Document:

DISCOVERY PARTNERS INTERNATIONAL, INC.
CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this “Agreement”) is made and entered into as of January 1, 2003 (the “Effective Date”) by and between Discovery Partners International, Inc., a Delaware corporation (the “Company”), and Arnold Hagler (“Consultant”). The Company desires to retain Consultant as an independent contractor to perform consulting services for the Company and Consultant is willing to perform such services, on terms set forth more fully below. In consideration of the mutual promises contained herein, the parties agree as follows:

1.  SERVICES AND COMPENSATION

(a)                The Company agrees to engage Consultant, and Consultant agrees to provide services to the Company under the terms and conditions herein provided. Consultant agrees to provide services to the Company, up to a maximum of forty (40) days per year, in such capacity or capacities as may be agreed upon from time to time by the Company and Consultant. Such services may include the provision of advice, input, and support for the Company’s internal research planning and targeted external business development, marketing, publications, and communications activities. Consultant will not perform any services for the Company except as and when authorized or requested by the Company.

(b)               The Company shall pay Consultant for his services hereunder fifty thousand dollars ($50,000) per year, payable semimonthly in the amount of $2,083.33. The Company shall reimburse Consultant for pre-approved and reasonable expenses, such as telephone, travel and lodging expenses, incurred by Consultant at the Company’s request, consistent with the Company’s general policies for employee/consultant expenses.

2.  NON-EXCLUSIVITY

The parties acknowledge that during the Term of this Agreement Consultant shall be permitted to provide services to third parties, including competitors of the Company, which services may be similar to the services provided by Consultant to the Company under this Agreement. Nothing in this Agreement shall be construed to limit Consultant’s right and ability to provide such services to any third party; provided, however, that Consultant shall be required to comply with the confidentiality provisions of this Agreement and any other agreements between Consultant and the Company.

3.  OWNERSHIP AND ASSIGNMENT OF INVENTIONS

(a)                Consultant will promptly and fully disclose and assign to the Company (even after the Term of this Agreement) all Inventions (defined below) made by Consultant (either alone or jointly with others) resulting from or arising out of services provided to the Company hereunder during the Term of this Agreement. All such Inventions will be the sole property of the Company. Consultant represents and warrants that Consultant has no obligations to any third party which prohibit or restrict the right to assign to the Company exclusive right, title and interest in and to any and all Inventions made by Consultant resulting from or arising out of services provided to the Company hereunder during the Term of this Agreement. Consultant agrees to assist the Company at Company’s
expense, and to execute any further documents that are necessary or appropriate, to obtain, maintain, or enforce patents on any Inventions described above in the United States and elsewhere.

 

(b)               As used in this Agreement, the term “Inventions” means any and all inventions, discoveries, designs, formulas, technology, improvements, trade secrets, results of experiments, processes, techniques and know-how, whether or not patentable, and whether or not related to the Company’s business, which result from or arise out of services rendered to the Company and are invented, conceived, discovered, developed or reduced to practice by Consultant, either alone or jointly with others.

4.  CONFIDENTIALITY 

(a)                Consultant shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Company’s operations, processes, products, inventions, finances, suppliers, customers, marketing methods or contractual relationships. Upon termination of this Agreement for any reason, upon written request of the Company, Consultant will promptly deliver to the Company all correspondence, drawings, manuals, notes, reports, programs, plans, proposals, financial documents, or any other
documents concerning the Company’s technologies, customers, business plans, marketing strategies, products or processes and/or which contain proprietary information or trade secrets.

(b)               Consultant may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as reasonably possible, make available to the Company and its counsel the documents and other information sought and shall reasonably assist such counsel in resisting or otherwise responding to such process.

5.  CONFLICTING OBLIGATIONS

Consultant certifies that Consultant has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement, or that would preclude Consultant from fully complying with the provisions hereof, and further certifies that Consultant will not enter into such conflicting agreement during the term of this Agreement.

6.  TERM AND TERMINATION

This Agreement shall be effective as of the Effective Date and shall continue through and including December 31, 2004. The Company may terminate this Agreement immediately and without prior notice if Consultant refuses to or is unable to perform the services hereunder or is in breach of any material provision of this Agreement, that certain General Release and Settlement Agreement between the parties dated as of December 31, 2002 (the “General Release”), or that certain Proprietary Information and Inventions Agreement between the parties dated as of July 20, 2000 (the “Proprietary Information Agreement”). For the avoidance of doubt, termination of this Agreement shall not cause any stock option issued to Consultant under the General Release to terminate or discontinue vesting. Consultant agrees that he remains bound by the Proprietary Information Agreement as if there had been no
break in time between his service as an employee and his service here as a consultant to the Company. Upon termination of this Agreement, all rights and duties of the parties toward each other under this Agreement shall cease except Sections 2, 3, 4, 6, 7, 9, and 10 shall survive termination or expiration of this Agreement.

