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ASCENT PEDIATRICS, INC.
CALIFORNIA STOCK OPTION PLAN
1. Purpose
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The purpose of this California Stock Option Plan (the "Plan") of Ascent
Pediatrics, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the "Code") and any other
business venture (including, without limitation, joint venture or limited
liability company) in which the Company has a significant interest, as
determined by the Board of Directors of the Company (the "Board").
2. Eligibility
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All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan, provided that such persons are
residents of the State of California on the date of grant of such Award. Each
person who has been granted an Award under the Plan shall be deemed a
"Participant".
3. Administration and Delegation
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(a) Administration by Board of Directors. The Plan will be administered by
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the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the
Board shall be made in the Board's sole discretion and shall be final and
binding on all persons having or claiming any interest in the Plan or in any
Award. No director or person acting pursuant to the authority delegated by the
Board shall be liable for any action or determination relating to or under the
Plan made in good faith.
(b) Appointment of Committees. To the extent permitted by applicable law,
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the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board to the
extent that the Board's powers or authority under the Plan have been delegated
to such Committee.
4. Stock Available for Awards.
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(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
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made under the Plan for up to 200,000 depositary shares ("Depositary Shares"),
each Depositary Share representing one share of common stock of the Company,
$.00004 par value per share (the "Common Stock"), subject to a call option and
represented by a depositary receipt. If any Award expires or is terminated,
surrendered or canceled without having been fully exercised or is forfeited in
whole or in part (including as the result of Depositary Shares subject to such
Award being repurchased by the Company at the original issuance price pursuant
to a contractual repurchase right) or results in any Depositary Shares not being
issued, the unused Depositary Shares covered by such Award shall again be
available for the grant of Awards under the Plan. Shares issued under the Plan
may consist in whole or in part of authorized but unissued shares or treasury
shares. At no time while there is any Option (as defined below) outstanding and
held by a Participant who was a resident of the State of California on the date
of grant of such Option, shall the total number of Depositary Shares issuable
upon exercise of all outstanding options and the total number of shares provided
for under any stock bonus or similar plan of the Company exceed the applicable
percentage as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of the California Code of Regulations, based on the shares of
the Company which are outstanding at the time the calculation is made.
(b) Per-Participant Limit. Subject to adjustment under Section 8, the
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maximum number of Depositary Shares with respect to which an Award may be
granted to any Participant under the Plan shall be 50,000 per calendar year.
The per-Participant limit described in this Section 4(c) shall be construed and
applied consistently with Section 162(m) of the Code.
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5. Stock Options
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(a) General. The Board may grant options to purchase Depositary Shares
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(each, an "Option") and determine the number of Depositary Shares to be covered
by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. All Options under this Plan shall be "Nonstatutory
Stock Options" and are not intended to comply with the requirements of Section
422 of the Code.
(b) Exercise Price. The Board shall establish the exercise price at the
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time each Option is granted and specify it in the applicable option agreement.
(c) Duration of Options. Each Option shall be exercisable at such times and
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subject to such terms and conditions as the Board may specify in the applicable
option agreement; provided, however, that no Option will be granted for a term
in excess of 10 years and that no Option granted hereunder may be exercised on
the Option Closing Date (as defined in Section 8(d) below).
(d) Exercise of Option. Options may be exercised by delivery to the Company
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of a written notice of exercise signed by the proper person or by any other form
of notice (including electronic notice) approved by the Board together with
payment in full as specified in Section 5(e) for the number of shares for which
the Option is exercised.
(e) Payment Upon Exercise. Depositary Shares purchased upon the exercise of
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an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide in an
option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax withholding or
(ii) delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price and any required
tax withholding;
(3) by delivery of Depositary Shares owned by the Participant valued at
their fair market value as determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Depositary Shares, if acquired
directly from the Company, was owned by the Participant at least six months
prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by (i)
delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(f) Substitute Options. In connection with a merger or consolidation of an
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entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5 or in Section 2.
