EXHIBIT 4.6
PRINCIPIA PHARMACEUTICAL CORPORATION
1999 EQUITY COMPENSATION PLAN
Amended and Restated September 8, 2000
Principia Pharmaceutical Corporation, a Delaware corporation
("Principia") adopted the Principia Pharmaceutical Corporation 1999 Equity
Compensation Plan (the "Plan") to provide (i) designated employees of Principia
and its subsidiaries (ii) certain consultants and advisors who performs services
for Principia or its subsidiaries and (iii) non-employee members of the Board of
Directors of Principia with the opportunity to receive grants of incentive stock
options, nonqualified stock options and restricted stock.
Human Genome Sciences, Inc., a Delaware corporation (the "Company"),
became the parent corporation of Principia pursuant to the transactions
contemplated in the Agreement and Plan of Reorganization by and among the
Company, Principia, the stockholders of Principia as listed in the signature
page of the Merger Agreement, and PCCA Inc., a Delaware corporation, dated
September 8, 2000 (the "Merger Agreement"). Pursuant to the Merger Agreement,
the Company assumed and amended and restated the Plan as set forth herein,
effective September 8, 2000.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by the
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board. After an initial public offering of the Company's stock as described
in Section 18(b) (a "Public Offering"), the Plan shall be administered by a
committee, which may consist of "outside directors" as defined under section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and
related Treasury regulations and "non-employee directors" as defined under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). However, the board may ratify or approve any grants as it deems
appropriate. If a committee administers the Plan, references in the Plan to the
"Board," as they relate to Plan administration, shall be deemed to refer to the
committee.
(b) Board Authority. The Board shall have the sole authority to (i)
determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, and (v) deal with any other matters
arising under the Plan.
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(c) Board Determinations. The Board shall have full power and authority
to administer and interpret the Plan, to make factual determinations and to
adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Board's interpretations of the Plan
and all determinations made by the Board pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interest in
the Plan or in any awards granted hereunder. All powers of the Board shall be
executed in its sole discretion, in the best interest of the Company, not as a
fiduciary, and in keeping with the objectives of the Plan and need not be
uniform as to similarly situated individuals.
2. Grants
Awards under the Plan may consist of grants of incentive stock options
as described in Section 5 ("Incentive Stock Options"), nonqualified stock
options as described in Section 5 ("Nonqualified Stock Options") (Incentive
Stock Options and Nonqualified Stock Options are collectively referred to as
"Options") and restricted stock as described in Section 6 ("Restricted Stock")
(hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Board deems appropriate and as are
specified in writing by the Board to the individual in a grant instrument or an
amendment to the grant instrument (the "Grant Instrument"). The Board shall
approve the form and provisions to each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 24,682 shares. The maximum
aggregate number of shares of Company Stock that shall be subject to Grants made
under the Plan to any individual during any calendar year shall be 24,682
shares, subject to adjustment as described below. The shares may be authorized
but unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of the
Plan. If and to the extent Options granted under the Plan terminate, expire, or
are canceled, forfeited, exchanged or surrendered without having been exercised
or if any shares of Restricted Stock are forfeited, the shares subject to such
Grants shall again be available for purposes of the Plan. If shares of Company
Stock are used to pay the exercise price of an Option, only the net number of
shares received by the grantee pursuant to such exercise shall be considered to
have been issued or transferred under the Plan with respect to such Option, and
the remaining number of shares subject to the Option shall again be available
for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spin-off,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (v) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spin-off or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
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Plan, and the price per share of such Grants may be appropriately adjusted by
the Board to reflect any increase or decrease in the number of, or change in the
kind or value of, issued sharers of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of right and benefits under such
Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Board shall be
final, binding and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of Principia and its subsidiaries
("Employees"), and members of the Board of Directors of Principia who were not
Employees ("Non-Employee Directors") were eligible to participate in the Plan.
Consultants and advisors who performed services for Principia or any of its
subsidiaries ("Key Advisors") were eligible to participate in the Plan if the
Key Advisors rendered bona fide services to Principia or its subsidiaries, the
services were not in connection with the offer and sale of securities in a
capital-raising transaction, and the Key Advisors did not directly or indirectly
promote or maintain a market for the Company's securities. Effective September
8, 2000, outstanding options granted under the Plan to purchase Principia common
stock are cancelled and are replaced by options granted under the Plan to
purchase the Company Stock, and outstanding awards of restricted Principia
common stock granted under the Plan are replaced by awards of restricted Company
Stock, all pursuant to the terms of the Merger Agreement. No other awards will
be granted under the Plan after September 8, 2000.
