Exhibit 10.4

 

[EMPLOYEE]

[ADDRESS]

 

[Grant Date: ____________]

 

COVANCE INC.

 

NON-QUALIFIED STOCK OPTION AWARD

 

20___ Employee Equity Participation Plan

 

NON-QUALIFIED STOCK OPTION AWARD granted by COVANCE INC., a Delaware Company
(the “Company”), located at 210 Carnegie Center, Princeton, New Jersey 08540, to
the “Employee”.

 

A.  WHEREAS, the Employee is now employed by the Company, or a corporation which
is a “subsidiary corporation” of the Company, within the meaning of
Section 424(f) of the Internal Revenue Code of 1986, as amended, modified or
supplemented from time to time (the “Code”) or which is an entity in which the
Company holds beneficially at least fifty percent (50%) of the ownership
interest (each, “Subsidiary Company”), in an important executive, managerial or
technical capacity.

 

B.  WHEREAS, the Company desires to have the Employee remain in the employment
of the Company or a Subsidiary Company and to afford the Employee the
opportunity to acquire, or enlarge the Employee’s stock ownership in the Company
so that the Employee may have direct proprietary interest in the Company’s
success;

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
terms and conditions set forth below, the parties hereto agree as follows:

 

1.  Grant; Vesting. (a)  Subject to the terms and conditions of the 20__
Employee Equity Participation Plan (as such plan may be amended, modified or
supplemented from time to time, the “Plan”) and the terms and conditions of this
Award, the Company hereby grants to the Employee, from the date of this Award 
(“Grant Date”), to the Expiration Date (Ten (10) years minus one day from Grant
Date), provided, however, that if an Option (the “Option”) may not be exercised
due to a Black-Out Period (defined as any period of time when, pursuant to any
policies of the Company, any securities of the Company may not be traded by
certain persons as designated by the Company) within the three business days
prior to the normal expiration date of such Option, then the expiration date of
such Option shall be extended for a period of 30 days following the end of the
Black-Out Period, the option to purchase from the Company up to an aggregate of
[Number] shares (the “Shares”) of the Company’s common stock, par value $.01 per
share (“Common Stock”) at the exercise price of $_____ per share (the “Option
Price”).  This Option is not an incentive stock option under Section 422 of the
Code.

 

(b)  The Option shall vest and may be exercised, in whole or in part, as
follows:

 

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(i)                                     Commencing twelve (12) months after the
Grant Date, one-third (1/3) of the aggregate Shares.

 

(ii)                                  Commencing twenty-four (24) months after
the Grant Date, an additional one-third (1/3) of the aggregate Shares.

 

(iii)                               Commencing thirty-six (36) months after the
Grant Date, an additional one-third (1/3) of the aggregate Shares.

 

2.  Exercise.  (a)  The Option shall be exercised by the Employee delivering to
the Senior Vice President, Human Resources, or Covance’s designated
administrator, (i) written notice specifying the numbers of Shares the Employee
desires to purchase, and (ii) the Option Price of the Shares being exercised and
the amount of any applicable federal and state withholding taxes (the “Purchase
Price”).  The Purchase Price shall be payable in (A) cash, (B) a certified check
payable to the Company or (C) shares of Common Stock owned for at least six
months by the Employee with a Current Market Value (as defined below) equal to
the Purchase Price duly endorsed or accompanied by stock power executed in
blank.  Current Market Value shall mean the closing selling price of Common
Stock on the date of exercise as reported by the New York Stock Exchange.  In no
event will the Employee receive or be entitled to an additional or “reload”
stock option by virtue of exercise of the Option.

 

(b)  Within fifteen (15) business days after any exercise of the Option, in
whole or in part, by the Employee, the Company shall instruct the transfer agent
to issue to the Employee the number of shares with respect to which the Option
shall be so exercised.

 

3.  Termination.  The Option, whether vested or unvested, shall terminate and be
of no further force or effect in accordance with the following provisions:

 

(a)           Expiration.  The occurrence of the Expiration Date.

 

(b)                                 Normal or Early Retirement With the Consent
of the Company.  If the Employee’s employment shall terminate on account of
normal retirement or early retirement with the consent of the Company, the
Options granted to such Employee shall become immediately vested and may be
exercised by such Employee at any time during the remaining life of the Option. 
At the end of such period, the unexercised portion of the Option shall expire.

 

(c)                                  Early Retirement Without Consent, Voluntary
Termination or Termination for Performance.  If the Employee shall retire early
without the consent of the Company, voluntarily leave the employ of the Company
or if the Employee’s employment shall be terminated for performance, the portion
of the Option which had vested prior to such retirement or termination may be
exercised for 90 days following such retirement or termination to the extent
exercisable at the date of such retirement or termination, and the portion of
the Option which had not vested prior to such retirement or termination shall
terminate immediately upon such retirement or termination.

 

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(d)                                 Death.  If the Optionee shall die while
employed, the Option granted to such Employee shall become immediately vested
and may be exercised by the Optionee’s duly appointed legal representative for
one year following such death. At the end of such period, the unexercised
portion of the Option shall expire.

