5(c)(vii)
above, whether any portion of the Option Shares acquired by an
Optionee upon exercise of an Option will be subject to repurchase by
the Company or its assigns pursuant to section 6.8(c) below at the
Option Price paid for such Shares or at some other price that may be
less than the Fair Market Value of such Shares (such Shares, if
subject to repurchase at less than Fair Market Value, being referred
to as "Unvested Shares") following a Termination of Eligibility Status
or other designated event, and the conditions (e.g., the passage of
time or the
-2-
<PAGE>
occurrence of events), if any, that must be satisfied for such Shares
to be no longer subject to such right of repurchase at less than Fair
Market Value (such Shares being referred to as "Vested Shares"); and
(d) to delegate all or a portion of the Administrator's authority
under sections 5(a), (b) and (c) above to one or more members of the Board
who also are executive Administrat may decide to impose on such delegation.
6. Default Terms and Conditions of Option Agreements. Unless otherwise
-----------------------------------------------------
expressly provided in an Option Agreement based on the Administrator's
determination pursuant to section 5(c) above, the following terms and conditions
will be deemed to apply to each Option as if expressly set forth in the Option
Agreement:
6.1 ISO. No Option will be treated as an ISO unless treatment as an ISO is
---
expressly provided for in an Option Agreement or in an award letter or other
document provided to the Optionee in connection with the grant of the Option and
such Option satisfies the conditions of Section 422(b) of the Code.
6.2 Option Term. The Option Term will be for a period of 10 years
-----------
beginning on the Grant Date, except that in the case of an ISO granted to a 10%
stockholder, the Option Term will be for a period of 5 years beginning on the
Grant Date.
6.3 Grace Periods. Following a Termination of Eligibility Status:
-------------
(a) the Grace Period will be ninety (90) days, unless the
Termination of Eligibility Status is a result of a Termination for Cause or
the death or disability of the Optionee;
(b) the Grace Period will be six months if the Termination of
Eligibility Status is a result of the death or disability of the Optionee;
and
(c) the Option will terminate, and there will be no Grace Period,
effective immediately as of the date and time of a Termination for Cause of
the Optionee, regardless of whether the Option is Vested or Unvested.
6.4 Vesting. The Option initially will be deemed an entirely Unvested
-------
Option, but portions of the Option will become a Vested Option on the following
schedule:
(a) twenty-five percent (25.0%) will become a Vested Option as of the
first anniversary of the "Vesting Start Date" specified in the Option
Agreement (which may be earlier but may not be later than the Grant Date
specified therein); and
(b) two and one-twelfth percent (2.08 33%) of the Option will become
a Vested Option as of the end of each month thereafter];
provided that the Optionee does not suffer a Termination of Eligibility Status
prior to each such vesting date and provided further that additional vesting
will be suspended during any period while the Optionee is on a leave of absence
from the Company or its Subsidiaries, as determined by the Administrator.
-3-
<PAGE>
6.5 Exercise of the Option; Issuance of Share Certificate.
-----------------------------------------------------
(a) The portion of the Option that is a Vested Option may be
exercised by giving written notice thereof to the Company, on such form as
may be specified by the Administrator, but in any event stating: the
Optionee's intention to exercise the Option; the date of exercise; the
number of full Option Shares to be purchased (which number will be no less
than 100 Shares, without regard to adjustments to the number of Shares
subject to the Option pursuant to section 8 below, or, if less, all of the
remaining Shares subject to the Option); the amount and form of payment of
the Option Price; and such assurances of the Optionee's investment intent
as the Company may require to ensure that the transaction complies in all
respects with the requirements of the 1933 Act and other applicable
securities laws. The notice of exercise will be signed by the person or
persons exercising the Option. In the event that the Option is being
exercised by the representative of the Optionee, the notice will be
accompanied by proof satisfactory to the Company of the representative's
right to exercise the Option. The notice of exercise will be accompanied by
full payment of the Option Price for the number of Option Shares to be
purchased, in United States dollars, in cash, by check made payable to the
Company, or by delivery of such other form of payment (if any) as approved
by the Administrator in the particular case.
(b) To the extent required by applicable federal, state, local or
foreign law, and as a condition to the Company's obligation to issue any
Shares upon the exercise of the Option in full or in part, the Optionee
will make arrangements satisfactory to the Company for the payment of any
applicable Tax Withholding Liability that may arise by reason of or in
connection with such exercise. Such arrangements may include, in the
Company's sole discretion, that the Optionee tender to the Company the
amount of such Tax Withholding Liability, in cash, by check made payable to
the Company, or in the form of such other payment as may be approved by the
Administrator, in its discretion pursuant to section 5(c)(vi) above.
