EXHIBIT 10.1


 


 


November 11, 2005


 


VIA EMAIL


 


Riccardo Pigliucci


Discovery Partners International, Inc.


 


 


Dear Riccardo:


This letter sets forth the substance of the
agreement (“Agreement”) between you and
Discovery Partners International, Inc. (the “Company”),
offered to you by the Company in connection with your resignation of
employment.


1.             Resignation.  Your employment
with the Company, and all affiliates, subsidiaries, and/or related corporation,
ventures, and entities, will terminate as a result of your resignation
effective November 14, 2005 (the “Resignation Date”).  You agree and acknowledge that you resign
from the Company’s Board of Directors effective as of the Resignation Date.


2.             Closing Benefits.  In consideration of your service and the
release of claims contained in this Agreement, and in satisfaction and complete
termination of that Key Employee Agreement of April 17, 1998 between you and
the Company,  the Company hereby agrees
to provide you with the following benefits on and after the Effective Date (as defined in
Section 13 below) of this Agreement:


2.1          Base Salary Compensation.  Provided that this Agreement becomes
effective as specified in Section 13 herein, the Company will pay to you, on
the Effective Date, a sum equivalent to one year of your base salary in effect
as of the Resignation Date, subject to standard payroll deductions and
withholdings.


2.2          COBRA Coverage.  Provided that this Agreement becomes
effective as specified in Section 13 herein, and provided that you timely elect
to continue your health insurance coverage under COBRA, the Company will pay
monthly premiums for continued insurance coverage for you and any family
members enrolled in Company-provided group health insurance coverage as of the
Resignation Date for a period of twelve (12) months.


2.3          Accelerated Vesting of Stock Award.  Provided that this Agreement
becomes effective as specified in Section 13 herein, your Deferred Stock
Issuance Award granted August 4, 2003 (the “Award”)
shall be vested as to 56,250 shares as of the Effective Date and such shares
shall be issued to you on the Effective Date (subject to withholding as
described below).  Your execution of this
Agreement constitutes your consent to the foregoing amendment of the
Award.  By executing this Agreement, you
hereby agree that any applicable federal, state, local and foreign tax
withholding obligation of the Company which arises in connection with the
vesting and issuance to you of the shares will be satisfied by the Company’s 


 


1





















 


withholding of shares (having an aggregate value equal to the minimum
statutory withholding rate) as set forth in the Award.  By executing this Agreement, you further
acknowledge that you have consulted with your tax advisor regarding the tax
consequences to you of the foregoing amendment of the Award.


2.4          Bonus Compensation.  Provided that
this Agreement becomes effective as specified in Section 13 herein, the Company
will, on the Effective Date, pay to you a bonus in the amount of seventy-five
thousand dollars ($75,000.00), subject to standard deductions and withholdings.


2.5          Legal Expenses.  Provided that this Agreement becomes
effective as specified in Section 13 herein, the Company will, upon submission
to the Company by your lawyers of a detailed statement for professional
services rendered, pay directly to such lawyers the reasonable expenses related
to you securing advice and representation in connection with the negotiation
and preparation of this Agreement, up to a maximum of ten thousand dollars
($10,000.00).


3.             Accrued Salary and Vacation.  On the Resignation Date, you will be paid all
accrued salary, and all accrued and unused vacation, earned through the
Resignation Date, subject to standard payroll deductions and withholdings.


4.             Stock Options or Awards.  Except as specifically modified by this
Agreement, terms, conditions, and limitations applicable to your restricted
stock award, other equity awards or options to purchase the Company’s Common
Stock (“Awards”) will remain in full
force and effect pursuant to the applicable agreements between you and the
Company, the applicable plan documents, and any other documents applicable to
such Awards.


5.             Payment Upon a Change of Control.  Provided that this Agreement becomes effective
as specified in Section 13 herein, and provided that an event or transaction
constituting a Change of Control as defined below shall have closed on or
before June 30, 2006, the Company shall pay to you in a lump-sum within fifteen
(15) business days of the closing date of the Change of Control a sum
equivalent to one year of your base salary in effect as of the Resignation
Date, subject to standard withholdings and deductions.


