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EXHIBIT 99.2
EPIMMUNE INC.
INCENTIVE STOCK OPTION AGREEMENT
(EARLY EXERCISE)
EXEMPT FROM QUALIFICATION UNDER
SECTION 25102(o) OF THE
CALIFORNIA CORPORATIONS CODE
Epimmune Inc. (the "Company"), pursuant to its 1997 Stock Option Plan
(the "Plan"), has granted to you, the optionee named on the Notice of Grant of
Stock Option to which this Incentive Stock Option Agreement is attached (the
"Notice of Grant"), an option to purchase shares of the common stock of the
Company ("Common Stock"). This option is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors and consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). The grant
of this option and the issuance of shares upon the exercise of this option are
also intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is set forth under "Total Number
of Shares Subject to Option" on the Notice of Grant.
2. VESTING. Subject to the limitations contained herein, 1/4th of the
shares will vest 12 months after the "Vesting Commencement Date" as stated on
the Notice of Grant, and 1/48th of the shares will vest each month thereafter
until either (i) your Continuous Service (as defined in the Plan) terminates for
any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is set forth
under "Exercise Price Per Share" on the Notice of Grant, being not less than the
fair market value of the Common Stock on the "Date of Grant" as stated on the
Notice of Grant.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may
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elect, to the extent permitted by applicable statutes and regulations, to make
payment of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subsection 3(b)(i) through 3(b)(iii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) Subject to the provisions of this option you may elect at any
time during your Continuous Service to exercise the option as to any part or all
of the shares subject to this option at any time during the term hereof,
including without limitation, a time prior to the date of earliest exercise
("vesting") stated in Section 2 hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached to the Notice of Grant;
(iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form attached to the Notice of Grant with a vesting schedule
that will result in the same vesting as if no early exercise had occurred; and
(iv) the date of exercisability of any share(s) subject to this
option under this Section 4 shall be delayed, if necessary (i.e., because the
aggregate fair market value of any shares subject to incentive stock options
granted you by the Company or any Affiliate of the Company (valued as of their
grant date) would otherwise become exercisable for the first time during any
calendar year in an amount exceeding $100,000), until the earliest date
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permissible in order to preserve treatment under Section 421 of the Code of each
share subject to this option.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in
this Section 4 to purchase shares upon the exercise of this option prior to the
vesting dates shall cease upon termination of your Continuous Service and may
not be exercised after the date thereof.
5. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
7. TERM. The term of this option commences on the Date of Grant and
expires on the "Date of Termination" as stated on the Notice of Grant, which
date shall be no more than ten (10) years from Date of Grant unless this option
expires sooner as set forth below or in the Plan. In no event may this option be
exercised on or after the Date of Termination. This option shall terminate prior
to the Date of Termination of its term as follows: three (3) months after the
termination of your Continuous Service unless one of the following circumstances
exists:
(a) Your termination of Continuous Service is due to your disability.
This option will then expire on the earlier of the Date of Termination or twelve
(12) months following such termination of Continuous Service. You should be
aware that if your disability is not considered a permanent and total disability
within the meaning of Section 422(c)(6) of the Code, and you exercise this
option more than three (3) months following the date of your termination of
employment, your exercise will be treated for tax purposes as the exercise of a
"nonstatutory stock option" instead of an "incentive stock option."
(b) Your termination of Continuous Service is due to your death or
your death occurs within three (3) months following your termination of
Continuous Service. This option will then expire on the earlier of the Date of
Termination or eighteen (18) months after your death.
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in Section 6
above, then your option will not expire until the earlier of the Date of
Termination or until this option shall have been exercisable for an aggregate
period of three (3) months after your termination of Continuous Service.
However, this option may be exercised following termination of
Continuous Service only as to that number of shares as to which it was
exercisable on the date of termination of Continuous Service under the
provisions of Section 2 of this option.
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In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
Date of Grant and ending on the day three (3) months before the date of the
option's exercise, you must be an employee of the Company or an Affiliate of the
Company, except in the event of your death or permanent and total disability.
The Company has provided for continued vesting or extended exercisability of
your option under certain circumstances for your benefit, but cannot guarantee
that your option will necessarily be treated as an "incentive stock option" if
you provide services to the Company or an Affiliate of the Company as a
consultant or exercise your option more than three (3) months after the date
your employment with the Company and all Affiliates of the Company terminates.
8. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of this option; (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
Date of Grant or within one (1) year after such shares of Common Stock are
transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Securities Act as may be requested by the Company or the
representative of the underwriters. You further agree that the Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company,
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you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise this option.
10. RIGHT OF REPURCHASE. The Company may elect, prior to the Listing
Date as defined in the Plan, to repurchase all or any part of the vested shares
you exercised pursuant to this option; provided, however, that (i) such
repurchase right shall be exercisable only within (A) the ninety (90) day period
following the termination of your Continuous Service (or in the case of a
post-termination exercise of the Option, the ninety (90) period following such
exercise), or (B) such longer period as may be agreed to by the Company and you,
(ii) such repurchase right shall be exercisable for less than all of the vested
shares only with your consent and (iii) such right shall be exercisable only for
cash or cancellation of purchase money indebtedness for the shares at a
repurchase price equal to the greater of the exercise price or the stock's fair
market value at the time of such termination.
The Company's Right of Repurchase shall be exercisable by giving written
notice (accompanied by payment for the shares) to you within ninety (90)
calendar days after the later of such termination of Continuous Service or a
proper purchase of shares following such termination of Continuous Service.
To ensure that shares subject to this Right of Repurchase will be
available for repurchase, the Company may require you to deposit the certificate
evidencing the shares which you purchase upon exercise of this option with an
agent designated by the Company under the terms and conditions of an escrow
agreement approved by the Company. If the Company does not require such deposit
as a condition of exercise of this option, the Company reserves the right at any
time to require you to so deposit the certificate in escrow. As soon as
practicable after the expiration of this Right of Repurchase, the agent shall
deliver to you the shares and any other property no longer subject to such
restriction. In the event the shares and any other property held in escrow are
subject to the Company's exercise of its Right of Repurchase, the notices
required to be given to you shall be given to the escrow agent, and any payment
required to be given to you shall be given to the escrow agent. Within thirty
(30) days after payment by the Company for the shares, the escrow agent shall
deliver the shares which the Company has purchased to the Company and shall
deliver the payment received from the Company to you. If, from time to time,
there is any stock dividend, stock split or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this option, then in such event any and all new,
substituted or additional securities to which you is entitled by reason of your
ownership of the shares acquired upon exercise of this option shall be
immediately subject to this Right of Repurchase with the same force and effect
as the shares subject to this Right of Repurchase immediately before such event.
11. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
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12. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
13. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached to the Notice of Grant and
its provisions are hereby made a part of this option, including without
limitation the provisions of Section 6 of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this option and
those of the Plan, the provisions of the Plan shall control.
Dated:
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Very truly yours,
EPIMMUNE INC.
By
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Duly authorized on behalf
of the Board of Directors
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