Exhibit 10.27

 

[PHARMACOPEIA DRUG DISCOVERY, INC. LETTERHEAD]

 

[DATE]

 

[OPTIONEE]

[OPTIONEE’S ADDRESS]

 

Re:                               Incentive Stock Option Award Notice

 

Dear [NAME OF OPTIONEE]:

 

PURSUANT TO THE PHARMACOPEIA DRUG DISCOVERY, INC. 2004 STOCK INCENTIVE PLAN (THE
“PLAN”), THE PLAN’S ADMINISTRATIVE COMMITTEE (THE “COMMITTEE”) HEREBY GRANTS TO
YOU AN INCENTIVE STOCK OPTION (“OPTION”) TO PURCHASE [NUMBER] SHARES OF COMMON
STOCK, PAR VALUE $0.01, (“COMMON STOCK”) OF PHARMACOPEIA DRUG DISCOVERY, INC.
(THE “COMPANY”) AT A PRICE OF $[EXERCISE PRICE] (“EXERCISE PRICE”) PER SHARE,
EFFECTIVE [GRANT DATE] (THE “GRANT DATE”).  HOWEVER, TO THE EXTENT THE OPTION
FAILS TO SATISFY ANY REQUIREMENT OF SECTION 422(D) OF THE INTERNAL REVENUE CODE
OF 1986, THE OPTION SHALL BE TREATED AS A NON-QUALIFIED STOCK OPTION AND SHALL
BE SUBJECT TO THE TERMS AND CONDITIONS OF THE AWARD NOTICE APPLICABLE TO THE
CONTEMPORANEOUS GRANT OF A NON-QUALIFIED STOCK OPTION TO YOU, IF ANY.

 

This Option is subject to the applicable terms and conditions of the Plan, which
are incorporated herein by reference, and in the event of any contradiction,
distinction or differences between this letter and the terms of the Plan, the
terms of the Plan will control.  All capitalized terms used herein, not
otherwise defined herein, shall have the meanings set forth in the Plan.

 

VESTING AND EXERCISE PERIOD

 

Subject to your continued employment with the Company and the other provisions
of this Award Notice, on the following dates, you will be entitled to exercise
this Option as follows:

 

One fourth of the shares of Common Stock subject to the Option shall be vested
and exercisable on the first anniversary of the Grant Date;

 

An additional 1/48th of the shares subject to the Option shall be vested and
exercisable on the same day of the month (or the last day of the month if there
is no such date) as the Grant Date in each of the next 36 months thereafter;

 

Shares that become exercisable will remain available for purchase until the
tenth anniversary of the Grant Date.

 

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EFFECTS OF TERMINATION ON VESTING AND EXERCISE

 

Retirement

 

Your Option will continue to vest in accordance with the schedule above until
the date which is three years following the date of your Retirement, provided
that you do not violate any applicable non-competition, non-disparagement,
non-solicitation or confidentiality requirement or similar restrictive covenant
with the Company (collectively, the “Restrictive Covenants”) during that
three-year period.

 

If your employment is terminated due to your Retirement, you will be permitted,
prior to the Expiration Date, to the extent the Option is exerciseable, to
exercise the Option until the third anniversary of your Retirement, provided you
have not violated any applicable Restrictive Covenants.  To the extent the
Option is exercised more than ninety days following your Retirement, the Option
will be treated as a non-qualified stock option and will no longer be entitled
to treatment as an incentive stock option subject to Section 422 of the Code. 
The Option shall immediately terminate in full upon violation of any Restrictive
Covenants and in any event to the extent not exercised during the applicable
period.

 

Death or Disability

 

If your employment with the Company terminates prior to the Expiration Date due
to your death or Disability, this Option will vest fully and will remain
exercisable by you, your personal representative or the persons who acquire the
right to exercise this Option by bequest or inheritance until the earlier of the
end of the twelve-month period immediately following your death or Disability,
or the Expiration Date.  To the extent the Option is exercised more than ninety
days following your death, the Option will be treated as a non-qualified stock
option and will no longer be entitled to treatment as an incentive stock option
subject to Section 422 of the Code.  This Option shall terminate in full to the
extent not exercised within such period.

 

Termination for Cause

 

If your employment with the Company is terminated for Cause (as determined by
the Committee), then the entire unexercised portion of this Option shall
terminate on such date.