5.1          Definition.  For purposes of
this Agreement, “Change of Control” means: (i) a sale or other disposition of
all or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving entity and in which the
stockholders of the Company immediately prior to such consolidation or merger
own less than fifty percent (50%) of the surviving entity’s voting power
immediately after the transaction; (iii) a reverse merger in which the Company
is the surviving entity but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, and in which the
stockholders of the Company immediately prior to such reverse merger own less
than fifty percent (50%) of the Company’s voting power immediately after the
transaction; (iv) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or any
comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or 


 


2





















 


subsidiary of the Company or other entity controlled by the Company) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the voting power entitled to vote
in the election of directors of the Company; or (v) in the event that the
individuals who, as of the Effective Date of this Agreement, are members of the
Board (the “Incumbent Board”), cease for
any reason to constitute at least fifty percent (50%) of the Board.  (If the election, or nomination for election
by the Company’s stockholders, of any new director of the Company is approved
by a vote of at least fifty percent (50%) of the Incumbent Board, such new
director shall be considered to be a member of the Incumbent Board in the
future.)


5.2          Parachute Tax.


(a)           If the payment you would receive
pursuant to this Section 5 (the “Payment”)
(i) constitutes a “parachute payment” within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, would be
subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the
Payment shall be decreased (including to zero, if necessary) to equal the
largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax.


(b)           The accounting firm engaged by the
Company for general audit purposes shall calculate the amount of the necessary
reduction (if any) in the Payment pursuant to the preceding sentence.  If the accounting firm regularly engaged by
the Company is unable to perform such calculations, the Board shall have the
discretion to appoint another nationally recognized accounting firm to make the
determinations required hereunder.  The
Company shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.


(c)           The accounting firm engaged to make
the determinations hereunder shall provide its calculations, together with
detailed supporting documentation, to the Company and you as soon as reasonably
practicable after engagement.  The
Company shall be entitled to rely upon the accounting firm’s determinations,
which shall be final and binding on you.


6.             No Other Compensation or Benefits.  You acknowledge that, except as expressly
provided in this Agreement, you will not receive any additional compensation,
severance or benefits after the Resignation Date.


7.             Expense Reimbursement.  You agree that, no later than December 1,
2005, you will submit your final documented expense reimbursement statement
reflecting all business expenses you incurred through the Resignation Date, if
any, for which you seek reimbursement. 
The Company will reimburse you for these expenses pursuant to its
regular business practice.


8.             Return of Company Property.  You agree that you will return to the Company
all proprietary Company documents (and all copies thereof) and other Company
property in your possession or control, including, but not limited to, Company
files, correspondence, memoranda, notes, notebooks, drawings, books and records,
plans, forecasts, reports, proposals, studies, 


 


3





















 


agreements, financial information, personnel information, sales and
marketing information, research and development information, systems
information, specifications, computer-recorded information, tangible property
and equipment, credit cards, entry cards, identification badges and keys and
any materials of any kind that contain or embody any proprietary or
confidential information of the Company (and all reproductions thereof in whole
or in part) (“Company Property”) no later
than November 16, 2005.  You also
represent that you will perform a good faith search to ensure that you are not
in possession or control of any Company Property after such date.  Notwithstanding the foregoing, in
consideration of your promises and covenants in this Agreement, you shall be
permitted to keep the cell phone and laptop computer issued to you by the
Company and currently in your possession, provided that you make arrangements
suitable to the Company to permanently delete all Company information contained
on either device.


9.             Proprietary Information Obligations.  You acknowledge that the Employee Invention
and Non-Disclosure Agreement executed by you, attached hereto as Exhibit A,
will remain in full force and effect.


10.          Confidentiality.  Each of you and the Company agree to hold the
terms of this Agreement in strictest confidence and agree not to publicize or
disclose the terms in any manner whatsoever; provided,
however, that:  (a) you may
disclose this Agreement in confidence to your immediate family, (b) the Company
may disclose this Agreement as required by any applicable law, regulation,
listing standard or rule, and (c) you and the Company may disclose this
Agreement in confidence to your respective attorneys, accountants, auditors,
and tax preparers.  In particular, and
without limitation, you may not disclose the terms of this Agreement to any
current or former Company employee or agent, other than to a Company employee
authorized to negotiate the terms of this Agreement on behalf of the Company.


