Exhibit 99.1
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ENTERA, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made and
entered into as of the date of grant set forth below (the "Date of Grant") by
and between Entera, Inc., a Delaware corporation (the "Company"), and the
participant named below (the "Participant"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1999 Equity
Incentive Plan (the "Plan").
Participant: _____________________________________________
Social Security Number: _____________________________________________
Address: _____________________________________________
Total Option Shares: _____________________________________________
Exercise Price Per Share: _____________________________________________
Date of Grant: _____________________________________________
First Vesting Date: _____________________________________________
Expiration Date: _____________________________________________
(unless earlier terminated under Section 5.6 of
the Plan)
Type of Stock Option
(Check one): [x] Incentive Stock Option
[ ] Nonqualified Stock Option
Item 10. Grant of Option. The Company hereby grants to Participant an option
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(this "Option") to purchase the total number of shares of Common Stock, 0.001
par value, of the Company set forth above as Total Option Shares (the "Shares")
at the Exercise Price Per Share set forth above (the "Exercise Price"), subject
to all of the terms and conditions of this Agreement and the Plan. If designated
as an Incentive Stock Option above, the Option is intended to qualify as an
"incentive stock option" (the "ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
Item 11. Exercise Period.
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(a) Exercise Period of Option. This Option is immediately
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exercisable although the Shares issued upon exercise of the
Option will be subject to the restrictions on transfer and
Repurchase Options set forth in Sections 7 , 8 and 9 below. On
the date of grant of this Option, 135,000 of the Total Option
Shares shall be vested and, provided Participant continues to
provide services to the Company or to any Parent or Subsidiary
of the Company, at the end of each full succeeding month after
the date of grant of this Option an additional number of
Shares equal to two and eight thousand three hundred and
thirty three ten thousands percent (2.08333%) of the remaining
315,000 Total Option Shares will become vested (the "Regular
Vesting Schedule"); provided, however, that, immediately prior
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to (and thereafter) the closing of the first Change of Control
occurs (if at all), the number of Total Option Shares which
shall be vested shall equal the greater
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of (i) the sum of the total number of Shares vested
immediately prior to the closing of such Change of Control
plus fifty percent (50%) of the total number of Shares
unvested immediately prior to the closing of such Change of
Control or (ii) the total number of Shares which would
otherwise be vested under the Regular Vesting Schedule.
For the purposes of the preceding provisions of this Section, a "Change-of
Control" shall mean the occurrence of any of the following events: (i) any
single entity or person becomes the owner of 50% or more of the Company's total
voting power; (ii) the Company merges with another entity and the Company's
stockholders do not continue to own at least 50% of the total voting power of
the surviving entity; and (iii) the Company sells substantially all of its
assets.
If application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this Option
shall become exercisable for the full remainder of the Shares. Unvested Shares
may not be sold or otherwise transferred by Participant without the Company's
prior written consent. Notwithstanding any provision in the Plan or this
Agreement to the contrary, Options for Unvested Shares (as defined in Section
2.2 of this Agreement) will not be exercisable on or after Participant's
Termination Date.
(b) Vesting of Options. Shares that are vested pursuant to the
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schedule set forth in Section 2.1 are "Vested Shares." Shares
that are not vested pursuant to the schedule set forth in Section
2.1 are "Unvested Shares." Unvested Shares may not be sold or
otherwise transferred by Participant without the Company's prior
written consent.
(c) Expiration. The Option shall expire on the Expiration Date set
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forth above or earlier as provided in Section 3 below or pursuant
to Section 5.6 of the Plan.
Item 12. Termination.
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(a) Termination for Any Reason Except Death, Disability or Cause. If
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Participant is Terminated for any reason, except death,
Disability or for Cause, the Option, to the extent (and only to
the extent) that it would have been exercisable by Participant on
the Termination Date, may be exercised by Participant no later
than three (3) months after the Termination Date, but in any
event no later than the Expiration Date.
