Exhibit 10.9

 

TORREYPINES THERAPEUTICS, INC.
2000 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock
Option Agreement, TorreyPines Therapeutics, Inc. (the “Company”) has granted you
an option under its 2000 Equity Incentive Plan, as amended (the “Plan”), to
purchase the number of shares of the Company’s Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined terms
not explicitly defined in this Stock Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

 

The details of your option are as follows:

 

1.             VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.

 

2.             NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.

 

3.             EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”). If permitted in
your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise”
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:

 

(a)           a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;

 

(b)           any shares of Common Stock so purchased from installments that
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 Company’s form of Early
Exercise Stock Purchase Agreement;

 

(c)           you shall enter into the Company’s form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and

 

(d)           if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or

 

1

--------------------------------------------------------------------------------

 

portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as nonstatutory stock options.

 

4.             METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner permitted by
your Grant Notice, which may include one or more of the following:

 

(a)           In the Company’s sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
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.

 

(b)           Provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
“Delivery” for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.

 

5.             WHOLE SHARES. You may exercise your option only for whole shares
of Common Stock.

 

6.             SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock 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. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations.

 

7.             TERM. You may not exercise your option before the commencement of
its term or after its term expires. The term of your option commences on the
Date of Grant and expires upon the earliest of the following:

 

(a)           three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three- (3-) month period your option is not exercisable solely
because of the condition set forth in the

 

2

--------------------------------------------------------------------------------

 

preceding paragraph relating to “Securities Law Compliance,” your option shall
not expire until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination of
your Continuous Service;

 

(b)           twelve (12) months after the termination of your Continuous
Service due to your Disability;

 

(c)           eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;

 

(d)           the Expiration Date indicated in your Grant Notice; or

 

(e)           the day before the tenth (10th) anniversary of the Date of Grant.

 

If your option is an incentive stock option, note that, 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 of your option and
ending on the day three (3) months before the date of your option’s exercise,
you must be an employee of the Company or an Affiliate, except in the event of
your death or Disability. The Company has provided for 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 continue to provide services to the Company or an Affiliate as a Consultant
or Director after your employment terminates or if you otherwise exercise your
option more than three (3) months after the date your employment terminates.

 

8.             EXERCISE.

 

(a)           You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
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.

 

(b)           By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into 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
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.

 

(c)           If your option is an incentive stock option, by exercising your
option you agree that 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 your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.

 

(d)           By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering

 

3

--------------------------------------------------------------------------------

 

of any securities of the Company under the Securities Act, require that you not
sell, dispose of, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any shares of Common Stock or other securities of the
Company held by you, for a period of time specified by the underwriter(s) (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Securities Act. You
further agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) that are consistent with the
foregoing or that are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to your shares of Common Stock until the end of such
period. The underwriters of the Company’s stock are intended third party
beneficiaries of this Section 8(d) and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto.

 

9.             TRANSFERABILITY. Your 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, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.

 

10.          RIGHT OF FIRST REFUSAL.

 

(a)           Shares of Common Stock that you acquire upon exercise of your
option are subject to any right of first refusal that may be described in the
Company’s bylaws in effect at such time the Company elects to exercise its
right.

 

(b)           If there is no right of first refusal described in the Company’s
bylaws in effect at such time the Company elects to exercise its right, then you
may not validly transfer (as hereinafter defined) any shares of Common Stock
that you acquire upon exercise of your option, or any interest in such shares,
unless such transfer is solely for cash consideration and is made in compliance
with the following provisions (the Company’s “Right of First Refusal”):

 

(i)            Before there can be a valid transfer of any shares or any
interest therein, the record holder of the shares to be transferred (the
“Offered Shares”) shall give written notice (by registered or certified mail) to
the Company. Such notice shall specify the identity of the proposed transferee,
the cash price offered for the Offered Shares by the proposed transferee and the
other terms and conditions of the proposed transfer. The date such notice is
mailed shall be hereinafter referred to as the “notice date,” and the record
holder of the Offered Shares shall be hereinafter referred to as the “Offeror.” 
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 your option, then in such
event any and all new, substituted or additional securities to which you are
entitled by reason of your ownership of the shares acquired upon exercise of
your option shall be immediately subject to the Company’s Right of First Refusal
with the same force and effect as the shares subject to the Company’s Right of
First Refusal immediately before such event.

 

4

--------------------------------------------------------------------------------

 

(ii)           For a period of thirty (30) calendar days after the notice date,
the Company shall have the option to purchase all (but not less than all) of the
Offered Shares at the purchase price and on the terms set forth in subsection
10(b)(iii). The Company may exercise its Right of First Refusal by mailing (by
registered or certified mail) written notice of exercise of its Right of First
Refusal to the Offeror prior to the end of said thirty (30) days. The Company
may assign its rights hereunder.

 

(iii)         The price at which the Company may purchase the Offered Shares
pursuant to the exercise of its Right of First Refusal shall be the cash price
offered for the Offered Shares by the proposed transferee (as set forth in the
notice required under subsection 10(b)(i). The Company’s notice of exercise of
its Right of First Refusal shall be accompanied by full payment for the Offered
Shares and, upon such payment by the Company, the Company shall acquire full
right, title and interest to all of the Offered Shares.

 

(iv)          If, and only if, the option given pursuant to subsection 10(b)(ii)
is not exercised, the transfer proposed in the notice given pursuant to
subsection 10(b)(i) may take place; provided, however, that such transfer must,
in all respects, be exactly as proposed in said notice except that such transfer
may not take place either before the tenth (10th) calendar day after the
expiration of said 30-day option exercise period or after the ninetieth (90th)
calendar day after the expiration of said 30-day option exercise period, and if
such transfer has not taken place prior to said ninetieth (90th) day, such
transfer may not take place without once again complying with subsection 10(b).

 

(v)            As used in this subsection 10(b), the term “transfer” means any
sale, encumbrance, pledge, gift or other form of disposition or transfer of
shares of the Company’s stock or any legal or equitable interest therein;
provided, however, that the term “transfer” does not include a transfer of such
shares or interests by will or by the applicable laws of descent and
distribution or a gift of such shares if the donee agrees to be bound by the
provisions of this subsection 10(b).

 

(vi)          None of the shares of the Company’s stock purchased on exercise of
your option shall be transferred on the Company’s books nor shall the Company
recognize any such transfer of any such shares or any interest therein unless
and until all applicable provisions of this subsection 10(b) have been complied
with in all respects. The certificates of stock evidencing shares of stock
purchased on exercise of your option shall bear an appropriate legend referring
to the transfer restrictions imposed by this subsection 10(b).

 

(vii)         The Company’s Right of First Refusal shall expire on the first
date upon which any security of the Company is listed (or approved for listing)
upon notice of issuance on any securities exchange or designated (or approved
for designation) upon notice of issuance as a national market security on an
interdealer quotation system if such securities exchange or interdealer
quotation system has been certified in accordance with the provisions of Section
25100(o) of the California Corporate Securities Law of 1968.

 

11.          RIGHT OF REPURCHASE. To the extent provided in the Company’s bylaws
as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.

 

5

--------------------------------------------------------------------------------

 

12.          OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

 

13.          WITHHOLDING OBLIGATIONS.

 

(a)           At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.

 

(b)           Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.

 

(c)           You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.

 

14.          NOTICES. Any notices provided for in your 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 mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.

 

6

--------------------------------------------------------------------------------

 

15.          GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, 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 your option and
those of the Plan, the provisions of the Plan shall control.

 

7

--------------------------------------------------------------------------------