(c) After receiving a proper notice of exercise and payment of
the applicable Option Price and Tax Withholding Liability, the Company will
cause to be issued a certificate or certificates for the Option Shares as
to which the Option has been exercised, registered in the name of the
person rightfully exercising the Option and the Company will cause such
certificate or certificates to be delivered to such person.
6.6 Compliance with Law. Notwithstanding any other provision of this Plan,
-------------------
Options may be granted pursuant to this Plan, and Option Shares may be issued
pursuant to the exercise thereof by an Optionee, only after and on the condition
that there has been compliance with all applicable federal and state securities
laws. The Company will not be required to list, register or qualify any Option
Shares upon any securities exchange, under any applicable state, federal or
foreign law or regulation, or with the Securities and Exchange Commission or any
state agency, or secure the consent or approval of any governmental regulatory
authority, except that if at any time the Board determines, in its discretion,
that such listing, registration or qualification of the Option Shares, or any
such consent or approval, is necessary or desirable as a condition of or in
connection with the exercise of an Option and the purchase of Option Shares
thereunder, that Option may not be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent or approval is effected
or obtained free of any conditions that are not acceptable to the Board, in its
discretion. However, the Company will seek to register or qualify with, or as
may be provided by applicable local law, file for and secure an exemption from
such registration or qualification requirements from, the applicable
-4-
<PAGE>
securities administrator and other officials of each jurisdiction in which an
Eligible Participant would be granted an Option hereunder prior to such grant.
6.7 Restrictions on Transfer.
------------------------
(a) Options Nontransferable. No Option will be transferable by
-----------------------
an Optionee otherwise than by will or the laws of descent and distribution.
During the lifetime of a natural person who is granted an Option under this
Plan, the Option will be exercisable only by him or her. Notwithstanding
anything else in this Plan to the contrary, no Option Agreement will
contain any provision which is contrary to, or which modifies, the
provisions of this section 6.7(a).
(b) Prohibited Transfers. Prior to the Initial Public Offering,
--------------------
no Holder of any Option Shares may Transfer such Shares, or any interest
therein (i) except as expressly provided in this Plan, and (ii) other than
in full compliance with all applicable securities laws and any applicable
restrictions on Transfer provided in the Company's Articles of
Incorporation and/or Bylaws, which will be deemed incorporated by reference
into this Plan. All Transfers of Option Shares not complying with the
specific limitations and conditions set forth in this section 6.7 and in
section 6.8 below are expressly prohibited. Any prohibited Transfer is void
and of no effect, and no purported transferee in connection therewith will
be recognized as a Holder of Option Shares for any purpose whatsoever.
Should such a Transfer purport to occur, the Company may refuse to carry
out the Transfer on its books, attempt to set aside the Transfer, enforce
any undertakings or rights under this Plan, or exercise any other legal or
equitable remedy.
(c) Permitted Transfers. In the case of a Permitted Transfer,
-------------------
the rights of first refusal and purchase of the Company set forth in
sections 6.8(a) and 6.8(b) below will not apply. For such purposes, a
"Permitted Transfer" means any of the following: (i) a Transfer by will or
under the laws of descent and distribution; or (ii) a Transfer by a Holder
of Option Shares to his or her ancestors, descendants or spouse (other than
pursuant to a decree of divorce, dissolution or separate maintenance, a
property settlement, or a separation agreement or any similar agreement or
arrangement with a spouse, except for bona fide estate planning purposes),
or to a trust, partnership, limited liability company, custodianship or
other fiduciary account for the benefit of the Holder and/or such
ancestors, descendants or spouse, including any Transfer in the form of a
distribution from any such trust, partnership, limited liability company,
custodianship or other fiduciary account to any of the foregoing permitted
beneficial owners or beneficiaries thereof.
(d) Conditions to Transfer. It will be a condition to any
----------------------
Transfer of any Option Shares that:
(i) the transferee of the Shares will execute such
documents as the Company may reasonably require to ensure that
the Company's rights under this Plan, and any applicable Option
Agreement, are adequately protected with respect to such Shares,
including, without limitation, the transferee's agreement to be
bound by all of the terms and conditions of this Plan and such
Agreement, as if he or she were the original Holder of such
Shares; and
(ii) the Company is satisfied that such Transfer
complies in all respects with the requirements imposed by
applicable state and federal securities laws and regulations.
-5-
<PAGE>
(e) Market Standoff. If in connection with any public offering of
---------------
securities of the Company (or any Successor Entity), the underwriter or
underwriters managing such offering so requests, then each Optionee and
each Holder of Option Shares will agree to not sell or otherwise Transfer
any such Shares (other than Shares included in such underwriting) without
the prior written consent of such underwriter, for such period of time as
may be requested by the underwriter commencing on the effective date of the
registration statement filed with the Securities and Exchange Commission in
connection with such offering.
