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EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
PREFERRED AND COMMON
(400,000 Shares of Series A Preferred Stock
and 100,000 Shares of Common Stock)
By and Between
COMBICHEM, INC.,
a California corporation
and
SEQUOIA CAPITAL VI,
a California limited partnership
SEQUOIA TECHNOLOGY PARTNERS VI,
a California limited partnership
and SEQUOIA XXIV,
a California limited partnership
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TABLE OF CONTENTS
1. Sale of Series A Preferred and Common Stock . . . . . . . . . . . . . . 1
2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Representations and Warranties of the Company . . . . . . . . . . . . . . 2
(a) Organization and Standing; Articles and Bylaws . . . . . . . . . . 2
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Validity of the Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Stockholders, Directors and Officers; Indebtedness . . . . . . . . . . 3
(g) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(j) Title to Properties; Liens and Encumbrances . . . . . . . . . . . . . . 4
(k) Franchises, Licenses, Trademarks, Patents and Other Rights . . . . . . 4
(l) Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(m) Compliance With Other Instruments . . . . . . . . . . . . . . . . . . . 4
(n) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(o) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(p) Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . 5
(a) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Reliance Upon the Purchasers' Representations . . . . . . . . . . . . . 5
(d) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Receipt of Information . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Investment Experience . . . . . . . . . . . . . . . . . . . . . . . . . 6
(g) Limitations on Disposition . . . . . . . . . . . . . . . . . . . . . . 6
(h) Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Market Standoff Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . 8
(b) Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Stock Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Prompt Payment of Taxes, etc . . . . . . . . . . . . . . . . . . . . . 8
(f) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Key Person Life Insurance . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Approval of Expenditures . . . . . . . . . . . . . . . . . . . . . . . 9
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(j) Maintenance of Corporate Existence, etc . . . . . . . . . . . . . . . . 9
(k) Election of Directors . . . . . . . . . . . . . . . . . . . . . . . 10
(l) Availability of Common Stock for Conversion . . . . . . . . . . . . . . 10
(m) Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(n) Confidentiality and Assignment Protections . . . . . . . . . . . . . . 10
7. The Purchasers' Rights to Purchase Additional Shares . . . . . . . . . . . . . . 10
8. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Further Instruments and Actions . . . . . . . . . . . . . . . . . . . . 13
(b) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 13
(f) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Counsel to the Company . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBITS
Exhibit A Schedule of Shares Purchased by Purchasers
Exhibit B Schedule of Exceptions
Exhibit C Schedule of Current Shareholders
Exhibit D Schedule of Patent, Trademark and Copyright Rights
Exhibit E Schedule of Material Contracts
Exhibit F Confidentiality and Invention Assignment Provisions
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STOCK PURCHASE AGREEMENT
(400,000 Shares of Series A Preferred Stock
and 100,000 Shares of Common Stock)
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of November 1,
1994, by and between CombiChem, Inc., a California corporation (the "Company"),
and SEQUOIA CAPITAL VI, a California limited partnership SEQUOIA TECHNOLOGY
PARTNERS VI, a California limited partnership, and SEQUOIA XXIV, a California
limited partnership (collectively, the "Purchasers"), which term includes
successors and assigns).
WHEREAS, the Purchasers desire to make a cash payment to the Company
as consideration for obtaining a fixed number of preferred and common shares of
the Company's capital stock; and
WHEREAS, the Company desires to sell a fixed number of common and
preferred shares of the Company's capital stock to the Purchasers; and
WHEREAS, certain defined terms used in this Agreement are referenced
in Section 8 hereof.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Purchasers
hereby agree as follows:
1. Sale of Series A Preferred and Common Stock. Subject to the
terms and conditions of this Agreement, the Purchasers hereby purchase, and the
Company hereby sells to the Purchasers, an aggregate of 400,000 shares of the
Company's Series A Preferred Stock (the "Preferred Shares") and an aggregate of
100,000 shares of Common Stock (the "Common Shares") (together, the "Shares")
at prices of fifty cents ($0.50) per Series A Preferred share and five cents
($.05) per Common share, for an aggregate sum of two hundred five thousand
dollars ($205,000.00) (the "Purchase Price"), as specified in Exhibit A.
2. Closing. The purchase and sale of the Shares shall take place
at the offices of Xxxx, Xxxx, Xxxx & Freidenrich simultaneous with the
execution of this Agreement, or at such other place and time as the Company and
the Purchasers shall mutually agree, either orally or in writing (the
"Closing"). At the Closing, the Purchasers shall pay the Purchase Price to the
Company by check, wire transfer, cancellation of indebtedness, or such other
form of payment as shall be mutually agreed upon by the Purchasers and the
Company. At the Closing, subject to the terms and conditions hereof, the
Company shall deliver to the Purchasers certificates, registered in the name
the Purchasers designate by notice to the Company, representing the Shares
purchased by the Purchasers, dated the date of the Closing.
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3. Representations and Warranties of the Company. Except as
specifically disclosed in this Agreement, in the schedule of exceptions
attached hereto as Exhibit B and incorporated by reference, or as otherwise
learned by the Purchaser, the Company hereby represents and warrants to the
Purchasers as follows:
(a) Organization and Standing: Articles and Bylaws. The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of California, and has all requisite corporate
power and authority to own and operate its properties and assets and to carry
on its business as presently conducted. The Company is duly qualified to do
business as a foreign corporation in each jurisdiction in which the conduct of
its business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the Company's business.
The Company has furnished the Purchasers or their special counsel with copies
of its Articles of Incorporation and its Bylaws. Said copies are true,
correct, and complete and contain all amendments through the date of the
Closing.
(b) Capitalization. The authorized capital stock of the
Company, immediately prior to the Closing, will consist of (a) 30,000,000
shares of no par value Common Stock, 1,447,500 shares of which are issued and
outstanding or committed for issuance on the date hereof, plus 100,000 of which
are being sold and issued to the Purchasers pursuant to this Agreement; and (b)
10,000,000 shares of no par value Preferred Stock, of which: (i) 1,000,000
shares have been designated Series A Preferred Stock, 600,000 shares of which
are issued and outstanding and 400,000 of which are being sold and issued to
the Purchasers pursuant to this Agreement; and (ii) 1,500,000 shares have been
designated Series Z Preferred Stock, 600,000 shares of which are issued and
outstanding or reserved for issuance on the date hereof (325,000 to 400,000
shares are reserved for issuance to The Scripps Research Institute ("Scripps")
in return for Scripps granting certain licensing rights to the Company). All
issued and outstanding shares of the Company's capital stock are represented on
Exhibit C hereto, have been duly authorized and validly issued, and are fully
paid and nonassessable.