11.          Nondisparagement.  You agree that you will not at any time
disparage the Company or any of its officers, directors, or employees, in any
manner likely to be harmful to them or their business, business reputation or
personal reputation; provided
that you will respond accurately and fully to any questions, inquiry or request
for information when required by legal process. 
The Company will direct its officers and directors not to at any time
disparage you in any manner likely to be harmful to you or your business
reputation or personal reputation; provided that the Company will respond
accurately and fully to any questions, inquiry or request for information when
required by legal process.


12.          Release of Claims.  Provided that this Agreement becomes
effective as specified in Section 13 herein, and except as otherwise provided
in this Agreement, in exchange for the consideration provided to you by this
Agreement that you are not otherwise entitled to receive, you hereby generally
and completely release the Company and its directors, officers, employees,
shareholders, members, partners, agents, attorneys, predecessors, successors,
parent and subsidiary entities, affiliates, and assigns from any and all
claims, liabilities and obligations, both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring
prior to your signing this Agreement. 
This general release includes, but is not limited to:  (1) all claims arising out of or in any
way related to your employment with the Company or the termination of that
employment; (2) all claims related to your compensation or benefits from the Company,
including, but not limited to, salary, bonuses, commissions, vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options,
or any other 


 


4





















 


ownership interests in the Company; (3) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (4) all tort claims, including, but not limited
to, claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and (5) all federal, state, and local statutory
claims, including, but not limited to, claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil
Rights Act of 1964 (as amended), the Employee Retirement Income Security Act,
the federal Americans with Disabilities Act of 1990, the California Fair
Employment and Housing Act (as amended), the California Labor Code, and the
federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”).  Notwithstanding the foregoing, this release
does not extend to (i) any payments or benefits receivable or obligations
incurred or specified under this Agreement, (ii) claims under the
Indemnification Agreement described in Section 18 of this Agreement, (iii) any
other right to indemnification based on acts in the course and scope of your
employment with the Company or service as a member of the Company’s Board of
Directors pursuant to applicable law or the Company’s Certificate of
Incorporation or Bylaws, or (iv) any rights or coverage to which you may be
entitled under the Company’s director and officer liability insurance
policy(ies).


13.          ADEA Waiver.  You acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA (“ADEA Waiver”).  You also acknowledge that the consideration
given for the ADEA Waiver is in addition to anything of value to which you were
already entitled.  You further
acknowledge that you have been advised by this writing, as required by the
ADEA, that:  (a) your ADEA Waiver does
not apply to any rights or claims that arise after the date you sign this
Agreement; (b) you should consult with an attorney prior to signing this
Agreement and that you have so consulted; (c) you have twenty-one (21)
days to consider this Agreement (although you may choose to voluntarily sign it
sooner); (d) you have seven (7) days following the date you sign this
Agreement to revoke the ADEA Waiver; and (e) this Agreement will not be
effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after you sign this Agreement (the “Effective Date”).   You understand and agree that you will not
receive the benefits provided by this Agreement unless this Agreement becomes
effective.


14.          Section 1542 Waiver by You. 
In granting the release herein, you hereby acknowledge that you have
read and understand Section 1542 of the California Civil Code:  “A general release does
not extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.”  You hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of similar
effect with respect to your release of claims herein.


15.          Release of Claims by the
Company.  Provided
that this Agreement becomes effective as specified in Section 13 herein and
except as otherwise provided in this Agreement, in exchange for the promises
and covenants set forth herein, the Company hereby releases, acquits, and
forever discharges you, your successors, heirs, legal representatives and
assigns of and from any and all claims, liabilities, demands, causes of action,
costs, expenses, attorneys’ fees, damages, indemnities and obligations of every
kind and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or any way related to
agreements, acts or conduct of yours in the good faith performance of duties 


 


5





















 


within the scope of your employment by the Company at any time prior to
the date upon which the Company executes this Agreement, except for (i) claims
that arise out of or are based on a breach by you of this Agreement or your
Employee Inventions and Non-Disclosure Agreement with the Company, (ii) claims that arise out of or are
based upon fraud or embezzlement perpetrated by you against the Company, (iii) claims that arise out of or are based upon
any theft perpetrated by you against the Company, (iv) claims against you that
arise out of or are based upon financial or reporting misconduct involving the
Company for periods ending on or before the Resignation Date, and (v) claims
that arise out of or are based upon criminal behavior by you against the
Company.