6.8 Rights of Purchase and First Refusal. The Company will have the
------------------------------------
following rights of purchase and first refusal with respect to Option Shares:
(a) Right of First Refusal. If any Holder proposes to Transfer any
----------------------
Option Shares prior to the Initial Public Offering, other than in the case
of a Permitted Transfer pursuant to section 6.7(c) above or an Involuntary
or Donative Transfer subject to section 6.8(b) below, the Company will have
an assignable right of first refusal to purchase such Shares on the terms
and conditions set out in this section 6.8(a). If the Company (or its
assignee) elects to exercise such right, it will do so on an all-or-nothing
basis with respect to any particular Transfer of Shares in the following
manner:
(i) Before any such Transfer, the Holder proposing to
Transfer such Shares will deliver a notice of proposed Transfer (a
"Proposed Transfer Notice") to the Company stating: the number of
Option Shares that the Holder proposes to Transfer and the Holder's
bona fide intention to Transfer such Shares; the names and addresses
of the Holder, the proposed transferee and subsequently such other
information regarding such transferee as the Company reasonably
requests; the manner and date of such proposed Transfer; and the bona
fide cash price and/or other consideration (and the fair market value
thereof) per share, if any, that such Transferee has offered to pay
Holder for such Shares (the "Offered Price") as well as such other
terms, including payment terms, and conditions, if any, as were
included in such offer (the "Offered Terms").
(ii) The Company (or its assignee) may exercise its right of
first refusal under this section 6.8(a) at any time not more than
twenty (20) days after the Company has received the Proposed Transfer
Notice with respect to such Shares. If the Company (or its assignee)
elects to exercise such purchase rights it will do so by delivering to
the Holder of such Shares a notice of such election and a closing date
that is no more than thirty (30) days after receipt of the Proposed
Transfer Notice (or such later date as the transferee may have offered
or on which the Transfer is otherwise scheduled to occur).
(iii) At the closing of the sale of the Shares to the Company
(or its assignee), to be held at its principal executive offices, the
Company (or its assignee) will pay the Holder of the Shares, in cash,
the purchase price equal to the Offered Price, subject to an
appropriate adjustment to take into account any deferred payment terms
that were included in the Offered Terms, except in the case of a
Transfer of Option Shares without consideration; provided that if the
Offered Price includes any non-cash consideration, the value thereof
for purposes of this section 6.8(a) will be determined in good faith
by the Board.
(iv) If the Company (including its assignees) fails or
refuses to exercise its rights under this section 6.8(a) with respect
to any Share s that are the subject of any
-6-
<PAGE>
Proposed Transfer Notice, then the Holder will have the right to
Transfer such Shares to the transferee named in such Notice at the
Offered Price and upon such Offered Terms as were set forth in such
Notice; provided that such Transfer must be completed within ninety
(90) days after the Company has received the Proposed Transfer Notice
with respect to such Shares.
(b) Following an Involuntary or Donative Transfer. Following any
---------------------------------------------
Involuntary Transfer or Donative Transfer (other than a Permitted Transfer)
of Option Shares (the "Transferred Shares") prior to the Initial Public
Offering, the Company will have the assignable right to purchase from the
transferee of the Transferred Shares ("Transferee") all or a portion of
such Shares for a purchase price that is equal to the Fair Market Value of
those Shares as of the date of such Transfer. If the Company (or its
assignee) elects to exercise such right, it will do so in the following
manner:
(i) Promptly after such Transfer, the transferor of the
Transferred Shares will deliver, or will cause the Transferee to
deliver, a notice (a "Completed Transfer Notice") to the Company
stating: the number of Transferred Shares; the names and addresses of
the transferor and the Transferee, and subsequently such other
information regarding the Transferee as the Company reasonably
requests; and the manner, circumstances and date of such Transfer.
(ii) The Company (or its assignee) may exercise its
purchase rights under this section 6.8(b) at any time not more than
ninety (90) days after the Company has received the Completed Transfer
Notice with respect to the Transferred Shares. If the Company (or its
assignee) elects to exercise such purchase rights it will do so by
delivering to the Transferee a notice of such election, specifying the
number of Transferred Shares to be purchased and a closing date that
is no more than sixty (60) days after the giving of such notice.
(iii) At such closing, to be held at the Company's
principal executive offices, the Company (or its assignee) will pay
the Transferee the purchase price specified in this section 6.8(b).
