Document:

Exhibit 10.16

 

MONOSOL RX, INC. 

2007 STOCK INCENTIVE PLAN

 

1.             Purpose. The
purpose of the plan is to facilitate the ability of Monosol Rx, Inc., a
Delaware corporation (the “Company”) and its subsidiaries to attract, motivate
and retain eligible employees, directors and other personnel through the use of
equity-based and other incentive compensation opportunities. Awards made under
the plan may take the form of options to purchase shares of the Company’s
common stock, $.01 par value (the “Common Stock”) granted pursuant to Section
5, stock appreciation rights granted pursuant to Section 6, restricted stock
and deferred stock rights issued or granted pursuant to Section 7, other types
of stock-based and cash incentive awards made pursuant to Section 8, or performance-based
awards made pursuant to Section 9.

 

2.             Administration.

 

2.1           The Committee.
The Plan will be administered by the compensation committee of the Company’s
board of directors, except the entire board will have sole authority for
granting and administering awards to non-employee directors.

 

2.2           Responsibility and
Authority of the Committee. Subject to the provisions of the Plan, the
committee, acting in its discretion, will have responsibility and the power and
authority to (a) select the persons to whom awards will be made, (b) prescribe
the terms and conditions of each award and make amendments thereto, (c)
construe, interpret and apply the provisions of the Plan and of any agreement
or other document evidencing an award made under the Plan, and (d) make any and
all determinations and take any and all other actions as it deems necessary or
desirable in order to carry out the terms of the Plan. The committee may obtain
at the Company’s expense such advice, guidance and other assistance from outside
compensation consultants and other professional advisers as the committee deems
appropriate in connection with the proper administration of the plan.

 

2.3           Delegation of
Authority by Committee. Subject to the requirements of applicable law, the
committee may delegate to any person or group or subcommittee of persons (who
may, but need not be members of the committee) such Plan-related functions
within the scope of its responsibility, power and authority as it deems
appropriate.

 

2.4           Indemnification.
The Company shall indemnify and hold harmless each member of the Committee and
any employee or director of the Company to whom any duty or power relating to
the administration or interpretation of the Plan is delegated from and against
any loss, cost, liability (including any sum paid in settlement of a claim with
the approval of the Board), damage and expense (including reasonable legal and
other expenses incident thereto) arising out of or incurred in connection with
the Plan, unless and except to the extent attributable to such person’s fraud
or willful misconduct.

 

3.             Share Limitation.
Subject to adjustments required or permitted by the plan, the Company may issue
a total of 1,502,641 shares of Common Stock under the plan. For these purposes,
the following shares of Common Stock will not be taken into account and will
remain available for issuance under the plan: (a) shares covered by awards that
expire or are canceled, 

 

 

forfeited, settled in cash or
otherwise terminated, (b) shares delivered to the Company and shares withheld
by the Company for the payment or satisfaction of purchase price or tax
withholding obligations associated with the exercise or settlement of an award,
and (c) shares covered by stock-based awards assumed by the Company in
connection with the acquisition of another company or business.

 

4.             Eligibility to
Receive Awards. Awards may be granted under the plan to any present or
future director, officer, employee, consultant or adviser of or to the Company
or any of its subsidiaries. For purposes of the plan, a subsidiary is any
entity in which the Company has a direct or indirect ownership interest of at
least 50%.

 

5.             Stock Option
Awards.

 

5.1           General. Stock
options granted under the Plan will have such vesting and other terms and
conditions as the committee, acting in its discretion in accordance with the
Plan, may determine, either at the time the option is granted or, if the holder’s
rights are not adversely affected, at any subsequent time.

 

5.2           Minimum Exercise
Price. The exercise price per share of Common Stock covered by an option
granted under the plan may not be less than 100% of the fair market value per
share on the date the option is granted (110% in the case of “incentive stock
options” (within the meaning of Section 422 of the Code) granted to an employee
who is a 10% stockholder within the meaning of Section 422(b)(6) of the Code).
Unless otherwise determined by the Committee or required by applicable law, the
fair market value of a share of Common Stock as of any given date shall be the
closing sale price per share of Common Stock reported on a consolidated basis
for securities listed on the principal stock exchange or market on which the
Common Stock is traded on the date as of which such value is being determined
or, if there is no sale on that day, then on the last previous day on which a
sale was reported; provided, however, that, the fair market value of a share
of  Common Stock on the date of the
initial public offering of the Common Stock shall be the initial public offering
price per share.

