SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission File Number 0-27316
Molecular Devices Corporation
(Exact name of registrant as specified in its charter)
Delaware 94-2914362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1311 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices, including zip code)
(408) 747-1700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
As of August 11, 1998, 9,415,190 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
<TABLE>
MOLECULAR DEVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997.............................................. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 1998 and 1997................................ 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997.......................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................................. 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................................... 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................ 10
ITEM 2. CHANGES IN SECURITIES............................................................ 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................. 10
ITEM 5. OTHER INFORMATION................................................................ 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................. 10
SIGNATURE................................................................................................. 11
</TABLE>
2
<PAGE>
<TABLE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
ASSETS: (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 29,786 $ 26,773
Accounts receivable, net 9,983 8,899
Inventories 3,668 3,465
Deferred tax asset 1,537 1,867
Other current assets 676 122
-------- --------
Total current assets 45,650 41,126
Equipment and leasehold improvements, net 1,489 1,497
Other assets 136 168
-------- --------
$ 47,275 $ 42,791
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,601 $ 1,316
Accrued liabilities 3,268 3,050
Deferred revenue 1,293 1,008
-------- --------
Total current liabilities 6,162 5,374
Stockholders' equity:
Preferred stock, no par value; 3,000,000 authorized
no shares issued or outstanding -- --
Common stock, $.001 par value; 30,000,000 shares
authorized; 9,412,733 and 9,331,599
shares issued and outstanding, at June 30, 1998
and December 31, 1997, respectively 9 9
Additional paid-in capital 41,262 40,302
Retained earnings (accumulated deficit) 766 (2,546)
Deferred compensation (607) (148)
Accumulated translation adjustment (317) (200)
-------- --------
Total Stockholders' Equity 41,113 37,417
-------- --------
$ 47,275 $ 42,791
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------------------ ------------------------
<S> <C> <C> <C> <C>
REVENUES $ 11,867 $ 9,818 $ 22,213 $ 18,124
COST OF REVENUES 4,510 3,875 8,223 7,066
-------- -------- -------- --------
GROSS MARGIN 7,357 5,943 13,990 11,058
-------- -------- -------- --------
OPERATING EXPENSES:
Research and development 1,488 1,108 2,871 2,187
Selling, general and administrative 3,183 3,008 6,492 5,668
-------- -------- -------- --------
Total operating expenses 4,671 4,116 9,363 7,855
-------- -------- -------- --------
INCOME FROM OPERATIONS 2,686 1,827 4,627 3,203
Other income, net 401 294 759 575
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 3,087 2,121 5,386 3,778
Income tax provision (1,189) (806) (2,074) (1,436)
-------- -------- -------- --------
NET INCOME $ 1,898 $ 1,315 $ 3,312 $ 2,342
======== ======== ======== ========
BASIC NET INCOME PER SHARE $ 0.20 $ 0.14 $ 0.35 $ 0.26
======== ======== ======== ========
DILUTED NET INCOME PER SHARE $ 0.20 $ 0.14 $ 0.34 $ 0.24
======== ======== ======== ========
SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE 9,386 9,084 9,373 9,055
======== ======== ======== ========
SHARES USED IN COMPUTING DILUTED NET INCOME PER SHARE 9,710 9,670 9,724 9,664
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited) Six Months Ended
<CAPTION>
Six Months Ended
June 30,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,312 $ 2,342
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 379 334
Loss on disposal of fixed assets -- 22
Amortization of deferred compensation 119 68
(Increase) decrease in assets:
Accounts receivable (1,084) (2,412)
Inventories (203) (1,295)
Deferred tax asset 330 585
Other current assets (553) (29)
Increase (decrease) in liabilities:
Accounts payable 285 411
Accrued liabilities 372 (402)
Deferred revenue 285 243
-------- --------
Net cash provided by (used in) operating activities 3,242 (133)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (370) (284)
Other assets 32 40
-------- --------
Net cash used in investing activities (338) (244)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment on promissory notes -- (1,500)
Issuance of common stock, net 228 331
-------- --------
Net cash provided by (used in) financing activities 228 (1,169)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (119) (47)
Net (decrease) increase in cash and cash equivalents 3,013 (1,593)
Cash and cash equivalents at beginning of period 26,773 23,727
-------- --------
Cash and cash equivalents at end of period 29,786 $ 22,134
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
5
<PAGE>
MOLECULAR DEVICES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures which are made are adequate to make the information presented
not misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1997.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
periods presented. The results for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 1998.
Certain reclassifications have been made to the financial statements for the
three month and six month periods ended June 30, 1997 to conform with the 1998
presentation for those periods.