6. Restricted Stock
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(a) Grants. The Board may grant Awards entitling recipients to acquire
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Depositary Shares, subject to the right of the Company to repurchase all or part
of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
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conditions of any such Restricted Stock Award, including the conditions for
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repurchase (or forfeiture) and the issue price, if any.
(c) Depositary Receipts. Any depositary receipts issued in respect of a
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Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the depositary receipts no longer subject to such restrictions to
the Participant or if the Participant has died, to the beneficiary designated,
in a manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
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7. Other Stock-Based Awards
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The Board shall have the right to grant other Awards based upon the
Depositary Shares having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Depositary Shares and the grant of stock
appreciation rights.
8. Adjustments for Changes in Depositary Shares and Certain Other Events
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(a) Changes in Capitalization. In the event of any stock split, reverse
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stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Depositary Shares other than a
normal cash dividend, (i) the number and class of securities available under
this Plan, (ii) the number and class of securities and exercise price per share
subject to each outstanding Option, (iii) the repurchase price per share subject
to each outstanding Restricted Stock Award, and (iv) the terms of each
other outstanding Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 8(a) applies and Section 8(c) also applies to
any event, Section 8(c) shall be applicable to such event, and this Section 8(a)
shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
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dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation
or dissolution on any Restricted Stock Award or other Award granted under the
Plan at the time of the grant of such Award.
(c) Acquisition Events
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(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
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consolidation of the Company with or into another entity as a result of which
the Depositary Shares are converted into or exchanged for the right to receive
cash, securities or other property or (b) any exchange of shares of the Company
for cash, securities or other property pursuant to a share exchange transaction.
(2) Consequences of an Acquisition Event on Options. Upon the occurrence of
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an Acquisition Event, or the execution by the Company of any agreement with
respect to an Acquisition Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, an Option shall be considered to be assumed if, following consummation
of the Acquisition Event, the Option confers the right to purchase, for each
Depositary Share subject to the Option immediately prior to the consummation of
the Acquisition Event, the consideration (whether cash, securities or other
property) received as a result of the Acquisition Event by holders of Depositary
Shares for each Depositary Share held immediately prior to the consummation of
the Acquisition Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Depositary Shares); provided, however, that if the consideration received as a
result of the Acquisition Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Options to consist solely of
common stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding Depositary Shares as a result of the Acquisition
Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised Options will become exercisable in full as of a
specified time prior to the Acquisition Event and will terminate immediately
prior to the consummation of such Acquisition Event, except to the extent
exercised by the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the terms of
which holders of Depositary Shares will receive upon consummation thereof a cash
payment for each Depositary Share surrendered pursuant to such Acquisition Event
(the "Acquisition Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (A) the Acquisition Price multiplied by
the number of Depositary Shares subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise price of such Options.
To the extent all or any portion of an Option becomes exercisable solely as a
result of the first sentence of this paragraph, upon exercise of such Option the
Participant shall receive shares subject to a right of repurchase by the Company
or its successor at the Option exercise price. Such repurchase right (1) shall
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lapse at the same rate as the Option would have become exercisable under its
terms and (2) shall not apply to any shares subject to the Option that were
exercisable under its terms without regard to the first sentence of this
paragraph.
If any Option provides that it may be exercised for Depositary Shares which
remain subject to a repurchase right in favor of the Company, upon the
occurrence of an Acquisition Event, any shares of restricted stock received upon
exercise of such Option shall be treated in accordance with Section 8(c)(3) as
if they were a Restricted Stock Award.
(3) Consequences of an Acquisition Event on Restricted Stock Awards. Upon
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the occurrence of an Acquisition Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the Company's successor and shall apply to the cash, securities or other
property which the Depositary Shares were converted into or exchanged for
pursuant to such Acquisition Event in the same manner and to the same extent as
they applied to the Depositary Shares subject to such Restricted Stock Award.
(4) Consequences of an Acquisition Event on Other Awards. The Board shall
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specify the effect of an Acquisition Event on any other Award granted under the
Plan at the time of the grant of such Award.
Alpharma Call Option.