16.          Section 1542 Waiver by the Company.  In granting the release
herein, the Company hereby acknowledges that it has read and understands
Section 1542 of the California Civil Code: 
“A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.” 
The Company hereby expressly waives and relinquishes all rights and
benefits under that section and any law of any jurisdiction of similar effect
with respect to its release of claims herein.


17.          Removal of Legends from
Stock Certificates.  The Company
covenants and agrees that, promptly following your written request accompanied
by appropriate and customary certificates and/or representations, as
applicable, executed by you and your broker made on or after the date that is
90 days following the Resignation Date, it will cause all affiliate and related
legends and other legends, as appropriate, to be removed from any stock
certificates representing shares of the Company’s common stock held by you.


18.          Indemnification.  The Indemnification Agreement entered into by
you and the Company, a copy of which is attached hereto as Exhibit B,
shall remain in effect following the Resignation Date in accordance with the
terms of such agreement.


19.          Arbitration.  To ensure rapid and economical resolution of
any disputes which may arise under this Agreement, you and the Company agree
that any and all disputes or controversies of any nature whatsoever (with the
sole exception of disputes involving enforcement of the Employee Inventions and
Non-Disclosure Agreement), arising from or regarding the interpretation,
performance, enforcement or breach of this Agreement shall be resolved by
confidential, final and binding arbitration (rather than trial by jury or court
or resolution in some other forum) conducted by Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) in San Diego, California, under the
then-existing JAMS rules.  The prevailing
party in such arbitration proceedings shall be entitled to recover from the
other party reasonable attorneys’ fees and other recoverable costs incurred in
connection with such arbitration proceeding. 
Nothing in this Agreement shall prevent either party from seeking to
obtain injunctive relief in court to preserve the status quo or prevent
irreparable harm pending the conclusion of any such arbitration.  Notwithstanding the foregoing, you and the
Company each have the right to resolve any issue or dispute involving
confidential, proprietary or trade secret information, or intellectual property
rights, by Court action instead of arbitration.


20.          Miscellaneous.  This Agreement constitutes the complete,
final and exclusive embodiment of the entire agreement between you and the
Company with regard to this subject 


 


6





















 


matter.  It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations.  This
Agreement may not be modified or amended except in a writing signed by both you
and the authorized representative of the Board of Directors of the
Company.  This Agreement will bind the
heirs, personal representatives, successors and assigns of both you and the
Company, and inure to the benefit of both you and the Company, their heirs,
successors and assigns.  The failure to
enforce any breach of this Agreement shall not be deemed to be a waiver of any
other or subsequent breach.  For purposes
of construing this Agreement, any ambiguities shall not be construed against
either party as the drafter.  If any
provision of this Agreement is determined to be invalid or unenforceable, in
whole or in part, this determination will not affect any other provision of
this Agreement and the provision in question will be modified so as to be
rendered enforceable in a manner consistent with the intent of the parties
insofar as possible.  This Agreement will
be deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of California as applied to contracts
made and to be performed entirely within California.  This Agreement may be executed in
counterparts or with facsimile signatures, which shall be deemed equivalent to
originals.


If this Agreement is acceptable to you, please sign
below and return one original to me.


I wish you all the best in your future endeavors.


	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Discovery
  Partners International, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Harry F. Hixson, Jr.

  
	
   

  	
   

  	
  Harry F. Hixson, Jr., Ph.D.

  
	
   

  	
   

  	
  Member,
  Board of Directors

  



 


AGREED AND ACCEPTED:




	
  /s/
  Riccardo Pigliucci

  	
   

  	
  November
  14, 2005

  
	
  Riccardo
  Pigliucci

  	
   

  	
  Date

  






 


7





















 


EXHIBIT A


 


Employee Invention and Non-Disclosure Agreement


 


8





















 


EXHIBIT B


 


Indemnification Agreement


 


9