EXHIBIT 4.2
NEUROCRINE BIOSCIENCES, INC.
EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION
THIS EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION (the "Agreement"),
dated as of SEPTEMBER 2, 2003, is made by and between Neurocrine Biosciences,
Inc., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an employee
of the Company (the "Optionee").
WHEREAS, the Board of Directors of the Company has determined that it
would be to the advantage and best interest of the Company and its stockholders
to grant the nonstatutory stock option provided for herein (the "Option") to
Optionee in connection with his initial commencement of employment with the
Company and that such grant is an essential inducement to Optionee's entering
into a contract of employment with the Company as its Executive Vice President
Research and Development.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Definitions.
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board to
administer this Option, if one is appointed, which Committee shall be
constituted to satisfy applicable laws.
(d) "Common Stock" shall mean the common stock of the Company, par
value $.001 per share.
(e) "Company" shall mean Neurocrine Biosciences, Inc.
(f) "Consultant" shall mean any natural person who is engaged by the
Company or any Parent or Subsidiary of the Company to render bona fide
consulting services and is compensated for such consulting services.
(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant, as applicable. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for a
period of not more than ninety (90) days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.
(h) "Employee" shall mean any person, including an officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Fair Market Value" shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the Fair Market Value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of determination, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the NASDAQ System) or, in the event the Common Stock is listed on a
stock exchange, the Fair Market Value per Share shall be the closing price on
such exchange on the date of determination, as reported in the Wall Street
Journal.
(j) "Optioned Stock" shall mean the Common Stock subject to this
Option.
(k) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(l) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
2. Grant of Option. In consideration of Optionee's agreement to render
services to the Company and for other good and valuable consideration, the
Company grants to Optionee an Option to purchase the Common Stock (the "Shares")
set forth below, at the exercise price set forth below (the "Exercise Price"),
subject to the terms and conditions of this Agreement. The terms of Optionee's
grant are set forth below:
Date of Grant: September 2, 2003
Vesting Commencement Date: September 2, 2003
Exercise Price per Share: $53.58
Total Number of Shares Granted: 100,000
Total Exercise Price: $53.58
Term/Expiration Date: September 2, 2013
This Option is a nonstatutory stock option and is not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
3. Exercise and Vesting Schedule. The Shares subject to this Option shall
vest and become exercisable according to the following schedule:
2
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
25% of the Shares subject to this Option shall vest twelve (12) months
after the Vesting Commencement Date, and 1/48th of the Shares subject to
this Option shall vest each month thereafter, subject to the Optionee
continuing to be an Employee or Consultant on such dates.
For purposes of this Agreement, Shares subject to this Option shall vest
and become exercisable based on Optionee's Continuous Status as an Employee or
Consultant.
4. Exercise of Option.
(a) Right to Exercise.
(i) This Option shall be exercisable cumulatively according to
the vesting schedule set out in Section 3 above.
(ii) This Option may not be exercised for a fraction of a
Share.
(iii) In the event of Optionee's death, retirement, disability
or other termination of Optionee's Continuous Status as an Employee or
Consultant, the exercisability of this Option is governed by Sections 7, 8, 9
and 10 below.
(iv) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in Section 2 above.
(b) Method of Exercise. This Option shall be exercisable by delivery
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise this Option, the number of
Shares in respect of which this Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company. The Exercise Notice shall be completed by Optionee and delivered to
the President, the Chief Financial Officer or Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares, including payment of any applicable withholding tax.
This Option shall be deemed to be exercised upon receipt by the Company of such
fully-executed Exercise Notice accompanied by such aggregate Exercise Price and
payment of any applicable withholding tax, which may be paid by the withholding
of shares otherwise issuable upon exercise having a Fair Market Value equal to
the statutory minimum amount required to be withheld.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company;
3
(d) surrender of other shares of Common Stock which (i) either have
been owned by Optionee for more than six (6) months on the date of surrender or
were not acquired directly or indirectly, from the Company, and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate Exercise Price of
the Exercised Shares;
(e) with the consent of the Board, such other consideration and
method of payment for the issuance of Shares to the extent permitted under
applicable law; or
(f) any combination of the foregoing methods of payment.
