EXHIBIT 10.22
PENWEST PHARMACEUTICALS CO.
Nonstatutory Stock Option Agreement Entered into
Pursuant to the 1997 Equity Incentive Plan
1. This agreement evidences the grant by Penwest Pharmaceuticals Co., a
Washington corporation (the "Company") on GRANT DATE (the "Grant Date") to
an employee of the Company FIRST NAME LAST NAME (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and
in the Company's 1997 Equity Incentive Plan (the "Plan"), a total of
OPTIONS GRANTED shares (the "Shares") of common stock, $0.001 par value
per share ("Common Stock"), of the Company at a price of OPTION PRICE per
Share. Unless earlier terminated, the option shall expire on GRANT
EXPIRATION DATE (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not 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 agreement, shall be deemed to include any
person who acquires the right to exercise the option validly under its
terms.
1.1. Except as otherwise provided in Section 1.2, the options shall become
exercisable ("vest") as follows:
25% of the original number of Shares on the first anniversary
and as to an additional 25% of the original number of Shares at the end of
each successive full one year period following the first anniversary of
the Grant Date until the fourth anniversary of the Grant Date of the
option. The option shall expire upon, and will not be exercisable after,
the Final Exercise Date.
Any option which is not exercised in any period to the maximum
extent permissible 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 the option under Section 2
hereof or the Plan. Except as provided in Section 2, no additional right
to purchase Shares under this option shall accrue on or after the date the
Participant's employment with the Company terminates.
1.2 Notwithstanding the foregoing, the Participant may purchase the full
amount of Shares for which the options have not been exercised, in the
event of a "Trigger Date" and as otherwise provided in this Section 1.2.
For the purposes of defining Trigger Date, the following terms are
incorporated by reference to the Company's Articles of Incorporation as
executed on January 20, 1995 (the "Articles"): "Affiliate," "Associate,"
"Board of Directors,"
1.2.1 "Major Transaction," "Substantial Shareholder," and "Voting Stock," as
well as the other definitions in the Articles that are used to define the
foregoing terms.
Any of the following shall constitute a Trigger Date:
(a) The effective date of a Major Transaction that is
subject to and satisfies the special voting requirement set forth in
Article VIII, Section 1 of the Articles;
(b) The completion of a tender or exchange offer for the
voting securities of the Company (other than a tender offer by the
Company) that is accepted by the holders of 51 % or more of the
combined voting power of the outstanding voting securities of the
Company;
(c) The termination of the Participant's employment within
36 months after the effective date of a merger, consolidation,
reorganization or dissolution in which the Company is not the
surviving entity; or
(d) The termination of the Participant's employment within
36 months after the date on which there is a "Significant Change" in
the membership of the Board of Directors occurring on or before the
third annual meeting after either the effective date of a merger,
consolidation, reorganization, or Major Transaction, or the date on
which any person becomes a Substantial Shareholder (as defined
below) (each of which is referred to as a "Significant Event"). A
Significant Change in the Board of Directors shall be deemed to have
occurred if one-third or more of the directors are individuals who
(i) are or were Affiliates or Associates of the Substantial
Shareholder (as defined below) or any party to the Significant
Event, and (ii) were not Affiliates or Associates of the Company
prior to becoming an or Associates of the Substantial Shareholder or
any party to the Significant Event.
1.2.2 The purchase of stock under the conditions set forth in
Section 1.2.1(a) or 1.2.1(b) shall be conditional and must be made
during the following time periods:
1.2.3. In the event of a Major Transaction described in Section
1.2.1(a), the Participant may conditionally purchase any or all
Shares during the period commencing 27 days and ending 7 days prior
to the scheduled effective date of the Major Transaction (as such
effective date may be delayed from time to time).
1.2.4 In the event of a tender or exchange offer described in
Section 1.2.1(b), the Participant may conditionally purchase any or
all Shares during the period commencing on the initial date of the
offer and ending on the day preceding the scheduled termination date
of acceptance of tenders of shares by the offeror (as such
termination date may be extended by the offeror).