 

5.3           No Repricing of
Options. The repricing of stock options granted under the plan is
prohibited in the absence of stockholder approval.

 

5.4           Maximum Duration.
Unless sooner terminated in accordance with its terms, an option granted under
the plan will automatically expire on the tenth anniversary of the date it is
granted or, in the case of an “incentive stock option” granted to an employee
who is a 10% stockholder, the fifth anniversary of the date it is granted.

 

5.5           Effect of Termination
of Employment or Service. The committee may establish such exercise and
other conditions applicable to an option following the termination of the
optionee’s employment or other service with the Company and its subsidiaries as
the committee deems appropriate on a grant-by-grant basis.

 

5.6           Method of Exercise.
An option granted under the plan may be exercised by transmitting to the
Secretary of the Company (or other person designated for this purpose by the
committee) a written notice identifying the option that is being exercised and
specifying the number of whole shares to be purchased pursuant to that option,
together with payment in full of

 

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the exercise price and the
withholding taxes due in connection with the exercise, unless and except to the
extent that other arrangements satisfactory to the Company have been made for
such payment(s). The exercise price may be paid in cash or in any other manner
the committee, in its discretion, may permit, including, without limitation,
(a) by the delivery of previously-owned shares, (b) by a combination of a cash
payment and delivery of previously-owned shares, or (c) pursuant to a cashless
exercise program established and made available through a registered broker-dealer
in accordance with applicable law. Any shares transferred to the Company (or
withheld upon exercise) in connection with the exercise of an option shall be
valued at fair market value for purposes of determining the extent to which the
exercise price and/or tax withholding obligation is satisfied by such transfer
(or withholding) of shares.

 

5.7           Transferability.
Except as otherwise provided, no option shall be assignable or transferable
except upon the optionee’s death to a beneficiary designated by the optionee in
a manner prescribed or approved for this purpose by the committee or, if no
designated beneficiary shall survive the optionee, pursuant to the optionee’s
will or by the laws of descent and distribution, and, during an optionee’s
lifetime, options may be exercised only by the optionee or the optionee’s
guardian or legal representative. Notwithstanding the foregoing, an optionee
may make an inter vivos transfer of an option (other than an “incentive stock
option”) pursuant to a domestic relations order (within the meaning of Rule
16a-12 promulgated under the Exchange Act) in settlement of marital property
rights, or by gift to any “family member” (within the meaning of Item A.1.(5) of the General Instructions to Form S-8
or any successor provision).

 

5.8           Rights as a
Stockholder. No shares of Common Stock shall be issued in respect of the
exercise of an option until payment of the exercise price and the applicable
tax withholding obligations has been made or provided for to the satisfaction
of the Company, and the holder of an option shall have no rights as a
stockholder with respect to any shares covered by the option until such shares
are duly and validly issued by the Company to or on behalf of such holder.

 

6.             Stock Appreciation
Rights.

 

6.1           General. The
committee may grant stock appreciation rights (“SARs”), either alone or in
connection with the grant of an option, upon such vesting and other terms and
conditions as the committee, acting in its discretion in accordance with the
Plan, including, as applicable, Section 5 (relating to options), may determine,
either at the time the SARs are granted or, if the holder’s rights are not
adversely affected, at any subsequent time. Upon exercise, the holder of an SAR
shall be entitled to receive cash and/or a number of whole shares of Common
Stock having a fair market value equal to the product of X
and Y, where—

 

X = the number of whole shares of
Common Stock as to which the SAR is being exercised, and

 

Y = the excess of the fair market
value per share of Common Stock on the date of exercise over the fair market
value per share of Common Stock on the date the SAR is granted (or such greater
base value as the committee may prescribe at the time the SAR is granted).

 

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6.2           Method of Exercise.
An outstanding and exercisable SAR may be exercised by transmitting to the
Secretary of the Company (or other person designated for this purpose by the
committee) a written notice identifying the SAR that is being exercised and
specifying the number of shares as to which the SAR is being exercised,
together with payment in full of the withholding taxes due in connection with
the exercise, unless and except to the extent that other arrangements
satisfactory to the Company have been made for such payment. The committee may
impose such additional or different conditions for exercise of an SAR as it
deems appropriate. No fractional shares will be issued in connection with the
exercise of an SAR.