(c) Following a Termination of Eligibility Status. Following any
---------------------------------------------
Termination of Eligibility Status of the original Holder of any Option
Shares, the Company will have the assignable right (but not the obligation)
to purchase all or a portion of such Shares, for a purchase price that is
equal to (1) in the case of Unvested Shares pursuant to section 5(c)(viii)
above, the Option Price paid for those Shares, and (2) in the case of
Vested Shares, or Option Shares that were never subject to Vesting pursuant
to section 5(c)(viii) above, the greater of (A) the Option Price paid for
those Shares, or (B) the Fair Market Value of those Shares as of the date
of such Termination of Eligibility Status. Such right will be exercisable
in the following manner:
(d) The Company (or its assignee) may exercise its right of
repurchase under this section 6.8(c) at any time not more than ninety (90)
days after the effective date of such Termination of Eligibility Status (or
in the case of Shares issued upon the exercise of Options after such
Termination of Eligibility Status, a period of ninety (90) days after the
date of the exercise). If the Company (or its assignee) elects to exercise
such purchase rights it will do so by delivering to the Holder of such
Shares a notice of such election, specifying the number of Shares to be
-7-
<PAGE>
purchased and a closing date that is within such 90-day period, provided that if
the Holder of the Shares is not an employee of the Company or any of its
Subsidiaries, or is an officer, director or affiliate thereof, the Option
Agreement may provide that the period during which such purchase of the Shares
must take place may be longer than 90 days.
(i) At such closing, the Company (or its assignee) will pay the
Holder of the Shares, the purchase price, as specified in this section
6.8(c), in cash, or by cancellation of indebtedness to the Company, if any,
incurred by the original Holder of the Option Shares to purchase such
Shares, or both, at a closing to be held at the Company's principal
executive offices on the date specified in such notice, provided that if
the Holder of the Shares is not an employee of the Company or any of its
Subsidiaries, or is an officer, director or affiliate thereof, the Option
Agreement may provide that the purchase price may be paid, in whole or in
part, with a promissory note from the Company (or its assignee).
(e) Escrow. For purposes of facilitating the enforcement of the
------
restrictions on Transfer set forth in this Plan or in any Option Agreement, the
Administrator may, at its discretion, require the Holder of Option Shares to
deliver the certificate(s) for such Shares with a stock power executed by him or
her and by his or her spouse (if required for Transfer), in blank, to the
Secretary of the Company or his or her designee, to hold said certificate(s) and
stock power(s) in escrow and to take all such actions and to effectuate all such
Transfers and/or releases as are in accordance with the terms of this Plan. The
certificates may be held in escrow so long as the Option Shares whose ownership
they evidence are subject to any right of repurchase or first refusal under this
Plan or under an Option Agreement, and will be released by the escrow holder to
an Optionee (or to any permitted transferee of the Optionee) when they are no
longer subject to any right of repurchase or first refusal under this Plan or
under the Option Agreement. Each Optionee, by exercising an Option, thereby
acknowledges that the Secretary of the Company (or his or her designee) is so
appointed as the escrow holder with the foregoing authorities as a material
inducement to the grant of an Option under this Plan, that the appointment is
coupled with an interest, and that it accordingly will be irrevocable. The
escrow holder will not be liable to any party to an Option Agreement (or to any
other party) for any actions or omissions unless the escrow holder is grossly
negligent relative thereto. The escrow holder may rely upon any letter, notice
or other document executed by any signature purported to be genuine.
(f) Resolution of Disputes. If there is a dispute concerning the fair
----------------------
market value of the consideration offered or accepted for the Option Shares or
the Fair Market Value of the Option Shares, in connection with the exercise by
the Company of its rights under this section 6.8, the dispute will be resolved
by the independent certified public accounting firm that audited or prepared
without audit the Company's last regular annual financial statement and the
determination of that firm will be binding on the parties in the absence of
fraud.
6.9 Change of Control Transactions and Reorganizations.
--------------------------------------------------
(a) In the event of a Change of Control Transaction, (i) the Company
shall endeavor to cause the Successor Entity (or its parent or its
Subsidiary) in such transaction either to assume all of the Options which
have been granted hereunder and which are outstanding as of the
consummation of such transaction ("Closing"), or to issue (or cause to be
issued) in substitution thereof comparable options of such Successor Entity
(or of its parent or its
-8-
<PAGE>
Subsidiary) and (ii) if Optionee is an employee of the Company (or a
Subsidiary) and within a period of 12 months following the Closing the
employer terminates his or her employment, other than in the event of
Optionee's disability or a Termination for Cause, that portion of the
Option (the "Accelerated Portion") which remains Unvested that either (x)
would have become Vested over the 12-month period immediately following the
--------------------------------------------
Closing, or (y) represents 50% of the Unvested portion of the Option as of
--------------------------------------------------------------------------
the Closing, whichever portion is smaller, will become Vested immediately
------------
prior to such Closing, with further Vesting to take place at the same rate
(based on the portion of the Option representing a specified number of
Option Shares to periodically become Vested) and subject to the same
schedule as before the Closing until the entire Option becomes fully Vested
(assuming the Optionee does not suffer a Termination of Eligibility Status
prior to each such vesting date). If the Successor Entity (or its parent or
its Subsidiary) is unwilling to either assume such Options or grant
comparable options in substitution for such Options, on terms that are
acceptable to the Company as determined by the Board in the exercise of its
discretion, then the Board may cancel all outstanding Options, and
terminate this Plan, effective as of the Closing, provided that it will
notify all Optionees of the proposed Change of Control Transaction a
reasonable amount of time prior to the Closing so that each Optionee will
be given the opportunity to exercise the Vested portion of his or her
Option (giving effect to the Vesting of the Accelerated Portion under
clause (ii) above) prior to the Closing. For purposes of this section 6.9,
the term "Change of Control Transaction" means a Business Combination in
which less than (50%) of the outstanding voting securities of the Successor
Entity immediately following the Closing of the Business Combination
transaction are beneficially held by those persons and entities in the same
proportion as such persons and entities beneficially held the voting
securities of the Company immediately prior to such transaction; the term
"Business Combination" means a transaction or series of transactions
consummated within any period of 90 days resulting in (A) the sale of all
or substantially all of the assets of the Company, (B) a merger or
consolidation or other reorganization of which the Company or a Subsidiary
is a merging party, or (C) the sale or other change of beneficial ownership
of at least fifty percent (50%) of the outstanding voting securities of the
Company.
