Exhibit 99.2
Form of Stock Option Agreement
EXHIBIT 99.2
LIGAND PHARMACEUTICALS INCORPORATED
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the "Option")
to purchase shares of the Common Stock of Ligand Pharmaceuticals Incorporated
(the "Company"):
OPTIONEE:
GRANT DATE:
OPTION PRICE: $________ per share
NUMBER OF OPTION SHARES: ___________ shares
EXPIRATION DATE:
TYPE OF OPTION: Incentive Stock Option
Non-Statutory Stock Option
EXERCISE SCHEDULE: The Option will become exercisable for 12.5% of the
Option Shares upon the Optionee's completion of six (6) months of Service
(as defined in the attached Stock Option Agreement) measured from the Grant
Date. The Option will become exercisable for the balance of the Option
Shares in a series of forty-two (42) successive equal monthly installments
upon the Optionee's completion of each additional month of Service
following the expiration of the initial six (6) month period measured from
the Grant Date.
Optionee understands that the Option is granted subject to and in
accordance with the express terms and conditions of the Ligand Pharmaceuticals
Incorporated 1992 Stock Option/Stock Issuance Plan (the "Plan"). Optionee agrees
to be bound by the terms and conditions of the Plan and the terms and conditions
of the Option as set forth in the Stock Option Agreement attached hereto as
Exhibit "A."
Optionee hereby acknowledges receipt of a copy of the official plan
prospectus in the form attached hereto as Exhibit "B."
For purposes of this grant, until such time as the Class B Common Stock
shall have been formally reclassified as Common Stock, Common Stock means the
Class B Common Stock of the Company.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in the Stock Option Agreement or
the Plan shall confer upon the Optionee the right to continue in the Service of
the Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company or the Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
LIGAND PHARMACEUTICALS INCORPORATED
By:
Title:
Optionee
Address:
Dated: _________________, 199__
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EXHIBIT A
LIGAND PHARMACEUTICALS INCORPORATED
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. The Board of Directors of the Company has adopted the Company's 1992
Stock Option/Stock Issuance Plan (the "Plan") for the purpose of attracting and
retaining the services of selected key employees (including officers and
directors) and consultants and other independent contractors who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services to the
Company or its parent or subsidiary corporations, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Company's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set forth
in this Agreement, the Company hereby grants to Optionee, as of the grant date
(the "Grant Date") specified in the accompanying Notice of Grant of Stock Option
(the "Grant Notice"), a stock option to purchase up to that number of shares of
the Company's Common Stock (the "Option Shares") as is specified in the Grant
Notice. The Option Shares shall be purchasable from time to time during the
option term at the option price per share (the "Option Price") specified in the
Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the expiration date (the "Expiration Date") specified in the Grant
Notice, unless sooner terminated in accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for the Option Shares in one or more such
installments, those installments shall accumulate and the option shall remain
exercisable for the accumulated installments until the Expiration Date or the
sooner termination of the option term under Paragraph 5 or 6 of this Agreement.
5. TERMINATION OF SERVICE. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be exercisable) prior to the
Expiration Date should one of the following provisions become applicable:
(i) Except to the extent otherwise provided in subparagraphs (ii)
through (iii) below, should Optionee cease to remain in the Service of the
Company at any time during the option term, then this option shall not
remain exercisable for more than a three (3)-month period commencing with
the date of such cessation of Service. Upon the expiration of such three
(3)-month period or (if earlier) upon the specified Expiration Date of the
option term, this option shall terminate and cease to be outstanding.
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(ii) Should Optionee die while in Service or within the three
(3)-month period following his or her cessation of Service, then the
personal representative of the Optionee's estate or the person or persons
to whom this option is transferred pursuant to the Optionee's will or in
accordance with the law of descent and distribution shall have the right to
exercise this option. Such right shall lapse, and this option shall
terminate and cease to remain exercisable, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the Expiration Date.
(iii) Should Optionee become permanently disabled and cease by reason
thereof to remain in Service at any time during the option term, then this
option shall not remain exercisable for more than a twelve (12) month
period commencing with the date of such cessation of Service. Upon the
expiration of such limited period of exercisability or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
outstanding.
(iv) In no event shall this option be exercisable at any time after
the specified Expiration Date of the option term.
