EXHIBIT 99.3
CURAGEN CORPORATION
NON-QUALIFIED OPTION AGREEMENT
WITH
[INSERT NAME]
[DATE]
NOTE: ALTERNATIVE PROVISIONS ARE BRACKETED.
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CURAGEN CORPORATION (the "Corporation"), a Delaware corporation having its
principal place of business in Branford, Connecticut, hereby grants to
______________________ , of Branford, Connecticut, (the "Optionee") personally
the right and option (the "Option") to purchase a total of _____ shares (the
"Stock") of Common Stock, par value $.01 per share, of the Corporation
(the "Common Stock") at the price and on the terms determined as provided
herein.
1. Option Price. The purchase price per share of the stock covered by the
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Option shall be $_____ per share.
2. Vesting. The Option shall vest cumulatively as follows:
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_____ shares of Stock shall vest on _____ , provided the Optionee is employed
full time by the Corporation on such date; _____ shares of Stock shall vest
on _____ , provided the Optionee is employed full time by the Corporation on
such date; shares of Stock shall vest on _____ , provided the Optionee is
employed full time by the Corporation on such date; _____ shares of Stock shall
vest on _____ , provided the Optionee is employed full time by the Corporation
on such date.
[The Option shall vest upon execution of this Agreement.]
[The Option shall vest as follows:
(i) ______ shares of Stock on __________;
(ii) ______ shares of Stock on __________, provided that the Optionee worked
as a Scientific Advisor on at least one day (eight hours) a year at the
Corporation's Designated Office during the period from __________ through
__________ (subparagraph 2(ii) is referred to herein as the "199_ Vesting
Condition"); and
(iii) ______ shares of Stock on __________ provided that the Optionee (a)
satisfied the 199_ Vesting Conditions, and (b) worked as a Scientific Advisor at
the Corporation's Designated Office on at least one day (eight hours) a year at
the
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Corporation's Designated Office during the period from __________through
__________ (subparagraph 2(iii) is referred to herein as the "199_ Vesting
Condition"). Notwithstanding the foregoing, if the Optionee's employment with
the Company is terminated without cause prior to __________, then all unvested
shares shall vest on the date of termination.
The Corporation, in its sole reasonable discretion, shall determine if the
foregoing Vesting Conditions have been met. As used in this Agreement, the
following terms shall have the following meanings: (i) the term "Scientific
Advisor" means that the Optionee shall use his best efforts and advise the
Corporation as to the Project, including being available to respond to questions
and assist with analysis and testing; (ii) the term "Corporation's Designated
Office" means the Corporation's principal office or such other office of the
Corporation as may be designated by the Corporation; and (iii) the term
"Project" shall mean the Corporation's project which involves the development of
molecular recognition technology for the precise design of protein-specific
drugs, or any other research or development project which the Corporation shall
designate.]
3. Term. The Option granted hereunder shall be exercisable by the Optionee
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from the date the Option (or part of the Option) is vested pursuant to Section 2
of this Agreement until [Ten years from date of grant](the "Option Period")
unless sooner terminated pursuant to the provisions of this Agreement.
[Except for directors, the effect and exercise of the Option is conditioned upon
the Optionee being an employee of the Corporation or its Subsidiaries for a one
year period ending on ____, except (i) if the Optionee is a member of the Board
of Directors and is not an employee of the Corporation or (ii) the Optionee's
employment with the Corporation or its Subsidiaries terminates as a result of
death or Disability.]
4. Exercise of Option. During the Option Period, the Optionee shall be
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entitled to purchase from the Corporation the shares of Stock subject to the
Option in whole at any time or in part from time to time, to the extent that the
Option is vested (or to the extent that the Option is otherwise exercisable
pursuant to Section 5 below), by giving written notice of exercise to the
Corporation, provided however, that any exercise of the Option is conditioned
upon: (i) the Optionee purchasing at least fifty (50) percent of the aggregate
vested portion of the Option as of the date of exercise; (ii) the Optionee not
exercising the Optionee's right to purchase stock hereunder more than once per
calendar year [and (iii) the Optionee being an employee or director of the
Corporation or its Subsidiaries at the time of exercise, except as provided in
Section 5 below] [and (iii)
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except as provided to the contrary in Section 5 below, if the Optionee exercises
the Option after (a) __________, the Optionee having satisfied the 199_ Vesting
Condition and (b) March 31, 199_, the Optionee having satisfied the 199_ and
199_ Vesting Conditions.