(b) Reorganization. If, in connection with a corporate reorganization
--------------
or any other transaction contemplated by Section 424 of the Code and
applicable regulations , with or involving another company (other than a
Subsidiary of the Company prior to the consummation of such reorganization
or other transaction, the "Target Company") or its outstanding voting
securities (and other than a Change of Control Transaction, a "Corporate
Reorganization"), the Company grants one or more Options (each, a
"Replacement Option") under this Plan in replacement or substitution for
one or more options (each, a "Terminated Option") granted by the Target
Company (or its parent or Subsidiary) to acquire shares of its capital
stock ("Target Shares") which are terminated or cancelled in connection
with such Corporate Reorganization, then notwithstanding section 5(c)(iii)
above, or in the case of an ISO notwithstanding section 6.1(b) above, the
Replacement Option shall be granted with an Option Price such that in the
good faith determination of the Administrator both (i) the excess of the
aggregate fair market value of the maximum number of Option Shares that may
be acquired by Optionee pursuant to the exercise of the Replacement Option
(without regard to the vesting thereof) over the aggregate Option Price of
such number of Option Shares is not greater than the excess of the
aggregate fair market value of the maximum number of Target Shares that
could have been acquired by Optionee pursuant to the exercise of the
Terminated Option prior to its termination or cancellation (without regard
to the vesting thereof) over the aggregate exercise price of the number of
such Target Shares, and (ii) the ratio of the Option
-9-
<PAGE>
Price to the fair market value of each Option Share is not less than the
ratio of the exercise price of the Terminated Option to the fair market
value of each Target Share, provided that the fair market value of the
Target Shares shall be determined immediately prior to such Corporate
Reorganization and the fair market value of the Option Shares shall be
determined immediately after such Corporation Reorganization.
6.10 Additional Restrictions on Transfer; Investment Intent. By accepting
------------------------------------------------------
an Option and/or Option Shares under this Plan, the Optionee will be deemed to
represent, warrant and agree that, unless a registration statement is in effect
with respect to the offer and sale of Option Shares: (i) neither the Option nor
any such Shares will be freely tradeable and must be held indefinitely unless
such Option and such Shares are either registered under the 1933 Act or an
exemption from such registration is available; (ii) the Company is under no
obligation to register the Option or any such Shares; (iii) upon exercise of the
Option, the Optionee will purchase the Option Shares for his or her own account
and not with a view to distribution within the meaning of the 1933 Act, other
than as may be effected in compliance with the 1933 Act and the rules and
regulations promulgated thereunder; (iv) no one else will have any beneficial
interest in the Option Shares; (v) the Optionee has no present intention of
disposing of the Option Shares at any particular time; and (vi) neither the
Option nor the Shares have been qualified under the securities laws of any state
and may only be offered and sold pursuant to an exception from qualification
under applicable state securities laws.
6.11 Stock Certificates; Legends. Certificates representing Option Shares
---------------------------
will bear all legends required by law and necessary or appropriate in the
Administrator's discretion to effectuate the provisions of this Plan and of the
applicable Option Agreement. The Company may place a "stop transfer" order
against Option Shares until full compliance with all restrictions and conditions
set forth in this Plan, in any applicable Option Agreement and in the legends
referred to in this section 6.11.
6.12 Notices. Any notice to be given to the Company under the terms of an
-------
Option Agreement will be addressed to the Company at its principal executive
office, Attention: Secretary, or at such other address as the Company may
designate in writing. Any notice to be given to an Optionee will be addressed to
him or her at the address provided to the Company by the Optionee. Any such
notice will be deemed to have been duly given if and when enclosed in a properly
sealed envelope, addressed as aforesaid, deposited, postage prepaid, in a post
office or branch post office regularly maintained by the local postal authority.