 

7.  INDEPENDENT CONTRACTOR; NO AGENCY

Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company, but Consultant shall perform the services hereunder as an independent contractor. Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement, and Consultant acknowledges the obligation to pay all self-employment and other taxes thereon and that he will not be eligible for any employee benefits. Consultant further agrees to indemnify the Company and hold it harmless to the extent of any obligation imposed on the Company:  (i) to pay withholding taxes or similar items; or (ii) resulting from Consultant being determined not to be an independent contractor.

8.  [INTENTIONALLY OMITTED]

9.  ARBITRATION

Any dispute or controversy arising under, out of, in connection with or in relation to this Agreement and Consultant’s services to the Company or termination by the Company shall be determined and settled by final and binding arbitration in San Diego, California in accordance with the rules and procedures of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof.

10.  MISCELLANEOUS

(a)                Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by Consultant without the express written consent of the Company.

(b)               This Agreement, the General Release, the Proprietary Information Agreement, that certain Stock Purchase Agreement by and between the parties dated as of the date hereof (the “Stock Purchase Agreement”), and the documents referenced therein, constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, and are intended to be fully binding and enforceable. If any provision in this Agreement shall be found or be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, then the meaning of said provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible
interpretation would save such provision, it shall be severed from the remainder of this Agreement which shall remain in full force and effect. In such event, the parties shall negotiate, in good faith, a substitute, valid and enforceable provision which most nearly effects the parties’ intent in entering into this Agreement.

 

(c)                This Agreement may not be amended or changed except by the written agreement of the Company and Consultant. The failure of either party to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a present or future waiver of such provisions and the express waiver by either party of any provision of this Agreement shall not constitute a waiver of any future obligation to comply with such provision.

(d)               In the event of any action brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recovery of attorneys’ fees, as well as all other costs and expenses of bringing such action as an element of damages, as permitted by law.

(e)                This Agreement shall be governed and construed in accordance with the laws of the State of California, without regard to the laws that might be applicable under conflicts of laws principles.

(f)                This Agreement may be executed in counterparts.

IN WITNESS WHEREOF, the parties hereto have caused to be executed or executed this CONSULTING AGREEMENT as of the day and year first above written.

 

	 Consultant:
 	  
 	 The Company:
 
	  
 	  
 	  
 
	  
 	  
 	 DISCOVERY PARTNERS
 INTERNATIONAL, INC.
 
	 Signature:
 	 
 
 
 	  
 	 By: 
 	 
 
 
 
	  
 	 
 	  
 	  
 	 
 
	  
 	     Arnold Hagler
 	  
 	  
 	     Chief Executive OfficerSTOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”) is made as of December 31, 2002, by and between Arnold Hagler (“Hagler”) and Discovery Partners International, Inc. (“DPI”).

WHEREAS, Hagler desires to sell and DPI desires to purchase 161,333 shares of common stock (the “Shares”) of Structural Proteomics, Inc., a New Jersey corporation (the “Company”), on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements set forth below, the parties hereto do hereby agree as follows:

1.         Sale of Shares. On the terms and subject to the conditions of this Agreement, on the Closing Date (as defined in Section 3 hereof), Hagler shall sell, transfer and deliver to DPI, and DPI shall purchase and acquire from Hagler, all right, title and interest in and to the Shares for a total purchase price of $1.00 (the “Purchase Price”).

2.         Instruments of Conveyance and Transfer. On the Closing Date, Hagler shall deliver to DPI against payment of the Purchase Price validly issued certificates for the Shares endorsed with stock transfer powers duly executed in blank.

3.         Closing. Subject to the terms and conditions of this Agreement, the closing with respect to the transactions provided for in this Agreement (the “Closing”) shall take place on December 31, 2002 (the “Closing Date”).

4.         Representations and Warranties of Hagler. Hagler represents and warrants to DPI as follows:

(a)    This Agreement constitutes a legal, valid and binding obligation of Hagler and Hagler has full right, power and authority to execute, deliver and perform this Agreement.

(b)    Hagler is the record and beneficial owner of all of the Shares and following the execution of this Agreement and, upon the consummation of the transactions provided for herein, DPI will have good and marketable title to such Shares, free and clear of all claims, liens and encumbrances of any nature whatsoever.

