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EXHIBIT 10.31
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
1, 1996, by and between CombiChem, Inc., a California corporation ("Employer")
and Xxxx Xxxxxxxx, Ph.D. ("Employee").
NOW, THEREFORE, the parties agree as follows:
1. Employment. Employer hereby engages Employee, and Employee hereby
accepts such engagement, upon the terms and conditions set forth herein.
2. Duties. During the term of this Agreement, Employee shall be
employed as the Employer's Vice President of Chemistry reporting to Employer's
Chief Operating Officer. Employee shall faithfully and diligently perform the
duties customarily performed by persons in the position or positions for which
Employee is engaged together with such other reasonable and appropriate duties
as Employer shall designate from time to time. Employee shall devote Employee's
full business time and effort to the rendition of such services and to the
performance of such duties. As a full-time employee of Employer, Employee shall
not be entitled to provide consulting services or other businesses or scientific
services to any other party, without the prior written consent of Employer.
3. Compensation.
3.1 Base Salary. During the term of this Agreement, as
compensation for the proper and satisfactory performance of all duties to be
performed by Employee hereunder, Employer shall pay to Employee an annual salary
of One Hundred and Forty-Five Thousand Dollars ($145,000) payable in accordance
with Employee's standard payroll practices, less required deductions for state
and federal withholding tax, Social Security and all other employee taxes and
payroll deductions. Employee's base salary shall be reviewed annually by the
President & Chief Executive Officer and the Chief Operating Officer and may be
increased or decreased in the sole discretion of such individuals.
3.2 Bonus. At the beginning of each fiscal year, Employer and
Employee shall reach mutually agreed upon scientific and business objectives for
Employer for its upcoming fiscal year which shall be set forth in writing and
approved by the Board. At the end of each such fiscal year, the Board shall
determine, in its reasonable discretion, the size and amount of Employee's
performance bonus, if any, up to a maximum of twenty percent (20%) of Employee's
base salary during the prior fiscal year (the "Annual Performance Bonus"). The
Annual Performance Bonus shall be paid to Employee within sixty (60) days
following Employer's fiscal year end. The first Annual Performance Bonus shall
be (i) based on Employer's 1996 fiscal
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year achievements; (ii) paid to Employee by March 1, 1997; (iii) guaranteed to
be not less than Fourteen Thousand Five Hundred Dollars ($14,500); provided that
employee's employment has continued through the end of 1996. No other Annual
Performance bonus shall have any guaranteed minimum payment.
4. Term of Employment.
4.1 Period of Employment. The Employee's period of employment by
Employer pursuant to this Agreement shall commence on January 1, 1996
("Commencement Date") and end upon the date the employment relationship is
terminated pursuant to Sections 4.2 or 4.3 hereunder (the "Period of
Employment").
4.2 Termination at Will. Although Employer and Employee anticipate
a long and mutually rewarding employment relationship, either party may
terminate this Agreement, without cause, upon fourteen (14) days prior written
notice delivered to the other party. It is expressly understood and agreed that
the employment is not for any specified term, and without any agreement for
employment, for so long as Employee performs satisfactorily.
4.3 Termination for Cause. Employer may immediately terminate this
employment relationship "for cause" upon written notice to Employee. For the
purposes herein, "for cause" shall be limited to the following: (i) Employee's
intentional violation of any rule or policy of Employer or its subsidiaries (a
"Violation") which, after written notice of a Violation, Employee fails to
correct within twenty (20) days of receipt of such notice from the Board; (ii)
any material failure by Employee to comply with any reasonable directive of the
Board which, after receiving written notice to do so, Employee fails to comply
within twenty (20) days of receipt of such notice from the Board; (iii)
Employee's willful misconduct concerning any material responsibility reasonably
assigned to Employee; (iv) without obtaining the prior consent of the Board,
Employee's active and intentional performance of services for any other
corporation or person which competes with Employer or its subsidiaries while he
is employed by Employer or its subsidiaries; (v) the Board reasonably determines
that Employee has stolen or embezzled either funds or property of Employer; (vi)
Employee's conviction by a court of competent jurisdiction of a felony (other
than a traffic or moving violation) involving moral turpitude or dishonesty;
(vii) Employee's intentional or grossly negligent conduct or violation of law
which results in either an improper personal benefit to Employee or a material
injury to Employer; (viii) Employee's failure to perform a material duty given
to him by the company's Chief Operating Officer or under this Agreement if such
failure was continued for thirty (30) days after Employee has been notified in
writing by the Company of his failure to perform; or (ix) the death or
disability of Employee.
