Exhibit 10.4
Xanodyne Pharmaceuticals, Inc.
Form of Incentive Stock Option Agreement
Granted Under 2007 Stock Incentive Plan
1. Grant of Option.
This agreement evidences the grant by Xanodyne Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), on ___________, 20___ (the "Grant Date")
to ____________ , an employee of the Company (the "Participant"), of an option
to purchase, in whole or in part, on the terms provided herein and in the
Company's 2007 Stock Incentive Plan (the "Plan"), a total of ____________ shares
(the "Shares") of common stock, $0.001 par value per share, of the Company
("Common Stock") at $______ per Share. Unless earlier terminated, this option
shall expire at 5:00 p.m., Eastern time, on _________________ (the "Final
Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
This option will become exercisable ("vest") as to 25% of the original
number of Shares on the first anniversary of the Grant Date and as to an
additional 2.0833% of the original number of Shares at the end of each
successive one-month period following the first anniversary of the Grant Date
until the fourth anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
(a) Form of Exercise. Each election to exercise this option shall be in
writing in the form attached hereto as Exhibit A, signed by the Participant, and
received by the Company at its principal office, accompanied by this agreement,
and payment in full in the manner provided in the Plan. The Participant may
purchase less than the number of shares covered hereby, provided that no partial
exercise of this option may be for any fractional share.
(b) Continuous Relationship with the Company Required. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee or officer of the Company or any
parent or subsidiary of the Company as defined in Section 424(e) or (f) of the
Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant ceases
to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant (or in the case of death by an authorized transferee), provided that
this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Final
Exercise Date.
(e) Termination for Cause. If, prior to the Final Exercise Date, the
Participant's employment is terminated by the Company for Cause (as defined
below), the right to exercise this option shall terminate immediately upon the
effective date of such termination of employment. If the Participant is party to
an employment or severance agreement with the Company that contains a definition
of "cause" for termination of employment, "Cause" shall have the meaning
ascribed to such term in such agreement. Otherwise, "Cause" shall mean willful
misconduct by the Participant or willful failure by the Participant to perform
his or her responsibilities to the Company (including, without limitation,
breach by the Participant of any provision of any employment, consulting,
advisory, nondisclosure, non-competition or other similar agreement between the
Participant and the Company), as determined by the Company, which determination
shall be conclusive. The Participant shall be considered to have been discharged
for Cause if the Company determines, within 30 days after the Participant's
resignation, that discharge for cause was warranted.
4. Company Right of First Refusal.
(a) Notice of Proposed Transfer. If the Participant proposes to sell,
assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of
law or otherwise (collectively, "transfer") any Shares acquired upon exercise of
this option, then the Participant shall first give written notice of the
proposed transfer (the "Transfer Notice") to the Company. The Transfer Notice
shall name the proposed transferee and state the number of such Shares the
Participant proposes to transfer (the "Offered Shares"), the price per share and
all other material terms and conditions of the transfer.
(b) Company Right to Purchase. For 30 days following its receipt of such
Transfer Notice, the Company shall have the option to purchase all or part of
the Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to
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purchase all or part of the Offered Shares, it shall give written notice of such
election to the Participant within such 30-day period. Within 10 days after his
or her receipt of such notice, the Participant shall tender to the Company at
its principal offices the certificate or certificates representing the Offered
Shares to be purchased by the Company, duly endorsed in blank by the Participant
or with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Promptly following receipt of
such certificate or certificates, the Company shall deliver or mail to the
Participant a check in payment of the purchase price for such Offered Shares;
provided that if the terms of payment set forth in the Transfer Notice were
other than cash against delivery, the Company may pay for the Offered Shares on
the same terms and conditions as were set forth in the Transfer Notice; and
provided further that any delay in making such payment shall not invalidate the
Company's exercise of its option to purchase the Offered Shares.
(c) Shares Not Purchased By Company. If the Company does not elect to
acquire all of the Offered Shares, the Participant may, within the 30-day period
following the expiration of the option granted to the Company under subsection
(b) above, transfer the Offered Shares which the Company has not elected to
acquire to the proposed transferee, provided that such transfer shall not be on
terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
(d) Consequences of Non-Delivery. After the time at which the Offered
Shares are required to be delivered to the Company for transfer to the Company
pursuant to subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Offered Shares or permit the Participant to
exercise any of the privileges or rights of a stockholder with respect to such
Offered Shares, but shall, insofar as permitted by law, treat the Company as the
owner of such Offered Shares.
(e) Exempt Transactions. The following transactions shall be exempt from
the provisions of this Section 4:
(1) any transfer of Shares to or for the benefit of any spouse, child
or grandchild of the Participant, or to a trust for their benefit;
(2) any transfer pursuant to an effective registration statement filed
by the Company under the Securities Act of 1933, as amended (the "Securities
Act"); and
(3) the sale of all or substantially all of the outstanding shares of
capital stock of the Company (including pursuant to a merger or consolidation);
provided, however, that in the case of a transfer pursuant to clause (1) above,
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
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(f) Assignment of Company Right. The Company may assign its rights to
purchase Offered Shares in any particular transaction under this Section 4 to
one or more persons or entities.