 

7.             Restricted Stock
and Deferred Stock Awards.

 

7.1           General. Under a
restricted stock award, shares of Common Stock will be issued by the Company to
the recipient at the time of the award. Under a deferred stock award, the
recipient will be entitled to receive shares of Common Stock in the future. The
shares covered by a restricted stock award and the right to receive shares
under a deferred stock award will be subject to such vesting and other
conditions and restrictions as the committee, acting in its discretion in
accordance with the plan, may determine.

 

7.2           Minimum Purchase
Price. Unless the committee, acting in accordance with applicable law,
determines otherwise, the purchase price payable for shares of Common Stock
transferred pursuant to a restricted or deferred stock award must be at least
equal to the par value of the shares.

 

7.3           Issuance of
Restricted Stock. Shares of Common Stock issued pursuant to a restricted
stock award may be evidenced by book entries on the Company’s stock transfer
records pending satisfaction of the applicable vesting conditions. If a stock
certificate for restricted shares is issued, the certificate will bear an
appropriate legend to reflect the nature of the conditions and restrictions
applicable to the shares. The Company may require that any or all such stock
certificates be held in custody by the Company until the applicable conditions
are satisfied and other restrictions lapse. The committee may establish such
other conditions as it deems appropriate in connection with the issuance of
certificates for restricted shares, including, without limitation, a
requirement that the recipient deliver a duly signed stock power, endorsed in
blank, for the shares covered by the award.

 

7.4           Certificates for
Vested Stock. The recipient of a restricted or deferred stock award will be
entitled to receive a certificate, free and clear of conditions and
restrictions (except as may be imposed in order to comply with applicable law),
for shares that vest in accordance with the award, subject, however, to the payment
or satisfaction of applicable withholding taxes. The delivery of vested shares
covered by a deferred stock award may be deferred if and to the extent provided
by the terms of the award, subject, however, to the applicable deferral
requirements of Section 409A of the Code.

 

7.5           Rights as a
Stockholder. Subject to and except as otherwise provided by the terms of a
restricted stock award, the holder of restricted shares of Common Stock will be
entitled to receive dividends paid on, and exercise voting rights associated
with, such shares as if the shares were fully vested. The holder of a deferred
stock award shall no rights as a stockholder

 

4

 

with respect to shares covered
by a deferred stock award unless and until the award vests and the shares are
issued; provided, however, that the committee, in its discretion, may provide
for the crediting and payment of dividend equivalents on shares covered by a
deferred stock award.

 

7.6           Nontransferability.
Neither a restricted or deferred stock award nor restricted shares of Common
Stock issued pursuant to any such award may be sold, assigned, transferred,
disposed of, pledged or otherwise hypothecated other than to the Company or its
designee in accordance with the terms of the award or of the plan, and any
attempt to do so shall be null and void and, unless the committee determines
otherwise, shall result in the immediate forfeiture of the award or the
restricted shares, as the case may be.

 

7.7           Termination of
Service Before Vesting; Forfeiture. Unless the committee determines
otherwise, shares of restricted stock and non-vested deferred stock awards will
be forfeited upon the recipient’s termination of employment or other service
with the Company and its subsidiaries. If shares of restricted stock are
forfeited, any certificate representing such shares will be canceled on the
books of the Company and the recipient will be entitled to receive from the
Company an amount equal to any cash purchase price previously paid for such
shares. If a non-vested deferred stock award is forfeited, the recipient will
have no further right to receive the shares of Common Stock covered by the
non-vested award.

 

8.             Other Stock-Based
Awards and Cash Incentive Awards. The committee is authorized, subject to
limitations under applicable law, to grant to participants such other awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock or factors that may
influence the value of Common Stock, including, without limitation, stock
bonuses, dividend equivalents, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Common Stock, purchase rights for
Common Stock, awards with value and payment contingent upon performance of the
Company or business units thereof or any other factors designated by the
Committee, and awards valued by reference to the book value of Common Stock or
the value of securities of or the performance of specified subsidiaries or
affiliates or other business units and awards designed to comply with or take
advantage of other applicable law. The committee shall determine the terms and
conditions of such awards. In addition, cash incentive awards, including annual
incentive awards and long-term incentive awards, denominated and settled in
cash, may be granted under this Section, which awards may be earned at such
times, under such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or otherwise
and under such other circumstances as the committee may determine at the date
of grant or thereafter.