[Or one may use the following alternative to paragraph 1 to Section 4: During
the Option Period, the Optionee shall be entitled to purchase from the
Corporation the shares of Stock subject to the Option in whole at any time or in
part from time to time, to the extent that the Option is vested (or to the
extent that the Option is otherwise exercisable pursuant to Section 5 below), by
giving written notice of exercise to the Corporation.]
The notice must be accompanied by payment to the Corporation of the full
purchase price for the Stock being purchased. Such purchase price is payable in
cash or by certified check, or, if the Optionee's Representative (as defined in
Article II, Section 1(c) of the Curagen Corporation 1993 Stock Option and
Incentive Award Plan (the "Plan")) exercises an Option as a result of the death
or Disability (as defined in Article V, Section 3(d) of the Plan) of the
Optionee, the purchase price may be paid, at the discretion of the Administrator
(as defined in Article I, Section 2 of the Plan): (a) by the Optionee's
Representative tendering a promissory note for the full purchase price, which
promissory note shall provide for interest on the unpaid balance, calculated
monthly, equal to the prime or base rate (or its equivalent) of Fleet Bank on
the date of the note (and thereafter fixed for the term of the loan), and shall
provide for equal monthly payments, consisting of a portion of the principal
balance and accrued interest, for a period of 24 consecutive months commencing
on the first day of the month following the exercise of the Option; (b) by
tendering to the Corporation shares of Common Stock owned by the Optionee; or
(c) partly by cash, certified check or promissory note and partly by tendering
to the Corporation shares of Common stock in accordance with (b) above. Shares
surrendered in accordance with (b) or (c) above shall be valued at the Per Share
Value (as defined below) at the date of exercise. Surrender of such shares shall
be evidenced by the delivery of certificate(s) representing such shares in such
manner, and endorsed in such form, or accompanied by stock powers endorsed in
such form, as the Administrator may determine. The exercise of the Option shall
be effective only upon the actual receipt of the notice and the required
payment. The Optionee shall not have any rights of a shareholder of the
Corporation with respect to the shares of Stock subject to the Option except
insofar as the Option has been exercised.
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In lieu of permitting the Optionee to purchase any vested Stock pursuant to
this Option, the Corporation may, in its sole discretion, pay to the Optionee an
amount equal to the Appreciated Value multiplied by the number of shares of
Stock being purchased by the Optionee (the "Appreciated Amount"). The
Appreciated Amount shall be payable to the Optionee within thirty (30) days of
receipt by the Corporation of the notice from the Optionee that the Optionee
intends to exercise the Option.
As used herein, the following terms shall have the following meanings:
"Appreciated Value" shall mean the amount by which (a) the Per Share Value on
the date of exercise of the Option, exceeds (b) the option price per share set
forth in paragraph 1 hereof.
"Control" shall have the meaning set forth in Section 203(c)(4) of the
Delaware General Corporation Law, or any amendments thereto.
"Net Income" shall mean the net income of the Corporation for the last four
(4) completed fiscal quarters for which financial information is available at
the time of the calculation, determined in accordance with generally accepted
accounting principles (except that, for such purpose, any interest upon debt for
borrowed money that was incurred during such four (4) quarters shall, to the
extent that it was not incurred to refinance or substitute for other debt for
borrowed money, be annualized and shall thereby reduce such net income for the
purposes hereof).
"Net Revenues" shall mean the net revenues of the Corporation for the last
four (4) completed fiscal quarters for which financial information is available
at the time of the calculation, determined in accordance with generally accepted
accounting principles.
"Per Share Preference" shall mean the quotient of (1) the aggregate amount of
the preference that any class of stock of the Corporation, excluding convertible
preferred stock, would have over the Common Stock in the event of the
liquidation of the Corporation, divided by (2) the total number of outstanding
shares of all Common Stock. For purposes of calculating the total number of
shares of Common Stock outstanding, Common Stock subject to being issued
pursuant to options, warrants, convertible preferred stock and convertible debt
shall be deemed to be outstanding.
