Exhibit 10.4
ARYX
THERAPEUTICS
2001 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, ARYX THERAPEUTICS
, a California corporation (the “ Company ”), has granted you an
option under its 2001 Equity Incentive Plan (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 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:
1
(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)
immediately upon the
termination of your Continuous Service for Cause;
(b)
three (3) months after the
termination of your Continuous Service for any reason other than
Cause, Disability or death, provided that if during any part of
such three- (3-) month period you may not exercise your option
solely because of the condition set forth in the 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;
(c)
twelve (12) months after
the termination of your Continuous Service due to your
Disability;
(d)
eighteen (18) months after
your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates
for reason other than Cause;
(e)
the Expiration Date
indicated in your Grant Notice; or
2
(f)
the day before the tenth
(10th) anniversary of the Date of Grant.
For
purposes of your option, “ Cause ” means your misconduct,
including but not limited to: (i) your conviction of any
felony or any crime involving moral turpitude or dishonesty,
(ii) your participation in a fraud or act of dishonesty
against the Company, (iii) your conduct that, based upon a
good faith and reasonable factual investigation and determination
by the Company’s board of directors (the “ Board ”), demonstrates your gross
unfitness to serve, or (iv) your intentional, material
violation of any contract between the Company and you or any
statutory duty of yours to the Company that you do not correct
within thirty (30) days after written notice to you thereof.
Your physical or mental disability shall not constitute “
Cause .”
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
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