(c) Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
the Company's obligations under this Agreement and the Stock Registration
Rights Agreement, and for the authorization, issuance, sale and delivery of the
Shares and the Common Shares issuable upon conversion thereof ("Underlying
Common Shares") has been taken prior to the Closing. This Agreement, when
executed and delivered by the Company and the Purchasers, and the Stock
Registration Rights Agreement shall constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors. The execution, delivery and performance
by the Company of this Agreement and compliance herewith and the sale and
issuance of the Shares and Common Stock issuable upon conversion of the Shares
will not result in any violation of and will not conflict with, or result in a
breach of any of the terms of, or constitute a default under, any provision of
state or federal law to which the Company is subject, the Company's Articles of
Incorporation or Bylaws, each
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as amended, or any provision of any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction to which the
Company is a party or by which it is bound, the breach of or default under
which would have a material adverse effect upon the business or operations of
the Company, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term. The Shares, when issued in compliance with the
provisions of this Agreement will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances; provided, however,
that the Shares (and the Common Stock issuable upon conversion thereof) may be
subject to restrictions on transfer under state and/or federal securities laws.
The shares of Common Stock issuable upon conversion of the Shares have been
duly and validly reserved and are not subject to any preemptive rights or
rights of first refusal, and upon issuance, will be validly issued, fully paid
and nonassessable.
(d) Validity of the Shares. The Shares and the
Underlying Common Shares will be validly issued, fully paid and nonassessable.
(e) Subsidiaries. The Company has no subsidiaries and
does not own of record or beneficially any capital stock or equity interest or
investment in any corporation, association or business entity.
(f) Stockholders, Directors and Officers: Indebtedness.
The Company is not currently indebted to its officers, directors or
stockholders or any of their respective relatives, other than travel,
relocation, normal compensation and other expenses which are advanced and
reimbursed in the ordinary course of business. To the best of the Company's
knowledge, none of the officers or directors or significant employees or
consultants of the Company, has, individually or collectively, a material
interest in any entity which is a competitor, customer or supplier of (or has
any existing contractual relationship with) the Company.
(g) Disclosure. This Agreement and the Exhibits hereto
do not contain any untrue statement of a material fact and do not omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. The Company has provided the Purchasers with all the
information which the Purchasers have requested for deciding whether to
purchase the Shares and all information which the Company believes is
reasonably necessary to enable the Purchasers to make such a decision.
(h) Litigation. There are no actions, suits, proceedings
or investigations pending, or to the Company's knowledge, claims asserted, to
which the Company is a party or its property is subject, which might result in
any material adverse change in the business or financial condition of the
Company or any of its properties or assets, or in any material impairment of
the right or ability of the Company to carry on its business as now conducted,
or in any material liability on the part of the Company, and none which
question the validity of this Agreement or any action taken or to be taken in
connection herewith.
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(i) Consents. No consent, approval, qualification, order
or authorization of, or filing with, any governmental authority, is required in
connection with the Company's valid execution, delivery or performance of this
Agreement, or the offer, sale or issuance of the Shares by the Company, the
conversion of the Shares, the issuance of Common Stock upon conversion of the
Shares, or the consummation of any other transaction contemplated on the part
of the Company hereby, except filings required pursuant to the applicable
federal and state securities laws and blue sky laws, which filings, the Company
covenants to complete within fifteen (15) days of the Closing.
(j) Title to Properties: Liens and Encumbrances. The
Company has good and marketable title to its properties and assets and has good
title to all its leasehold interests, in each case subject to no mortgage,
pledge, lien, security interest, conditional sale agreement, encumbrance or
charge, except (i) tax, materialmen's or like liens for obligations not yet due
or payable or being contested in good faith by appropriate proceedings, or (ii)
possible minor liens or encumbrances which do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of the Company and which have not arisen otherwise then in the
ordinary course of business.
(k) Franchises, Licenses, Trademarks, Patents and Other
Rights. To the best of the Company's knowledge, it has all franchises,
permits, licenses and other similar authority necessary for the conduct of its
business, the lack of which could materially and adversely affect the
operations or condition, financial or otherwise, of the Company, and it is not
in default in any material respect under any of such franchises, permits, liens
or other similar authority. To the best of Company's knowledge, the Company
possesses certain patent, trademark, trade name and copyright rights as set
forth on Exhibit D. To the best of Company's knowledge, the Company's
intellectual property rights are sufficient to allow Company to proceed with
its business as planned and Company is not aware of any infringements of its
intellectual property rights. Reasonable security measures have been taken by
the Company to protect the secrecy, confidentiality and value of the Company's
trade secrets, confidential information, and intellectual property rights
referred to in this Section 3(k).
(l) Offering. Subject to the truth and accuracy of the
Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Act"), and from any applicable blue sky requirements of the State of
California.
(m) Compliance With Other Instruments. The Company is
not in violation of any term of its Articles of Incorporation or Bylaws nor any
material term of any mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, statute, rule or regulation to which the Company is
subject and a violation of which would have a material adverse effect on the
condition, financial or otherwise, or operations of the Company.
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(n) Employees. To the best of the Company's knowledge
and belief, no employee of the Company is in violation of any term of any
employment contract, patent disclosure agreement, non-competition agreement, or
any restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or to the use of
trade secrets or proprietary information of others. There is neither pending
nor, to the Company's knowledge and belief, threatened any actions, suits,
proceedings or claims, or to its knowledge any basis therefor or threat thereof
with respect to any contract, agreement, covenant or obligation referred to in
the preceding sentence. The Company does not have any collective bargaining
agreement covering any of its employees.
(o) Material Contracts. A true and complete list of all
contracts, agreements and investments with respect to which the Company is
party and has an obligation in excess of Twenty Thousand Dollars ($20,000) is
set forth on Exhibit E.