 

9.             Limits on
Transferability; Beneficiaries. Except as otherwise provided, no award or
other right or interest of a participant under the plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation or
liability of such participant to any party (other than the Company or an
affiliate thereof), or assigned or transferred by such participant otherwise
than by will or the laws of descent and distribution or to a beneficiary upon
the death of a participant, and such awards or rights that may be exercisable
shall be exercised during the lifetime of the participant only by the participant
or his or her guardian or legal representative. Notwithstanding the foregoing,
awards and other rights (other than ISOs) granted under the plan may be
transferred to one or more persons during a participant’s lifetime, and may

 

5

 

be exercised by or settled with
the transferee(s) in accordance with the terms of such award, but only if and
to the extent such transfers are permitted by the committee, subject to any
terms and conditions as the committee, acting in its good faith discretion, may
impose thereon. A beneficiary, transferee, or other person claiming any rights
under the plan from or through any participant shall be subject to all terms
and conditions of the plan and any award agreement applicable to such
participant, except as otherwise determined by the committee, and to any
additional terms and conditions deemed necessary or appropriate by the
committee in connection with the lawful and orderly administration of the plan.
For purposes hereof, the term “beneficiary” shall mean the legal
representatives of a participant’s estate entitled by will or the laws of
descent and distribution to receive the benefits under a participant’s award
upon a participant’s death, provided that, if and to the extent authorized by
the committee, a participant may be permitted to designate a beneficiary, in
which case the “beneficiary” instead will be the person, persons, trust or
trusts (if any are then surviving) which have been designated by the
participant in his or her most recent written beneficiary designation filed
with the Committee to receive the benefits specified under the participant’s
Award upon such participant’s death.

 

10.           Capital Changes,
Reorganization or Sale of the Company.

 

10.1         Adjustments Upon Changes
in Capitalization. The aggregate number and class of shares issuable under
the plan, the number and class of shares and the exercise price per share
covered by each outstanding option, the number and class of shares and the base
price per share covered by each outstanding SAR, and the number and class of
shares covered by each outstanding deferred stock award or other-equity-based
award, and any per-share base or purchase price or target market price included
in the terms of any such award, and related terms shall be subject to
adjustment in order to equitably reflect the effect on issued shares of Common
Stock resulting from a split-up, spin-off, recapitalization, consolidation of
shares or any similar capital adjustment, and/or to reflect a change in the
character or class of shares covered by the plan and an award.

 

10.2         Cash, Stock or Other
Property for Stock. Except as otherwise provided in this Section, in the
event of an Exchange Transaction (as defined below), all option and SAR holders
shall be permitted to exercise their outstanding options and SARs in whole or
in part (whether or not otherwise exercisable) immediately prior to such
Exchange Transaction, and any outstanding options and SARs which are not
exercised before the Exchange Transaction shall thereupon terminate.
Notwithstanding the preceding sentence, if, as part of an Exchange Transaction,
the stockholders of the Company receive capital stock of another corporation (“Exchange
Stock”) in exchange for their shares of Common Stock (whether or not such
Exchange Stock is the sole consideration), the Company may cause all options
and SARs for Common Stock that are outstanding at the time of the Exchange
Transaction to be converted into options or SARs (as the case may be) for
shares of Exchange Stock. The number of shares of Exchange Stock and the
exercise price per share under a converted option will be adjusted such that
(a) the ratio of the exercise price per share to the value per share at the
time of the conversion (which value will be equal to the consideration payable
for each share of Common Stock in the Exchange Transaction) is the same as the
ratio of the per share exercise price to the value of per share of Common Stock
under the original option; and (b) the aggregate difference

 