(b) Selection of Grantees. The Board shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Board determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
(a) Number of Shares. The Board shall determine the number of shares of
Company Stock that will be subject to each Grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price
(i) The Board may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees, Non-Employee Directors and Key Advisors.
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(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Board and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted; provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or the
NASDAQ National Market, the last reported sale price thereof on the relevant
date or (if there were no trades on that date) the latest preceding date upon
which a sale was reported, or (y) if the Company Stock is not principally traded
on such exchange or market, the mean between the last reported "bid" and "asked"
prices of Company Stock on the relevant date, as reported on NASDAQ or, if not
so reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Board determines. If the Company Stock is not publicly traded or, if publicly
traded, is not subject to reported transactions or "bid" or "asked" quotations
as set forth above, the Fair Market Value per share shall be as determined by
the Board.
(c) Option Term. The Board shall determine the term of each Option. The
term of any Option shall not exceed ten years from the date of grant. However,
an Incentive Stock Option that is granted to an Employee who, at the time of
grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company, or any parent or subsidiary of the
Company, may not have a term that exceeds five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Board and specified in the Grant Instrument. The Board may
accelerate the exercisability of any or all outstanding Options at any time for
any reason.
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(e) Termination of Employment, Disability or Death
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee ceases
to be employed by, or provide service to, the Company for any reason other than
Disability, death, or termination for Cause, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other period of time as may be specified by the
Board), but in any event no later than the date of expiration of the Option
term. Except as otherwise provided by the Board, any of the Grantee's Options
that are not otherwise exercisable as of the date on which the Grantee ceases to
be employed by, or provide service to, the Company shall terminate as of such
date.
(ii) In the event the Grantee ceases to be employed by, or
provide service to, the Company on account of a termination for Cause by the
Company, any Option held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Company. In
addition, notwithstanding any other provisions of this Section 5, if the Board
determines that the Grantee has engaged in conduct that constitutes Cause at any
time while the Grantee is employed by, or providing service to, the Company or
after the Grantee's termination of employment or service, any Option held by the
Grantee shall immediately terminate, and the Grantee shall automatically forfeit
all shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee is Disabled, any Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of time as may be
specified by the Board), but in any event no later dm the date of expiration of
the Option term. Except as otherwise provided by the Board, any of the Grantee's
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall terminate as
of such date.
(iv) If the Grantee dies while employed by, or providing
service to, the Company or within 90 days after the date on which the Grantee
ceases to be employed or provide service on account of a termination specified
in Section 5(e)(i) above (or within such other period of time as may be
specified by the Board), any Option that is otherwise exercisable by the Grantee
shall terminate unless exercised within one year after the date on which the
Grantee ceases to be employed by, or provide service to, the Company (or within
such other period of time as may be specified by the Board), but in any event no
later than the date of expiration of the Option term. Except as otherwise
provided by the Board, any of the Grantee's Options that are not otherwise
exercisable as of the date on which the Grantee ceases to be employed by, or
provide service to, the Company shall terminate as of such date.
(v) For purposes of this Section 5(e) and Section 6:
(A) The term "Company" shall mean the Company and its parent
and subsidiary corporations or other entities, as determined by the
Board.
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(B) "Employed by, or provide service to, the Company" shall
mean employment or service as an employee, key advisor or member of the
Board of Director of the Company or Principia (so that, for purposes of
exercising Options and satisfying conditions with respect to Restricted
Stock, a Grantee shall not be considered to have terminated employment
or service until the Grantee ceases to be an employee, key advisor or
member of the Board of Director of the Company or Principia), unless
the Board determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Cause" shall mean, except to the extent specified
otherwise by the Board, a finding by the Board that the Grantee (i) has
breached his or her employment or service contract with the Company,
(ii) has engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his or her employment or service,
(iii) has disclosed trade secrets or confidential information of the
Company to persons not entitled to receive such information or (iv) has
engaged in such other behavior detrimental to the interests of the
Company as the Board determines.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Board (x) in cash, (y) with the
approval of the Board, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Board deems appropriate) and having
a Fair Market Value on the date of exercise equal to the Exercise Price or by
attestation (on a form prescribed by the Board) to ownership of shares of
Company Stock having a Fair Market Value on the date of exercise equal to the
Exercise Price, or (z) by such other method as the Board may approve, including
(after a Public Offering) payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board. The Board may authorize
loans by the Company to Grantees in connection with the exercise of an Option,
upon such terms and conditions as the Board, in its sole discretion, deems
appropriate. Shares of Company Stock used to exercise an Option shall have been
held by the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Grantee shall pay
the Exercise Price and the amount of any withholding tax due (pursuant to
Section 7) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code).
