EXHIBIT 10.3(a)
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into as of the
1st day of August, 1994, by and between HYSEQ, INC., a Nevada corporation (the
"Corporation"), and XX. XXXXXX X. XXXXXXX ("Scientist").
In consideration of the mutual promises and agreements herein contained,
the Corporation hereby employs Scientist, and Scientist hereby agrees to work
for the Corporation, upon following terms and conditions:
1. Employment.
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(a) Positions. Scientist shall become employed by the Corporation on
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August 1, 1994, or such earlier time as the parties shall mutually agree (the
"Commencement Date"). The Scientist shall serve as a Co-Senior Vice President of
Research of the Corporation and Co-Chairman of its Scientific Advisory Board and
shall perform such duties as may be assigned by the Corporation to Scientist
consistent with this position.
(b) Service as a Director. Unless Scientist is requested to resign as
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herein provided, Scientist shall serve as a director of the Corporation for a
one (1) year term, beginning on the Commencement Date. After Funding,
Corporation may request that Scientist resign as a director, provided that (i)
Xxxxxxx X. Xxxxxxxxxxx is serving on the Corporation's Board of Directors at
that time; and (ii) a majority of the other directors of the Board believe that
is in the best interest of the Corporation that a new director replace
Scientist.
2. Term. The term of this Agreement shall continue until July 31, 1998,
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unless the Corporation fails to obtain aggregate funds, including funds already
obtained, from any source or sources of not less than $8.5 million on or prior
to August 1, 1995 (the "Funding"), in which case, the term of this Agreement
shall terminate on July 31, 1996. Notwithstanding the above,
(a) the Agreement shall terminate immediately upon the first to occur
of the following:
(i) the death of Scientist; or
(ii) the disability of Scientist extending for a continuous
period of twelve (12) months; however, any periods of disability separated
by thirty (30) days or less shall be considered continuous;
(b) the Scientist may terminate this Agreement upon a Change in
Control (as hereinafter defined) by giving written notice to Corporation of such
termination whereupon such termination shall be effective ten (10) days after
the giving of such notice; and
(c) the Corporation may terminate this Agreement upon an Act of
Misconduct (as hereinafter defined) by giving written notice to Scientist of
such termination, whereupon such termination shall be effective ten (10) days
after the giving of such notice.
In the event this Agreement terminates for any reason other than an Act of
Misconduct, the Scientist shall be entitled to the full cash compensation as set
forth in Paragraph 4(a) he would have received under the full term of the
Agreement.
For the purposes of this Agreement, "Change in Control" shall mean that (i)
the members of the Board of Directors of the Corporation, as of the date the
Scientist begins employment, each as set forth on Exhibit A, fail to constitute
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a majority of the Board of Directors of the Corporation; provided, however, that
if the Scientist has consented to the appointment or election of an individual
who becomes a new member of the Board of Directors, for the purposes of this
paragraph, that new member shall be treated as if he were a member of the Board
of Directors as of the date this Agreement is executed; and (ii) a sale of the
Corporation (whether such sale is a stock or asset purchase or merger or share
exchange in which the Company is not the survivor), but shall not include
additional offerings of Corporation stock.
For the purposes of this Agreement, an "Act of Misconduct" shall be deemed
to exist if Scientist (i) is grossly negligent or engages in willful misconduct
in the performance of his obligations under this Agreement; (ii) engages in
fraudulent activity detrimental to the Corporation; or (iii) engages in
competition with the Corporation without the consent of the Board of Directors
of the Corporation.
3. Scientist Obligations. Scientist agrees:
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(a) To diligently and faithfully serve the Corporation and to devote
his best efforts, talents, skills, and his full-time attention to the affairs
and activities of the Corporation as may be required to best serve the interests
of the Corporation and to handle such administrative and supervisory
responsibilities as may be assigned to him from time to time by the Corporation.
(b) Without limiting the generality of the foregoing, to not, directly
or indirectly, alone or as a member of a partnership or as an officer, director
or shareholder of any other corporation, be engaged in or concerned with any
other commercial or professional duties or pursuits whatsoever, without the
consent of the Board of Directors of the Corporation.
(c) To comply with the Corporation's policies, rules and regulations
as reasonably determined by the Board of Directors of the Corporation.