6. Restrictions on Exercise. No Shares shall be issued pursuant to the
exercise of this Option unless such issuance and such exercise comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of the Nasdaq Stock
Market or any stock exchange upon which the Shares may then be listed, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance. Assuming such compliance, for income tax purposes the Exercised
Shares shall be considered transferred to Optionee on the date this Option is
exercised with respect to such Exercised Shares. As a condition to the exercise
of this Option, the Company may require the person exercising this Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
7. Termination of Relationship. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant (as the case may be) (other than
by reason of Optionee's death, retirement or the total and permanent disability
of Optionee as defined in Code Section 22(e)(3)), Optionee may exercise this
Option to the extent this Option was vested at the date on which Optionee's
Continuous Status as an Employee or Consultant terminates, but only within
ninety (90) days from such date (or such other period of time not exceeding six
(6) months, as is determined by the Board) (and in no event later than the
expiration date of the term of this Option as set forth in Section 2). To the
extent that Optionee was not entitled to exercise this Option at the date of
such termination, or if Optionee does not exercise this Option (which Optionee
was entitled to exercise) within the time specified herein, this Option shall
terminate.
8. Disability of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant (as the case may be) as a result
of Optionee's total and permanent disability as defined in Code Section
22(e)(3), Optionee may exercise this Option to the extent the right to exercise
would have accrued had Optionee continued Continuous Status as an Employee or
Consultant for a period of six (6) months following termination of Optionee's
Continuous Status by reason of disability, but only within six (6) months from
such date (and in no event later than the expiration date of the term of this
Option as set forth in Section 2). To the extent that Optionee was not entitled
to exercise this Option in this period, or if Optionee does not exercise this
Option (which Optionee was entitled to exercise) within the time specified
herein, this Option shall terminate.
4
9. Retirement of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee as a result of such Optionee's retirement from
the Company at age fifty five (55) or greater after having Continuous Status as
an Employee for (5) years or more, Optionee shall fully vest in and have the
right to exercise this Option as to all of the Optioned Stock and Optionee may,
but only within three (3) years from the date of such termination (but in no
event later than the expiration date of the term of this Option as set forth in
Section 2), exercise this Option to the extent Optionee was entitled to exercise
it at the date of such termination. To the extent that Optionee does not
exercise this Option (which Optionee was entitled to exercise) within the time
specified herein, this Option shall terminate.
10. Death of Optionee. In the event of the death of Optionee:
(a) During the term of this Option while still an Employee or
Consultant of the Company, so long as Optionee shall have been in Continuous
Status as an Employee or Consultant since the date of grant of this Option, this
Option may be exercised, at any time within six (6) months (but in no event
later than the expiration date of the term of this Option as set forth in
Section 2), by Optionee's estate or by a person who acquired the right to
exercise this Option by bequest or inheritance, but only to the extent that the
right to exercise would have accrued had Optionee continued living and remained
in Continuous Status as an Employee or Consultant six (6) months after the date
of death; or
(b) Within thirty (30) days after the termination of Optionee's
Continuous Status as an Employee or Consultant, this Option may be exercised, at
any time within six (6) months following the date of death (but in no event
later than the expiration date of the term of this Option as set forth in
Section 2), by Optionee's estate or by a person who acquired the right to
exercise this Option by bequest or inheritance, but only to the extent that the
right to exercise had accrued at the date of termination.