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6. Restricted Stock Grants
The Board may issue or transfer shares of Company Stock to an Employee,
Non-Employee Director or Key Advisor under a Grant of Restricted Stock, upon
such terms as the Board deems appropriate. The following provisions are
applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, and subject to restrictions or no
restrictions, as determined by the Board. The Board may establish conditions
under which restrictions on shares of Restricted Stock shall lapse over a period
of time or according to such other criteria as the Board deems appropriate. The
period of time during which the Restricted Stock will remain subject to
restrictions will be designated in the Grant Instrument as the "Restriction
Period."
(b) Number of Shares. The Board shall determine the number of shares of
Company Stock to be issued or transferred pursuant to a Restricted Stock Grant
and the restrictions applicable to such.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which the restrictions
have not lapsed, and those shares of Company Stock must be immediately returned
to the Company. The Board may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 8(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Board may determine that the Company will not issue
certificates for shares of Restricted Stock until all restrictions on such
shares have lapsed, or that the Company will retain possession of certificates
for shares of Restricted Stock until all restrictions on such shares have
lapsed.
(e) Right to Vote and to Receive Dividends. During the Restriction
Period, the Grantee shall have the right to vote shares of Restricted Stock and
to receive any dividends or other distributions paid on such shares, subject to
any restrictions deemed appropriate by the Board.
(f) Lapse of Restrictions. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Board. The Board may determine, as
to any or all Restricted Stock Grants, that the restrictions shall lapse without
regard to any Restriction Period.
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7. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Grantee or other person receiving
or exercising Grants pay to the Company the amount of any federal, state or
local taxes that the Company is required to withhold with respect to such
Grants, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Board so permits, a Grantee may
elect to satisfy the Company's income tax withholding obligation with respect to
a Grant by having shares withheld up to an amount that does not exceed the
Grantee's minimum applicable withholding tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Board and may be subject to the prior approval of the Board.
8. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by the laws of descent and
distribution or, with respect to Grants other than Incentive Stock Options, if
permitted in any specific case by the Board, pursuant to a domestic relations
order (as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the regulations thereunder). When a Grantee
dies, the personal representative or other person entitled to succeed to the
rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Board may provide, in a Grant Instrument, that a Grantee may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
applicable securities laws, according to such terms as the Board may determine;
provided that the Grantee receives no consideration for the transfer of an
Option and the transferred Option shall continue to be subject to the same terms
and conditions as were applicable to the Option immediately before the transfer.
9. Right of First Refusal; Repurchase Right
(a) Offer. Prior to a Public Offering, if at any time an individual
desires to sell, encumber, or otherwise dispose of shares of Company Stock that
were issued or distributed to him or her under this Plan and that are
transferable, the individual may do so only pursuant to a bona fide arm's length
written offer, and the individual shall first offer the shares to the Company by
giving the Company written notice disclosing: (a) the name of the proposed
transferee of the Company Stock; (b) the certificate number and number of shares
of Company Stock proposed to be transferred or encumbered; (c) the proposed
price; (d) all other terms of the proposed transfer; and (e) a written copy of
the proposed offer. Within 60 days after receipt of such notice, the Company
shall have the option to purchase all or part of such Company Stock at the then
current Fair Market Value (as defined in Section 5(b)) and may pay such price in
installments over a period not to exceed four years, at the discretion of the
Board.
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(b) Sale. In the event the Company (or a stockholder, as described
below) does not exercise the option to purchase Company Stock, as provided
above, the individual shall have the right to sell, encumber, or otherwise
dispose of the shares of Company Stock described in subsection (a) on the terms
of the transfer set forth in the written notice to the Company, provided such
transfer is effected within 15 days after the expiration of the option period.
The Committee may require that the transferee of such shares agree to be bound
by the terms of this Section 9 or a stockholder's agreement as described in
subsection (e) below. If the transfer is not effected within such period, the
Company must again be given an option to purchase, as provided above.