Note 2. New Accounting Standards
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130). SFAS 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity. SFAS 130 requires unrealized gains or losses on the Company's foreign
currency translation adjustments, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive
income. Comprehensive income was approximately $3.2 million and $2.3 million for
the six month periods ended June 30, 1998 and 1997, respectively.
Note 3. Inventories
Inventories consist of (in thousands):
June 30, 1998 December 31, 1997
------------- -----------------
Finished goods $1,774 $2,051
Work in process 587 565
Raw materials and subassemblies 1,307 849
------ ------
$3,668 $3,465
====== ======
Note 4. Net Income Per Share
Basic net income per share is computed using the weighted average number of
shares of common stock outstanding and diluted net income per share is computed
using the weighted average number of shares of common stock outstanding and
dilutive common equivalent shares from outstanding stock options (using the
treasury stock method).
6
<PAGE>
MOLECULAR DEVICES CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as those identified in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 as
filed with the Securities and Exchange Commission on March 26, 1998.
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- - Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
1997 contained in the Company's 1997 Annual Report to Stockholders. The results
for the three and six month periods ended June 30, 1998 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 1998.
Results of Operations - Three and Six Months Ended June 30, 1998 and 1997.
REVENUES. Product revenues for the second quarter of 1998 increased 21% to
approximately $11.9 million from approximately $9.8 million in the second
quarter of 1997. All three product families showed increased levels of revenue.
Maxline product revenues increased primarily due to greater sales of new
SPECTRAmax products worldwide. Cell Analysis product revenues increased
primarily due to greater volume shipments of the FLIPR product worldwide.
Threshold revenues increased primarily due to greater volume shipments to
military customers worldwide.
Product revenues for the first six months of 1998 increased 23% to approximately
$22.2 million from approximately $18.1 million in the same period of the prior
year. All three product families, again, showed increased levels of revenue
based on the same trends as discussed above for the second quarter.
GROSS MARGIN. Gross margin increased to 62.0% and 63.0% in the second quarter
and first six months of 1998, respectively, from 60.5% and 61.1%, respectively,
in the same periods of the prior year. The improved margins for both periods are
due primarily to the continued strength of new SPECTRAmax products.
RESEARCH AND DEVELOPMENT. Research and development expenses for the second
quarter of 1998 increased by 34% to approximately $1.5 million (12.5% of total
revenues) from approximately $1.1 million (11.3% of total revenues) for the
second quarter of 1997. Research and development expenses for the first six
months of 1998 increased by 31% to approximately $2.9 million (12.9% of total
revenues) from approximately $2.2 million (12.1% of total revenues) for the same
period of 1997. The increased spending for both periods is primarily the result
of additional headcount and increased expenditures on development of new
products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the second quarter of 1998 increased by 6% to approximately $3.2
million (26.8% of total revenues) from approximately $3.0 million (30.6% of
total revenues) for the second quarter of 1997. Selling, general and
administrative expenses for the first six months of 1998 increased by 15% to
approximately $6.5 million (29.2% of total revenues) from approximately $5.7
million (31.3% of total revenues) for the same period of 1997. This increased
spending is primarily the result of additional expenditures on marketing, sales
and service related activities as the Company continued to expand market
coverage worldwide. Selling, general and administrative expenses as a percentage
of total revenues has dropped for both periods primarily as a result of
continued operating leverage and, particularly in the second quarter of 1998,
headcount vacancies in certain sales and marketing management positions which
were filled early in the third quarter of 1998.
OTHER INCOME (NET). Net other income for the second quarter and first six months
of 1998 increased by 36% and 32%, respectively, over the same periods in the
prior year primarily due to increased cash balances for both periods.
INCOME TAX PROVISION. Income tax provisions of $1.2 million and $2.1 million
were recorded in the second quarter and first six months of 1998, respectively,
as compared to $.8 million and $1.4 million in the same periods of the prior
year. The 38.5% effective tax rate for 1998 has increased from the 38% rate for
1997 primarily due to anticipated proportional decreased tax benefits from the
Company's Foreign Sales Corporation.
Liquidity and Capital Resources.
The Company had cash and cash equivalents of approximately $29.8 million at June
30, 1998. During the first six months of 1998, the Company generated
approximately $3.2 million and $228,000 from operations and financing
activities, respectively, as partially offset by approximately $338,000 used in
investing activities. The cash flow
7
<PAGE>
from operations relates primarily to the Company's earnings. The cash flow from
financing activities relates solely to stock option exercises, while the cash
used in investing activities relates primarily to capital additions.