4. Compensation.
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(a) Cash Compensation. Subject to the provisions of Section 6 hereof
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and subject to Corporation's right to pay a portion of such bonus in stock
options, as described in
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Section 4(c) below, the Corporation agrees to pay to Scientist as cash
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compensation for his services hereunder as follows:
(i) A one time funding bonus of Ninety-One Thousand Two Hundred
Dollars ($91,200.00), payable on Funding.
(ii) A cash salary of One Hundred Forty-Six Thousand Dollars
($146,00.00), payable in monthly installments of Twelve Thousand One
Hundred Sixty-Six and 67/100 Dollars ($12,166.67) for each year of
employment hereunder.
(iii) A guaranteed annual bonus of Thirteen Thousand Six Hundred
Eighty Dollars ($13,680.00) paid at the same time as other senior
executives.
(b) Stock Compensation. The Corporation agrees to grant stock options
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as additional compensation for Scientist's services hereunder as follows:
(i) A stock and signing bonus consisting of an option to
purchase twenty thousand (20,000) shares of the common stock of the
Corporation at a purchase price of Three Dollars ($3.00) per share. This
option will be fully vested on the Commencement Date.
(ii) A stock option to purchase seventy thousand (70,000) shares
of common stock, which option shall vest in four (4) equal annual
installments, with the first such installment vesting on the one (1) year
anniversary of the Commencement, and each subsequent installment in each of
the next three (3) years thereafter; provided the Scientist is employed at
such time. Notwithstanding the above, in the event that the Funding occurs
within twelve (12) months after the date hereof, thirty thousand (30,000)
shares of such option shall be surrendered to Corporation for cancellation.
(iii) If the Funding does not occur within twelve (12) months
after the Commencement Date, an additional stock option to acquire ten
thousand (10,000) shares of the Corporation's common stock at Three Dollars
($3.00) per share, which option shall be fully vested on the date of grant.
(c) Election to Pay in Stock Options. Corporation may, in its
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discretion, elect to pay up to Six Thousand Dollars ($6,000.00) of the salary,
up to Two Thousand Four Hundred Thirty Dollars ($2,430.00) of the guaranteed
bonus, and up to Sixteen Thousand Dollars ($16,000.00) of the funding bonus in
stock options to purchase common shares at a purchase price of Three Dollars
($3.00) per share, which options will be fully vested on the date of grant. If
the Corporation elects to pay a portion of such compensation in stock options,
the number of shares of common stock to be acquired upon exercise of the option
will be equal to that number of shares which is obtained by dividing that
portion of cash compensation to be paid in stock options by the difference
between the Three Dollar ($3.00) purchase price and the offering price
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for the Corporation's next offering of securities, or if there is no offering
within twelve (12) months following the date hereof, the offering price of the
most recent offering prior to the date hereof ($6.56), less that number of
shares attributable to the funding bonus if the Funding occurs by August 1,
1995.
(d) Loan. The Corporation will loan Scientist Forty-Five Thousand
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Dollars ($45,000.00) on a date no later than the Commencement Date. This loan
shall be evidenced by a nonrecourse promissory note due and payable on the date
the cash portion of the bonus described in Section 4(a)(i) above is paid by the
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Corporation.
(e) Benefits. As an employee, Scientist shall, upon meeting the
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respective eligibility requirements, be entitled to participate in any pension,
profit-sharing, bonus or other employee benefit plan as may be in effect from
time to time.
(f) Health Coverage. During Scientist's employment, he shall be
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entitled to such health and other insurance coverage in amounts equivalent to
the coverage provided by the Corporation for its other professional employees.
(g) Vacation. Scientist shall also be entitled to two (2) weeks' paid
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vacation during the first full year of his employment, to be taken at such time
or times, as shall be acceptable to the Corporation, and three (3) weeks' paid
vacation for each subsequent full year of employment under this Agreement.
Attendance at professional meetings shall not be treated as vacation time.
Scientist shall not be entitled to any payment for any unused vacation time and
no vacation time may be carried over to a subsequent year.
(h) Best Efforts. The Corporation shall use its best efforts to offer
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to Scientist, and Scientist shall have the right to purchase from the
Corporation, any and all securities of the Corporation made available through
future offerings of the Corporation's securities, on the same terms and
conditions that the securities are made available to other offerees. The
Corporation shall have no obligation to assist Scientist in either financing or
obtaining financing for the purchase of such securities.
