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Exhibit 10.3  


 
 

SENOMYX, INC.
  2004 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, Senomyx, Inc.
(the "Company") has granted you an option under its 2004 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. In addition, if the Company is subject to a Change in Control before your Continuous
Service terminates, and within either one (1) month prior to or eighteen (18) months following the effective date of such Change in Control your Continuous Service is involuntarily
terminated by the Company without Cause (which shall not include a termination resulting from death or Disability) or you resign for Good Reason, then all of the remaining unvested shares subject to
this option will become fully vested and exercisable upon the date of such termination of your Continuous Service. 


        For
purposes of this Section 1, "Good Reason" means the occurrence of one or more of the following without your express written
consent: (i) a change in your position, duties or responsibilities (including reporting responsibilities) that results in a material diminution in your duties; provided,
however, that a change in your title or reporting relationship alone shall not provide the basis for a voluntary termination with Good Reason; (ii) a reduction in your
annual base compensation or (iii) the Company's requiring you to permanently relocate to any place outside a fifty (50) mile radius of your then current work site. 


        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. 



        3.    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: 



        (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 (6) 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 



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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. 




        4.    WHOLE SHARES.    You may exercise your option only for whole shares of Common Stock.



        5.    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 also must 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. 


        6.    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)   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; 


        (b)   twelve (12) months after the termination of your Continuous Service due to your Disability; 



        (c)   eighteen (18) months after your death if you die either during your Continuous Service or within three
(3) months after your Continuous Service terminates; 


        (d)   immediately upon the termination of your Continuous Service if for Cause; 


        (e)   the Expiration Date indicated in your Grant Notice; or 



        (f)    the day before the tenth (10th) anniversary of the Date of Grant. 




        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 your permanent and total disability, as defined in Section 22(e) of the Code. (The definition of disability in Section 22(e) of the Code is different from the
definition of the Disability under the Plan). 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 with the Company or an Affiliate terminates. 


        7.    EXERCISE.    



        (a)   You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require. 



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        (b)   By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such
exercise. 


        (c)   If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in
writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option. 




        8.    TRANSFERABILITY.    



        (a)   If your option is an Incentive Stock Option, your option is not transferable, except by will or by the laws of descent
and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to exercise your option. 


        (b)   If your option is a Nonstatutory Stock Option, your option is not transferable, except (i) by will or by the laws
of descent and distribution, (ii) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the option
is to be passed to beneficiaries upon the death of the trustor (settlor) and (iii) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a permitted
transferee under Rule 701 of the Securities Act. 




        9.    OPTION NOT A SERVICE CONTRACT.    Your option is not an employment or service contract,

and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their
respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate. 


        10.    WITHHOLDING OBLIGATIONS.    



        (a)   At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you
hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision as instructed by the Company (including by means of a "cashless exercise"
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent instructed by the Company), for any sums required to satisfy the federal, state,
local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option. 


        (b)   The Company may, in its sole discretion, and in compliance with any applicable legal conditions or restrictions, withhold
from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting). Any adverse consequences
to you arising in connection with such share withholding procedure shall be your sole responsibility. 


        (c)   You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a 



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certificate
for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied. 


        (d)   If any payment or benefit you would receive pursuant to a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G
of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), then such Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account
all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute
payments" is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless you elect in writing a different order (provided,
however, that such election shall be subject to Company approval if made on
or after the effective date of the event that triggers the Payment): reduction of cash payments; cancellation of accelerated vesting of Stock Awards; reduction of employee benefits. In the event that
acceleration of vesting of Stock Award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of your Stock Awards (i.e., earliest
granted Stock Award cancelled last) unless you elect in writing a different order for cancellation. 




        The
accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. 


        The
accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen
(15) calendar days after the date on which your right to a Payment is triggered (if requested at that time by you or the Company) or such other time as requested by you or the Company. If the
accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish you and the Company with an opinion
reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive
upon you and the Company. 


