Document:

exv10w1

 

EXHIBIT 10.1

NEUROCRINE BIOSCIENCES, INC.

EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION

     THIS EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION (the “Agreement”), dated as of
October 31, 2005, is made by and between Neurocrine Biosciences, Inc., a Delaware corporation (the
“Company”), and Christopher O’Brien, M.D., 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 Senior Vice President,
Clinical 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:

	 	October 31, 2005
	 
	 	 
	Vesting Commencement Date:

	 	October 31, 2005
	 
	 	 
	Exercise Price per Share:

	 	Closing price of the Company’s
common stock on the NASDAQ
National Market System on October
31, 2005
	 
	 	 
	Total Number of Shares Granted:

	 	55,000
	 
	 	 
	Term/Expiration Date:

	 	October 31, 2015

     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.

2

 

     3. Exercise and Vesting Schedule. The Shares subject to this Option shall vest and
become exercisable according to the following schedule:

     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;

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          (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.

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     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
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.

5

 

          (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.

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     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)(1)(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]

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          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.
	 	 	 	 	 
	/s/
Christopher O’Brien, M.D.
	 	By:	 	/s/ Gary Lyons
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name: Christopher O’Brien, M.D.	 	 	 	Gary Lyons
	 
	 	 	 	 	 	 
	Date:	 	10/31/05	 	 	 	President and Chief Executive Officer
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Residence Address:	 	 	 	 
	440
San Antonio Ave.
	 	 	 	 
	 	 	 	 	 
	San
Diego, CA 92106
	 	 	 	 
	 	 	 	 	 

9

 

EXHIBIT A

NEUROCRINE BIOSCIENCES, INC.

EXERCISE NOTICE

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Attention: Secretary

     1. Exercise of Option. Effective as of today, ___, ___, the undersigned
(“Purchaser”) hereby elects to purchase ___shares (the “Shares”) of the Common
Stock of Neurocrine Biosciences, Inc. (the “Company”) under and pursuant to the Employment
Commencement Nonstatutory Stock Option dated October 31, 2005 (the “Option Agreement”).
The purchase price for the Shares shall be $___, as required by the Option Agreement.

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase
price for the Shares.

	 	 	 	 	 	 	 
	Cash Exercise

	 	 	 	_________
	 	(Payment Attached)
	 

	 	 	 	 
	 	 
	Same-Day Sale

	 	 	 	_________

	 	(Broker Paid)
	 

	 	 	 	 
	 	 
	Sell-to-Cover

	 	 	 	_________

	 	(Broker Paid)
	 

	 	 	 	 
	 	 
	Other

	 	 	 	_________
	 	(Please Specify: _________
)

     3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received,
read and understood the Option Agreement and agrees to abide by and be bound by its terms and
conditions.

     4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares,
no right to vote or receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be
issued to Purchaser as soon as practicable after the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the date of issuance,
except as provided in Section 11 of the Option Agreement.

     5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser
represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on
the Company for any tax advice.

 

 

     6. Entire Agreement; Governing Law. The Option Agreement is incorporated herein by
reference. This Agreement and the Option Agreement 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 Purchaser 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.

	 	 	 	 	 	 	 
	Submitted by:	 	Accepted by:
	 
	 	 	 	 	 	 
	PURCHASER:	 	NEUROCRINE BIOSCIENCES, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 	 	 	 	 
	Signature	 	 	 	 
	 
	 	 	 	 	 	 
	Name:	 	Its:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Address:	 	Address:
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Neurocrine Biosciences, Inc.
	 	 	 	 	 
	 	 	 	 	12790 El Camino Real
	 	 	 	 	San Diego, California 92130
	 
	 	 	 	 	 	 
	 	 	 	 	Date Received:

2<PAGE>

                                                                    Exhibit 4.01

          This Note is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of the Depository named
below or a nominee of the Depository. This Note is not exchangeable for Notes
registered in the name of a Person other than the Depository or its nominee
except in the limited circumstances described herein and in the Indenture, and
no transfer of this Note (other than a transfer of this Note as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository) may be registered except in
the limited circumstances described herein.

          Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation (the "Depository"), to
the Company or its agent for registration of transfer, exchange, or payment, and
any certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of the Depository (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of the Depository), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.

                                 CITIGROUP INC.

REGISTERED                                                            REGISTERED

                                                              CUSIP: 172967 DD 0
                                                              ISIN: US172967DD00

No. R-0001-DTC-A                                                  Y_____________

          CITIGROUP INC., a Delaware corporation (the "Company", which term
includes any successor Person under the Indenture), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of
Y________ (or such other principal sum as has been most lately endorsed on the
Schedule of Exchanges of Interests hereto) on October 31, 2025 and to pay
interest thereon from and including October 31, 2005 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, in
equal amounts semi-annually on April 30 and October 31 of each year, commencing
May 1, 2006, at the rate of 2.40% per annum, in the amount of Yen 1,200 per each
Yen 100,000 principal amount of this Note, until the principal hereof is paid or
made available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Note is registered at the close of
business on the Record Date for such interest, which shall be the April 15 or
October 15 (whether or not a Business Day) next preceding such Interest Payment
Date.

<PAGE>

          Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the holder on such Record Date and may either
be paid to the Person in whose name this Note is registered at the close of
business on a subsequent Record Date, such subsequent Record Date to be not less
than five days prior to the date of payment of such defaulted interest, notice
whereof shall be given to holders of Notes of this series not less than 15 days
prior to such subsequent Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes of this series may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.

     In the case of any period of less than six months and any date other than
an Interest Payment Date, interest hereon will be calculated on the basis of the
actual number of days in the relevant period and a year of 365 days.

     If either a date for payment of principal or interest on the Notes or the
Maturity of the Notes falls on a day that is not a Business Day, the related
payment of principal or interest will be made on the next succeeding Business
Day as if made on the date the payment was due. No interest will accrue on any
amounts payable for the period from and after the date for payment of principal
or interest on the Notes or the Maturity of the Notes. For these purposes,
"Business Day" means any day which is a day on which commercial banks and
foreign exchange markets settle payments and are open for general business
(including dealings in foreign exchange and foreign currency deposits) in (a)
the relevant place of payment and (b) each of The City of New York, Tokyo and
London.

          Payment of the principal of and interest on this Note will be made at
the office or agency of the Company maintained for that purpose in London or The
City of New York in Japanese Yen, provided that holders of interests in this
Note through The Depository Trust Company will receive payment in United States
dollars unless they make an election to receive payment in Japanese Yen in
accordance with the procedures of The Depository Trust Company and the Fiscal
Agency Agreement dated as of October 31, 2005 (the "Fiscal Agency Agreement"),
in which case the exchange agent under the Fiscal Agency Agreement will convert
the Japanese Yen paid by the Company into U.S. dollars in accordance with the
Fiscal Agency Agreement.

          Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

          Unless the certificate of authentication hereon has been executed by
the Trustee or by the authenticating agent on behalf of the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated: October 31, 2005

                                        CITIGROUP INC.

                                        By:
                                            ------------------------------------
                                        Title: Treasurer

ATTEST:

By:
    ---------------------------------
Assistant Secretary

<PAGE>

          This is one of the Notes of the series issued under the
within-mentioned Indenture.

Dated: October 31, 2005

                                        THE BANK OF NEW YORK,
                                        as Trustee

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        -or-

                                        CITIBANK, N.A., LONDON OFFICE,
                                        as Authenticating Agent

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

<PAGE>

          This Note is one of a duly authorized issue of Securities of the
Company (the "Notes"), issued and to be issued in one or more series under the
Indenture, dated as of March 15, 1987 (as amended and supplemented to date, the
"Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the holders of the Notes
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. This Note is one of the series designated on the face hereof,
initially issued in the aggregate principal amount of Y50,000,000,000.