6

 

between the value of the shares
of Exchange Stock and the exercise price under the converted option immediately
after the Exchange Transaction is the same as the aggregate difference between
the value of the shares of Common Stock and the exercise price under the
original option immediately before the Exchange Transaction. Similar
adjustments will be made to the number of shares of Exchange Stock and the base
value per share covered by SARs that are converted. Unless the Company’s board
of directors determines otherwise, the vesting and other terms and conditions
of the converted options and SARs shall be substantially the same as the
vesting and corresponding other terms and conditions of the original options
and SARs. The Company’ board of directors, acting in its discretion, may
accelerate vesting of other non-vested awards, and cause cash settlements
and/or other adjustments to be made to any outstanding awards (including,
without limitation, options and SARs) as it deems appropriate in the context of
an Exchange Transaction, taking into account with respect to other awards the
manner in which outstanding options and SARs are being treated. If a
participant’s employment or other service is terminated within two years after
an Exchange Transaction for any reason other than voluntary termination by the
participant or termination by the acquiring or successor company for good
cause, then any options or other awards that were granted under the plan and
that were assumed by the acquiring or successor entity in connection with the
Exchange Transaction will, upon such termination, become fully vested and
nonforfeitable.

 

10.3         Definition of Exchange
Transaction. For purposes of the plan, the term “Exchange Transaction”
means a merger (other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate
ownership of Common Stock in the surviving corporation immediately after the
merger), consolidation, acquisition or disposition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation
of a holding company), liquidation of the Company or any other similar
transaction or event so designated by the Company’s board of directors in its
sole discretion, as a result of which the stockholders of the Company receive
cash, stock or other property in exchange for or in connection with their
shares of Common Stock.

 

10.4         Fractional Shares.
In the event of any adjustment in the number of shares covered by any award
pursuant to the provisions hereof, any fractional shares resulting from such
adjustment shall be disregarded, and each such award shall cover only the
number of full shares resulting from the adjustment.

 

10.5         Determination of Board
to be Final. All adjustments under this Section shall be made by the
Company’s board of directors, and its determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.

 

11.           Termination and
Amendment of the Plan. The board of directors of the Company may terminate
the plan at any time or amend the plan at any time and from time to time;
provided, however, that:

 

(a)           no
such action shall impair or adversely alter any awards theretofore granted
under the plan, except with the consent of the recipient or holder, nor shall
any such action deprive any such person of any shares which he or she may have
acquired through or as a result of the plan; and

 

(b)           to
the extent necessary under applicable law or the requirements of any stock
exchange or market upon which the shares of Common Stock may then be listed, no

 

7

 

amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law.

 

12.           Limitation of Rights.
Nothing contained in the plan or in any award agreement shall confer upon any
recipient of an award any right with respect to the continuation of his or her
employment or other service with the Company or a subsidiary or other
affiliate, or interfere in any way with the right of the Company and its
subsidiaries and other affiliates at any time to terminate such employment or
other service or to increase or decrease, or otherwise adjust, the compensation
and/or other terms and conditions of the recipient’s employment or other
service.

 

13.           Miscellaneous.

 

13.1         Governing Law. The
plan and the rights of all persons claiming under the plan shall be governed by
the laws of the State of Delaware, without giving effect to conflicts of laws
principles thereof.

 

13.2         Shares Issued Under
Plan. Shares of Common Stock available for issuance under the plan may be
authorized and unissued, held by the Company in its treasury or otherwise
acquired for purposes of the plan. No fractional shares of Common Stock will be
issued under the plan.

 

13.3         Compliance with Law.
The Company will not be obligated to issue or deliver shares of Common Stock
pursuant to the plan unless the issuance and delivery of such shares complies
with applicable law, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, and the requirements of any stock exchange or
market upon which the Common Stock may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

 

13.4         Transfer Orders;
Placement of Legends. All certificates for shares of Common Stock delivered
under the plan shall be subject to such stock-transfer orders and other
restrictions as the Company may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange or market upon which the Common Stock may then be listed, and any
applicable federal or state securities law. The Company may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.

 

13.5         Decisions and
Determinations Final. All decisions and determinations made by the Company’s
board of directors pursuant to the provisions hereof and, except to the extent
rights or powers under the Plan are reserved specifically to the discretion of
the board of directors, all decisions and determinations of the committee,
shall be final, binding and conclusive on all persons.