        11.    NOTICES.    Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company. 



        12.    GOVERNING PLAN DOCUMENT.    Your option is subject to all the provisions of the Plan,
the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control. 


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SENOMYX, INC.
  2004 EQUITY INCENTIVE PLAN    
    
    NON-EMPLOYEE DIRECTORS' STOCK OPTION PROGRAM    
    
    STOCK OPTION AGREEMENT
  (NONSTATUTORY STOCK OPTION)    
    


        Pursuant
to your Stock Option Grant Notice ("Grant Notice") and this Stock Option Agreement, Senomyx, Inc. (the  "Company") has granted you an
option under its 2004 Equity Incentive Plan (the "Plan") and
Non-Employee Directors' Stock Option Program 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. In addition, if the Company is subject to a Change in Control before your Continuous
Service terminates, then all of the unvested shares subject to this option shall become fully vested and exercisable immediately prior to the effective date of such Change in Control. 


        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; and 


        (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. 




        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: 



        (d)   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. 


        (e)   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 



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(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)   three (3) months after the termination of your Continuous Service for any reason other than your Disability or
death, provided that if during any part of such three (3) month period your option is not exercisable 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; 


        (b)   twelve (12) months after the termination of your Continuous Service due to your Disability or upon a Change in
Control; 


        (c)   eighteen (18) months after your death if you die either during your Continuous Service or within three
(3) months after your Continuous Service terminates; 


        (d)   immediately upon the termination of your Continuous Service for Cause; 


        (e)   the Expiration Date indicated in your Grant Notice; or 



        (f)    the day before the tenth (10th) anniversary of the Date of Grant. 




        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 a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such additional documents as the Company may then require. 


        (b)   By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such
exercise. 



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        9.    TRANSFERABILITY.    Your option is not transferable, except (i) by will or by the
laws of descent and distribution, (ii) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the
option is to be passed to beneficiaries upon the death of the trustor (settlor) and (iii) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a
permitted transferee under Rule 701 of the Securities Act. 


        10.    OPTION NOT A SERVICE CONTRACT.    Your option is not an employment or service
contract,
and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue
in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their
respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate. 


        11.    WITHHOLDING OBLIGATIONS.    



        (a)   At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you
hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision as directed by the Company (including by means of a "cashless exercise"
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent directed by the Company), for any sums required to satisfy the federal, state, local
and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option. 


        (b)   The Company may, in its sole discretion, and in compliance with any applicable conditions or restrictions of law,
withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. Any adverse consequences to you arising in connection with such share withholding
procedure shall be your sole responsibility. 


        (c)   You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of
Common Stock or release such shares of Common Stock from any escrow provided for herein. 



        (d)   If any payment or benefit you would receive pursuant to a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G
of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), then such Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account
all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute
payments" is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless you elect in writing a different order (provided,
however, that such election shall be subject to Company approval if made on or after the effective date of the event that triggers the Payment): reduction of cash payments;
cancellation of accelerated vesting of Stock Awards; reduction of employee benefits. In the event that acceleration of vesting of Stock Award compensation is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order 



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of
the date of grant of your Stock Awards (i.e., earliest granted Stock Award cancelled last) unless you elect in writing a different order for cancellation. 




        The
accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. 


        The
accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen
(15) calendar days after the date on which your right to a Payment is triggered (if requested at that time by you or the Company) or such other time as requested by you or the Company. If the
accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish you and the Company with an opinion
reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive
upon you and the Company. 


        12.    NOTICES.    Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company. 


        13.    GOVERNING PLAN DOCUMENT.    Your option is subject to all the provisions of the Plan,
the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control. 


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QuickLinks


SENOMYX, INC. 2004 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT (INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)


SENOMYX, INC. 2004 EQUITY INCENTIVE PLAN NON-EMPLOYEE DIRECTORS' STOCK OPTION PROGRAM STOCK OPTION AGREEMENT (NONSTATUTORY STOCK OPTION)