Exhibit 10.2

 

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                  , 200      

 

[Name]

[Address]

 

Re:                               Incentive Stock Option Award Notice

 

Dear [Name]:

 

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 [                   ]
SHARES OF COMMON STOCK, PAR VALUE $0.01 (“COMMON STOCK”), OF PHARMACOPEIA DRUG
DISCOVERY, INC. (THE “COMPANY”)  AT A PRICE OF $[           ] (“EXERCISE PRICE”)
PER SHARE, EFFECTIVE                      , 200     (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 THIS AWARD NOTICE APPLICABLE TO THE CONTEMPORANEOUS GRANT OF A NON-QUALIFIED
STOCK OPTION TO YOU, IF ANY.

 

The 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 Award Notice and the terms of the Plan,
the terms of this Award Notice 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
the 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 (the “Expiration Date”).

 

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EFFECTS OF TERMINATION ON VESTING AND EXERCISE

 

Retirement

 

The 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, the Option will vest fully and will remain
exercisable, as applicable, by you, your personal representative or the persons
who acquire the right to exercise the Option by bequest or inheritance until, as
applicable (i) the earlier of the end of the twelve-month period immediately
following your death or the Expiration Date and (ii) the earlier of the end of
the three-year period immediately following your 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 prior to the Expiration Date
for Cause (as defined in the Severance Agreement for [name] dated as
of              , 200      (the “Severance Agreement”)), then the entire
unexercised portion of the Option shall terminate on such date.

 

Good Reason or without Cause

 

If your employment with the Company terminates prior to the Expiration Date for
Good Reason (as defined in the Severance Agreement) or without Cause (as defined
in the Severance Agreement), vesting in the Option will cease immediately. The
Option, to the extent it is exercisable upon such a termination of employment,
will remain exercisable by you or your personal representative, as applicable,
until the Expiration Date.

 

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Resignation or Other Reasons

 

If your employment with the Company is terminated for any reason other than for
Retirement, death, Disability, Cause, Good Reason or in connection with a Change
In Control prior to the Expiration Date, vesting in the Option will cease
immediately.  The Option, to the extent it is exerciseable upon such a
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 such a termination of employment or the Expiration
Date.  The Option shall terminate in full to the extent not exercised within
such period.

 

CHANGE IN CONTROL

 

Notwithstanding anything in this Award Notice or the Plan to the contrary, but
subject to the immediately following paragraph, upon a Change In Control, any
unvested portion of the Option shall immediately vest; provided, however, that
in the event the Option is assumed by a successor corporation upon a Change In
Control, the Option shall be substituted with an option involving the common
stock of the successor corporation with equivalent value and with the terms and
conditions of the substituted option being no less favorable than the Option. 
All such substituted option awards shall vest in full if your employment with
the Company is terminated for any reason other than Cause or your voluntary
termination within eighteen (18) months of the Change In Control.

 

Notwithstanding anything in this Award Notice or the Plan to the contrary
(including the immediately preceding paragraph), in the event your employment
with the Company is terminated by the Company involuntarily without Cause or you
terminate your employment with the Company for Good Reason, in either case at
any time during the period commencing two (2) months before and ending twelve
(12) months after the occurrence of a Change In Control, any unvested portion of
the Option shall immediately vest on the date of such termination of your
employment, the expiration date of the exercise period for the Option shall be
the earlier of (i) one (1) year following the date of termination or (ii) the
Expiration Date, and the Company shall take all actions necessary or advisable
to give effect to this Section of the Award Notice.

 

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.

 

The 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: Vice
President, Finance.  Such notice of exercise must include a statement of the
number of shares underlying the Option exercise and a statement of preference as
to the manner in which payment to the Company shall be made, as

 

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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 as
permitted by the Plan, by will or the laws of descent and distribution or be
exercised other than by you 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 the
Option within two years from the Grant Date or one year after such shares were
acquired pursuant to an exercise of the Option, you agree to notify the Company
in writing of such disposition.  Any notice required hereunder must be given
within 30 days of such disposition.

 

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 (the
“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.

 

Nothing in this Award Notice 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.

 

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You should sign and return a copy of this Award Notice to the Vice President,
Finance of the Company.

 

Very truly yours,

 

 

 

 

[Name]

[Title]

 

Enclosure

 

 

Acknowledged and Accepted:

 

 

 

 

Name:

Title:

 

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