11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any action by the Company
required by applicable law or regulations or the requirements of the Nasdaq
Stock Market or an established stock exchange on which the Company's securities
are traded, the number and kind of shares of Common Stock (or other securities
or property) covered by this Option, as well as the exercise price per share of
Common Stock (or other securities or property) subject to this Option, shall be
adjusted proportionately to the extent the Board determines that any increase,
decrease or adjustment in the number or kind of issued shares of Common Stock
(or other securities or property), dividend, distribution, stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, reorganization, merger, consolidation, split-up, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, exchange of Common Stock or
other securities of the Company, or other similar corporate transaction or
event, in the Board's sole discretion, affects the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under this Option. Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities
5
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to this Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify Optionee at
least fifteen (15) days prior to such proposed action. To the extent it has not
been previously exercised, this Option shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger, sale of all or
substantially all of the assets of the Company, tender offer or other
transaction or series of related transactions resulting in a change of ownership
of more than fifty percent (50%) of the voting securities of the Company
("Change in Control") approved by the majority of the members of the Board on
the Board prior to the commencement of such Change in Control, this Option shall
be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation; provided,
however, in the event that within one year of the date of the completion of the
Change in Control, the successor corporation or a Parent or Subsidiary of the
successor corporation terminates the employment of Optionee without Cause (as
defined below), Optionee shall fully vest in and have the right to exercise the
options assumed or substituted for this Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be exercisable. In the event
that the successor corporation refuses to assume or substitute for this Option,
Optionee shall fully vest in and have the right to exercise this Option as to
all of the Optioned Stock, including Shares as to which it would not otherwise
be exercisable. If this Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a Change of Control, the Board shall
notify Optionee in writing or electronically that this Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and this Option shall terminate upon the expiration of such period. For
the purposes of this paragraph, this Option shall be considered assumed if,
following the Change of Control, the option confers the right to purchase, for
each Share of Optioned Stock subject to this Option immediately prior to the
Change in Control, the consideration (whether stock, cash, or other securities
or property) received in the Change of Control by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the Change of Control is not solely common stock
of the successor corporation or its Parent, the Board may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of this Option, for each Share of Optioned Stock subject to this
Option, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the Change of Control. For purposes of this paragraph,
termination shall be for "Cause" in the event of the occurrence of any of the
following: (a) any intentional action or intentional failure to act by Optionee
which was performed in bad faith and to the material detriment of the successor
corporation or its Parent or Subsidiary; (b) Optionee willfully and habitually
neglects the duties of employment; or (c) Optionee is convicted of a felony
crime involving moral turpitude, provided that in the event that any of the
foregoing events is capable of being cured, the successor corporation or its
Parent or Subsidiary shall provide written notice to the employee describing the
nature of such event and Optionee shall thereafter have five (5) business days
to cure such event.
6
In the event of a Change in Control which is not approved by the majority
of the members of the Board on the Board prior to the commencement of a Change
in Control, Optionee shall fully vest in and have the right to exercise this
Option as to all of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable.
12. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
13. Term of Option. This Option may be exercised only within the term set
out in Section 2 and may be exercised during such term only in accordance with
the terms of this Option.
14. Powers of the Board. The Board shall have the authority, in its
discretion, to interpret this Option; to accelerate or defer (with the consent
of Optionee) the exercise date of this Option; and to make all other
determinations deemed necessary or advisable for the administration of this
Option. Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under this
Option.
15. Successors and Assigns. Subject to the provisions of Section 11
above, the Company may assign any of its rights under this Option to single or
multiple assignees, and this Option shall inure to the benefit of the successors
and assigns of the Company. Subject to the restrictions on transfer herein set
forth, this Option shall be binding upon Optionee and his heirs, executors,
administrators, successors and assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Board, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board shall be final and binding on the
Company and on Optionee.
17. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
18. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Option.
7
19. Entire Agreement: Governing Law: Severability. This Option and the
exhibit hereto constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This Agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California. Should any provision of this Option be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain
effective and shall remain enforceable.
20. Shareholder Approval Not Required. Rule 4350(i) promulgated by the
National Association of Securities Dealers, Inc. ("NASD") generally requires
shareholder approval for stock option plans or other equity compensation
arrangements adopted by companies whose securities are listed on the Nasdaq
Stock Market pursuant to which options or stock may be acquired by officers,
directors, employees, or consultants of such companies. NASD Rule
4350(i)(l)(A)(iv) provides an exception to this requirement for issuances of
securities to a person not previously an employee or director of the issuer, or
following a bona fide period of non-employment, as an inducement material to the
individual's entering into employment with the issuer, provided such issuances
are approved by either the issuer's compensation committee comprised of a
majority of independent directors or a majority of the issuer's independent
directors. The grant of this Option is made to the Optionee, who has not
previously been an employee or director of the Company, as an inducement
material to the Optionee's entering into employment with the Company, and this
Option has been approved by the Company's compensation committee comprised of a
majority of the Company's independent directors or a majority of the Company's
independent directors. Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the
issuance of this Option and the Shares issuable upon exercise of this Option are
not subject to the approval of the Company's shareholders.
21. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR PURCHASING
SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS AN EMPLOYEE OR CONSULTANT AT ANY TIME, WITH OR
WITHOUT CAUSE.
[SIGNATURE PAGE FOLLOWS]
8
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms of this Agreement. Optionee has reviewed the Option, has had an
opportunity to obtain the advice of counsel prior to executing this Option and
fully understands all provisions of the Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
OPTIONEE: NEUROCRINE BIOSCIENCES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- ----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ Executive Vice President and CFO
Date: 10/14/03
------------------------------
Residence Address:
▇▇ ▇▇▇ ▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇ ▇▇▇▇▇
------------------------------------
9