(v) During the limited post-Service period of exercisability
determined in accordance with subparagraphs (i) through (iii) above, this
option may not be exercised for more than the number of Option Shares (if
any) for which this option is, at the time of the Optionee's cessation of
Service, exercisable in accordance with either the normal exercise
provisions specified in the Grant Notice or the special acceleration
provisions of Paragraph 6 of this Agreement. However, the number of Option
Shares purchasable after the Optionee's death shall be reduced for any
Option Shares purchased by the Optionee after his or her cessation of
Service but prior to death.
(vi) For purposes of this Paragraph 5 and for all other purposes under
this Agreement, the following definitional provisions shall be in effect:
A. The Optionee shall be deemed to remain in Service for so long as
the Optionee continues to render periodic services to the Company or any
parent or subsidiary corporation, whether as an Employee, a non-employee
member of the Company's Board of Directors or an independent consultant or
advisor.
B. The Optionee shall be deemed to be an Employee and to continue in
the Company's employ for so long as the Optionee remains in the employ of
the Company or one or more of its parent or subsidiary corporations,
subject to the control and direction of the employer entity as to both the
work to be performed and the manner and method of performance.
C. The Optionee shall be deemed to be permanently disabled if the
Optionee is, by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
not less than twelve (12) consecutive months or more, unable to perform his
or her usual duties for the Company or the parent or subsidiary corporation
retaining his or her services.
D. A corporation shall be considered to be a subsidiary corporation of
the Company if it is a member of an unbroken chain of corporations
beginning with the Company, provided each such corporation in the chain
(other than the last corporation) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
E. A corporation shall be considered to be a parent corporation of the
Company if it is a member of an unbroken chain ending with the Company,
provided each such corporation in the chain (other than the Company) owns,
at the time of determination, stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
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6. CORPORATE TRANSACTION.
A. For purposes of this Section III, a "Corporate Transaction" shall
be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in liquidation or dissolution of the
Company, or
(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to holders different from those who held such securities
immediately prior to such merger.
B. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall not so
accelerate if and to the extent that, in connection with the Corporate
Transaction and in accordance with an agreement between the Company and the
successor corporation (or parent thereof): (i) such option is, either to be
assumed by the successor corporation (or parent thereof) or is to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation (or parent thereof), (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
C. If this option is to be assumed in connection with the Corporate
Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the option price payable per share, provided that the aggregate
option price payable for such securities shall remain the same.
D. This option, to the extent not previously exercised, shall
terminate upon the consummation of the Corporate Transaction and cease to be
exercisable, unless it is expressly assumed by the successor corporation or
parent thereof.
E. The exercisability of this option as an incentive stock option
under the Federal tax laws (if designated as such in the Grant Notice) shall, in
connection with any such Corporate Transaction, be subject to the applicable
dollar limitation of Paragraph 18.
F. This Agreement shall not in any way affect the right of the Company
to adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
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7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, then appropriate adjustments shall be made to (i) the total
number of Option Shares subject to this option and (ii) the Option Price payable
per share in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction or is otherwise to continue in effect, then this option shall,
immediately after such Corporate Transaction, be appropriately adjusted to apply
and pertain to the number and class of securities which would have been issued
to the Optionee in the consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the Option Price payable per share, provided
the aggregate Option Price payable hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not have
any of the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised the option, paid the Option Price for the
purchased shares and been issued a stock certificate for such shares.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, Optionee (or
in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company a written
notice of exercise (the "Exercise Notice"), in substantially the form of
Exhibit I attached hereto, specifying the number of Option Shares for which
the option is exercised.
(ii) Pay the aggregate Option Price for the purchased shares in one or
more of the following alternative forms:
1. full payment in cash or check drawn to the Company's order;
2. full payment in shares of Common Stock of the Company held by the
Optionee for at least six (6) months and valued at Fair Market Value on the
Exercise Date (as such terms are defined below);
3. full payment in a combination of shares of Common Stock of the
Company held by the Optionee for at least six (6) months and valued at Fair
Market Value on the Exercise Date and cash or check drawn to the Company's
order;
4. full payment effected through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate Option Price payable for the purchased shares plus all applicable
Federal and State income and employment taxes required to be withheld by
the Company by reason of such purchase and (II) shall provide written
directives to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction; or
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5. full payment in any other form which the Plan Administrator may, in
its discretion, approve at the time of exercise in accordance with the
provisions of Paragraph 15 of this Agreement.1
(iii) Furnish to the Company appropriate documentation that the person
or persons exercising the option (if other than the Optionee) have the
right to exercise this option.
