EXHIBIT 99.2
PENWEST PHARMACEUTICALS CO.
Nonstatutory Stock Option
Agreement
1. Grant of Option
.
This agreement
(this “Agreement”) evidences the grant by Penwest
Pharmaceuticals Co., a Washington corporation (the
“Company”), on June 21, 2004 (the “Grant
Date”) to Alan F. Joslyn, an employee of the Company (the
“Employee”), of an option to purchase, in whole or in
part, on the terms provided herein, a total of 100,000 shares (the
“Shares”) of common stock, $.001 par value per share,
of the Company (“Common Stock”) at an exercise price of
$11.06 per Share. Unless earlier terminated, this option shall
expire at 5:00 p.m., Eastern time, on June 22, 2014 (the
“Final Exercise Date”).
It
is intended that the option evidenced by this Agreement shall not
be an incentive stock option as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the “Code”). Except as
otherwise indicated by the context, the term
“Employee”, as used in this option, shall be deemed to
include any person who acquires the right to exercise this option
validly under its terms.
2. Vesting Schedule
.
(a) This
option will become exercisable (“vest”) as to 25% of
the original number of Shares on the first anniversary of the Grant
Date and as to an additional 25% of the original number of Shares
at the end of each successive one year period following the first
anniversary of the Grant Date until the fourth anniversary of the
Grant Date.
(b) The right
of exercise shall be cumulative so that to the extent the option is
not exercised in any period to the maximum extent permissible it
shall continue to be exercisable, in whole or in part, with respect
to all Shares for which it is vested until the earlier of the Final
Exercise Date or the termination of this option under
Section 3 or Section 6 hereof.
(c) Notwithstanding
the foregoing, this option shall automatically become exercisable
in full (i) upon a Change in Control Event (as defined below)
prior to the date the Employee ceases to be an Eligible Employee
(as defined below), (ii) upon the Employee’s death or
disability (within the meaning of Section 22(e)(3) of the
Code) on or prior to the date the Employee ceases to be an Eligible
Employee or (iii) upon the Employee’s retirement in
accordance with the Company’s normal retirement policy,
provided in each case that the Company has not terminated the
Employee’s relationship with the Company for
“cause” or determined that discharge for
“cause” was warranted as specified in Section 3(e)
below.
(d) For the
purposes of this Section 2, a “Change in Control
Event” shall mean:
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(i)
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the
acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended) (a “Person”) of beneficial
ownership of any capital stock of the Company if, after such
acquisition, such
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Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) 50% or more of the combined
voting power of the then-outstanding securities of the Company
entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control Event:
(A) any acquisition directly from the Company, (B) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (C) any acquisition by any
corporation pursuant to a Business Combination (as defined below)
which complies with clauses (x) and (y) of subsection
(iii) of this definition; or
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(ii)
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such time as the Continuing
Directors (as defined below) do not constitute a majority of the
Board of Directors of the Company (the “Board”) (or, if
applicable, the Board of Directors of a successor corporation to
the Company), where the term “Continuing Director”
means at any date a member of the Board (x) who was a member
of the Board on the Grant Date or (y) who was nominated or
elected subsequent to such date by at least a majority of the
directors who were Continuing Directors at the time of such
nomination or election or whose election to the Board was
recommended or endorsed by at least a majority of the directors who
were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this
clause (y) any individual whose initial assumption of office
occurred as a result of an actual or threatened election contest
with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents, by or on
behalf of a person other than the Board; or
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(iii)
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the
consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving the Company or a sale
or other disposition of all or substantially all of the assets of
the Company (a “Business Combination”), unless,
immediately following such Business Combination, each of the
following two conditions is satisfied: (x) all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% the combined voting power of
the then-outstanding securities entitled to vote generally in the
election of directors, of the resulting or acquiring corporation in
such Business Combination (which shall include, without limitation,
a corporation which as a result of such transaction owns the
Company or substantially all of
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the
Company’s assets either directly or through one or more
subsidiaries) (such resulting or acquiring corporation is referred
to herein as the “Acquiring Corporation”) in
substantially the same proportions as their ownership of the
Outstanding Company Voting Securities immediately prior to such
Business Combination and (y) no Person (excluding any employee
benefit plan (or related trust) maintained or sponsored by the
Company or by the Acquiring Corporation) beneficially owns,
directly or indirectly, 50% of the combined voting power of the
then-outstanding securities of the Acquiring Corporation entitled
to vote generally in the election of directors (except to the
extent that such ownership existed prior to the Business
Combination); or
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(iv)
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the
liquidation or dissolution of the Company.
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3. Exercise of Option
.
(a) Form
of Exercise . Each election to exercise this option shall be in
writing, signed by the Employee, and received by the Company at its
principal office, accompanied by this agreement, and payment in
full in the manner provided in Section 4 below. The Employee
may purchase less than the number of shares covered hereby,
provided that no partial exercise of this option may be for any
fractional share or for fewer than five whole shares.
(b)
Continuous Relationship with the Company Required . Except
as otherwise provided in this Section 3, this option may not
b
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