(b) Termination Because of Death or Disability. If Participant is
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Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination when
Termination is for any reason other than Participant's Disability
or for Cause), the Option, to the extent that it is exercisable
by Participant on the Termination Date, may be exercised by
Participant (or Participant's legal representative) no later than
twelve (12) months after the Termination Date, but in any event
no later than the Expiration Date. Any exercise beyond (i) three
(3) months after the Termination Date when the Termination is for
any reason other than the Participant's death or disability,
within the meaning of Section 22(e)(3) of the Code; or (ii)
twelve (12) months after the Termination Date when the
termination is for Participant's disability, within the meaning
of Section 22(e)(3) of the Code, is deemed to be an NQSO.
(c) Termination for Cause. If Participant is Terminated for Cause,
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then the Option will expire on Participant's Termination Date, or
at such later time and on such conditions as are determined by
the Committee.
(d) No Obligation to Employ. Nothing in the Plan or this Agreement
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shall confer on Participant any right to continue in the employ
of, or other relationship with, the Company or any Parent or
Subsidiary of the Company, or limit in any way the right of the
Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with
or without Cause.
Item 13. Manner of Exercise.
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(a) Stock Option Exercise Agreement. To exercise this Option,
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Participant (or in the case of exercise after Participant's death
or incapacity, Participant's executor, administrator, heir or
legatee, as the case may be) must deliver to the Company an
executed stock option exercise agreement in the form attached
hereto as Exhibit A, or in such other form as may be approved by
the Committee from time to time (the "Exercise Agreement"), which
shall set forth, inter alia, (i) Participant's election to
exercise the Option, (ii) the number of Shares being purchased,
(iii) any restrictions imposed on the Shares and (iv) any
representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by
the Company to comply with applicable securities laws. If someone
other than Participant exercises the Option, then such person must
submit documentation reasonably acceptable to the Company
verifying that such person has the legal right to exercise the
Option.
(b) Limitations on Exercise. The Option may not be exercised unless
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such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of
exercise. The Option may not be exercised as to fewer than one
hundred (100) Shares unless it is exercised as to all Shares as to
which the Option is then exercisable.
(c) Payment. The Exercise Agreement shall be accompanied by full
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payment of the Exercise Price for the shares being purchased in
cash (by check), or where permitted by law:
A. by cancellation of indebtedness of the Company to the
Participant;
B. by surrender of shares of the Company's Common Stock that
(i) either (A) have been owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares); or (B) were obtained by Participant in the
open public market; and (ii) are clear of all liens, claims, encumbrances or
security interests;
C. by waiver of compensation due or accrued to Participant for
services rendered;
D. provided that a public market for the Company's stock
exists: (i) through a "same day sale" commitment from Participant and a broker-
dealer that is a member of the National Association of Securities Dealers (an
"NASD Dealer") whereby Participant irrevocably elects to exercise the Option and
to sell a portion of the Shares so purchased sufficient to pay for the total
Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the total Exercise Price directly to the Company, or (ii)
through a "margin" commitment from Participant and an NASD Dealer whereby
Participant irrevocably elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the total Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the total
Exercise Price directly to the Company; or
E. by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon exercise
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of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company.
If the Committee permits, Participant may provide for payment of
withholding taxes upon exercise of the Option by requesting that
the Company retain Shares with a Fair Market Value equal to the
minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon
exercise.
(e) Issuance of Shares. Provided that the Exercise Agreement and
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payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name
of Participant, Participant's authorized assignee, or
Participant's legal representative, and shall deliver certificates
representing the Shares with the appropriate legends affixed
thereto.
Item 14. Notice of Disqualifying Disposition of ISO Shares. If the Option is an
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ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two (2)
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years after the Date of Grant, and (ii) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
Item 15. Compliance with Laws and Regulations. The Plan and this Agreement are
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intended to comply with Section 25102(o) of the California Corporations Code and
any regulations relating thereto. Any provision of this Agreement which is
inconsistent with Section 25102(o) or any regulations relating thereto shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o) and any regulations relating
thereto. The exercise of the Option and the issuance and transfer of Shares
shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
Item 16. Nontransferability of Option. The Option may not be transferred in any
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manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of Participant only by Participant or in the event
of Participant's incapacity, by Participant's legal representative. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of Participant.