(p) Board of Directors. As of the Closing, the Company's
Board of Directors will consist of Xxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxxx Xxxx.
4. Representations and Warranties of the Purchaser. The
Purchasers hereby represent and warrant to the Company as follows:
(a) Authorization. The Purchasers have the requisite
legal power and authority to enter into this Agreement and that this Agreement
when executed shall constitute a valid and legally binding obligation of the
Purchaser.
(b) Investment Intent. This Agreement is made with the
Purchasers in reliance upon their representation to the Company, which by their
execution hereof they confirm, that the Shares have been acquired with their
own funds for investment for an indefinite period for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that they have no present intention of selling, granting
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchasers further represent that they do not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participation, to such person or to any third person, with respect to any
of the Shares.
(c) Reliance Upon the Purchasers' Representations. The
Purchasers understand (i) that the Shares are not, and the Underlying Common
Shares acquired on conversion thereof at the time of issuance may not be,
registered under the Securities Act or qualified under the California Corporate
Securities Law of 1968, as amended (the "Law"), and (ii) that the Shares are
being issued to the Purchasers on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof and/or Regulation D
promulgated thereunder and the exemption from qualification provided by Section
25102(f) of the Law, and (iii) that the Company's reliance on
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such exemptions is predicated on the Purchasers' representations set forth
herein. The Purchasers realize that the basis for the exemptions may not be
present if, notwithstanding such representations, the Purchasers have in mind
merely acquiring the Shares for a fixed or determinable period in the future,
or for a market rise, or for sale if the market does not rise. The Purchasers
do not have any such intention. These exemptions only exempt the issuance of
the Shares to the Purchasers and not any sale or other disposition of the
Shares or any interest therein by the Purchasers.
(d) Restricted Securities. The Purchasers hereby confirm
that they have been informed that the Shares are restricted securities under
the Securities Act and may not be resold or transferred unless the Shares are
first registered under the Federal securities laws or unless an exemption from
such registration is available. In addition, the Purchasers understand that
any resale or transfer must comply with applicable state securities laws.
Accordingly, the Purchasers hereby acknowledge that they are prepared to hold
the Shares for an indefinite period, and that the Purchasers are familiar with
the provisions of Rule 144 of the Securities and Exchange Commission issued
under the Securities Act, and are aware that Rule 144 is not presently
available to exempt the sale of the Shares from the registration requirements
of the Securities Act.
(e) Receipt of Information. The Purchasers acknowledge
that they have received all the information they consider necessary or
appropriate for deciding whether to purchase the Shares. The Purchasers
further represent that they have had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Shares and the business, properties, prospects, and financial
condition of the Company, and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy or any information
furnished to them or to which they had access.
(f) Investment Experience. In connection with the
investment representations made herein, the Purchasers represent that each of
them; is an "accredited investor" as defined in Section 501 of Regulation D,
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment, has the ability
to bear the economic risks of its investment and has been furnished with and
has had access to all of the information it considers necessary or appropriate
to evaluate the risks and merits of an investment in the Shares, and has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management.
(g) Limitations on Disposition. The Purchasers agree
that in no event will they make a disposition of any of the Shares, unless and
until (a) they shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and (b) they shall have furnished the
Company with an opinion of counsel satisfactory to the Company to the effect
that (i) such disposition will not require registration of such Shares under
the Securities Act, or (ii) that appropriate action necessary for compliance
with the Securities Act has been taken, or (c) the
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Company shall have waived, expressly and in writing, its rights under clauses
(a) and (b) of this subparagraph. The opinion shall also indicate that the
disposition is exempt from, in compliance with, or qualified under all
applicable state securities laws.
(h) Legends. All certificates representing any shares of
Shares of the Company subject to the provisions of this Agreement shall have
endorsed thereon customary legends regarding:
(1) Restrictions on transfer under the Federal
Securities Act of 1933.
(2) Market Stand-Off Agreements pursuant to
Section 5 hereof.
(3) Any legend required by state securities laws.
5. Market Stand-off Agreement.
(a) In connection with any underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Securities Act, including the Company's initial
public offering, the Purchasers shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to the Shares without the prior written consent of
the Company or its underwriters. Such limitations shall be in effect for one
hundred eighty (180) days from and after the effective date of such
registration statement or such longer time as may be required by the Company's
underwriters. The limitations of this Section 5 shall remain in effect for the
two-year period immediately following the effective date of the Company's
initial public offering and shall thereafter terminate and cease to have any
force or effect.
(b) In the event any stock dividend, stock split,
recapitalization or other change affecting the Company's outstanding common
shares is effected without receipt of consideration, then any new, substituted
or additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this Section 5 to the same extent the
Shares are at such time covered by such provisions.
(c) In order to enforce the limitations of this Section
5, the Company may impose stop-transfer instructions with respect to the Shares
until the end of the applicable stand-off period.
(d) The obligations in this Section 5 shall not apply to
a registration relating solely to employee benefit plan shares or to a Rule 145
transaction registered on Form S-4.
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6. Covenants of the Company.
(a) Delivery of Financial Statements. The Company shall deliver to
the Purchasers:
(1) as soon as practicable after the end of each
fiscal year of the Company, audited financial statements for such fiscal year,
prepared in accordance with generally accepted accounting principles ("GAAP")
together with an annual report of the Company, all in reasonable detail and
certified by an independent public accountant of recognized national standing
selected by the Company;
(2) as soon as practicable after the end of each
month of each fiscal year of the Company, unaudited financial statements for
such month, prepared in accordance with generally accepted accounting
principles consistently applied, subject to changes resulting from year-end
audit adjustments and the absence of notes, all in reasonable detail and
certified by the principal financial or accounting officer of the Company;
(3) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company
as the Purchasers or any assignee of the Purchasers may from time to time
reasonably request, provided, however, that the Company shall not be obligated
under provision of this Agreement to provide information which it deems in good
faith to be a trade secret or similar confidential information.
(b) Inspection. The Company shall permit the Purchasers,
at their expense, to visit and inspect the Company's properties, to examine its
books of account and records, and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be
requested by the Purchaser; provided, however, that the Company shall not be
obligated pursuant to this section to provide access to any information which
it reasonably considers to be a trade secret or similar confidential
information.