          So long as the Notes of this series are in the form of Global
Securities only, all Notes of this series will collectively be evidenced (a) by
this Global Note (the "DTC Global Note") and (b) by the Global Security of this
series registered in the name of Citivic Nominees Limited (the "International
Global Note"). The DTC Global Note and the International Global Note will at all
times collectively represent the aggregate principal amount of this series
outstanding from time to time. If at any time a portion of the International
Global Note is exchanged for an interest in the DTC Global Note, the principal
amount of the DTC Global Note shall be increased by the amount of such portion,
and the DTC Global Note shall be endorsed on the Schedule of Exchanges of
Interests thereto to reflect such principal increase, subject to the limitation
that in no event may the principal amount of the DTC Global Note be greater than
the equivalent in U.S. dollars of $500,000,000. If at any time a portion of the
DTC Global Note is exchanged for an interest in the International Global Note,
the principal amount of the DTC Global Note shall be decreased by the amount of
such portion, and the DTC Global Note shall be endorsed on the Schedule of
Exchanges of Interests thereto to reflect such principal decrease. To ascertain
the U.S. dollar equivalent of the principal amount endorsed on the Schedule of
Exchanges of Interests attached to the DTC Global Note, inquiry shall be made of
the exchange agent under the Fiscal Agency Agreement, and the U.S. dollar
equivalent quoted by such exchange agent (and the date of such quote) shall be
noted on such Schedule of Exchanges of Interests next to the corresponding Yen
amount.

          If an event of default (as defined in the Indenture) with respect to
Notes of this series shall occur and be continuing, the principal of the Notes
of this series may be declared due and payable in the manner and with the effect
provided in the Indenture.

          The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Note upon compliance by the Company with certain
conditions set forth in Sections 11.03 and 11.04 thereof, which provisions apply
to this Note.

          The Indenture contains provisions permitting the Company and the
Trustee, without the consent of the holders of Securities, to establish, among
other things, the form and terms of any series of Securities issuable thereunder
by one or more supplemental indentures, and, with the consent of the holders of
not less than 66 2/3% in aggregate principal amount of Securities at the time
Outstanding which are affected thereby, to modify the Indenture or any

<PAGE>

supplemental indenture or the rights of the holders of Securities of such series
to be affected, provided that no such modification will (x) extend the fixed
maturity of any Securities, reduce the rate or extend the time of payment of
interest thereon, reduce the principal amount thereof or the premium, if any,
thereon, reduce the amount of the principal of Original Issue Discount
Securities payable on any date, change the currency in which Securities are
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the maturity thereof, without the consent of the holder of
each Security so affected, or (y) reduce the aforesaid percentage of Securities
of any series the consent of the holders of which is required for any such
modification without the consent of the holders of all Securities of such series
then Outstanding, or (z) modify, without the written consent of the Trustee, the
rights, duties or immunities of the Trustee.

          No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.

          This Note is a Global Security registered in the name of a nominee of
the Depository. This Note is exchangeable for Notes registered in the name of a
person other than the Depository or its nominee only in the limited
circumstances hereinafter described. Unless and until it is exchanged in whole
or in part for definitive Notes in certificated form, this Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository.

          The Notes represented by this Global Security are exchangeable for
definitive Notes in certificated form of like tenor as such Notes in
denominations of Y1,000,000 and integral multiples thereof only if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the DTC Global Note or (ii) the Depository ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, or (iii) both the Euroclear System and Clearstream Banking, societe
anonyme, notify the Company that they are unwilling or unable to continue as a
clearing system for the International Global Note or (iv) the Company in its
sole discretion decides to allow the Notes to be exchanged for definitive Notes
in registered form. Any Notes that are exchangeable pursuant to the preceding
sentence are exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of definitive Notes in certificated form is registrable in the
register maintained by the Company for such purpose, upon surrender of the
definitive Note for registration of transfer at the office or agency of the
Company in any place where the principal of and interest on the definitive Note
are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the registrar duly executed by,
the holder thereof or his attorney duly authorized in writing, and thereupon one
or more new Notes of this series and of like tenor, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. Subject to the foregoing, this Note is not
exchangeable, except for a Global Security or Global Securities of

<PAGE>

this issue of the same principal amount to be registered in the name of the
Depository or its nominee.