1.2.5 If the Major Transaction or tender or exchange offer
discussed in Sections 1.2.1(a) and 1.2.1(b) does not occur or is
canceled or revoked, any conditional purchase of Shares for which
the option would not have otherwise been exercisable but for the
operation of Section 1.2.1(a) and 1.2.1(b) shall be rescinded. With
respect to all other Shares conditionally purchased, the Participant
may rescind such purchase at his or her option.
1.2.6 The Participant may conditionally exercise any or all
options during the period commencing on the date the shareholders of
the Company approve a sale of substantially all the assets of the
Company and ending seven days prior to the scheduled closing date of
such sale (as such closing date may be delayed from time to time).
1.2.7 The Participant may conditionally exercise any or all
options during the period commencing on the date the shareholders of
the Company approve a dissolution of the Company and ending 30 days
later but not in any event later than the day before the Company
files its Articles of Dissolution.
1.2.8 If the Major Transaction or tender or exchange offer
discussed in Section 1.2.1(a) or 1.2.1(b) does occur, or 30 days
pass after the Company's shareholders approve a dissolution of the
Company (or Articles of Dissolution are filed), and the Participant
has not conditionally exercised all options, all unexercised options
shall terminate on the effective, termination, or closing date, or
30 days after the date of said approval (but not later than the day
before the Articles of Dissolution are filed), as the case may be.
1.2.9 The right to purchase all Shares shall automatically
accrue upon (a) the retirement by the Participant (i) in accordance
with the Company's normal retirement policy, or (ii) prior to
attaining 65 years of age provided specific approval of such accrual
is given by the Company, or (b) the Participant's death, or (c) the
Participant's disability as defined in, and determined in accordance
with, the Company's Supplemental Plan of Disability.
1.2.10 If the Company shall be the surviving corporation in any
merger or is a party to a merger or consolidation between or among
the Company and other corporations related to or affiliated with the
Company, any option granted hereunder shall pertain and apply to the
securities to which a holder of the number of shares of Common Stock
of the Company subject to the option would have been entitled.
1.2.11 Nothing herein shall allow the Participant or permitted
transferee to purchase Shares, the options for which have expired.
The purpose of Section 1.2 is to ensure that the
Participant will receive reasonable compensation for services
rendered prior to the event permitting acceleration. The
Compensation Committee in granting this option has determined in its
best judgment that the acceleration of the exercise date in
accordance with the foregoing conditions will result in reasonable
compensation being paid for personal services actually rendered. In
the event a Trigger Date or other acceleration occurs, the Company
or its successor shall indemnify and hold harmless the Participant
against any expense, including attorneys' fees and disbursements,
incurred in connection with securing the Participant's rights under
this award.
2.. Except as provided in Section 1.2, this option shall expire at
the earliest of the following:
(a) 10 years and 10 days from the date hereof;
(b) 12 months after voluntary or involuntary termination of the
Participant's employment other than termination as described in
Section 2.3;
(c) Upon discharge of the Participant for misconduct, willfully or
wantonly harmful to the Company; or
(d) 12 months after the Participant's death or disability.
3.. This option may be exercised at different times for
portions of the total number of Shares for which the right to
purchase shall have accrued hereunder, provided that such portions
are in multiples of five shares.
4. The Compensation Committee may, in its sole discretion,
authorize the Company to pay to the Participant a cash bonus at the
time all or a portion of the option evidenced hereby is exercised,
in such amount as the Compensation Committee may determine and which
may be sufficient to offset the federal income tax incurred by the
Participant as a consequence of such exercise or which may represent
an amount related to the tax benefit accruing to the Company as a
consequence of such exercise.
5. The aggregate number of Shares for which this option is
granted and the price per share thereof shall be proportionately
adjusted for any increase or decrease in the number of outstanding
shares of Common Stock of the Company resulting from a stock split
or reverse split of shares, or any other capital adjustment, or the
payment of a stock dividend or any other increase or decrease in
such shares that is effected without receipt of consideration by the
Company, excluding any decrease resulting from the purchase of
shares by the Company. If the adjustment would result in a
fractional Shares, the Participant shall be entitled to one
additional Share, provided that the total number of options to be
granted under the Plan (as defined below) shall not be increased
above the equivalent number of Shares approved by the shareholders.