(c) Termination of Covenants. The covenants set forth in
this Section 6 shall terminate and be of no further force or effect upon the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Securities Act in connection with the firm
commitment underwritten offering of its securities to the general public where
the gross proceeds to the Company are at least five million dollars
($5,000,000).
(d) Stock Registration. Simultaneous with entering into
this Agreement, the Company and the Purchasers are also entering into a Stock
Registration Rights Agreement which grants certain rights to the Purchasers to
have the Common Shares and the shares of common stock issuable upon conversion
of the Preferred Shares registered.
(e) Prompt Payment of Taxes, etc. The Company will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes,
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assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor.
(f) Insurance. The Company will keep its assets and
those of its subsidiaries which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business, in amounts sufficient to allow it to replace any of
its properties which might be damaged or destroyed. The Company will maintain
with financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated.
(g) Key Person Life Insurance. The Company shall use
reasonable efforts to obtain and maintain with financially sound and reputable
insurers, an annually renewable key person term life insurance policy in the
amount of $1,000,000 on the life of its chief executive officer. Such policy
shall name the company as loss payee and shall be maintained by the Company
with financially sound and reputable insurers. The Board of Directors shall
decide whether to renew this policy on an annual basis, in its sole discretion.
(h) Approval of Expenditures. Until the Company obtains
an aggregate,cash investment of three million dollars ($3,000,000) in the
Company's capital stock, (i) the Company shall submit each year's proposed
annual budget to the Company's Board of Directors prior to year-end and such
budget must be approved by not less than seventy-five percent (75%) of the
Company's Board of Directors; (ii) the Company shall not make any expenditure
in excess of $50,000 (which is not provided for in the Company's approved
annual budget) unless such expenditure is approved by an affirmative vote of
not less than seventy-five percent (75%) of the Company's Board of Directors;
and (iii) the Company shall not liquidate or otherwise dispose of any assets
with a value in excess of $50,000 without an affirmative vote of not less than
seventy-five percent (75%) of the Company's Board of Directors.
(i) Accounts and Records. The Company will keep true
records and books of account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a
consistent basis.
(j) Maintenance of Corporate Existence, etc. The Company
shall maintain in full force and effect its corporate existence, rights and
franchises and all licenses and other rights to use patents, processes,
licenses, trademarks, trade names or copyrights owned or possessed by it or any
subsidiary and deemed by the Company to be material to the conduct of their
business.
-9-
13
(k) Election of Directors. Effective upon the closing
date of this Agreement, the Company shall cause Xxxxx Xxxx to be appointed to
the Company's Board of Directors. So long as the Purchasers own not less than
a combined total of the greater of (i) 300,000 shares or (ii) 25% of the
Company's Preferred Stock (including shares of Common Stock issued upon
conversion of the Preferred Stock and as adjusted for stock splits, etc.), the
Purchasers shall have the right to nominate for election to the Company's Board
of Directors (the "Board") one member of the Board (the "Preferred Director").
The name of the person(s) so nominated shall be subject to approval by the
Company, which approval shall not be unreasonably withheld. The parties hereto
agree that the initial Preferred Director shall be Xxxxx Xxxx. The Company
agrees to take all actions necessary or appropriate to present the Preferred
Director to the shareholders for election and approval as a director. Xxxxxx
Xxxxxx and Forward Ventures II, L.P. agree to take all action necessary to
elect the Preferred Director to the Board of Directors of the Company and each
of them agrees to vote such shareholder's shares in favor of election of the
Preferred Director. If a Preferred Director resigns or is removed by a vote of
the Company's shareholders, or if his or her Board seat is otherwise vacated
for any reason, then the Purchasers shall have the right to nominate his or her
replacement, subject to the Company's approval, which approval shall not be
unreasonably withheld, and Xxxxxx Xxxxxx and Forward Ventures II, L.P. agree to
vote each of such shareholder's shares for the election of such replacement
Preferred Director. The provisions of this Section 6(k) shall be construed to
constitute the granting of proxies coupled with an interest.
(l) Availability of Common Stock for Conversion. The
Company will from time to time, in accordance with the laws of the State of
California, increase the authorized amount of Common Stock if at any time the
number of shares of Common Stock remaining unissued and available for issuance
shall be insufficient to permit conversion of all the then outstanding shares
of Series A Preferred Stock.
(m) Stock Option Plan. The Company hereby agrees not to
issue, sell or otherwise transfer in excess of one million three hundred
thousand (1,300,000) shares of the Company's Common Stock to employees,
directors, officers or consultants of the Company pursuant to any stock option
plan or other arrangement approved by the Board of Directors; provided,
however, that this one million three hundred thousand (1,300,000) share
limitation shall not include any shares of Common Stock issued prior to the
date hereof
(n) Confidentiality and Assignment Protections. The
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into an
agreement that contains the following confidential information and assignment
provisions substantially in the form of Exhibit F hereto.
7. The Purchasers' Rights to Purchase Additional Shares.
(a) Subject to the terms and conditions specified in this
Section 7, the Company hereby grants to the Purchasers a right to purchase a
pro rata share of New Securities (as
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hereinafter defined) equal to the ratio of (i) the aggregate number of shares
of the Company's Common Stock owned by the Purchasers immediately prior to the
issuance of New Securities (assuming full conversion of all owned convertible
securities into shares of Common Stock of), and (ii) to the total number of
shares of Common Stock outstanding on a fully diluted basis immediately prior
to the issuance of New Securities (the "Pro Rata Share"). For purposes of this
Section 7, Purchasers include any general partners and affiliates of a
Purchaser. Purchasers shall be entitled to apportion the right to purchase
additional Shares hereby granted them among themselves and their partners and
affiliates in such proportions as they deem appropriate.
Not later than thirty calendar days after the Company sells
any shares solely for cash (excluding however securities described in Section
7(e) hereof), including any common shares, preferred shares, or securities
convertible into any shares ("New Securities"), the Company shall make an
offering of some of the New Securities to the Purchasers in accordance with the
following provisions:
(b) The Company shall deliver a notice by certified mail
("Notice") to the Purchasers stating (i) the number of New Securities sold and
available for sale, (ii) the number of such New Securities the Purchasers are
entitled to purchase, as the Purchasers' Pro Rata Shares, and (iii) the price
and terms upon which the New Securities were sold or are to be sold.