          No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

          Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

          The Company will pay additional amounts ("Additional Amounts") to the
beneficial owner of any Note that is a non-United States person in order to
ensure that every net payment on such Note will not be less, due to payment of
U.S. withholding tax, than the amount then due and payable. For this purpose, a
"net payment" on a Note means a payment by the Company or a paying agent,
including payment of principal and interest, after deduction for any present or
future tax, assessment or other governmental charge of the United States. These
Additional Amounts will constitute additional interest on the Note.

          The Company will not be required to pay Additional Amounts, however,
in any of the circumstances described in items (1) through (12) below.

          (1)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld solely by reason of the
               beneficial owner:

               (a)  having a relationship with the United States as a citizen,
                    resident or otherwise;

               (b)  having had such a relationship in the past or

               (c)  being considered as having had such a relationship.

          (2)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld solely by reason of the
               beneficial owner:

               (a)  being treated as present in or engaged in a trade or
                    business in the United States;

               (b)  being treated as having been present in or engaged in a
                    trade or business in the United States in the past or

               (c)  having or having had a permanent establishment in the United
                    States.

          (3)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld solely by reason of the
               beneficial owner being or having been a:

               (a)  personal holding company;

               (b)  foreign personal holding company;

<PAGE>

               (c)  foreign private foundation or other foreign tax-exempt
                    organization;

               (d)  passive foreign investment company;

               (e)  controlled foreign corporation or

               (f)  corporation which has accumulated earnings to avoid United
                    States federal income tax.

          (4)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld solely by reason of the
               beneficial owner owning or having owned, actually or
               constructively, 10 percent or more of the total combined voting
               power of all classes of stock of the Company entitled to vote.

For purposes of item (1) through (4) above, "beneficial owner" means a
fiduciary, settlor, beneficiary, member or shareholder of the holder if the
holder is an estate, trust, partnership, limited liability company, corporation
or other entity, or a person holding a power over an estate or trust
administered by a fiduciary holder.

          (5)  Additional Amounts will not be payable to any beneficial owner of
               a Note that is a:

               (a)  fiduciary;

               (b)  partnership;

               (c)  limited liability company or

               (d)  other fiscally transparent entity

               or that is not the sole beneficial owner of the Note, or any
               portion of the Note. However, this exception to the obligation to
               pay Additional Amounts will only apply to the extent that a
               beneficiary or settlor in relation to the fiduciary, or a
               beneficial owner or member of the partnership, limited liability
               company or other fiscally transparent entity, would not have been
               entitled to the payment of an Additional Amount had the
               beneficiary, settlor, beneficial owner or member received
               directly its beneficial or distributive share of the payment.

          (6)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld solely by reason of the
               failure of the beneficial owner or any other person to comply
               with applicable certification, identification, documentation or
               other information reporting requirements. This exception to the
               obligation to pay Additional Amounts will only apply if
               compliance with such reporting requirements is required by
               statute or regulation of the United States or by an applicable
               income tax treaty to which the United States is a party as a
               precondition to exemption from such tax, assessment or other
               governmental charge.

          (7)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is collected or imposed by any method other than by
               withholding from a payment on a Note by the Company or a paying
               agent.

<PAGE>

          (8)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld by reason of a change in law,
               regulation, or administrative or judicial interpretation that
               becomes effective more than 15 days after the payment becomes due
               or is duly provided for, whichever occurs later.

          (9)  Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment or other governmental
               charge that is imposed or withheld by reason of the presentation
               by the beneficial owner of a Note for payment more than 30 days
               after the date on which such payment becomes due or is duly
               provided for, whichever occurs later.

          (10) Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any:

               (a)  estate tax;

               (b)  inheritance tax;

               (c)  gift tax;

               (d)  sales tax;

               (e)  excise tax;

               (f)  transfer tax;

               (g)  wealth tax;

               (h)  personal property tax or

               (i)  any similar tax, assessment or other governmental charge.

          (11) Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any tax, assessment, or other governmental
               charge required to be withheld by any paying agent from a payment
               of principal or interest on a Note if such payment can be made
               without such withholding by any other paying agent.