5. Reimbursement of Expenses.
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(a) Subject to the prior approval of the President of the Corporation,
Scientist shall be entitled to reimbursement for reasonable out-of-pocket
expenses (including professional license fees, dues and subscriptions, fees for
professional seminars and postgraduate courses, expenses incurred in the
attendance at professional meetings and conventions as are necessary in order to
be fully and currently informed as to new developments in the fields of bio-
technology, health care, and other similar topics) actually incurred by him on
behalf of the Corporation upon supplying to the Corporation the necessary proof
of expenses; provided, however, that reimbursement of expenses incurred as a
result of attendance at professional meetings and conventions shall not exceed
Fifty Thousand Dollars ($50,000) in any year. Such reimbursement
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shall not be deemed compensation to him for purposes of paragraph 4 above, but
ordinary and necessary business expenses. It is therefore agreed that if any
expense paid for or reimbursed to Scientist is disallowed by the Internal
Revenue Service as a federal income tax deduction of the Corporation, that
Scientist will reimburse the Corporation for such disallowed expense within
sixty (60) days after the final determination of such disallowance by the
Internal Revenue Service.
(b) Corporation shall pay, or reimburse Scientist, for expenses of
moving Scientist's personalty and family plus the cost of the family's travel to
the new location (subject to a maximum of Twenty Thousand Dollars ($20,000.00))
and temporary living facilities at the new location for not less than 14 days,
subject to an overall limit of Five Thousand Dollars ($5,000.00). To the extent
such amounts exceed the amount that is currently deductible under the Internal
Revenue Code ("Code"), the excess over the currently deductible portion shall be
adjusted for the related tax liability.
6. Disability. In the event Scientist is unable by reason of illness or
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injury to perform his duties hereunder (whether temporarily or permanently), he
shall be considered disabled and he shall be entitled to receive full
compensation and benefits during his period of disability subject to the
termination of this Agreement pursuant to Section 2(a)(ii).
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7. Confidential Information.
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(a) Scientist shall use his best efforts and exercise utmost diligence
to protect and guard Confidential Information (as hereinafter defined). Except
as specifically required in the performance of Scientist's services for the
Corporation, Scientist will not directly or indirectly use, permit others to
use, disseminate, or disclose any Confidential Information. If Scientist
prepares a grant, research, or similar proposal for dissemination to a third
party, Scientist agrees not to include any Confidential Information therein and
shall first furnish to the Corporation those portions of the proposal that refer
to the Corporation, its subsidiaries, or affiliates, or any of their
consultants, employees, or agents, or any work done by such persons for them.
(b) Scientist may lecture upon, disseminate, and publish under
Scientist's own name scientific papers arising from the work done in the course
of performance of services for the Corporation hereunder, but only upon the
prior written approval of the Corporation. The Corporation will not unreasonably
withhold its approval provided Confidential Information will not be disclosed by
such dissemination or publication. Appropriate credit will be given to the
Corporation in any publication.
(c) All rights, title and interest in all documents, records,
notebooks, correspondence, deposits of microorganisms, cells or parts thereof,
cell lines, parts and progeny thereof, and all products made thereby that
directly or indirectly relate to and arise out of his work under this Agreement
shall belong to the Corporation, and upon expiration or termination
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of this Agreement, all such documents and material, including copies thereof,
then in Scientist's possession or subject to his control, whether prepared by
him or others, will be turned over to the Corporation.
(d) For the purposes of this Agreement, "Confidential Information"
shall mean information disclosed to Scientist or known to Scientist as a
consequence of or through performance of services for the Corporation, whether
or not related to his duties at the Corporation, and includes trade secrets or
any other like information of value relating to the business and/or field of
interest of the Corporation or of any corporation, firm, or partnership directly
or indirectly controlled by or controlling the Corporation or in which any of
the aforesaid have more than 20% ownership interest, including, but not limited
to, information relating to inventions, disclosures, processes, systems,
methods, formulas, patents, patent applications, machinery, materials, research
activities and plans, cost of production, contract forms, prices, volume of
sales, promotional methods, and lists of names or classes of customers.
Information shall be considered, for purposes of this Agreement, to be
confidential if not known by the trade generally, even though such information
has been disclosed to one or more third parties pursuant to distribution
agreements, joint research agreements, or other agreements entered into by the
Corporation or any of its affiliates. For purposes of this Agreement,
information shall not be considered confidential to the extent that such
information is or becomes, through no fault of Scientist, part of the public
domain, such information is independently known to Scientist, or such
information is lawfully furnished to Scientist by a third party without
restriction on disclosure.