(c) Within 20 calendar days after the Company provides
such Notice, each Purchaser may elect to purchase or obtain, at the price and
on the terms specified in the Notice, up to the Purchasers' Pro Rata Share of
the New Securities.
(d) If any party elects not to obtain its Pro Rata Share
of the New Securities, the Company may, during the 90-day period following the
expiration of the period provided in subsection 7(c) hereof, assign the right
to purchase the remaining unsubscribed portion of such New Securities to any
person or persons at a price not less than, and upon terms no more favorable to
the offeree than those specified in the Notice without offering any of such
unsubscribed New Securities to the Purchaser. If the Company does not enter
into an agreement for the sale of the New Securities within such period, or if
such agreement is not consummated within such 90-day period, the Company's
right to assign the right to purchase the New Securities provided hereunder
shall be deemed to be revoked and such New Securities shall not be offered to
any third party unless first re-offered to the Purchasers in accordance
herewith.
(e) Notwithstanding any other provision to the contrary, the
right to purchase New Securities contained in this Section 7 shall not be
applicable (i) to the issuance or sale of up to 1,300,000 shares of the
Company's Common Stock (or related options) issued to employees, directors,
officers or consultants of the Company pursuant to any stock option plan or
other arrangement approved by the Board of Directors which number may be
increased by the approval of not less than seventy-five percent (75%) of the
Board of Directors, provided, however, that only a majority approval of the
Company's Board of Directors shall be required after the Company has obtained
an aggregate cash investment of Three Million Dollars
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($3,000,000) in its capital stock; (ii) to or after the consummation of a bona
fide, firmly underwritten public offering of shares of common stock, registered
under the Securities Act pursuant to a registration statement; (iii) the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities; (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of shares or otherwise; (v) to
securities issued in connection with obtaining real estate lease financing,
whether issued to a lessor, guarantor or other person; (vi) to securities
issued in connection with any borrowings, direct or indirect, from financial
institutions by the Company, including without limitation, equipment lease
financing arrangements approved by the Board of Directors; (vii) to securities
issued pursuant to the acquisition of license or other rights, assets or
technology with third parties or in connection with corporate partnering
arrangements with third parties, provided that such arrangements are approved
by not less than seventy-five percent (75%) of the Company's Board of
Directors; and (viii) to securities issued in connection with any stock split,
stock dividend or recapitalization of the Company.
(f) The right to purchase New Securities set forth in
this Section 7 may not be assigned or transferred except that (i) such right is
assignable by the Purchasers to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with, any such Purchaser, and (ii) such
right is assignable between and among any of the Purchasers of the Company's
preferred stock.
8. Defined Terms. When used herein the following defined terms
shall have the respective definitions as set forth below:
Accredited Investor shall have the meaning set forth in Section 4(f).
Agreement shall have the meaning set forth in the first paragraph.
Closing shall have the meaning set forth in Section 2.
Company shall have the meaning set forth in first paragraph.
GAAP shall have the meaning set forth in Section 6(a)(1).
Law shall have the meaning set forth in Section 4(c).
New Securities shall have the meaning set forth in Section 7(a).
Notice shall have the meaning set forth in Section 7(b).
Pro Rata Shares shall have the meaning set forth in Section 7(a).
Purchase Price shall have the meaning set forth in Section 1.
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Purchasers shall have the meaning set forth in the first paragraph.
Shares shall have the meaning set forth in Section 1.
Underlying Common Shares shall have the meaning set forth in Section
3(c).
9. Miscellaneous.
(a) Further Instruments and Actions. The parties agree
to execute such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.
(b) 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 Post Office, by registered or
certified mail with postage and fees prepaid, addressed to the other party
hereto at its address hereinafter shown below its signature or at such other
address as such party may designate by advance written notice to the other
party hereto.
(c) Expenses. The Company and the Purchasers shall bear
their own expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby; provided, however, that the Company will
pay the reasonable legal fees and out-of-pocket expenses of Wilson, Sonsini,
Xxxxxxxx & Xxxxxx, special counsel to the Purchasers, in an amount not to
exceed $6,000.
(d) Governing Law. This Agreement has been negotiated,
executed and delivered in the State of California. The parties hereto agree
that all questions pertaining to the validity and interpretation of this
Agreement shall be determined in accordance with the laws of the State of
California.
(e) Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of the successors and assigns of the Company and, subject to the restrictions
on transfer herein set forth, be binding upon the Purchaser, its successors and
assigns.
(f) Amendments and Waivers. This Agreement represents
the entire understanding of the parties with respect to the subject matter
hereof and supersedes all previous understandings, written or oral. This
Agreement may only be amended with the written consent of the parties hereto,
or the successors or assigns of the foregoing, and no oral waiver or amendment
shall be effective under any circumstances whatsoever.
(g) Counsel to the Company. The Purchasers acknowledge
and agree that this Agreement has been prepared by Xxxx Xxxx Xxxx &
Freidenrich, counsel to the Company, which counsel has represented the
interests of the Company and not those of the Purchasers with respect
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to the transactions documented by this Agreement. The Purchasers further
acknowledge and agree that the Purchasers have been provided the opportunity
and encouraged to consult with counsel of the Purchasers' own choosing with
respect to this Agreement. The Purchasers certify and acknowledge that the
Purchasers have carefully read all of the provisions of this Agreement and that
the Purchasers fully understand and shall fully and faithfully comply with such
provisions.