Item 17. Company's Repurchase Option for Unvested Shares. The Company, or its
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assignee, shall have the option to repurchase Participant's Unvested Shares (as
defined in Section 2.2 of this Agreement) on the terms and conditions set forth
in the Exercise Agreement (the "Repurchase Option") if Participant is Terminated
(as defined in the Plan) for any reason, or no reason, including without
limitation Participant's death, Disability (as defined in the Plan), voluntary
resignation or termination by the Company with or without Cause. Notwithstanding
the foregoing, the Company shall retain the Repurchase Option for Unvested
Shares only as to that number of Unvested Shares (whether or not exercised) that
exceeds the number of shares which remain unexercised.
Item 18. Company's Right of First Refusal. Unvested Shares may not be sold or
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otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares to
be sold or transferred on the terms and conditions set forth in the Exercise
Agreement (the "Right of First Refusal"). The Company's Right of First Refusal
will terminate when the Company's securities become publicly traded.
Item 19. Tax Consequences. Set forth below is a brief summary as of the
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Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If the Option qualifies as an ISO, there will
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be no regular federal or California income tax liability upon
the exercise of the Option, although the excess, if any, of
the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as a tax preference
item for federal alternative minimum tax purposes and may
subject the Participant to the alternative minimum tax in the
year of exercise.
(b) Exercise of Nonqualified Stock Option. If the Option does not
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qualify as an ISO, there may be a regular federal and
California income tax liability upon the exercise of the
Option. Participant will be treated as having received
compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If
Participant is a current or former employee of the Company,
the Company may be required to withhold from Participant's
compensation or collect from Participant and pay to the
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applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
(c) Disposition of Shares. The following tax consequences may
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apply upon disposition of the Shares.
A. Incentive Stock Options. If the Shares are held for more
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than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an ISO and are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated as
long term capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within the applicable one (1) year or two
(2) year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price.
B. Nonqualified Stock Options. If the Shares are held for more
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than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.
C. Withholding. The Company may be required to withhold from
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the Participant's compensation or collect from the Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
(d) Section 83(b) Election for Unvested Shares. With respect to
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Unvested Shares, which are subject to the Repurchase Option,
unless an election is filed by the Participant with the
Internal Revenue Service (and, if necessary, the proper state
taxing authorities), within 30 days of the purchase of the
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Unvested Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions, if applicable) to be
taxed currently on any difference between the Exercise Price
of the Unvested Shares and their Fair Market Value on the date
of purchase, there may be a recognition of taxable income
(including, where applicable, alternative minimum taxable
income) to the Participant, measured by the excess, if any, of
the Fair Market Value of the Unvested Shares at the time they
cease to be Unvested Shares, over the Exercise Price of the
Unvested Shares.
Item 20. Privileges of Stock Ownership. Participant shall not have any of the
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rights of a stockholder with respect to any Shares until the Shares are issued
to Participant.
Item 21. Interpretation. Any dispute regarding the interpretation of this
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Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
Item 22. Entire Agreement. The Plan is incorporated herein by reference. This
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Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
Item 23. Notices. Any notice required to be given or delivered to the Company
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under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
Item 24. Successors and Assigns. The Company may assign any of its rights under
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this Agreement including its rights to purchase Shares under the Repurchase
Option and the Right of First Refusal. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer set forth herein, this Agreement shall be binding
upon Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
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Item 25. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
Item 26. Acceptance. Participant hereby acknowledges receipt of a copy of the
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Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in triplicate by its duly authorized representative and Participant
has executed this Agreement in triplicate, effective as of the Date of Grant.
ENTERA, INC. PURCHASER
By: By:
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(Please print name) (Please print name)
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(Please print title)
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