(c) Assignment of Rights. The Board, in its sole discretion, may waive,
in whole or in part, the Company's right of first refusal and repurchase right
under this Section 9. In the event of such a waiver, the Board may, in its sole
discretion, assign to the Company's stockholders, as described below, that
portion of the Company's right of first refusal and repurchase right that has
been so waived, in which case such portion shall be assigned to the "Large
Stockholders" (as that term is defined in the Stockholders' Agreement, dated as
of July 14, 1999, among the Company and certain of its stockholders (the
"Stockholders Agreement")) and the holders of Series A-2 Preferred Stock of the
Company (collectively, the "assignee stockholders"). The rights so assigned may
be exercised by the assignee stockholders in the same proportion that each such
assignee stockholder's stock ownership bears to the stock ownership of all such
assignee stockholders. If the assignee stockholders do not exercise all of the
rights so assigned to them, the Board may, in its sole discretion, assign the
unexercised rights to any or all of the stockholders of the Company (the
"subsequent assignee stockholders") in the same proportion that each such
subsequent assignee stockholder's stock ownership bears to the stock ownership
of all the subsequent assignee stockholders of the Company, as determined by the
Board. To the extent that a subsequent assignee stockholder has been given such
right and does not purchase his or her allotment, the other subsequent assignee
stockholders shall have the right to purchase such allotment on that same basis.
(d) Purchase by the Company. Prior to a Public Offering, if a Grantee
ceases to be employed by, or provide service to, the Company, the Company shall
have the right to purchase all or part of any Company Stock issued or
distributed to him or her under this Plan at its then current Fair Market Value
(as defined in Section 5(b)) (or at such other price as may be established in
the Grant Instrument); provided, however, that such repurchase shall be made in
accordance with applicable accounting rules to avoid adverse accounting
treatment.
(e) Stockholder's Agreement. Notwithstanding the provisions of this
Section 9, if the Board requires that a Grantee execute a stockholder's
agreement with respect to any Company Stock issued or distributed pursuant to
this Plan, the provisions of this Section 9 shall not apply to such Company
Stock.
10. Change of Control of the Company
As used herein, a "Change in Control" shall be deemed to have occurred
if:
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(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than persons who are stockholders on the effective date
of the Plan) becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the voting power of the then outstanding securities of the
Company; provided that a Change of Control shall not be deemed to occur as a
result of a change of ownership resulting from the death of a stockholder, and a
Change of Control shall not be deemed to occur as a result of a transaction in
which the Company becomes a subsidiary of another corporation and in which the
stockholders of the Company, immediately prior to the transaction, will
beneficially own, immediately after the transaction, shares entitling such
stockholders to more than 50% of all votes to which all stockholders of the
parent corporation would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a
separate class vote); or
(b) The stockholders of the Company approve (or, if stockholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
stockholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to more than 50% of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
11. Consequences of a Change in Control
(a) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Board determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by the surviving corporation, and outstanding Restricted Stock shall be
converted to restricted stock of the surviving corporation.
(b) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (c) below, in the event of a Change of Control, the Board may take
any of the following actions with respect to any or all outstanding Grants: the
Board may (i) determine that outstanding Options shall automatically accelerate
and become fully exercisable and that the restrictions and conditions on
outstanding Restricted Stock shall immediately lapse, (ii) require that Grantees
surrender their outstanding Options in exchange for a payment by the Company, in
cash or Company Stock as determined by the Board, in an amount equal to the
amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's unexercised Options exceeds the Exercise Price of the
Options or (iii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Board deems appropriate. Such surrender or termination shall take place as
of the date of the Change of Control or such other date as the Board may
specify. The Board shall have no obligation to take any of the foregoing
actions, and, in the absence of any such actions, outstanding Options and
Restricted Stock shall continue in effect according to their terms (subject to
any assumption pursuant to subsection (a)).
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(c) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Board shall not have the right to take
any actions described in the Plan (including without limitation actions
described in subsection (b) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
12. Requirements for Issuance or Transfer of Shares
(a) Stockholder's Agreement. The Board may require that a Grantee
execute a stockholder's agreement, with such terms as the Board deems
appropriate, with respect to any Company Stock issued or distributed pursuant to
this Plan.
(b) Limitations on Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance or transfer of such
Company Stock have been complied with to the satisfaction of the Board. The
Board shall have the right to condition any Grant made to any Grantee hereunder
on such Grantee's undertaking in writing to comply with such restrictions on his
or her subsequent disposition of such shares of Company Stock as the Board shall
deem necessary or advisable, and certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Company Stock issued or transferred under the Plan will be subject to such
stop-transfer orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend
be placed thereon.