-14-
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
COMBICHEM, INC., Address:
a California corporation 00000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx, Chief Executive Officer
PURCHASERS:
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Xxxxx Xxxx
----------------------------------------
In the Capacity indicated for each
of the following entities:
SEQUOIA CAPITAL VI, Address:
a California Limited Partnership 0000 Xxxx Xxxx Xxxx
a General Partner Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SEQUOIA TECHNOLOGY PARTNERS VI, Address:
a California Limited Partnership 0000 Xxxx Xxxx Xxxx
a General Partner Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SEQUOIA XXIV Address:
a California Limited Partnership 0000 Xxxx Xxxx Xxxx
a General Partner Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
[Signature Page to Sequoia Stock Purchase Agreement]
19
EXHIBIT A
SCHEDULE OF SHARES PURCHASED BY PURCHASER
Number of Shares Number of Shares
Purchaser of Preferred of Common
--------- ------------ ---------
SEQUOIA CAPITAL VI 364,000 91,000
SEQUOIA TECHNOLOGY
PARTNERS VI 20,000 5,000
SEQUOIA XXIV 16,000 4,000
------- ------
Total Shares 400,000 100,000
20
EXHIBIT B
SCHEDULE OF EXCEPTIONS
1. Employees (Section 3(f))
Xxxxxx Xxxxxx owns stock in and is a former officer of Pharmacopeia
which is a competitor of the Company.
2. Litigation (Section (3h))
Affymax and Company have independent patent rights which may be
blocking. Affymax currently utilizes the name CombiChem in its presentations.
3. Intellectual Property (Section 3(k))
The Company is a start up entity which is in the process of negotiating with The
Scripps Research Institute and Xxxxxxx and Xxxxxxx to secure licensing rights to
certain patents and other intellectual property which may be important to the
operation of the Company's current and future business. The Company is not
aware of any competing intellectual property rights held by third parties which
adversely affect the Company's right to utilize its intellectual property or the
conduct of the Company's current or future business endeavors.
21
EXHIBIT C
SCHEDULE OF STOCK HOLDERS
(Common and Preferred)
22
COMBICHEM, INC.
COMMON STOCK LEDGER
Cert # No. of Shares Shareholder Date issued
======================================================================================================
1 175,000 XXX X. XXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
2 150,000 CHI-XXXX XXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
3 150,000 XXXX X. XXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
4 10,000 XXXX XXX September 28th, 1994
------------------------------------------------------------------------------------------------------
5 37,500 XXXXXXXX XXXXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
6 37,500 ROYSTON FAMILY TRUST September 28th, 1994
------------------------------------------------------------------------------------------------------
7 150,000 XXXXXX XXXXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
8 225,000 FORWARD VENTURES II, L.P. September 28th, 1994
------------------------------------------------------------------------------------------------------
9 10,000 XXXXXXX XXXXXXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
10 500,000 XXXXXX XXXXXX September 28th, 1994
------------------------------------------------------------------------------------------------------
11 2,500 XXXX XXXXX October 18, 1994
------------------------------------------------------------------------------------------------------
TOTAL 1,447,500 October 28, 1994
======================================================================================================
PREFERRED STOCK LEDGER
======================================================================================================
Cert # No. of Shareholder Date issued
Shares
------------------------------------------------------------------------------------------------------
PA1 600,000 FORWARD VENTURES II, L.P. August 26th, 1994
------------------------------------------------------------------------------------------------------
PZ1 200,000 XXXXXX XXXXXXX October 12th, 1994
------------------------------------------------------------------------------------------------------
TOTAL 800,000
======================================================================================================
23
EXHIBIT D
SCHEDULE OF PATENT, TRADEMARK AND COPYRIGHT RIGHTS
1. PATENTS
(a) The Company has been assigned rights to the following patents:
(1) Xxxxxx Xxxxxxx, "Combinatorial libraries and methods
for their use," US Patent Application Serial No. 07/978,646, filed November
19,1992.
(2) Xxxxxx Xxxxxxx, "Combinatorial libraries and methods
for their use," US Patent Application Serial No. 08/168,966, filed December 15,
1993 (continuation in part of 07/978,646).
(3) Xxxxxx Xxxxxxx, "Combinatorial libraries and methods
for their use," US Patent Application Serial No. 08/281,195, filed July 26,
1994 (continuation in part of 08/168,966).
(4) Xxxxxx Xxxxxxx, "Multidimensional conduit
combinatorial library synthesis device," US Patent Application Serial No.
08/281,194, filed July 26, 1994.
(b) The Company is in the process of negotiating licenses to use the
following patents from The Scripps Research Institute and Xxxxxxx and Xxxxxxx:
See attached TSRI Technology License Letter of Understanding
Known Issues
Affymax Corporation's Patent Application (International Application
No. PCT/US92/07815) may prove to be blocking on the Xxxxxxx/Xxxxx/Xxxxx Patent
Applications (U.S. Serial No. 07/860,445 or International Application No. PCT
US93/20243).
The Company does not have a licensing agreement with Xxxxxxx & Xxxxxxx
and does not have a definitive written agreement with Scripps Research
Institute beyond the Letter of Understanding.
2. TRADEMARKS
The Company has been assigned the following intent to use trademark
applications:
COMBICHEM Serial No. 74/363,514
COMBICHEM Serial No. 74/363,515
24
Known Issues
Affymax Corporation has attempted to register the CombiChem trademark
in the United States and such attempt was rejected. To the Company's knowledge,
Affymax has not registered the CombiChem trademark in Europe. The Company has
not registered the CombiChem trademark outside of the United States.
3. COPYRIGHTS
The Company does not possess any registered copyrights.
25
EXHIBIT E
SCHEDULE OF MATERIAL CONTRACTS
1. Asset Purchase Agreement with CombiChem, Inc., a Delaware corporation
2. Promissory Note to CombiChem, Inc., a Delaware corporation
3. Series A Stock Purchase Agreement with Forward Ventures II, LP.
4. Series Z Stock Purchase Agreement with Dr. Xxxxxx Xxxxxxx
5. Series Z Stock Registration Rights
6. Employment Agreements with Xxxxxx Xxxxxx, Xxxx Xxx and Xxxxxxx
Xxxxxxxxx
7. Consulting Agreements w/ Brenner, Boger, Xxxxx and Xxxx
8. Termination Agreement dated October 20, 1994 with Xxxxx Xxxxxxx dba
BioScience Ventures; Company currently owes Xx. Xxxxxxx $25,000
9. Sublease of Research Space from Science Applications International
Corporation
l0. $175,000 Purchase Order for NMR Equipment
ll. $25,000 Purchase Order for Ionized Water Purifier
12. The Scripps Research Institute Licensing Letter of Understanding
13. Comdisco Equipment Lease Letter of Understanding
26
EXHIBIT F
CONFIDENTIALITY AND INVENTION ASSIGNMENT PROVISIONS
See attached.