6.13 Other Provisions. Each Option Agreement may contain such other terms,
----------------
provisions and conditions, including restrictions on the Transfer of Option
Shares, and rights of the Company to repurchase such Shares, not inconsistent
with this Plan and applicable law, as may be determined by the Administrator in
its sole discretion.
6.14 Specific Performance. Under those circumstances in which the Company
--------------------
chooses to timely exercise its rights to repurchase Option Shares as provided
herein or in any Option Agreement, the Company will be entitled to receive such
Shares in specie in order to have the same available for future issuance without
dilution of the holdings of other stockholders of the Company. By accepting
Option Shares, the Holder thereof therefore acknowledges and agrees that money
damages will be inadequate to compensate the Company and its stockholders if
such a repurchase is not completed as contemplated hereunder and that the
Company will, in such case, be entitled to a decree of specific performance of
the terms hereof or to an injunction restraining such holder (or
-10-
<PAGE>
such Holder's personal representative) from violating this Plan or Option
Agreement, in addition to any other remedies that may be available to the
Company at law or in equity.
7. Term of the Plan. This Plan will become effective on the date of its
----------------
adoption by the Board, provided that this Plan is approved by the stockholders
of the Company (excluding Option Shares issued by the Company pursuant to the
exercise of Options granted under this Plan) within 12 months before or after
that date. If this Plan is not so approved by the stockholders of the Company
within that 12-month period of time, any Options granted under this Plan will be
rescinded and will be void. This Plan will expire on the tenth (10th)
anniversary of the date of its adoption by the Board or its approval by the
stockholders of the Company, whichever is earlier, unless it is terminated
earlier pursuant to section 11 of this Plan, after which no more Options may be
granted under this Plan, although all outstanding Options granted prior to such
expiration or termination will remain subject to the provisions of this Plan,
and no such expiration or termination of this Plan will result in the expiration
or termination of any such Option prior to the expiration or early termination
of the applicable Option Term.
8. Adjustments Upon Changes in Stock. In the event of any change in the
---------------------------------
outstanding Shares of the Company as a result of a stock split, reverse stock
split, stock bonus or distribution, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made in: (i)
the aggregate number of Shares that are reserved for issuance in the Option Pool
pursuant to section 4 above, under outstanding Options or future Options granted
hereunder; (ii) the Option Price and the number of Option Shares that may be
acquired under each outstanding Option granted hereunder; and (iii) other rights
and matters determined on a per share basis under this Plan or any Option
Agreement evidencing an outstanding Option granted hereunder. Any such
adjustments will be made only by the Board, and when so made will be effective,
conclusive and binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
Shares or securities convertible into or exchangeable for Shares.
9. Modification, Extension and Renewal of Options. Subject to the terms and
----------------------------------------------
conditions and within the limitations of this Plan, the Administrator may
modify, extend or renew outstanding Options granted under this Plan, or accept
the surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefore (to the
extent not theretofore exercised). Notwithstanding the foregoing, however, no
modification of any Option will, without the consent of the Optionee, alter or
impair any rights or obligations under any outstanding Option.
10. Governing Law; Venue. The internal laws of the State of Delaware
---------------------
irrespective of its choice of law principles) will govern the validity of this
Plan, the construction of its terms and the interpretation of the rights and
duties of the parties hereunder and under any Option Agreement. Any party may
seek to enforce its rights under this Plan or any Option Agreement entered into
under this Plan in any court of competent jurisdiction located within the
judicial district in which the Company or its Subsidiaries has a regular place
of business.
11. Amendment and Discontinuance. The Board may amend, suspend or discontinue
----------------------------
this Plan at any time or from time to time; provided that no action of the Board
will, without the approval of the stockholders of the Company, materially
increase (other than by reason of an adjustment pursuant to section 8 hereof)
the maximum aggregate number of Option Shares in the Option Pool, materially
increase the benefits accruing to Eligible Participants, or materially modify
the category of, or
-11-
<PAGE>
eligibility requirements for persons who are Eligible Participants. However, no
such action may alter or impair any Option previously granted under this Plan
without the consent of the Optionee, nor may the number of Option Shares in the
Option Pool be reduced to a number that is less than the aggregate number of
Option Shares (i) that may be issued pursuant to the exercise of all outstanding
and unexpired Options granted hereunder, and (ii) that have been issued and are
outstanding pursuant to the exercise of Options granted hereunder.
12. No Stockholder Rights. No rights or privileges of a stockholder in the
---------------------
Company are conferred by reason of the granting of an Option. No Optionee will
become a stockholder in the Company with respect to any Option Shares unless and
until the Option has been properly exercised and the Option Price fully paid as
to the portion of the Option exercised.