 

13.6         Withholding of Taxes.
As a condition to the exercise and/or settlement of any award or the lapse of
restrictions on any award or shares, or in connection with any other event that
gives rise to a federal or other governmental tax withholding obligation on the
part of the Company or a subsidiary with respect to an award, the Company
and/or the subsidiary may (a) deduct or withhold (or cause to be deducted or
withheld) from any payment or distribution otherwise payable to the award
recipient, whether or not such payment or distribution is covered

 

8

 

by the plan, or (b) require the
recipient to remit cash (through payroll deduction or otherwise) or make other
arrangements permitted by the Company, in each case in an amount or of a nature
sufficient in the opinion of the Company to satisfy or provide for the
satisfaction of such withholding obligation. If the event giving rise to the
withholding obligation involves a transfer of shares of Common Stock, then, at
the sole discretion of the committee, the recipient may satisfy the withholding
obligations associated with such transfer by electing to have the Company
withhold shares of Common Stock or by tendering previously-owned shares of
Common Stock, in each case having a fair market value equal to the amount of
tax to be withheld.

 

14.           Term of the Plan.
The plan shall be effective as of the date of its adoption by the Board,
subject to the approval of the stockholders of the Company within twelve months
from the date of such adoption by the Board. The plan shall expire on the tenth
anniversary of the date of its adoption by the Board, unless sooner terminated
by the Board. The rights of any person with respect to an Award made under the
plan that is outstanding at the time of the termination of the plan shall not
be affected solely by reason of the termination of the plan and shall continue
in accordance with the terms of the award and of the plan, as each is then in
effect or is thereafter amended.

 

9Exhibit 10.17

 

STOCK
OPTION AGREEMENT

UNDER THE MONOSOL Rx, INC.

2007 STOCK INCENTIVE PLAN

 

AGREEMENT (the
“Agreement”) is made as of the         
day of               ,
20    , by and between MONOSOL Rx, INC., a Delaware
corporation (the “Company”), and                                   
( the “Optionee”) pursuant to the Monosol Rx, Inc. 2007 Stock Incentive
Plan (the “Plan”).

 

1.             Grant of Option;
Tax Status. The Company hereby grants to the Optionee an option to purchase
up to             
shares of the Company’s common stock (the “Common Stock”), at a purchase price
per share of $                
subject to the provisions of this Agreement and the Plan. Inconsistencies
between this Agreement and the Plan will be governed by the applicable
provisions of the Plan. The Executive acknowledges receipt of a copy of the
Plan. This option is [not] intended to qualify as an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986.

 

2.             Term. Unless
sooner terminated in accordance with this Agreement or the Plan, the option
will automatically expire on the tenth anniversary of the date hereof.

 

3.             Vesting Schedule.
Except as otherwise provided in this Agreement, the option shall become vested
and exercisable in accordance with the following schedule, based upon the
period of the Optionee’s continuous employment or other service with the
Company following the date hereof:

 

	
  Period of Service

  	
   

  	
  Vesting Percentage

  	
   

  
	
  Less than 1 Year

  	
   

  	
  0

  	
  %

  
	
  At least 1 Year

  	
   

  	
  25

  	
  %

  
	
  At least 2 Years

  	
   

  	
  50

  	
  %

  
	
  At least 3 Years

  	
   

  	
  75

  	
  %

  
	
  4 or more Years

  	
   

  	
  100

  	
  %

  

 

4.             Non-Transferability.
This option may not be assigned or transferred except upon the Optionee’s death
to a beneficiary designated by the Optionee in a manner prescribed or approved
for this purpose by the compensation committee of the Company’s board of
directors (the “Committee”) or, if no designated beneficiary shall survive the
Optionee, pursuant to the Optionee’s will or by the laws of descent and
distribution. During the Optionee’s lifetime, this option may be exercised only
by the Optionee or the Optionee’s guardian or legal representative.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
permit the inter vivos transfer
of this option by gift to any “family member” (within the meaning of Item
A.1.(5) of the

 

 

General
Instructions to Form S-8 or any successor provision), on such terms and
conditions as the Committee deems appropriate.