27
I Inventions, Trade Secrets and Confidentiality.
A. Definitions.
1. Invention Defined. As used herein
"Invention" means Inventions, discoveries, concepts, and ideas, whether
patentable or copyrightable or not, including but not limited to processes,
methods, formulas, techniques, devices, designs, programs (including computer
programs), computer graphics, apparatus, products, as well as improvements
thereof or know-how related thereto, relating to any present or anticipated
business or activities of Employer.
2. Trade Secret Defined. As used herein "Trade
Secret" means, without limitation, any document or information relating to
Employer's products, processes or services, including documents and information
relating to Inventions, and to the research, development, engineering or
manufacture of Inventions, and to Employer's purchasing, customer or supplier
lists and pricing policies, which documents or information have been disclosed
to Employee or known to Employee as a consequence of or through Employee's
employment by Employer (including documents, information or Inventions
conceived, originated, discovered or developed by Employee), which is not
generally known in the relevant trade or industry.
3. Protected Information. As used in this
Agreement, the term "Protected Information" shall mean, without limitation, all
trade secrets, confidential or proprietary information, and all other
knowledge, data, know-how, processes, information, documents or materials,
owned, developed or possessed by Employer, whether in tangible or intangible
form, the confidentiality of which Employer takes reasonable measures to
protect, and which pertains in any manner to subjects which include, but are
not limited to, Employer's research operations, customers (including identifies
of customers and prospective customers, identities of individual contacts at
business entities which are customers or prospective customers, preferences,
businesses or habits), business relationships, engineering data or results,
specifications, concepts, methods, processes, rates or schedules, customer or
vendor information, products (including prices, costs, sales or content),
financial information or measures, business methods, future business plans,
data bases, computer programs, designs, models, operating procedures, and
knowledge of the organization.
B. Inventions.
1. Disclosure of Prior Inventions. Employee hereby
warrants and represents that Employee has identified and described on Exhibit
A, attached hereto and incorporated by reference, all Inventions, innovations,
improvements, discoveries and patents made, conceived or acquired by Employee
prior to the Period of Employment in which Employee has any interest whatsoever
(the "Prior Inventions") and that as of the date this Agreement is executed,
Exhibit A contains a complete list of all Prior Inventions. Employee
represents that Employee has no rights in any Inventions other than those Prior
Inventions specified in Exhibit A. If there are no Prior Inventions listed on
Exhibit A, Employee represents that Employee has not made any Prior Inventions
prior to the execution of this Agreement.
28
2. Disclosure. Employee shall disclose promptly to
Employer each Invention, whether or not reduced to practice, which is conceived
or learned by Employee (either alone or jointly with others) during the term of
his employment with Employer. Employee shall disclose in confidence to
Employer all patent applications filed by or on behalf of Employee during the
term of his employment and for a period of one year thereafter.
3. Employer Property; Assignment. Employee acknowledges
and agrees that all Inventions which are discovered, conceived, developed,
made, produced or prepared by Employee (alone or in conjunction with others)
during the duration of Employee's employment with Employer shall be the sole
property of Employer. Said property rights of Employer include without
limitation all domestic and foreign patent rights, rights of registration or
other protection under the patent and copyright laws, and all other rights
pertaining to the Inventions. Employee further agrees that all services,
products and Inventions that directly or indirectly result from engagement with
Company shall be deemed "works for hire" as that term is defined in Title 17 of
the United States Codes and accordingly all rights associated therewith shall
vest in the Company. Notwithstanding the foregoing, Employee hereby assigns to
Employer all of Employee's right, title and interest in any such services,
products and Inventions, in the event any such services, products and
Inventions shall be determined not to constitute "works for hire."
4. Exclusion Notice. The assignment by Employee of
Inventions under this Agreement does not apply to any Inventions which are
owned or controlled by Employee prior to the commencement of employment of
Employee by Employer (all of which are set forth on Exhibit A). Additionally,
Employee is not required to assign an idea or invention where the invention or
idea meets all of the following criteria, namely in the invention or idea: (i)
was created or conceived without the use of any of Employer's equipment,
supplies, facilities, or trade secret information, and (ii) was developed
entirely on Employee's own time, and (iii) does not relate to the business of
Employer, and (iv) does not relate to Employer's actual or demonstrably
anticipated research or development, and (v) does not result from any work
performed by Employee for Employer. Employee has reviewed the notification in
this Section 6.2.4 and in Exhibit B (the "Limited Exclusion Notification"),
attached hereto and incorporated by reference, and agrees that Employee's
signature on the Limited Exclusion Notification acknowledges receipt of the
notification.
5. Inventions Within One Year of Separation Presumed to
Belong to Employer. All inventions improvements, concepts or discoveries
claimed to have been made or conceived by Employee during the first year
following the termination of the Period of Employment and related in any way to
Employer's business, work or investigations shall be presumed to have been made
or conceived during the Period of Employment and shall be subject to the
provisions of this Agreement unless Employee can conclusively establish the
contrary to the Employer or a court of competent jurisdiction.
29
6. Disclosure and Prior Review.of Articles. Employee
agrees that, while an employee of Employer and for three years following the
termination, for any reason, of Employee's employment with Employer, at least
fifteen days prior to submission for publication of any article or contribution
from or by Employee, which article or contribution deals with or makes
reference to the Employer's field of endeavors, any Inventions, any Protected
Information or any other subject pertaining to Employer, Employee shall deliver
a copy of such article or publication to Employer and shall request Employer's
permission to publish such articles which consent shall not be unreasonably
withheld.
7. Patents and Copyrights; Attorney-in-Fact. Both
before and after termination of this Agreement (and with reasonable
compensation paid by Employer to Employee after termination), Employee agrees
to assist the Employer to apply for, obtain and enforce patents on, and to
apply for, obtain and enforce copyright protection and registration of, the
Inventions described in Section 6.2.2 in any and all countries. To that end,
Employee shall (at Employer's request) without limitation, testify in any
proceeding, and execute any documents and assignments determined to be
necessary or convenient for use in applying for, obtaining, registering and
enforcing patent or copyright protection involving any of the Inventions.