"Per Share Value" shall mean (a) if the Common Stock is listed on a securities
exchange or is quoted on the NASDAQ Stock Market, the closing price of the
Common Stock on the date on which the Per Share Value must be determined; or (b)
if subsection (a) is not applicable, the most recent price per share paid for
the Common Stock by a purchaser which does not control, and is not
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controlled by or under common control with the Corporation, provided that (A)
such purchaser paid cash for such Common Stock, (B) the purchase is not pursuant
to the exercise of any stock option, warrant, right or convertible preferred
stock, and (C) such price was paid within the six month period preceding the
date on which the Per Share Value must be determined; or (c) if subsections (a)
and (b) are not applicable, the greater of (A) $1.00 per share, or (B) 15
multiplied by the amount by which (y) the quotient of (1) Net Income, divided by
(2) the total number of outstanding shares of all Common Stock, exceeds (z) the
Per Share Preference, or (C) 1.5 multiplied by the amount by which (y) the
quotient of (1) Net Revenues, divided by (2) the total number of outstanding
shares of Common Stock exceeds (z) the Per Share Preference.
[5. Termination of Employment. The Option shall terminate upon termination of
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the Optionee's employment with the Corporation, regardless of whether such
termination was voluntary or involuntary, with cause or without cause, except
that upon termination of employment, the Optionee may exercise the Option to the
extent that the Optionee was entitled to do so at termination of employment, at
any time within two years [three months] thereafter if such termination is [for
any reason other than Disability or death and is] without cause (as defined in
Article V, Section 3(b) of the Plan); provided, however, that if the
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Administrator determines, subsequent to an Optionee's termination of service but
prior to the exercise of an Option, that either prior or subsequent to the
Optionee's termination, the Optionee engaged in conduct which would constitute
"cause," then the right to exercise any Option is forfeited.
If the Optionee dies within two years [three months] after termination of
employment with the Corporation or its Subsidiaries [or termination as a
director] (other than from a termination for cause [or resulting from a
Disability]) [or if the Optionee dies within one year after termination of
employment or service as a director as a result of Disability], the Option may
be exercised by such Optionee's Representative (to the extent that the Optionee
was entitled to do so at the termination of Optionee's employment [or service as
a director]) at any time within the period ending on (i) the first anniversary
of the Optionee's death, [or (ii) the second anniversary of the termination of
the Optionee's employment with the Corporation or its Subsidiaries, whichever
period is longer]. In no event shall an Option be exercisable in whole or in
part after the termination date provided in this Agreement.
[If an Optionee's employment or service is terminated as a result of death or
Disability and if such death or Disability occurs while the Optionee is employed
by or rendering service to the Corporation or its Subsidiaries, then upon
termination of employment or service with the Corporation or its Subsidiaries,
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the Optionee's Representative may exercise the Option to the extent the Optionee
was entitled to do so on the date of the Optionee's Disability or death at any
time within one year after such Disability or death.
Notwithstanding the foregoing, if the Optionee's employment with the
Corporation terminates either voluntarily or involuntarily, and without cause,
(i) prior to ________, or (ii) prior to 195 calendar days subsequent to the
effective date declared by the United States Securities and Exchange Commission
with respect to the initial public offering of shares of Common Stock of the
Corporation, which ever event shall first occur (the "Minimum Exercise Period"),
the Option shall remain in full force and effect throughout the Minimum Exercise
Period, provided, however, the Optionee has not been employed since his
termination of employment by an employer operating a business engaged in by the
Corporation.]]
6. Non-Transferability of Option. The Option may not be transferred in any
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manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by Optionee, or, if the
Optionee has a Disability by the Optionee's Representative. The terms of the
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
[Or, instead of the foregoing paragraph the following text may be inserted:
This Option may be transferred, in whole or in part, by the Optionee to (i) the
spouse, children, step-children or any other issue of the Optionee ("Immediate
Family Members"), (ii) any trust for the exclusive benefit of Immediate Family
Members, (iii) any partnership of which Immediate Family Members are the only
partners, or (iv) any limited liability company of which Immediate Family
Members are the only shareholders; provided, however, that any subsequent
transfers of this Option, or any part thereof, shall be prohibited except by
will or by the laws of descent and distribution. The Administrator may permit
transfers in addition to those described above in its discretion.
In the event of the Optionee's death or disability, the Option may be
exercised by the Optionee's Representative.