The Company believes that its existing capital resources and cash expected to be
generated from future operations will be sufficient to fund its operations and
anticipated capital expenditures through at least 1999. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the resources the Company devotes to developing, manufacturing and
marketing its products, the extent to which the Company's products generate
market acceptance and demand, potential acquisition opportunities that may arise
and other factors. As such, there can be no assurances that the Company will not
require additional financing within this time frame and, therefore, the Company
may in the future seek to raise additional funds through bank facilities, debt
or equity offerings or other sources of capital. Additional funding may not be
available when needed or on terms acceptable to the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Factors That May Affect Future Results
The Company's business, financial condition and results of operations are
subject to various risk factors, including those described below and elsewhere
in this report.
* Uncertainty of Future Operating Results. Future operating results will
depend on many factors, including demand for the Company's products, the
levels and timing of government and private sector funding of life sciences
research activities, the timing of the introduction of new products by the
Company or by competing companies, the integration of acquired products and
technology into manufacturing and distribution processes, the Company's
ability to control costs and its ability to attract and retain highly
qualified personnel. Furthermore, the Company's gross margins can be
significantly affected by many factors, including shifts in product mix,
the mix of direct sales as compared with sales through distributors,
competitive price pressures or quarterly fluctuations in sales levels
relative to fixed costs.
* Fluctuations in Quarterly Operating Results; Lack of Backlog. The Company
manufactures its products to forecast rather than to outstanding orders,
and products are typically shipped within 30 to 90 days of purchase order
receipt. As a result, the Company does not believe the amount of backlog at
any particular date is indicative of its future level of sales. The
Company's manufacturing procedures may in certain instances create a risk
of excess or inadequate inventory levels if orders do not match forecasts.
The Company's expense levels are based, in part, on expected future sales.
If sales levels in a particular quarter do not meet expectations, the
Company may not be able to adjust operating expenses sufficiently quickly
to compensate for the shortfall, and the Company's results of operations
may be materially adversely affected. Many of the Company's products are
subject to long customer procurement processes. Accordingly, the timing of
capital equipment purchases by customers is expected to be uneven and
difficult to predict. In addition, a significant portion of the Company's
revenues is typically derived from sales of a small number of relatively
high-priced systems, and sales of such products may increase as a
percentage of revenue in the future. Delays in receipt of anticipated
orders of such products could lead to substantial variability from quarter
to quarter. In addition, the Company has historically received purchase
orders and made a significant portion of each quarter's product shipments
near the end of the quarter. If that pattern continues, even short delays
in the receipt of orders or shipment of products at the end of a quarter
could have a material adverse effect on results of operations for that
quarter. The Company typically experiences a decrease in the level of sales
in the first calendar quarter as compared to the fourth quarter of the
preceding year because of budgetary and capital equipment purchasing
patterns in the life sciences industry. The Company also typically
experiences a decrease in product revenues in the third quarter compared to
the second quarter, related to seasonality primarily associated with lower
European and academic sales during the summer months. Operating results in
any period should not be considered indicative of the results to be
expected for any future period.
* Dependency on New Products; Rapid Technological Change. The life sciences
instrumentation market is characterized by rapid technological change and
frequent new product introductions. The Company's future success will
depend on its ability to enhance its current products and to develop and
introduce, on a timely basis, new products that address the evolving needs
of its customers.
* Reliance on Sole Source Suppliers. Certain components used in the
Company's products are currently purchased from single sources. Any delay
in the manufacture of such components could materially adversely affect the
Company's business, financial condition and results of operations.
* Year 2000 Compliance. There can be no assurances that the vendors of the
Company will be in compliance, and the Company has no control over whether
such vendors will be in compliance, with year 2000 requirements. Any
failure on the part of the Company's vendors could materially adversely
effect the Company's business, financial condition and results of
operations.
* Other Factors. The Company's business is affected by other factors,
including: (i) the possibility that the introduction or announcement of new
products would render existing products obsolete or result in a delay or
decrease in purchase orders for existing products; (ii) the extent to which
and the timing in which the
8
<PAGE>
Company's products achieve market acceptance; (iii) the capital spending
policies of the Company's customers (which depend on various factors,
including the resources available to such customers, the spending
priorities among various types of research equipment and the policies
regarding capital expenditures during recessionary periods), including
those policies of universities, government research laboratories and other
institutions whose funding is dependent on grants from government agencies;
(iv) competition in the life sciences instrumentation market which is
highly competitive and expected by the Company to increase; (v) the
Company's ability to obtain and maintain patent and other intellectual
property protection for its products and technology; (vi) the Company's
ability to obtain in a timely manner certain components used in its
products which are currently obtained from single sources; (vii) compliance
with governmental regulations, including those promulgated by the United
Sates Food and Drug Administration and similar state and foreign agencies;
and (viii) the extent of the Company's sales outside the United States,
which involve certain specific risks, including risks related to currency
fluctuations, imposition of government controls, export license
requirements, restrictions on export of critical technology, political and
economic instability or conflicts, trade restrictions, changes in tariffs
and taxes, difficulties in staffing and managing international operations
and international distributor relationships and general economic
conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
9
<PAGE>
MOLECULAR DEVICES CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
<TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Matters presented at the Annual Meeting of Stockholders on May 22, 1998,
and the voting of stockholders were as follows:
(a) Election of directors for the ensuing year:
<CAPTION>
Total Vote For Each Director Total Vote Withheld From
Each Director
----------------------------- -----------------------------
<S> <C> <C>
Joseph D. Keegan 7,682,136 8,590
Moshe H. Alafi 7,681,992 8,734
David L. Anderson 7,682,136 8,590
A. Blaine Bowman 7,682,136 8,590
Paul Goddard 7,681,536 9,190
Andre F. Marion 7,681,536 9,190
Harden M. McConnell 7,680,992 9,734
J. Allan Waitz 7,681,536 9,190
(b) Ratification of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998.