Employee hereby irrevocably appoints Employer, and its duly authorized officers
and agents, as Employee's agent and attorney-in-fact to act for and in behalf
of Employee in filing all patent applications, applications for copyright
protection and registration, amendments, renewals, and all other appropriate
documents in any way related to the Inventions described in Section 6.2.3. The
decision to file (or not to file) a patent application or applications on any
Inventions shall be in the Company's sole discretion.
C. Trade Secrets.
1. Ownership of Trade Secrets and Protected Information.
All Trade Secrets and Protected Information, and any Derivatives thereof
whether created by Employer or Employee, alone or in conjunction with others,
shall be and remain the property of Employer and no license or other rights to
the Trade Secrets or Protected Information is granted or implied hereby. For
purposes of this Agreement, "Derivatives" shall mean: (i) for copyrightable or
copyrighted material, any translation, abridgement, revision or other form in
which an existing work may be recast, transformed or adapted; (ii) for
patentable or patented material, any improvement thereon; and (iii) for
material which is protected by trade secret, any new material derived from such
existing trade secret material, including new material which may be protected
by copyright, patent and/or trade secret. All materials (including without
limitation, documents, drawings, models, apparatus, sketches, designs and
lists) furnished to Employee shall remain the property of Employer and shall be
returned to it promptly at its request, together with any copies thereof.
2. Covenant Not to Divulge Trade Secrets. Employee
acknowledges and agrees that Employer is entitled to prevent the disclosure of
Employer's Trade Secrets or Protected Information. As a portion of the
consideration for the employment of Employee and for the compensation being
paid to Employee by Employer, Employee agrees at all times during the term of
the employment by Employer and thereafter to hold in strictest confidence, and
not to use, disclose or allow to be disclosed to any person, firm, or
corporation, Employer's Trade
30
Secrets or Protected Information, including Trade Secrets developed by
Employee, other than disclosures to persons who have entered into
confidentiality agreements with Employer without Employer's express prior
written consent.
3. Term. This Agreement shall govern all communications
between the parties that are made during the period from the effective date of
this Agreement to the date on which either party receives from the other
written notice that the Agreement is being terminated, provided, however, that
the obligations set forth in Section 6 shall continue for a period of five
years after the termination of this Agreement.
D. No Adverse Use. Employee will not at any time during the
Period of Employment or thereafter use Employer's Trade Secrets, Protected
Information or Inventions in any manner which may directly or indirectly have
an adverse effect upon Employer's business, nor will Employee perform any acts
which would tend to reduce Employer's proprietary value in Employer's Trade
Secrets, Protected Information or Inventions.
II Covenant Not to Compete. Employee agrees that, during
Employee's employment, Employee will not directly or indirectly compete with
Employer in any way, and that Employee will not act as an officer, director,
employee, consultant, shareholder, lender, or agent of any other entity which
is engaged in any business of the same nature as, or in competition with, the
business in which Employer is now engaged or in which Employer becomes engaged
during the term of Employee's employment, or which is involved in science or
technology which is similar to Employer's science or technology. During
Employee's employment, and for a period of one (1) year thereafter, Employee
shall not directly or indirectly through another entity (i) induce or attempt
to induce any employee of Employer or any subsidiary of Employer to leave the
employ of Employer or such subsidiary, or in any way interfere with the
relationship between the Employer or any subsidiary and the employee thereof;
(ii) hire any person who was an employee of Employer or any subsidiary at any
time; or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor or other party which has a contractual relationship with Employer or
its subsidiaries or affiliates to cease doing business with Employer or any
such subsidiary (including, without limitation, making any negative statements
or communications about Employer or its affiliates).
31
III Employee's Representations. Employee represents and warrants
that Employee (i) is free to enter into this Agreement and to perform each of
the terms and covenants contained herein, (ii) is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Agreement,
and (iii) will not be in violation or breach of any other agreement by reason
of Employee's execution and performance of this Agreement and Employee has
identified any exceptions on Exhibit C ("Possible Violations of Third Party
Rights") attached hereto and incorporated by reference.
32
EXHIBIT A
PRIOR INVENTIONS
_________ Yes, I claim an ownership interest in the following Inventions.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
_________ No, I do not claim an ownership interest in any Inventions.
By:___________________________________
Dated:________________________________
Witnessed by:
____________________________________
____________________________________
(Printed Name of Representative)
Dated:______________________________
33
EXHIBIT B
LIMITED EXCLUSION NOTIFICATION
THIS IS TO NOTIFY you in accordance with Section 2872 of the
California Labor Code that the foregoing Agreement between you and the Company
does not require you to assign or offer to assign to the Company any invention
that you developed entirely on your own time without using the Company's
equipment, supplies, facilities or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company.
(2) Result from any work performed by you for the Company.
To the extent a provision in the foregoing Agreement purports to
require you to assign an invention otherwise excluded from the preceding
paragraph, the provision is against the public policy of this state and is
unenforceable.
This limited exclusion does not apply to any patent or invention
covered by a contract between the Company and the United States or any of its
agencies requiring full title to such patent or invention to be in the United
States.
I ACKNOWLEDGE RECEIPT of a copy of this notification.
By:___________________________________
Dated:________________________________
Witnessed by:
____________________________________
____________________________________
(Printed Name of Representative)
Dated:______________________________
34
EXHIBIT C
POSSIBLE VIOLATIONS OF THIRD PARTY AGREEMENTS OR
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS
_________ I am aware of the following potential violations of former
consulting, employment or other third party agreements, or
infringements upon the intellectual property rights of third
parties which could occur due to my contemplated activities
and duties pursuant to that certain Consulting Agreement of
even date herewith or that have occurred due to any of my
previous activities performed on behalf of the Company.
Describe in detail any potential violations or infringements:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
_________ I am unaware of any potential violations of former consulting,
employment or other third party agreements, or of any
infringements upon the intellectual property rights of third
parties which could occur due to my contemplated activities
and duties pursuant to that certain Employment Agreement of
even date herewith or that have occurred due to any of my
previous activities performed on behalf of the Company.
By:___________________________________
Dated:________________________________
Witnessed by:
____________________________________
____________________________________
(Printed Name of Representative)
Dated:______________________________