8. Inventions. All Inventions (as hereinafter defined) made, conceived,
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or completed by Scientist, individually or in conjunction with others during the
term of this Agreement or within one year after termination (or, which having
possibly been conceived prior hereto, may be completed during the term of this
Agreement or within one year after termination) shall be the sole and exclusive
property of the Corporation provided such Inventions (i) are made, conceived, or
completed with the equipment, supplies, facilities, or Confidential Information
of the Corporation, its subsidiaries, or affiliates; or (ii) are made,
conceived, or completed by Scientist during the term of his employment with the
Corporation; or (iii) result from any work performed by Scientist for the
Corporation; provided, however, that this Agreement does not apply to any
Inventions that are protected by Section 2870 of the California Labor Code.
For the purposes of this Agreement, "Inventions" shall mean any and all
discoveries, concepts, and ideas, whether patentable or not, including, but not
limited to, processes, methods, formulas, compositions, techniques, articles,
and machines, as well as improvements thereof or know-how related thereto,
relating to the business and/or field of interest, including, actual or
anticipated research and development, of the Corporation or of any corporation,
firm, or partnership directly or indirectly controlled by or controlling the
Corporation or in which any of the aforesaid have more than a 20% ownership
interest.
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Scientist shall, without royalty or any further consideration to Scientist
therefor, but at the expense of the Corporation:
(a) As promptly as known or possessed by Scientist, disclose to the
Corporation all information with respect to any Inventions.
(b) Whenever requested so to do by the Corporation, promptly execute
and assign any and all applications, assignments, and other instruments that the
Corporation shall deem necessary to apply for and obtain letters patent of the
United States and of foreign countries for said Inventions, and to assign and
convey to the Corporation or to the Corporation's nominee the sole and exclusive
right, title, and interest in and to the Inventions or any applications or
patents thereon.
(c) Whenever requested so to do by the Corporation, deliver to the
Corporation evidence for interference purposes or other legal proceedings and
testify in any interference or other legal proceedings.
(d) Do such other acts as may be necessary in the opinion of the
Corporation to obtain and maintain United States and foreign letters patent for
the Inventions.
9. Non-Competition.
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(a) During the term of his employment with the Corporation, and for a
period of two (2) years (one (1) year if the Funding does not occur) following
the termination, for any reason whatsoever, of his employment therewith,
Scientist will not (i) own or have any interest, directly or indirectly, in, or
act as an officer, director, agent, employee, or consultant of, or assist in any
way or in any capacity, any person, firm, association, partnership, corporation,
or other entity which is in competition with the Corporation; (ii) divert or
attempt to divert any business from the Corporation; or (iii) directly or
indirectly entice, induce or in any manner influence any person who is, or shall
be, in the service of the Corporation to leave such services for the purpose of
engaging in a business, or being employed by or associated with any person,
firm, association, partnership, corporation or other entity, which is in
competition with the Corporation. The Scientist's obligations under this
Subsection (a) shall terminate in the event the Corporation terminates this
Agreement prior to its expiration for any reason other than an Act of
Misconduct.
(b) Scientist agrees that upon termination of his employment with the
Corporation he will deliver to the Corporation all books, records, lists or
suppliers and customers, samples, price lists, brochures and other property
belonging to the Corporation or relating to the business of the Corporation.
(c) Scientist agrees that he will not at any time during or after his
employment with the Corporation reveal, divulge or make known to any person,
firm or corporation any knowledge or information or any facts concerning any
suppliers, customers, methods, processes,
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developments, schedules, lists or plans of or relating to the business of the
Corporation and will retain all knowledge and information which he has acquired
or which he will acquire during his employment therewith relating to such
supplier, customers, methods, processes, developments, schedules, lists and
plans and the business of the Corporation in trust in a fiduciary capacity for
the sole benefit of the Corporation, its successors or assigns.
(d) In the event any court shall finally hold that the time or any
other provision of this Section 9 constitutes an unreasonable restriction
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against the Scientist, Scientist agrees that the provision hereof shall not be
rendered void but shall apply as to such time, territory, and other extent as
such court may judicially determinate or indicate constitutes a reasonable
restriction under the circumstances involved.
(e) The provisions for this Section 9 shall survive the termination of
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the terms of this Agreement and shall run to and inure to the benefit of the
Corporation, its successors and assigns.