4.4 Obligations Upon Termination.
4.4.1 Survival of Obligations. The parties' obligations under
Section 4.4.2, 6, 7, 9.7 and 9.8, shall survive the termination of this
Agreement.
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4.4.2 Return of Materials at Termination. Upon termination of
the Period of Employment, the Employee will promptly deliver to Employer all
materials, property, documents, data and other information belonging to Employer
or containing Employer's Trade Secrets or other Protected Information (each as
defined herein). The Employee shall not take any materials, property, documents
or other information, or any reproduction or excerpt thereof, belonging to
Employer or containing any Trade Secrets or other Protected Information of
Employer.
4.4.3 Resignation. Upon termination of the Period of
Employment, the Employee shall be deemed to have resigned from any and all
offices then held with the Employer.
4.5 Compensation to Employee On Termination by Employer. In the
event that Employer terminates Employee pursuant to Paragraph 4.2, Employee
shall be entitled to (1) receive an aggregate severance benefit of nine months
of Employee's then current base salary (Section 3.1) and benefits (Section 5)
which shall be paid by Employer to employee in nine (9) equal monthly
installments until fully paid or until Employee has secured full-time employment
and (2) a nine (9) month credit towards any vesting schedule or vesting
requirements contained in any stock option or stock purchase agreements then
existing between the Employee and Employer. In the event the Employee elects to
receive and does receive any of the benefits set for in this Section 4.5,
Employee agrees that such payments shall constitute Employee's sole and
exclusive rights and entitlements in connection with Employee's employment by
Employer, the termination of such employment and any and all matters related to
or arising in connection with such employment, and agrees that his acceptance of
any such payments shall release Employee and any and all affiliated persons and
entities (including all directors, officers, employees and agents) from any
claims that Employee may otherwise have or assert in connection with such
matters. If Employee desires to pursue or enforce any such rights, entitlements
or remedies that would otherwise be waived and released, then Employee shall
refuse any payments provided for pursuant to this Section 4.5. If Employee
accepts any such severance payment or payments, he shall be deemed to have
agreed to the foregoing exclusivity of rights and waiver of claims.
5. Benefits
5.1 Health Insurance, Vacation and Sick Leave. Employee shall be
entitled to Employer's standard benefits package for its executive employees
including, but not limited to, family health care insurance, officer and
director liability insurance (when obtained for Employer's other officers),
long-term disability (when obtained for Employer's other officers), vacation and
sick leave (the "Fringe Benefits"). Employer reserves the right to change such
benefits from time to time.
5.2 Accumulation. Employee shall not earn and accumulate unused
vacation and sick leave, or other Fringe Benefits, in excess of an unused amount
equal to the amount earned for one year. Furthermore, Employee shall not be
entitled to receive payments in lieu of said Fringe Benefits, other than for
unused vacation earned and
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accumulated at the time the employment relationship terminates. All unused sick
leave and other Fringe Benefits earned during the preceding twelve (12) month
period ending on each anniversary of the date of this Agreement shall be
forfeited if not used within ninety (90) days following such anniversary date.
Notwithstanding the forgoing, if Employer adopts a more favorable accumulation
policy for its executives, Employee shall be entitled to the benefits of such
more favorable accumulation policy.
5.3 Personal Leave. Employee shall accrue fifteen (15) days of
personal leave during each year of his employment. Upon accrual of fifteen (15)
days of unused personal leave, no additional personal leave time will accrue
until Employee has used some of his accrued personal leave time and has reduced
the amount of accrued time below fifteen (15) days. Once Employee has taken
personal leave and his accrued personal leave time has dropped below fifteen
(15) days, Employee shall begin to accrue personal leave time again (at the rate
of fifteen (15) days per year), up to the maximum of fifteen (15) days.
Notwithstanding the foregoing, if Employer adopts a more favorable personal
leave policy for its executives, Employee shall be entitled to the benefits of
such more favorable personal leave policy.