(g) Termination. The provisions of this Section 4 shall terminate upon the
earlier of the following events:
(1) the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act, covering the offer
and sale of the Company's common stock for the account of the Company to the
public; or
(2) the sale of all or substantially all of the outstanding shares of
capital stock, assets or business of the Company, by merger, consolidation, sale
of assets or otherwise (other than a merger or consolidation in which all or
substantially all of the individuals and entities who were beneficial owners of
the Company's voting securities immediately prior to such transaction
beneficially own, directly or indirectly, more than 50% (determined on an
as-converted basis) of the outstanding securities entitled to vote generally in
the election of directors of the resulting, surviving or acquiring corporation
in such transaction).
(h) No Obligation to Recognize Invalid Transfer. The Company shall not be
required (1) to transfer on its books any of the Shares which shall have been
sold or transferred in violation of any of the provisions set forth in this
Section 4, or (2) to treat as owner of such Shares or to pay dividends to any
transferee to whom any such Shares shall have been so sold or transferred.
(i) Legends. The certificate representing Shares shall bear a legend
substantially in the following form (in addition to, or in combination with, any
legend required by applicable federal and state securities laws and agreements
relating to the transfer of the Company securities):
"The shares represented by this certificate are subject to a right of
first refusal in favor of the Company, as provided in a certain stock
option agreement with the Company."
5. Agreement in Connection with Initial Public Offering.
The Participant agrees, in connection with the initial underwritten public
offering pursuant to an effective registration statement under the Securities
Act, covering the offer and sale of the Company's common stock for the account
of the Company to the public, (i) not to (a) offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any other securities of the Company or
(b) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of shares of Common Stock or other
securities of the Company, whether any transaction described in clause (a) or
(b) is to be settled by delivery of securities, in cash or otherwise, during the
period beginning on the date of the filing of such registration statement with
the Securities and Exchange Commission and ending 180 days after the date of the
final prospectus relating to the offering (plus up to an
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additional 34 days to the extent requested by the managing underwriters for such
offering in order to address Rule 2711(f) of the National Association of
Securities Dealers, Inc. or any similar successor provision), and (ii) to
execute any agreement reflecting clause (i) above as may be requested by the
Company or the managing underwriters at the time of such offering. The Company
may impose stop-transfer instructions with respect to the shares of Common Stock
or other securities subject to the foregoing restriction until the end of the
"lock-up" period.
6. Tax Matters.
(a) Withholding. No Shares will be issued pursuant to the exercise of this
option unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.
(b) Disqualifying Disposition. If the Participant disposes of Shares
acquired upon exercise of this option within two years from the Grant Date or
one year after such Shares were acquired pursuant to exercise of this option,
the Participant shall notify the Company in writing of such disposition.
7. Nontransferability of Option.
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Provisions of the Plan.
This option is subject to the provisions of the Plan (including the
provisions relating to amendments to the Plan), a copy of which is furnished to
the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.
Xanodyne Pharmaceuticals, Inc.
By:
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Name:
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Title:
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PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 2007 Stock Incentive Plan.
PARTICIPANT:
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Address:
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EXHIBIT A
FORM OF
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
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Attention: Treasurer
Dear Sir or Madam:
I am the holder of an Incentive Stock Option granted to me under the
Xanodyne Pharmaceuticals, Inc. (the "Company") 2007 Stock Incentive Plan on
[insert date of grant] for the purchase of [insert total number of shares
granted in option] shares of Common Stock of the Company at a purchase price of
$__________ per share.
I hereby exercise my option to purchase [insert number of shares being
exercised shares of Common Stock (the "Shares"), for which I have enclosed
[cash/check/other] in the amount of $_________. Please register my stock
certificate as follows:
Name(s): [Enter name(s) to appear on stock certificate: (a) Your name
only; (b) Your name and other name (i.e., John Doe and Jane
Doe, Joint Tenants With Right of Survivorship); or (c) In the
case of a Nonstatutory option only, a Child's name, with you
as custodian (i.e., Jane Doe, Custodian for Tommy Doe). Note:
There may be income and/or gift tax consequences of
registering shares in a Child's name.]
Address:
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Tax I.D. #:
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[Include if shares are not registered pursuant to a Form S-8: I represent,
warrant and covenant as follows:
- I am purchasing the Shares for my own account for investment only, and
not with a view to, or for sale in connection with, any distribution
of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
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- I have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to
permit me to evaluate the merits and risks of my investment in the
Company.
- I have sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of
the Shares and to make an informed investment decision with respect to
such purchase.
- I can afford a complete loss of the value of the Shares and am able to
bear the economic risk of holding such Shares for an indefinite
period.
- I understand that (i) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of
Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration
is then available; (iii) in any event, the exemption from registration
under Rule 144 will not be available for at least one year and even
then will not be available unless a public market then exists for the
Common Stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144
are complied with; and (iv) there is now no registration statement on
file with the Securities and Exchange Commission with respect to any
stock of the Company and the Company has no obligation or current
intention to register the Shares under the Securities Act.]
Very truly yours,
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(Signature)
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