(c)    There are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from Hagler of any of the Shares. Hagler is not a party or subject to any agreement or understanding, and there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any of the Shares. 

(d)    Hagler owns no securities of the Company other than the Shares and 25,000 stock options, and to his knowledge the Company has issued no securities to anyone after DPI acquired DPI’s 2,200,000 shares in the Company in May 2000.

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5.         Representations and Warranties of DPI. DPI represents and warrants to Hagler as follows:

(a)    This Agreement constitutes a legal, valid and binding obligation of DPI and DPI has full right, power and authority to execute, deliver and perform this Agreement.

(b)    The Shares will be acquired for investment for DPI’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and DPI has no present intention of selling, granting any participation in or otherwise distributing the same. DPI does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares.

(c)    DPI is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. DPI has not been organized for the purpose of acquiring the Shares.

(d)    DPI is an “accredited investor” within the meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in effect.

(e)    DPI understands that the Shares it is purchasing are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from Hagler in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Act”) only in certain limited circumstances. In the absence of an effective registration statement covering the Shares or an available exemption from registration under the Act, the Shares must be held indefinitely. In this connection, DPI represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act, including without limitation the Rule 144 condition that current
information about the Company be available to the public. Such information is not now available and the Company has no present plans to make such information available.

(f)     It is understood that the certificates evidencing the Shares may bear the following legend:

“These securities have not been registered under the Securities Act of 1933, as amended. They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under such Act or unless sold pursuant to Rule 144 of such Act or unless another exemption from such Act is available.”

6.         Transfer. DPI will not sell, transfer, pledge or otherwise dispose of or encumber any of the Shares unless and until (i) such shares are subsequently registered under the Act and each applicable state securities law; or (ii) (1) an exemption from such registration is available thereunder, and (2) DPI has notified the Company of the proposed transfer and has furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such transfer will not require registration of such shares under the Act. DPI understands that the Company is not obligated, and does not intend, to register any Shares under the Act or any state securities laws.

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7.         Conditions of DPI’s Obligations at Closing. DPI’s obligations under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against DPI unless DPI consents in writing thereto:

(a)    Representations and Warranties. The representations and warranties of Hagler contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing Date.

(b)    Performance. Hagler shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by him on or before the Closing.

(c)    Amendment to Rights Agreement. The Company, Hagler and DPI  shall have entered into an Amendment No. 1 to Rights Agreement in a form acceptable to DPI (the “Rights Amendment”).

(d)    General Release and Settlement Agreement. Hagler and DPI shall have entered into a General Release and Settlement Agreement in a form acceptable to DPI (the “Settlement Agreement”). 

8.         Conditions of Hagler’s Obligations at Closing. Hagler’s obligations under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against Hagler unless Hagler consents in writing thereto:

(a)    Representations and Warranties. The representations and warranties of DPI contained in Section 5 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing Date.

(b)    Payment of Purchase Price. DPI shall have delivered the Purchase Price.

(c)    Amendment to Rights Agreement. The Company, Hagler and DPI shall have entered into the Rights Amendment.

(d)    General Release and Settlement Agreement. Hagler and DPI shall have entered into the Settlement Agreement.

9.         Survival. The covenants, agreements, representations and warranties contained in this Agreement shall survive the closing and any delivery of the Purchase Price, irrespective of any investigation made by or on behalf of DPI or Hagler.

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10.      Modification. This Agreement and the documents referenced herein set forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements among them concerning such subject matter, and may be modified only by a written instrument duly executed by each party.

11.      Assignment; Binding Effect. Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by Hagler without the express written consent of DPI. The provisions of this Agreement shall be binding upon and inure to the benefit of DPI and its successors and assigns.

12.      No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement.

13.      Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall be governed by and construed in accordance with the laws of California, without giving effect to provisions regarding conflicts of law.

14.      Attorney’s
  Fees. DPI shall reimburse HAGLER for fifty percent (50%)
  of all attorney’s fees incurred by him in December 2002 in connection with
  negotiation and execution of this Agreement provided that such reimbursement
  shall not exceed $500.

   

	 DISCOVERY PARTNERS
 INTERNATIONAL, INC.
 	  
 	 ________________________________________
 Arnold Hagler
 
	 
 By: 
 	  
 	  
 	  
 	 
 
 
 
	  
 	 
 	  
 	  
 	  
 
	  
 	 Chief Executive Officer
 	  
 	  
 	  
 

 

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