 

(e)                                  Disability.  If the Employee’s employment
shall terminate as a result of disability (as defined in Section 22(e) (3) of
the Code), the Options granted to such Employee shall become immediately vested
and may be exercised by such Employee for one year after such termination of
employment.  At the end of such period, the unexercised portion of the Option
shall expire.

 

(f)                                    Divestiture, etc.  If the Employee’s
employment is terminated due to a reduction in force or divestiture or
discontinuance of certain of the Company’s operations, the portion of the Option
which had vested prior to such termination may be exercised for one year after
such termination of employment, and shall terminate thereafter.

 

(g)                                 Dereliction of Duties or Harmful Acts. If
the Employee shall cause the Company to suffer financial harm or damage to its
reputation (either before or after termination of employment) through
(i) dishonesty, (ii) material violation of the Company’s standards of ethics or
conduct, or (iii) material deviation from the duties owed the Company by the
Employee, this Option shall terminate and be of no further force or effect.

 

(h)                                 Transfers. If the Employee shall be
transferred from the Company to a Subsidiary Company, or from a Subsidiary
Company to the Company, or from a Subsidiary Company to another Subsidiary
Company, his or her employment shall not be deemed to be terminated by reason of
such transfer.  The portion of the Option that had already vested may be
exercised for one year after the date on which a Subsidiary Company in which the
Employee is employed shall cease to be a Subsidiary Company and the Employee is
not thereupon transferred to and employed by the Company or another Subsidiary
Company, and shall terminate thereafter.

 

4. Construction.  Whenever the word “Employee” is used in any provision of this
document  under circumstances where the provision should logically be construed
to apply to the estate, personal representative, or beneficiary to whom this
Option may be transferred by Will, by the laws of descent and distribution, or a
qualified domestic relations order pursuant to the Code or Title I of the
Employment Retirement Income Security Act of 1974, as amended, modified or
supplemented from time to time (“ERISA”), it shall be deemed to include such
person.

 

5.  Restrictions on Transfer.  The Option is not transferable by the Employee
otherwise than by Will, the laws of descent and distribution, or a qualified
domestic relations order pursuant to the Code or Title I of ERISA.  During the
Optionee’s lifetime, the Option shall be exercisable only by the Employee  and
any shares purchased upon the exercise of the Option shall be issued in the name
of the Employee alone.  No assignment or transfer of the Option, or of the
rights represented thereby, whether voluntary or involuntary, by operation of
law or

 

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otherwise, (except by Will, the laws of descent and distribution, or a
qualified  domestic relations order pursuant to the Code or Title I of ERISA),
shall vest in the assignee or transferee any interest or right herein to the
Option whatsoever.  Further, immediately upon any attempt to assign or transfer
the Option, the Option shall terminate and be of no further force or effect.

 

6.  Rights.  The Employee shall not be deemed, for any purpose, to be a
stockholder of the Company with respect to any Shares underlying the Option
which shall not have been exercised and payment and issue made as provided in
this document.

 

7.  Powers.  The existence of this Option shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalization, reorganizations or other changes in the Company’s
capital structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior preference stocks
ahead of or affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

 

8.  Adjustments; Recapitalization.  The Shares subject to the Option are shares
of the Common Stock of the Company as constituted on the date of this Award ,
but if and whenever, prior to the delivery by the Company of the Shares subject
to the Option, the Company shall effect a subdivision or consolidation of
shares, or other capital adjustment, or the payment of a stock dividend, or
other increase or reduction of the number of shares of Common Stock outstanding,
without receiving compensation therefor in money, services or property, then
(a) in the event of any increase in the number of such shares outstanding, the
number of Shares then remaining subject to the Option shall be proportionately
increased, and the cash consideration payable per share shall be proportionately
reduced, and (b) in the event of a reduction in the number of shares
outstanding, the number of Shares of then remaining subject to the Option shall
be proportionately reduced, and the cash consideration payable per share shall
be proportionately increased.  There shall be no adjustment to the Option with
respect to the payment of cash dividends to the Company’s stockholders.

 

9.  Change of Control.  All Options which have not vested as of the date of a
Change of Control (as defined below) occurs, shall vest and be immediately
exercisable by Employee upon a Change of Control.  For purposes of this Award, a
Change of Control shall be defined as:

 

(1)                                  any person (including as such term is used
in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becomes the beneficial owner, directly or indirectly, of securities
representing 30% or more of the combined voting power of the Company’s then
outstanding securities; or

 

(2)                                  as a result of a proxy contest or contests
or other forms of contested shareholder votes (in each case either individually
or in the aggregate), a majority of the individuals elected to serve on the
Company’s Board of Directors are different than the individuals who served on
the Company’s Board of Directors at any time within the two years prior to such
proxy contest or contests or other forms of contested shareholder votes (in each
case either individually or in the aggregate); or

 

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(3)                                  upon consummation of a merger or
consolidation (where in each case the Company is not the survivor thereof), or
sale or disposition of all or substantially all of the Company’s assets, or a
plan of partial or complete liquidation; or

 

(4)                                  where an offerer (other than the Company)
purchases shares of the Company’s Common Stock pursuant to a tender or exchange
offer for securities representing 30% or more of the combined voting power of
the Company’s then outstanding securities.