 

5.             Termination of
Employment or other Service.

 

(a)           If the Optionee’s
employment or other service with the Company or its subsidiaries is terminated
due to the Optionee’s death or Disability (as defined below), then: (1) that
portion of the option that is not then vested exercisable will terminate upon
the date of the Optionee’s termination of employment or other service, and (2)
that portion of the option, if any, that is then vested and exercisable will
terminate if and to the extent it is not exercised before the first anniversary
of the Optionee’s termination of employment or service or, if earlier, the
expiration of the stated term of the option. As used herein, the term “Disability”
means the inability of the Optionee to perform the principal duties of the
Optionee’s employment by reason of a physical or mental illness or injury that
is expected to last indefinitely or result in death, as determined by a duly
licensed physician selected by the Company.

 

(b)           If the Optionee’s
employment or other service is terminated by the Company or its subsidiaries
for cause (which determination shall be made in the sole and absolute
discretion of the Committee), then this option (whether or not then vested and
exercisable) shall immediately terminate and cease to be exercisable.

 

(c)           If the Optionee’ s
employment or other service with the Company or its affiliates is terminated
for any reason other than those set forth in Section 5(a) or (b) above, then:
(1) that portion of the option that is not then vested exercisable will
terminate upon the date of the Optionee’s termination of employment or other
service, and (2) that portion of the option, if any, that is then vested and
exercisable shall terminate if and to the extent it is not exercised within
three months after such termination of employment or service (or, if earlier,
the expiration of the stated term of the option).

 

6.             Method of Exercise.
This option may be exercised by transmitting to the Secretary of the Company
(or such other person designated by the Committee) a written notice identifying
the option being exercised and specifying the number of whole shares being
purchased, together with payment of the exercise price and the amount of the
applicable tax withholding obligations (unless other arrangements are made for
the payment of such exercise price and/or the satisfaction of such withholding
obligations). The exercise price and withholding obligation may be paid in
whole or in part (a) in cash or by check, (b) by means of a cashless exercise
procedure to the extent permitted by law, (c) if permitted by the Committee, by
the surrender of previously-owned shares of Common Stock (to the extent of the
fair market value thereof), and/ or (d) subject to applicable law, by any other
form of consideration deemed appropriate by the Committee.

 

7.             Stockholder Rights.
No shares of Common Stock will be issued in respect of the exercise of this
option until payment of the exercise price and the applicable tax withholding
obligations have been made or arranged to the satisfaction of the Company. The
holder of this option shall have no rights as a stockholder with respect to any
shares of Common Stock covered by this option until the shares of Common Stock
are issued pursuant to the exercise of this option.

 

2

 

8.             Compliance with
Law. The Company will not be obligated to issue or deliver shares of Common
Stock pursuant to this option unless the issuance and delivery of such shares
complies with applicable law, including, without limitation, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the
requirements of any stock exchange or market upon which the Common Stock may
then be listed. The Company may prevent or delay the exercise of this option if
and to the extent the Company deems necessary or advisable in order to avoid a violation
of applicable law or its own policies regarding the purchase and sale of Common
Stock. If, during the period of any such ban or delay, the term of this option
would expire, then the term of this option will be extended for thirty (30)
days after the Company removes the restriction against exercise.

 

9.             Transfer Orders;
Legends. All certificates for shares of Common Stock delivered under this
option shall be subject to such stock-transfer orders and other restrictions as
the Company may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange or
market upon which the Common Stock may then be listed, and any applicable
federal or state securities law. The Company may cause a legend or legends to
be placed on any such certificates to make appropriate reference to such
restrictions.

 

10.           No Rights Conferred.
Nothing contained in the Plan or this Agreement shall confer upon the Optionee
any right with respect to the continuation of the Optionee’s employment or
other service with the Company or its subsidiaries or interfere in any way with
the right of the Company and its subsidiaries at any time to terminate such
employment or other service or to otherwise modify the terms and conditions of
the Optionee’s employment or other service.

 

11.           Provisions of the
Plan. The provisions of the Plan, the terms of which are hereby
incorporated by reference, shall govern if and to the extent that there are
inconsistencies between those provisions and the provisions hereof. The
Optionee acknowledges receipt of a copy of the Plan prior to the execution of
this Agreement. Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Plan.

 

12.           Miscellaneous
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and, except as otherwise provided in the Plan, may
not be modified other than by written instrument executed by the parties.

 

3

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first above
written.

 

	
   

  	
  MONOSOL Rx, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee

  
					

 

4

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