Following any transfer hereunder, the Option shall continue to be subject to the
terms and conditions of this Agreement as if the Transferee were the Optionee;
provided, however, that the events of (i) vesting based on continued employment
in Section 2 hereof and (ii) termination of employment in Sections 5 and 13
hereof shall continue to be applied to the original Optionee, and following
termination of employment the Option shall be exercisable by any transferee only
to the extent and for the
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periods specified in Section 5 hereof. The original Optionee will also remain
subject to withholding taxes upon exercise of the Option pursuant to Section 12
hereof. The original Optionee agrees to notify the Corporation in writing upon
the completion of any transfer pursuant to this Section, such notice to include
the name and address of the transferee and the date of transfer. The Company
undertakes no obligation to notify any transferee of any event affecting the
employment status of the original Optionee or otherwise affecting this Option
which may have the effect of limiting or terminating the Option.]
7. Representations. Unless the offering and sale of the Stock shall have
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been effectively registered under the Securities Act of 1933, as now in force or
hereafter amended, (the "1933 Act") the Corporation shall be under no obligation
to issue the shares unless and until the following conditions have been
fulfilled:
(a) The Optionee represents and warrants to the Corporation at the time of
the exercise or receipt, as the case may be, that the Optionee is acquiring the
Stock for the Optionee's own account for investment and not with a view toward
distribution thereof, in which event the Optionee acquiring the Stock shall be
bound by the provisions of the following legend which shall be endorsed upon the
certificate(s) evidencing the Stock issued pursuant to such exercise or such
grant:
The shares represented by this certificate have been purchased for
investment purposes and they may not be sold or otherwise transferred by
any person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the
Securities Act of 1933, as amended, or (b) the Corporation shall have
received an opinion of counsel satisfactory to it that an exemption from
registration under such Act is then available, and (2) there shall have
been compliance with all applicable state securities laws.
(b) The Corporation shall have received an opinion of its counsel that the
Common Stock may be issued upon such particular exercise in compliance with
the 1933 Act without registration thereunder.
The Corporation may delay issuance of the Common Stock until completion of
any action or obtaining of any consent which the Corporation deems necessary
under any applicable law (including, without limitation, state securities or
"blue sky" laws).
8. Dissolution or Liquidation of the Corporation. Upon the dissolution or
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liquidation of the Corporation, all Options granted
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under this Agreement which as of such date have not been exercised will
terminate and become null and void; provided, however, that if the rights of an
Optionee or any Optionee's Representative have not otherwise terminated and
expired, the Optionee or the Optionee's Representative will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent vested as of the date immediately prior to such dissolution or
liquidation.
9. Effect of Change of Stock Subject to the Option. Upon the occurrence of
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any of the following events, an Optionee's rights with respect to the Option,
which have not previously been exercised in full, shall be adjusted as
hereinafter provided, unless otherwise specifically provided herein:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock shall
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be subdivided or combined into a greater or smaller number of shares or if the
Corporation shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of the Option shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the option price
per share to reflect such subdivision, combination or stock dividend.
(b) Consolidations or Mergers. If the Corporation is to be consolidated
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with or merged into another entity (such that the Corporation is not the
surviving entity), or upon sale of all or substantially all of the Corporation's
assets or otherwise (an "Acquisition"), the Administrator or the board of
directors of any entity assuming the obligations of the Corporation hereunder
(the "Successor Board"), shall, as to the Option, either (i) make appropriate
provision for the continuation of such Option by substituting on an equitable
basis for the Common Stock then subject to such Option either the consideration
payable with respect to the outstanding shares of Common Stock in connection
with the Acquisition or securities of any successor or acquiring entity; or (ii)
upon written notice to the Optionee, provide that the Option must be exercised,
to the extent then exercisable (as the Option may have been amended), within a
specified number of days of the date of such notice, at the end of which period
the Option shall terminate; or (iii) terminate the Option in exchange for a cash
payment equal to the excess of the Per Share Value of the shares subject to the
Option (to the extent then exercisable as the Option may have been amended) over
the option price thereof.
(c) Recapitalization or Reorganization. In the event of a recapitalization
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or reorganization of the Corporation (other than a transaction described in
subsection (b) above) pursuant to which
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securities of the Corporation or of another corporation are issued with respect
to the outstanding shares of Common Stock, the Optionee, upon exercising the
Option, shall be entitled to receive for the option price paid upon such
exercise the securities the Optionee would have received if the Optionee had
exercised the Option prior to such recapitalization or reorganization.