 

Resignation or Other Reasons

 

If your employment with the Company is terminated for any other reason,
including resignation, prior to the Expiration Date, vesting in the Option will
cease immediately.  This Option, to the extent it is exerciseable upon your
termination of employment, will remain exerciseable by you or your personal
representative, as applicable, until the later of the end of the  ninety-day
period immediately following your termination of employment or the Expiration
Date.  This Option shall terminate in full to the extent not exercised within
such period.

 

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CHANGE IN CONTROL

 

Notwithstanding anything in this Notice to the contrary, upon a Change in
Control, (1) if the Option is assumed and substituted with an Option of
equivalent value by an acquiror, the substituted awards shall vest in full if
your employment is terminated for any reason other than Cause or your voluntary
termination within eighteen (18) months following the date of the Change In
Control, (2) if the Option is not assumed and substituted with an Option of
equivalent value by an acquiror in accordance with the terms of the Plan, then
upon a Change in Control, the Option shall immediately become 100% vested and
exercisable.

 

EXERCISING OPTIONS

 

Upon exercise of any portion of the Option and before delivery of the shares of
Common Stock, full payment for shares of Common Stock purchased upon the
exercise shall be paid within three days of the date of exercise and shall be
made in cash, or, with the Consent of the Committee, (a) in whole or in part in
shares of Common Stock that have been held by you for at least six months and
have an aggregate Fair Market Value equal to the aggregate Exercise Price, or
(b) in cash received from a broker-dealer whom you have authorized to sell all
or a portion of the Common Stock covered by the Option.

 

An Option shall be exercised by you by giving written notice of exercise to the
Company at the Company’s office in Princeton, New Jersey, Attention: Albert N.
Essilfie.  Such notice of exercise must include a statement of the number of
vested Options to be exercised and a statement of preference as to the manner in
which payment to the Company shall be made, as described above.  Such notice
shall be deemed to have been given when hand-delivered, telecopied or mailed,
first class postage prepaid, and shall be irrevocable once given.

 

As promptly as is reasonably practicable after the exercise of the Option and
the satisfaction of any applicable taxes, as determined by the Company, a
certificate for the shares of Common Stock issuable on the exercise of the
Option shall be delivered to you or your personal representative, heir or
legatee.

 

The Option may not be transferred, assigned or pledged by you otherwise than by
will or the laws of descent and distribution or be exercised other than by the
Optionee or, in the case of your death, by your personal representative, heir or
legatee.

 

If you dispose of any shares of Common Stock acquired upon the exercise of this
Option within two years from the Grant Date or one year after such shares were
acquired pursuant to the exercise of this Option, you must notify the Company in
writing of such disposition.  Any notice required hereunder must be given within
30 days of such disposition.

 

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GOVERNING TERMS

 

The terms of this Award Notice, and any sale, purchase or exercise of any shares
subject to the Option granted by this Award Notice shall be governed by the
terms of the Pharmacopeia Drug Discovery, Inc. Insider Trading Policy (“Policy”)
previously provided or enclosed with this Award Notice, and incorporated by
reference herein.  By executing this Award Notice, you acknowledge having
received and carefully read the Policy, and you agree to be bound by the terms
of the Policy, as interpreted and amended from time to time by the Company.

 

The construction and interpretation of any provision of this Option or the Plan
shall be final and conclusive when made by the Committee.

 

Nothing in this letter shall confer on you the right to continue in the
employment or service of the Company or interfere in any way with the right of
the Company to terminate your employment or service at any time.

 

The Committee may at any time unilaterally amend this Award Notice; provided,
however, (i) no Option may be repriced, replaced, regranted through
cancellation, or modified without shareholder approval if the effect would be to
reduce the exercise price for the shares underlying the Option, and (ii) that
any amendment which, in the opinion of the Committee, is adverse to you will
require your consent.

 

You should sign and return a copy of this letter to Albert N. Essilfie.  Your
acknowledgement must be returned within ninety (90) days, otherwise, this Option
will lapse and become null and void.

 

Very truly yours,

 

 

 

 

[COMMITTEE MEMBER (or if granted to non-executive officer, Secondary Committee
member)]

 

Enclosure

 

Acknowledged and Accepted

 

 

 

 

 

[OPTIONEE]

Date

 

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