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(5) From and after the date of adoption of this Plan by the Board of
Directors of the Company until the Option Determination Date (as defined in the
Depositary Agreement dated as of February 16, 1999 by and among the Company,
Alpharma USPD, Inc. and State Street Bank and Trust Company (the "Depositary"),
as amended (the "Depositary Agreement")), the class of securities available
under this Plan shall mean the Depositary Shares, and a Participant shall
receive from the Depositary, upon the exercise of an Option a depositary receipt
representing the number of Depositary Shares issuable upon exercise of such
Option.
(6) From and after the Option Closing Date (as defined in the Depositary
Agreement), a Participant shall receive from the Company, upon exercise of an
Option, cash in an amount equal to the Option Exercise Price (as defined in the
Depositary Agreement) for each Depositary Share issuable upon conversion or
exercise of such Option. Upon the occurrence of an Option Closing (as defined
in the Depositary Agreement), except to the extent specifically provided to the
contrary in the instrument evidencing any Option, Restricted Stock Award, other
Award or any other agreement between a Participant and the Company: (i) all
Options then-outstanding shall automatically become immediately exercisable in
full, (ii) all Restricted Stock Awards then-outstanding shall automatically be
deemed free of all conditions or restrictions, and (iii) all other Awards shall
become exercisable, realizable or vested in full, or shall be free of all
conditions or restrictions, as applicable to each such Award.
(7) From and after the Option Expiration Date (as defined in the Depositary
Agreement), the class of securities available under this Plan shall mean the
Common Stock, and a Participant shall receive from the Company, upon exercise of
an Option, the number of shares of Common Stock of the Company issuable upon
conversion or exercise of such Option.
9. General Provisions Applicable to Awards
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(a) Transferability of Awards. Except as the Board may otherwise determine
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or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced in such form (written,
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electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
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may be made alone or in addition or in relation to any other Award. The terms
of each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an Award
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of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
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provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may, to the extent then permitted under
applicable law, satisfy such tax obligations in whole or in part by delivery of
Depositary Shares, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value; provided, however, that the total
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tax withholding where stock is being used to satisfy such tax obligations cannot
exceed the Company's minimum statutory withholding obligations (based on minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to such supplemental taxable income). The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
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outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type and changing the date of exercise or
realization, provided that the Participant's consent to such action shall be
required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Shares. The Company will not be obligated to
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deliver any Depositary Shares pursuant to the Plan or to remove restrictions
from shares previously delivered under the Plan until (i) all conditions of the
Award have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.
(h) Acceleration. The Board may at any time provide that any Award shall
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become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
10. Miscellaneous
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(a) No Right To Employment or Other Status. No person shall have any claim
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or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at
any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan, except as expressly provided in
the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
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Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any Depositary Shares to be distributed with respect
to an Award until becoming the record holder of such shares. Notwithstanding
the foregoing, in the event the Company effects a split of the Depositary Shares
by means of a stock dividend and the exercise price of and the number of shares
subject to such Option are adjusted as of the date of the distribution of the
dividend (rather than as of the record date for such dividend), then an optionee
who exercises an Option between the record date and the distribution date for
such stock dividend shall be entitled to receive, on the distribution date, the
stock dividend with respect to the Depositary Shares acquired upon such Option
exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on the
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date on which it is adopted by the Board. No Awards shall be granted under the
Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
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or any portion thereof at any time.
(e) Authorization of Sub-Plans. The Board may from time to time establish
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one or more sub-plans under the Plan for purposes of satisfying applicable blue
sky, securities or tax laws of various jurisdictions. The Board shall establish
such sub-plans by adopting supplements to this Plan containing (i) such
limitations on the Board's discretion under the Plan as the Board deems
necessary or desirable or (ii) such additional terms and conditions not
otherwise inconsistent with the Plan as the Board shall deem necessary or
desirable. All supplements adopted by the Board shall be deemed to be part of
the Plan, but each supplement shall apply only to Participants within the
affected jurisdiction and the Company shall not be required to provide copies of
any supplement to Participants in any jurisdiction which is not the subject of
such supplement.
(f) Governing Law. The provisions of the Plan and all Awards made hereunder
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shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.