5.4 Housing and Automobile. For the first three (3) months of this
Agreement, Employer shall reimburse Employee each month for the first Two
Thousand Dollars ($2,000) of Employee's housing and automobile expenses. Any
allowance paid pursuant to this Section 5.4 shall be "grossed up" to cover
Employee's local, state and federal income tax liability at Employee's then
current marginal tax rate if deemed necessary by Employer's accountants. The tax
gross-up payment(s) shall initially be calculated at an assumed effective
marginal rate of forty percent (40%) and paid to Employee no later than (i)
April 15 of the calendar year following any year Employee has expenses
reimbursed pursuant to this Section; and (ii) any date Employee is required to
make increased quarterly estimated payments due to Employee's receipt of the
allowance payments pursuant to this Section. Once Employee has finalized
Employee's federal and state income tax returns, Employee's effective marginal
rate shall be calculated and any shortfall or overpayment will be corrected.
5.5 Relocation Expenses. Employer shall reimburse Employee the
following expenses: (a) selling expenses related to sale of Employee's current
residence in England including realtor commissions and closing expenses
typically paid by sellers; (b) reasonable moving expenses incurred in the move
to San Diego, California; (c) the cost of up to two round trip coach airline
tickets from London, England to San Diego, California for Employee's spouse for
the purpose of looking at houses in the San Diego area during the first six (6)
months of this Agreement; and (d) a tax gross-up payment calculated at an
assumed effective marginal rate of forty percent (40%) to cover Employee's
income tax liability for expenses reimbursed pursuant to subsections (a), (b)
and (c) of this Section. Expenses related to subsections (a), (b) and (c) shall
be reimbursed within thirty (30) days after Employee submits adequate
verification of incurred expenses. The tax gross-up bonus related to subsection
(d) shall be paid to Employee no later than (i) April 15 of the calendar year
following any year Employee has expenses reimbursed pursuant to this Section;
and (ii) any date Employee is required
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to make increased quarterly estimated payments due to Employee's receipt of
reimbursed expenses pursuant to subsections (a), (b) or (c) of this Section.
Once Employee has finalized Employee's federal and state income tax returns,
Employee's effective marginal rate shall be calculated and any shortfall or
overpayment will be corrected. Notwithstanding the foregoing, Employer's maximum
aggregate obligations to Employee pursuant to this Section shall not under any
circumstances exceed Fifty Thousand Dollars ($50,000).
5.6 Home Loan. In the event Employee purchases a residence in the
San Diego area prior to November 1, 1996, then Employer shall provide a second
mortgage loan to Employee in an amount no greater than Seventy Thousand Dollars
($70,000) at the then- lowest available interest rate (the "Home Loan");
provided, however, that the Home Loan shall (i) be utilized to purchase the
Employee's first San Diego area residential purchase; (ii) remain secured by a
second trust deed which is recorded at the time the Home Loan is made; and (iii)
not confer upon Employee any right to continued employment by Employer as a
result of Employee's repayment obligations under the Note evidencing the Home
Loan. Notwithstanding the foregoing, upon the earlier of (a) the effectiveness
of Employer's registration statement filed with the Securities and Exchange
Commission for Employer's initial public offering of its common stock or (b) the
termination of Employee's employment with Employer (for whatever reason), the
Home Loan shall be accelerated and shall automatically become due and payable
without any action by Employer.
5.7 Support in Immigration Proceedings. Throughout the Period of
Employment, Employer shall use its commercially reasonable efforts to support
Employee's application for a green card.
6. Inventions, Trade Secrets and Confidentiality.
6.1 Definitions.
6.1.1 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.
6.1.2 Trade Secrets 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
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or Inventions conceived, originated, discovered or developed by Employee), which
is not generally known in the relevant trade or industry.
6.1.3 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, document 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, 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, but not limited to, prices, costs,
sales or content), financial information or measures, business methods, future
business plans, databases, computer programs, designs, models, operating
procedures and knowledge of the organization.
6.2 Inventions.
6.2.1 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 Period of
Employment. Employee shall disclose in confidence to Employer all patent
applications filed by or on behalf of Employee during the Period of Employment
and for a period of one (1) year thereafter. Any disclosure of any Invention, or
any patent application, made within one (1) year after termination of employment
shall be presumed to relate to an Invention made during Employee's Period of
Employment, unless Employee clearly proves otherwise.
6.2.2 Employer Property; Assignment. Except as otherwise
provided in Section 6.2.3, 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 Period of Employment
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 Employer shall be deemed "works for hire" as that term is
defined in Title 17 of the United States Code and accordingly all rights
associated therewith shall vest in Employer. 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."