          (12) Additional Amounts will not be payable if a payment on a Note is
               reduced as a result of any combination of items (1) through (11)
               above.

          Except as specifically provided herein, the Company will not be
required to make any payment of any tax, assessment or other governmental charge
imposed by any government or a political subdivision or taxing authority of such
government.

          As used in this Note, "United States person" means:

          (a)  any individual who is a citizen or resident of the United States;

          (b)  any corporation, partnership or other entity created or organized
               in or under the laws of the United States;

          (c)  any estate if the income of such estate falls within the federal
               income tax jurisdiction of the United States regardless of the
               source of such income and

          (d)  any trust if a United States court is able to exercise primary
               supervision over its administration and one or more United States
               persons have the authority to control all of the substantial
               decisions of the trust.

<PAGE>

          Additionally, "non-United States person" means a person who is not a
United States person, and "United States" means the United States of America,
including the States and the District of Columbia, its territories, its
possessions and other areas within its jurisdiction.

          Except as provided below, the Notes may not be redeemed prior to
maturity.

          (1) The Company may, at its option, redeem the Notes if:

               (a)  the Company becomes or will become obligated to pay
                    Additional Amounts as described above;

               (b)  the obligation to pay Additional Amounts arises as a result
                    of any change in the laws, regulations or rulings of the
                    United States, or an official position regarding the
                    application or interpretation of such laws, regulations or
                    rulings, which change is announced or becomes effective on
                    or after October 21, 2005 and

               (c)  the Company determines, in its business judgment, that the
                    obligation to pay such Additional Amounts cannot be avoided
                    by the use of reasonable measures available to it, other
                    than substituting the obligor under the Notes or taking any
                    action that would entail a material cost to the Company.

          (2)  The Company may also redeem the Notes, at its option, if:

               (a)  any act is taken by a taxing authority of the United States
                    on or after October 21, 2005, whether or not such act is
                    taken in relation to the Company or any affiliate, that
                    results in a substantial probability that the Company will
                    or may be required to pay Additional Amounts as described
                    under above;

               (b)  the Company determines, in its business judgment, that the
                    obligation to pay such Additional Amounts cannot be avoided
                    by the use of reasonable measures available to it, other
                    than substituting the obligor under the Notes or taking any
                    action that would entail a material cost to the Company and

               (c)  the Company receives an opinion of independent counsel to
                    the effect that an act taken by a taxing authority of the
                    United States results in a substantial probability that the
                    Company will or may be required to pay the Additional
                    Amounts described under above, and delivers to the Trustee a
                    certificate, signed by a duly authorized officer, stating
                    that based on such opinion the Company is entitled to redeem
                    the Notes pursuant to their terms.

Any redemption of the Notes as set forth in clauses (1) or (2) above shall be in
whole, and not in part, and will be made at a redemption price equal to 100% of
the principal amount of the Notes Outstanding plus accrued interest thereon to
the date of redemption. Holders shall be given not less than 30 days nor more
than 60 days prior notice by the Trustee of the date fixed for such redemption.

          All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Notes are governed by
the laws of the State of New York.

<PAGE>

                       SCHEDULE OF EXCHANGES OF INTERESTS

          The following exchanges of a part of this Note for an interest in
another Global Security or for a certificated Note, or exchanges of a part of
another Global Security or certificated Note for an interest in this Note, have
been made:

<TABLE>
<CAPTION>
                                                                                               Signature of
             Amount of decrease in      Amount of increase in    Principal Amount of this   Authorized Officer
 Date of   Principal Amount of this   Principal Amount of this      Note following such        of Trustee or
Exchange             Note                       Note              decrease (or increase)       Fiscal Agent
--------   ------------------------   ------------------------   ------------------------   ------------------
<S>        <C>                        <C>                        <C>                        <C>

October 31, 2005 (original issuance)                                                              Y___________

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</TABLE>

*    This Schedule may be used by the Trustee, Paying Agent, Fiscal Agent or
     other agent of the Company in respect of this Note, and, if so used, shall
     be deemed a part thereof for all purposes.

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