(c) Lock-Up Period. If so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any registration of the offering of any securities of the Company under the
Securities Act of 1933, as amended (the "Securities Act"), a Grantee (including
any successor or assigns) shall not sell or otherwise transfer any shares or
other securities of the Company during the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period"). Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
(d) Certain Prohibited Transfers. Notwithstanding any other provision
of the Plan:
(i) Until a registration statement with respect to an initial
public offering of the Company's stock is declared effective by the United
States Securities and Exchange Commission, a Grantee shall not in any manner
transfer or sell any shares of Company Stock to any person who is listed as a
prohibited sublicensee in the License Agreement dated July 14, 1999 (the
"License Agreement"), among the Company, Centeon L.L.C., Centeon Pharma GmbH,
Centeon Bio-Services, Inc. and Delta Biotechnology Limited.
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(ii) Each certificate for shares of Company Stock held by a
Grantee shall contain a legend giving appropriate notice of the restriction
imposed by this Section 12(d).
(iii) The provisions of this subsection (d) shall survive the
termination of the Plan and shall continue to apply until a registration
statement with respect to an initial public offering of the Company's stock is
declared effective by the United States Securities and Exchange Commission.
13. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without stockholder
approval if such approval is required in order for Incentive Stock Options
granted or to be granted under the Plan to meet the requirements of section 422
of the Code or, after a Public Offering, such approval is required in order to
exempt compensation under the Plan from the deduction limit under section 162(m)
of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the Board
acts under Section 18(b). The termination of the Plan shall not impair the power
and authority of the Board with respect to an outstanding Grant. Whether or not
the plan has terminated, an outstanding Grant may be terminated or amended under
Section 19(b) or may be amended by agreement of the Company and the Grantee
consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon an
enforceable against the Company and its successors and assigns.
(e) Certain Amendments Prohibited. Notwithstanding any other provisions
of the Plan:
(i) Until the first to occur of (A) the date that the holders
of Series A-2 Preferred Stock of the Company (the "Series A-2 Stockholders") own
less than 3% of the Company Stock or (B) the date of a First Approval of a
Licensed Product in a Major Territory (as such terms are defined in the License
Agreement), no modification, amendment or waiver, temporary or permanent, of
Section 9(c) or 12(d) or this Section 13(e) which is adverse to the Series A-2
Preferred Stock may be made without the written consent of (x) the Board and (y)
the holders of a majority of the voting power of the shares of Series A-2
Preferred Stock then outstanding. The percentage of Company Stock owned by the
Series A-2 Stockholders shall be computed in the manner set forth in Section 13
of the Stockholders Agreement.
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(ii) Any modification, amendment or waiver, temporary or
permanent, of Section 9(c) or 12(d) or this Section 13(e) that (A) is not
adverse to the Series A-2 Stockholders or (B) is adverse to the Series A-2
Stockholders but arises after the occurrence of either event (A) or (B) listed
in the first sentence of subsection (e)(i) above may be made only pursuant to
the written consent of (x) the Board and (y) the holders of a majority of the
voting power of the Series A Preferred Stock of the Company.
14. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
15. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
16. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Board shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
17. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
18. Effective Date of the Plan
(a) Effective Date. Subject to approval by the Company's stockholders,
the Plan shall be effective on September 8, 1999.
(b) Public Offering. The provisions of the Plan that refer to a Public
Offering, or that refer to, are applicable to persons subject to, section 16 of
the Exchange Act or section 162(m) of the Code, shall be effective, if at all,
upon the initial registration of the Company Stock under section 12(g) of the
Exchange Act, and shall remain effective thereafter for so long as such stock is
so registered.
<PAGE>
19. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Board to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Board may make a Grant
to an employee of another corporation who becomes an Employee by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation. The terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Board shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, after a Public Offering it is the
intent of the Company that the Plan and all transactions under the Plan comply
with a applicable provisions of Rule 16b-3 or its successors under the Exchange
Act. In addition, it is the intent of the Company that the Plan and applicable
Grants under the Plan comply with the applicable provisions of section 162(m) of
the Code, after a Public Offering, and section 422 of the Code. To the extent
that any legal requirement of section 16 of the Exchange Act or section 162(m)
or 422 of the Code as set forth in the Plan ceases to be required under section
16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision
shall cease to apply. The Board may revoke any Grant if it is contrary to law or
modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Board may also adopt rules regarding the withholding
of taxes on payments to Grantees. The Board may, in its sole discretion, agree
to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the conflict of laws provisions
thereof.
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