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6.2.3 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" attached hereto).
Additionally, Employee is not required to assign an idea or invention where the
idea or invention meets all of the following criteria, namely if 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 6.2.3 and in Exhibit "B" ("Limited
Exclusion Notification") and agrees that Employee's signature on the Limited
Exclusion Notification acknowledges receipt of the notification.
6.2.4 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 patent and/or 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 on 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
6.2.2.
6.3 Trade Secrets.
6.3.1 Acknowledgment of Proprietary Interest. Employee
recognizes the proprietary interest of Employer in any Trade Secrets of
Employer. Employee acknowledges and agrees that any and all Trade Secrets of
Employer, whether developed by Employee alone or in conjunction with others or
otherwise, shall be and are the property of Employer.
6.3.2 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 Period of
Employment by Employer and thereafter to hold in strictest confidence, and not
to use, disclose or allow to be disclosed to any person, form or corporation,
Employer's Trade Secrets or Protected Information, including Trade Secrets
developed by Employee, other than disclosures, with Employer's express prior
written consent, to persons who have entered into confidentiality agreements
with Employer.
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6.3.3 Confidential Information of Others. Employee represents
and warrants that if Employee has any confidential information belonging to
others, Employee will not use or disclose to Employer any such information or
documents. Employee represents that his employment with Employer will not
require him to violate any obligation to or confidence with any other party.
6.4 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.
6.5 Remedies Upon Breach. In the event of any breach by Employee
of the provisions in this Section 6, Employer shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to enjoin Employee from violating any
of the terms of this Section 6, to enforce the specific performance by Employee
of any of the terms of this Section 6, and to obtain damages, or any of them,
but nothing herein contained shall be construed to prevent such remedy or
combination of remedies as Employer may elect to invoke. The failure of Employer
to promptly institute legal action upon any breach of this Section 6 shall not
constitute a waiver of that breach or any other breach hereof.
7. 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 at any time; or (ii) 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).
8. Stock Options. Simultaneous with the execution of this Agreement,
Employer and Employee will enter into a written stock option agreement
substantially in the form attached hereto as Exhibit C, pursuant to which
Employee will be granted an incentive stock option for 335,300 shares of the
Company's Common Stock, exercisable at $0.062 per share and vesting twenty-five
percent (25%) as of October __, 1996 and 1/48th each month thereafter.
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9. General Provisions.
9.1 Amendments. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by both
parties hereto. There shall be no implied-in-fact contracts modifying the terms
of this Agreement.
9.2 Entire Agreement. This Agreement, and the Exhibits attached
hereto, constitutes the entire agreement between the parties with respect to the
employment of Employee. This Agreement supersedes all prior agreements,
understandings, negotiations and representation with respect to the employment
relationship including, but not limited to the Memorandum dated August 28, 1995,
containing proposed terms and conditions for hiring Employee.
9.3 Successors and Assigns. The rights and obligations of Employer
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Employee shall not be entitled to assign any
of Employee's rights or obligations under this Agreement.
9.4 Waiver. Either party's failure to enforce any provision of
this Agreement shall not in any way be construed as a waiver of any such
provision, or prevent that party thereafter from enforcing each and every other
provision of this Agreement.
9.5 Severable Provisions. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be judicially
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.
9.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same Agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.7 Choice of Law. This Agreement shall be governed and construed
in accordance with the laws of California.
9.8 Jurisdiction and Venue. In the event that any legal
proceedings are commenced in any court with respect to any matter arising under
this Agreement, Employer and Employee specifically consent and agree that:
(a) the courts of the State of California and/or the United
States Federal Courts located in the State of California shall have exclusive
jurisdiction over each of the parties and such proceedings; and
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(b) the venue of any such action shall be in San Diego
County, California and/or the United States District Court for the Southern
District of California.
10. 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.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates first set forth above.
EMPLOYER:
COMBICHEM, INC., a California corporation
By: /s/ Xxxxx Xxxxx
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Its: Chief Operating Officer
------------------------------------
EMPLOYEE:
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
-----------------------------------------
(Signature)
Address: 000 Xxx Xxx Xxxxxx #00
--------------------------------
Xxxxxx Xxxxx, XX 00000
-----------------------------------------
-----------------------------------------
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
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EXHIBIT A
LIST OF PRIOR INVENTIONS (SECTION 6.2.3)
None, other than the following: ________________________________________________
________________________________________________________________________________
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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 Employer does not
require you to assign or offer to assign to Employer inventions that you
developed entirely on your own time without using Employer'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 Employer's business, or Employer's actual or demonstrably
anticipated research or development.