13. Copies of Plan. A copy of this Plan will be delivered to each Optionee at
--------------
or before the time he, she or it executes an Option Agreement.
Date Plan Adopted by Board of Directors: September 8, 1999
Date Plan Approved by the Stockholders: September 8, 1999
-12-
<PAGE>
SiLutia, Inc.
1999 Stock Option Plan
Exhibit A
Definitions
-----------
1. "10% stockholder" means a person who owns, either directly or indirectly by
virtue of the ownership attribution provisions set forth in Section 424(d) of
the Code at the time he or she is granted an Option, stock possessing more than
10% of the total combined voting power or value of all classes of stock of the
Company and/or of its Subsidiaries.
2. "1933 Act" means the Securities Act of 1933, as amended.
3. "Administrator" has the meaning set forth in section 5 of the Plan.
4. "Board" has the meaning set forth in section 1 of the Plan.
5. "Business Combination" has the meaning set forth in section 6.9 of the Plan.
6. "Change of Control Transaction" has the meaning set forth in section 6.9 of
the Plan.
7. "Closing" has the meaning set forth in section 6.9 of the Plan.
8. "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of the Code as
enacted at the time of the Plan's adoption by the Board and as subsequently
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise).
9. "Company" has the meaning set forth in section 1 of the Plan.
10. "Completed Transfer Notice" has the meaning set forth in section 6.8(b) of
the Plan.
11. "disability" means any physical or mental disability which results in a
Termination of Eligibility Status under applicable law, except that for purposes
of section 6.1(c) of the Plan, the term "disability" means permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
12. "Donative Transfer" with respect to Option Shares means any voluntary
Transfer by a transferor other than for value or the payment of consideration to
the transferor.
13. "Eligible Participants" has the meaning set forth in section 3 of the Plan.
14. "Fair Market Value" means, with respect to the Shares and as of the date
that is relevant to such a determination (e.g., on the Grant Date), the market
price per share of such Shares determined by the Administrator, consistent with
the requirements of Section 422 of the Code and to the extent consistent
therewith, as follows: (a) if the Shares are traded on a stock exchange on the
date in question, then the Fair Market Value will be equal to the closing price
reported by the applicable composite-transactions report for such date; (b) if
the Shares are traded over-the-counter on the date in question and are
classified as a national market issue, then the Fair Market Value will be equal
to the last-transaction price quoted by the NASDAQ system for such date; (c) if
the Shares are traded over-the-counter on the date in question but are not
classified as a national market issue, then the Fair
<PAGE>
Market Value will be equal to the mean between the last reported representative
bid and asked prices quoted by the NASDAQ system for such date; and (d) if none
of the foregoing provisions is applicable, then the Fair Market Value will be
determined by the Administrator in good faith on such basis as it deems
appropriate.
15. "Grace Period" has the meaning set forth in section 5(c)(v) of the Plan.
16. "Grant Date" means, with respect to an Option, the date on which the Option
Agreement evidencing that Option is entered into between the Company and the
Optionee, or such other date as may be set forth in that Option Agreement as the
"Grant Date" which will be the effective date of that Option Agreement.
17. "Holder" means the holder of any Option Shares.
18. "Initial Public Offering" means the closing of the first sale of securities
of the Company, or of any Successor Entity, to the public, through a firm
commitment underwriting, for an aggregate price (exclusive of underwriters'
discounts and commissions and expenses of the offering) of at least $7,500,000,
pursuant to an effective registration statement filed with the Securities and
Exchange Commission under the 1933 Act.
19. "Involuntary Transfer" with respect to Option Shares includes, without
limitation, any of the following: (A) an assignment of the Shares for the
benefit of creditors of the transferor; (B) a Transfer by operation of law; (C)
an execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor; (D) a Transfer pursuant
to any decree of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a spouse
(except for bona fide estate planning purposes) under which any Shares are
Transferred or awarded to the spouse of the transferor or are required to be
sold; or (E) a Transfer resulting from the filing by the transferor of a
petition for relief, or the filing of an involuntary petition against the
transferor, under the bankruptcy laws of the United States or of any other
nation.
20. "ISO" means an "incentive stock option" as defined in Section 422 of the
Code.
21. "Offered Price" has the meaning set forth in section 6.8(a) of the Plan.
22. "Offered Terms" has the meaning set forth in section 6.8(a) of the Plan.
23. "Option Agreement" has the meaning set forth in section 1 of the Plan.
24. "Option Pool" has the meaning set forth in section 4 of the Plan.
25. "Option Price" has the meaning set forth in section 5(c)(iii) of the Plan.