6. The Company shall have the right to substitute or assume
options in connection with mergers, reorganizations, separations or
other "corporate transactions" as that term is defined in and said
substitutions and assumptions are permitted by Section 424 of the
Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder. The number of Shares reserved under the Plan
pursuant to which this option is granted may be increased by the
corresponding number of options assumed and, in the case of a
substitution, by the net increase in the number of Shares subject to
options before and after the substitution.
7. This is not an employment contract, and while the
benefits, if any, of this agreement are an incident of the
Participant's employment with the Company, the terms and conditions
of such employment are otherwise wholly independent hereof. The
terms of this option shall not be affected by any change of the
Participant's duties or position so long as the Participant shall
continue to be employed by the Company or a subsidiary.
8. This option may be exercised only by the Participant or
permitted transferee. Neither the whole nor any part of the option
shall be transferable (whether by operation of law or otherwise)
other than by the will of, or by the laws of descent and
distribution applicable to, a deceased Participant or pursuant to a
qualified domestic relations order or, provided the transfer is
without consideration, to the spouse, children or grandchildren of
the Participant ("Immediate Family Members") or to a trust for the
exclusive benefit of such Immediate Family Members or to a
partnership in which such Immediate Family Members are the only
partners. This option and any and all rights granted to the
Participant hereunder and not heretofore effectively and completely
exercised shall automatically terminate and expire upon any sale,
transfer or hypothecation or any attempted sale, transfer or
hypothecation of such rights contrary to the provisions hereof or
upon the bankruptcy or insolvency of the Participant or permitted
transferee.
9. The Participant represents, warrants and covenants that:
(a) Any Shares purchased upon exercise of the option shall
be acquired for the Participant's 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 or any rule or
regulation under the Securities Act.
(b) The Participant has had such opportunity as he or she
has deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Participant to
evaluate the merits and risks of his or her investment in the
Company.
(c) The Participant is able to bear the economic risk of
holding Common Stock acquired pursuant to the exercise
of the option for an indefinite period.
10. By making payment upon exercise of the option, the
Participant shall be deemed to have reaffirmed, as of the date of
such payment, the representations made in Section 9.
11. The Participant understands that (A) the Common Stock
acquired pursuant to the exercise of the option will not be
registered under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act; (B) such
Common Stock cannot be sold, transferred or otherwise disposed of
unless it is subsequently registered under the Securities Act or an
exemption from registration is then available; (C) in any event, an
exemption from registration under Rule 144 or otherwise under the
Securities Act may 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 (D) there is now no registration
statement on file with the Securities and Exchange Commission with
respect to any securities of the Company and the Company has no
obligation or current intention to register any Common Stock
acquired pursuant to the exercise of the option under the Securities
Act.
12. All stock certificates representing necessary Common
Stock issued to the Participant upon exercise of the option shall
have affixed thereto legends substantially in the following forms,
in addition to any other legends required by applicable law:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred, sold or
otherwise disposed of in the absence of an effective registration
statement with respect to the shares evidenced by this certificate,
filed and made effective under the Securities Act of 1933, or an
opinion of counsel satisfactory to the Company to the effect that
registration under such Act is not required."
"The shares represented by this certificate are subject to certain
restrictions on transfer contained in an Option Agreement, a copy of
which will be furnished upon request by the issuer."
13. The option is subject to the provisions of the Plan, a copy of which
is on file with the Corporate Secretary.
IN WITNESS WHEREOF, the Company has caused this agreement to be executed
by its duly authorized officer. The option shall take effect as a sealed
instrument.
PENWEST PHARMACEUTICALS CO.
Dated:__________________ By:________________________
Name: Jennifer L. Good
Title: Corporate Secretary
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the option and agrees to the terms and
conditions thereof as set forth in the foregoing agreement. The undersigned
hereby acknowledges receipt of a copy of the Company's 1997 Equity Incentive
Plan.
PARTICIPANT: ___________________________
Address: ___________________________
___________________________