(2) Result from any work performed by you for Employer.
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 Employer 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: /s/ Xxxx Xxxxxxxx
-------------------------------------
-------------------------------------
Dated: 18th July 96
----------------------------------
Witnessed by:
/s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx
---------------------------------
(Printed Name of Representative)
Dated: 7/18/96
--------------------------
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EXHIBIT C
STOCK OPTION AGREEMENT
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COMBICHEM, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the CombiChem,
Inc. 1995 Stock Option/Stock Issuance Plan (the "Plan") for the purpose of
attracting and retaining the services of persons who contribute to the growth
and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall expire at the close of business on the
expiration date (the "Expiration Date") specified in the Grant Notice, unless
sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or in
part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder approval
is obtained, this option shall thereupon become exercisable for the Option
Shares in one or more installments as is specified in the Grant Notice. As the
option becomes exercisable in one or more installments, the installments shall
accumulate and the option shall remain
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exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. Unless extended by the Plan
Administrator in its sole discretion, the option term specified in Paragraph 2
shall terminate (and this option shall cease to be exercisable) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced
to a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time
after the Expiration Date. Upon the expiration of such three (3)-month
period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the law of descent and distribution shall have the right
to exercise this option. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (A) the expiration of the
twelve (12) month period measured from the date of Optionee's death or (B)
the Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing with
the date of such cessation of Service) during which to exercise this
option, but in no event shall this option be exercisable at any time after
the Expiration Date. Optionee shall be deemed to be permanently disabled
if Optionee is unable to engage in any substantial gainful activity for
the Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for
any or all of the Option Shares for which this option is, at the time of
the
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Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. The Optionee shall be deemed to remain in SERVICE for so long
as the Optionee continues to render periodic services to the Corporation
or any parent or subsidiary corporation, whether as an Employee, a
non-employee member of the board of directors, or an independent
contractor or consultant.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as the
Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain of
corporations beginning with the Corporation, provided each such
corporation in the chain (other than the last corporation) owns, at the
time of determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
A. This Option, to the extent not previously exercised, shall terminate
and cease to be exercisable upon the consummation of one or more of the
following shareholder-approved transactions (a "Corporate Transaction") unless
this Option is expressly assumed by the successor corporation or parent thereof:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons acting
in concert acquire, in the aggregate, more than 50% of the outstanding
shares of the stock of the Corporation.
B. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share, provided the aggregate Option Price payable hereunder shall
remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not
have any of the rights of a shareholder with respect to the Option Shares until
such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, Optionee (or
in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
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(i) Execute and deliver to the Secretary of the Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially the
form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in one
or more forms approved under the Plan.
(iii) Furnish to the Corporation appropriate documentation that the
person or persons exercising the option, if other than Optionee, have the
right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the date
on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported
by the National Association of Securities Dealers through its NASDAQ
system or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the closing selling price
on the last preceding date for which such quotation exists shall be
determinative of fair market value.
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(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted
to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the value determined
pursuant to subparagraphs (i) and (ii) above does not accurately reflect
the fair market value of the Common Stock, then such fair market value
shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation shall
mail or deliver to Optionee or to the other person or persons exercising this
option a certificate or certificates representing the shares so purchased and
paid for, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares upon
such exercise shall be subject to compliance by the Corporation and the Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Corporation's Common
Stock may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
12. LIABILITY OF CORPORATION.
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A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. Notwithstanding any
provision of this Agreement to the contrary, this option may not be exercised in
whole or in part until such shareholder approval is obtained. In the event that
such shareholder approval is
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not obtained, then this option shall thereupon terminate in its entirety and the
Optionee shall have no further rights to acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this option is designated an incentive stock option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as an
incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
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B. Should this option be designated as immediately exercisable in the
Grant Notice, then this option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments in
the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate arrangements
with the Corporation or parent or subsidiary corporation employing Optionee for
the satisfaction of all Federal, State or local income tax withholding
requirements and Federal social security employee tax requirements applicable to
the exercise of this option.
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