26. "Option Shares" has the meaning set forth in section 1 of the Plan, provided
that for purposes of section 6.7 and section 6.8 of the Plan, the term "Option
Shares" includes all Shares issued by the Company to a Holder (or his, her or
its predecessor) by reason of such holdings, including any securities which may
be acquired as a result of a stock split, stock dividend, and other
distributions of Shares in the Company made upon, or in exchange for, other
securities of the Company.
27. "Option Term" has the meaning set forth in section 5(c)(iv) of the Plan.
ii
<PAGE>
28. "Optionee" has the meaning set forth in section 1 of the Plan.
29. "Options" has the meaning set forth in section 1 of the Plan.
30. "Permitted Transfer" has the meaning set forth in section 6.7(c) of the
Plan.
31. "Plan" has the meaning set forth in section 1 of the Plan.
32. "Proposed Transfer Notice" has the meaning set forth in section 6.8(a) of
the Plan.
33. "Replacement Option" has the meaning set forth in section 6.9(b) of the
Plan.
34. "Shares" has the meaning set forth in section 1 of the Plan.
35. "Subsidiary" has the same meaning as "subsidiary corporation" as defined in
Section 424(f) of the Code.
36. "Successor Entity" means a corporation or other entity that acquires all or
substantially all of the assets of the Company, or which is the surviving or
parent entity resulting from a Business Combination, as that term is defined in
section 6.9 of the Plan.
37. "Target Company" has the meaning set forth in section 6.9(b) of the Plan.
38. "Target Shares" has the meaning set forth in section 6.9(b) of the Plan
39. "Tax Withholding Liability" in connection with the exercise of any Option
means all federal and state income taxes, social security tax, and any other
taxes applicable to the compensation income arising from the transaction
required by applicable law to be withheld by the Company.
40. "Terminated Option" has the meaning set forth in section 6.9(b) of the
Plan.
41. "Termination of Eligibility Status" means (i) in the case of any employee
of the Company and/or any of its Subsidiaries, a termination of his or her
employment, whether by the employee or employer, and whether voluntary or
involuntary, including without limitation as a result of the death or disability
of the employee, (ii) in the case of any advisor, consultant, or independent
contractor of the Company and/or any of its Subsidiaries, the termination of the
services relationship pursuant to any contract between the parties or otherwise
under applicable law, and (iii) in the case of any director of the Company
and/or any of its Subsidiaries, the death of or resignation by the director or
his or her removal from the board in the manner provided by the articles of
incorporation, bylaws or other organic instruments of the Company or Subsidiary
or otherwise in accordance with applicable law.
42. "Termination for Cause" means (i) in the case of an Optionee who is an
employee of the Company and/or any of its Subsidiaries, a termination by the
employer of the Optionee's employment for "cause" as defined by applicable law,
by any contract of employment or the Option Agreement, or if not defined
therein, pursuant to the "For Cause Standard" set forth below, (ii) in the case
of an Optionee who is or which is an advisor, consultant or independent
contractor to the Company and/or any of its Subsidiaries, a termination of the
services relationship by the hiring party for "cause" or breach of contract, as
defined by applicable law, by any contract between the parties or the Option
Agreement, or if not defined therein, pursuant to the "For Cause Standard" set
forth
iii
<PAGE>
below, and (iii) in the case of an Optionee who is a director of the Company
and/or any of its Subsidiaries, removal of him or her from the board of
directors by action of the stockholders or, if permitted by applicable law and
the articles, bylaws or other organic documents of the Company or the
Subsidiary, as the case may be, or pursuant to applicable law, by the other
directors), in connection with the good faith determination of the board of
directors (or of the Company's or Subsidiary's stockholders if so required, but
in either case excluding the vote of the subject individual if he or she is a
director or a stockholder) that the Optionee has engaged in any acts which
breach any fiduciary duty to the Company, any of its Subsidiaries or their
stockholders, or in any acts involving dishonesty or moral turpitude or in any
acts that materially and adversely affect the business, affairs or reputation of
the Company or any of its Subsidiaries (the "For Cause Standard").
43. "Transfer" with respect to Option Shares, includes, without limitation, a
voluntary or involuntary sale, assignment, transfer, conveyance, pledge,
hypothecation, encumbrance, disposal, loan, gift, attachment or levy of those
Shares, including any Involuntary Transfer, Donative Transfer or transfer by
will or under the laws of descent and distribution.
44. "Transferee" has the meaning set forth in section 6.8(b) of the Plan.
45. "Transferred Shares" has the meaning set forth in section 6.8(b) of the
Plan.
46. "Unvested Option" has the meaning set forth in section 5(c)(vii) of the
Plan.
47. "Unvested Shares" has the meaning set forth in section 5(c)(viii) of the
Plan.
48. "Vested Option" has the meaning set forth in section 5(c)(vii) of the Plan.
49. "Vested Shares" has the meaning set forth in section 5(c)(viii) of the
Plan.
iv