B. For purposes of this Agreement, the Fair Market Value of a share of
Common Stock on any relevant date shall be determined in accordance with
subparagraphs (i) and (ii) below, and the Exercise Date shall be the date on
which the executed Exercise Notice is delivered to the Company. Except to the
extent the sale and remittance procedure specified above is utilized for the
exercise of the option, payment of the Option Price for the purchased shares
must accompany the Exercise Notice. The procedure for measuring Fair Market
Value shall be as follows:
(i) If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the NASDAQ National
Market, Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers through the NASDAQ National
Market or any successor system. If there is no reported closing selling
price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation exists
shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to trading
on any national stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If shares of the series of common stock to be valued at the time
are neither listed nor admitted to trading on any stock exchange nor traded
in the over-the-counter market, then the fair market value shall be
determined by the Plan Administrator after taking into account such factors
as the Plan Administrator shall deem appropriate, including one or more
independent professional appraisals, in a manner consistent with the
provisions of Section 260.140.50 of the Rules of the California
Corporations Commissioner.
C. As soon after the Exercise Date as practical, the Company shall
mail or deliver to or on behalf of the Optionee (or to any other person or
persons exercising this option) a certificate or certificates representing the
purchased shares.
D. In no event may this option be exercised for any fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Option
Shares may be listed at the time of such exercise and issuance.
_________________________
1 Authorization of a Company loan or installment payment pursuant to
this provision may, under currenlty proposed Treasruy Regulation, result in the
loss of incentive stock option treatment under the Federal tax laws.
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B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
12. LIABILITY OF COMPANY.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article 4, Section III of the
Plan.
B. The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Company of any liability with respect to the non-issuance or sale of the Common
Stock as to which such approval shall not have been obtained. The Company,
however, shall use its best efforts to obtain all such approvals.
13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the
Plan shall confer upon the Optionee any right to continue in the Service of the
Company (or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate the
Optionee's Service at any time for any reason whatsoever, with or without cause.
14. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Company in care of the Corporate Secretary at the Company's principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Company or (ii) permitting the Optionee to pay the Option Price for the
purchased Common Stock in installments over a period of years. The terms of any
loan or installment method of payment (including the interest rate, the
collateral requirements and terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the express terms and provisions of the Plan. All decisions of the Plan
Administrator with respect to any question or issue arising under the Plan or
this Agreement shall be conclusive and binding on all persons having an interest
in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the event
this option is designated as an incentive stock option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
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A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. No installment under this option (whether annual or monthly) shall
qualify for favorable tax treatment as an incentive stock option under the
Federal tax laws if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder will, when added to the aggregate fair
market value (determined as of the respective date or dates of grant) of any
earlier installments of Common Stock for which this option or any other
post-1986 incentive stock options granted to the Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Company or any
parent or subsidiary corporations) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
C. Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws only to the
extent the aggregate fair market value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable at the time the
Corporate Transaction occurs does not, when added to the aggregate fair market
value (determined as of the respective date or dates of grant) of any earlier
installments of Common Stock for which this option or any other post-1986
incentive stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Company or any parent or
subsidiary corporations) first become exercisable during the calendar year in
which the Corporate Transaction occurs, exceed One Hundred Thousand Dollars
($100,000) in the aggregate.
D. To the extent this option should fail to qualify as an incentive
stock option under the Federal tax laws, the Optionee will recognize
compensation income in connection with the acquisition of one or more Option
Shares hereunder, and the Optionee must make appropriate arrangements for the
satisfaction of all Federal, State or local income tax withholding requirements
and Federal social security employee tax requirements applicable to such
compensation income.
19. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION. In the
event this option is designated as a non-statutory stock option in the Grant
Notice, Optionee hereby agrees to make appropriate arrangements with the Company
or parent or subsidiary corporation employing Optionee for the satisfaction of
any Federal, State or local income tax withholding requirements and Federal
social security employee tax requirements applicable to the exercise of this
option.
20. LIMITED STOCK APPRECIATION RIGHT. Optionee is hereby granted a limited
stock appreciation right on the terms and subject to the limitations set forth
in the Plan. The stock appreciation right shall under no circumstances become
exercisable until this option has been outstanding for a period of at least six
(6) months measured from the Grant Date of this option.
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LIGAND PHARMACEUTICALS INCORPORATED
By:
Title:
Optionee
Address:
Dated: _________________, 199__
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