10. Issuance of Securities. Except as expressly provided herein, no issuance
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by the Corporation of shares of stock of any class, or securities 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 subject to
the Option. Except as expressly provided herein, no adjustments shall be made
for dividends paid in cash or in property (including without limitation,
securities) of the Corporation.
11. Fractional Common Stock. No fractional share shall be issued under this
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Agreement and the person exercising such right shall receive from the
Corporation cash in lieu of such fractional share equal to the Per Share Value
thereof determined in good faith by the Board of Directors of the Corporation.
12. Tax Withholding Requirement. In the event that any federal, state, or
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local income taxes, [employment taxes], Federal Insurance Contributions Act,
withholdings or other amounts are required by applicable law or governmental
regulation to be withheld from the Optionee's salary, wages or other
renumeration in connection with the exercise of an Option, the Optionee shall
advance in cash to the Corporation or its Subsidiaries the amount of such
withholdings unless a different withholding arrangement, including the use of
Common Stock, is authorized by the Administrator (and permitted by law);
provided, however, that with respect to Optionee subject to Section 16 of the
1934 Act, any such withholding arrangement shall be in compliance with any
applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934
Act. For purposes hereof, the value of the shares withheld [for purposes of
payroll withholding] shall be the Per Share Value thereof, as of the most recent
practicable date prior to the date of exercise. If the Per Share Value of the
shares withheld is less than the amount [of payroll withholdings] required, the
Optionee may be required to advance the difference in cash to the Corporation or
its Subsidiaries. The Administrator in its discretion may condition the exercise
of an Option for less than the then Per Share Value on the Optionee's payment of
such additional withholding [amounts].
[13. Employment or other Relationship. Nothing in this Agreement shall be
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deemed to prevent the Corporation or any Subsidiary from terminating the
employment, director status or status as a member of the Scientific Advisory
Board of an
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Optionee, nor to prevent an Optionee from terminating his or her own employment,
director status or member status of the Scientific Advisory Board, nor to give
any Optionee a right to be retained in employment or other service by the
Corporation or any Subsidiary for any period of time.]
14. Acceptance. The Optionee hereby accepts the Option subject to all of the
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terms and provisions hereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Option. It is understood that this Agreement is
subject to the terms and conditions of the Plan unless otherwise stated. Terms
not defined herein shall have the meanings set forth in the Plan.
15. Governing Law. This Agreement shall be construed and enforced in
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accordance with the law of the State of Delaware.
[16. Incorporation of Curagen Corporation 1993 Stock Option and Incentive
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Award Plan. The option granted herein has not been granted pursuant to the
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Curagen Corporation 1993 Stock Option and Incentive Award Plan ("the Plan"), but
certain terms and conditions of the Plan are incorporated herein by reference,
and to the extent that the provisions of the Plan are not inconsistent with the
terms of this Agreement, the terms of the Plan shall be deemed to be a part of
this Agreement.]
[17. Stockholder's Agreement. The Optionee agrees, as a condition precedent
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to the Optionee exercising the Option to purchase Stock, hereunder, to execute a
Stockholder's Agreement with the Corporation in the form of Exhibit A, attached
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hereto.]
[18. Agreement Not to Compete. During the Optionee's employment as a
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Scientific Advisor and for one year after the completion of such employment, the
Optionee shall not, directly or indirectly, alone or as an employee, partner,
officer, director, agent or a major stockholder (beneficially owning ten percent
(10%) or more of any class of capital stock) of any other entity, engage in the
business of drug design or DNA analysis, either for the Optionee's own benefit
or for the benefit of any other person, firm or corporation whatsoever other
than the Corporation, without the written consent of the Board of Directors of
the Corporation. In addition, during the term hereof, the Optionee shall not
disclose any work, research, designs or results thereof made or developed by
him, alone or with others, in connection with his employment by the Corporation,
to any person or entity, other than to employees of the Corporation, without the
written consent of the Board of Directors of the Corporation. The foregoing
agreements not to disclose information and not to compete with the Company are
collectively referred to herein as the "Agreement Not to Compete".
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Dated as of ______________________.
CURAGEN CORPORATION
By
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its President
Agreed to and accepted this
___th day of ______, 19__.
_______________________________
Optionee