 

10.  Changes in Law.   Notwithstanding anything in the terms and conditions of
this Award to the contrary, if at any time from the Grant Date to the Expiration
Date, any law or regulations of any governmental authority having jurisdiction
in the premises shall require either the Company or the Employee to take any
action in connection with the Shares then to be issued, the issue of such Shares
shall be deferred until such action shall have been taken.

 

11.  Dispute.  Any dispute or disagreement which shall arise under, or as a
result of, or pursuant to, this Award shall be finally determined by the
Company’s Compensation Committee of the Board of Directors in its absolute and
uncontrolled discretion, and any such determination or any other determination
by the Company’s Compensation Committee of the Board of Directors under or
pursuant to this Award and any interpretation by the Company’s Compensation
Committee of the Board of Directors of the terms of this Award, shall be final,
binding and conclusive on all persons affected thereby.

 

12.  Securities Law Restrictions.  The Employee represents and warrants that he
or she is acquiring this Option, and, in the event this Option is exercised, the
Shares, for investment, for his or her own account and not with a view to the
distribution thereof, and that the Employee has no present intention of
disposing of this Option or the Shares or any interest therein or sharing
ownership thereof with any other person or entity.  The Employee shall not sell,
pledge or transfer the Shares except pursuant to an effective registration
statement under the Securities Act of 1933, as amended.

 

13.  Data Authorization.  The Employee acknowledges and consents to the
collection, use, processing and transfer of personal data as described in this
paragraph.  The Company, its subsidiaries and the Employee’s employer hold
certain personal information about the Employee, including the Employee’s name,
home address and telephone number, date of birth, social security number or
other employee identification number, salary, nationality, job title, any shares
of stock or directorships held in the Company, details of all options or any
other entitlement to shares of stock awarded, canceled, purchased, vested,
unvested or outstanding in the Employee’s favor, for the purpose of managing and
administering the Plan (“Data”).  The Company and/or its subsidiaries will
transfer Data amongst themselves as necessary for the purpose of implementation,
administration and management of the Employee’s participation in the Plan, and
the Company and/or any of its subsidiaries may each further transfer Data to any
third parties assisting the Company in the implementation, administration and
management of the Plan.  These recipients may be located in the European
Economic Area, the United States, or elsewhere.  The Employee authorizes them to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing the
Employee’s participation in the Plan, including any requisite transfer of such
Data as may be required for the administration of the Plan and/or the subsequent
holding of shares of stock on

 

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the Employee’s behalf to a broker or other third party with whom the Employee
may elect to deposit any shares of stock acquired pursuant to the Plan.  The
Employee may, at any time, review Data, require any necessary amendments to it
or withdraw the consents herein in writing by contacting the Company; however,
withdrawing consent may affect the Employee’s ability to participate in the
Plan.

 

14.  Discretionary Nature of Plan.  The Employee acknowledges and agrees that
the Plan is discretionary in nature and may be amended, cancelled, or terminated
by the Company, in its sole discretion, at any time.  The grant of stock options
under the Plan is a one-time benefit and does not create any contractual or
other right to receive a grant of stock options or benefits in lieu of stock
options in the future.  Future grants of stock options, if any, will be at the
sole discretion of the Company, including, but not limited to, the timing of any
grant, the number of stock options, vesting provisions, and the exercise price.

 

15.  No Effect on Employment.  This Award does not give, nor shall it be
construed as giving, the Employee any right to employment by the Company or any
of its subsidiaries or affiliates.

 

16.  Governing Law; Binding Effect.  THIS AWARD SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY (WITHOUT REGARD
TO THE CONFLICT OF LAW PROVISIONS THEREOF) AND ALL QUESTIONS CONCERNING THE
VALIDITY AND CONSTRUCTION THEREOF SHALL BE GOVERNED IN ACCORDANCE WITH THE LAWS
OF SAID STATE; PROVIDED, HOWEVER, THAT ALL MATTERS OF CORPORATE GOVERNANCE AND
OTHER CORPORATE MATTERS CONCERNING DELAWARE CORPORATIONS SHALL BE GOVERNED BY
THE DELAWARE GENERAL CORPORATION LAW. Except as otherwise expressly provided
herein, this Award  shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.

 

17.  Effect on Compensation. Notwithstanding anything in these terms and
conditions  to the contrary, none of the Options or the Shares subject to the
Options, if any, granted or paid to Employee shall be considered compensation
for the purpose of determining Employee’s compensation under any other benefit
or compensation plan of the Company, including, without limitation, any bonus
plan, variable compensation plan, long-term incentive plan, pension plan or
other retirement plans.

 

18.  Plan Document.  This Award is subject in all respects to the terms and
conditions of the Plan, a copy of which may be obtained from the Company’s Vice
President, Human Resources, 210 Carnegie Center, Princeton, New Jersey 08540. 
To the extent that there is any inconsistency or conflict between these terms
and conditions and the Plan, the Plan shall control.

 

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