10. Acknowledgment.
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(a) Scientist hereby waives any rights, now existing or in the future,
to assert a claim for damages, liability, loss or expense in connection with any
alleged breach or cause of action against the Corporation regarding any conflict
Scientist may have with Arch or Argonne. Scientist further covenants and agrees
that, subject to Section 11 hereof, Scientist will not bring a lawsuit against
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the Corporation or join the Corporation in any suit to which Scientist is a
party in connection with any claim, alleged wrong doing, act, cause of action or
damage regarding any conflict Scientist may have with Arch or Argonne.
Scientist acknowledges that he was paid the amount of Sixty-Five Thousand
Dollars ($65,000.00) to enter the Employment Option Agreement dated November 12,
1993 between Company and Scientist.
(b) Scientist waives any rights to claim a breach of confidentiality
against the Corporation with respect to or arising from any information supplied
by the Corporation to Arch or Argonne. Scientist further agrees that he
consented in the Employment Option Agreement to supply certain information to
Arch and Argonne and that with respect to providing such information, he waived
any rights to claim confidentiality. Scientist further acknowledges that he hand
delivered the Employment Option Agreement to Argonne.
(c) Scientist further acknowledges that Scientist has been advised
that the resignation of the Chief Executive Officer of the Corporation may
result in a delay or termination of the funding of the private placement
offering for which Xxxxxxxxxxx & Company is the placement agent and that in such
case, Scientist understands that other funding sources will need to be pursued.
Although the Corporation believes that it has alternatives, the Corporation
provides no guarantee that any such funding will be available.
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11. Indemnification. The Corporation hereby indemnifies Scientist with
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respect to all expenses and liabilities which Scientist may incur arising from
actions performed on behalf of Corporation and requested by or known to the
Corporation which result in an alleged conflict of interest in the event
Scientist is sued by Argonne or any of its affiliates, Arch or the Department of
Energy or any other person or entity.
12. Restrictions. Scientist agrees that he will not, unless authorized
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by the Board of Directors of the Corporation, make, draw, accept or endorse any
contract, lease, promissory note or other instrument requiring the payment of
money by the Corporation nor pledge the credit of the Corporation.
13. Arbitration and Extension of Time. Any dispute or controversy
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arising out of or relating to this Agreement, but not relating to any other
agreement or contract made or entered into by, or made on behalf of, the
Corporation shall be determined and settled by arbitration in Chicago, Illinois,
in accordance with the Commercial Rules of the American Arbitration Association
then in effect, and judgment rendered upon the award rendered by the Arbitrator
may be entered in any court of a competent jurisdiction. Expenses incurred in
connection with any such arbitration shall be borne equally by the parties
thereto, provided, however, that each party shall bear the cost of its own
expert evidence and legal counsel. Whenever any action is required to be taken
by the terms of this Agreement within a specified period of time and the taking
of such action is materially affected by a matter subjected to arbitration under
this provision, such period shall be extended automatically by the number of
days plus ten (10) business days that are taken for the determination of the
matter by the arbitrator(s).
14. Governing Law. This Agreement shall be subject to and governed by
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the law of the State of Illinois, irrespective of the fact that one or more of
the parties now is or may become a resident of a different state.
15. Assignment. This Agreement and all rights and benefits hereunder
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are personal to Scientist, and neither this Agreement nor any right or interest
of Scientist herein or arising hereunder shall be voluntarily or involuntarily
sold, transferred or assigned.
16. Equity. The relationship of Scientist and the Corporation being of
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a special and unique nature, it is expressly agreed that this Agreement shall be
enforceable in equity by specific performance.
17. Beneficiaries. This Agreement shall be binding upon and inure to
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the benefit of the parties and their respective heirs, representatives and
successors.
18. Written Consent. No termination or amendment of this Agreement or
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any provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless specifically set forth in writing, and signed
by the party or parties to be bound thereby. The waiver of any right or remedy
in respect of any occurrence or event on one
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occasion shall not be deemed a waiver of such right or remedy in respect of the
same of any similar occurrence or event on any other occasion.
19. Severability. If any term or provision of this Agreement shall be
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found by any court of competent jurisdiction to be unenforceable, the remaining
terms and provisions hereof shall remain in full force and effect, as if such
unenforceable provisions or term had never been a part hereof. If any provision
hereof is determined to be unenforceable, the parties shall promptly meet to
negotiate a substitute for such provisions in order to preserve to the extent
legally possible the original intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
HYSEQ, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Its: President
/s/ Xxxxxx X. Xxxxxxx
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XX. XXXXXX X. XXXXXXX
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