For: 7,675,873 Against: 500 Abstain: 14,353
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between February
20, 1999 and March 22, 1999 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10.19 Key Employee Agreement for Joseph D. Keegan dated March 11,
1998 (as amended)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1998.
- ----------------
*Management agreement.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOLECULAR DEVICES CORPORATION
By: Timothy A. Harkness
---------------------------------------------------
Vice President, Finance and Chief Financial Officer
(Duly Authorized and Principal Financial and
Accounting Officer)
Date: August 13, 1998
11
EXHIBIT 10.19
MOLECULAR DEVICES CORPORATION
KEY EMPLOYEE AGREEMENT
for
JOSEPH D. KEEGAN
This Employment Agreement ("Agreement") is entered into as of the 11th
day of March, 1998, by and between Joseph D. Keegan ("Executive") and Molecular
Devices Corporation, a Delaware corporation (the "Company").
Whereas, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
Whereas, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
Now, Therefore, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. Employment by the Company.
1.1 Subject to terms set forth herein, the Company agrees to
employ Executive in the position of President and Chief Executive Officer
("CEO") of the Company and Executive hereby accepts such employment effective as
of March 30, 1998. During the term of his employment with the Company, Executive
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods as set forth herein and reasonable
periods of illness or other incapacities permitted by the Company's general
employment policies) to the business of the Company.
1.2 Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then current title,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board").
1.3 The employment relationship between the parties shall also
be governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with the Company's general employment policies or
practices, this Agreement shall control. In addition, as an executive officer of
the Company Executive will be covered by the Company's directors and officers
liability insurance coverage, as in effect from time to time, as well as the
Company's bylaw indemnification and indemnity agreement for executive officers
and directors.
2. Board of Directors.
<PAGE>
2.1 Board of Directors. The Company shall use its best efforts
to elect Executive to the Board for so long as Executive holds the position of
President and Chief Executive Officer of the Company. Executive agrees to serve
as a director if elected by the shareholders and the Board, as the case may be.
3. Compensation.
3.1 Salary. Executive shall receive for services to be
rendered hereunder an annualized base salary of $280,000, payable according to
the Company's regular payroll schedule.
3.2 Signing Bonus. Upon his first performance of services
under this Agreement, Executive shall receive a one time payment of $150,000,
minus standard payroll withholdings and deductions ("Signing Bonus"). If
Executive voluntarily terminates his employment with Company within his first
year of employment, Executive shall repay the gross amount of the Signing Bonus
to the Company.
3.3 Performance Bonus. Executive will be eligible for a
discretionary performance bonus of up to 50% of base salary, earned under the
following conditions, if Executive achieves the goals established in agreement
with the Board. The Board shall determine, in its sole discretion, whether any
or all of the goals have been achieved and conditions have been met, and if so,
the amount of the bonus.
(a) Company Corporate Financial Goals. The Company
must meet or exceed its planned profit objectives for the bonus year; and
(b) Executive's Performance. Executive must
demonstrate performance equal to or above that required to meet the ordinary
expectations of his job position, as determined by the Board in its sole
discretion; and
(c) Achievement of Goals. Executive shall achieve
each of the goals agreed upon with the Board. Goals will be set in the following
areas: (1) product development schedule; (2) product introduction schedule; and
(d) Active Employment. Executive must remain an
active employee through the end of the bonus year. Executive forfeits any bonus
for which he would otherwise be eligible, if his employment terminates for any
reason before the end of the bonus year. No prorated bonus can be earned.
3.4 Standard Company Benefits. Executive shall be entitled to
all rights and benefits for which he is eligible under the terms and conditions
of the standard Company benefits and compensation practices which may be in
effect from time to time and provided by the Company to its employees generally.
3.5 Car Allowance. The Company will pay Executive, in lieu of
providing a Company-leased car, an allowance of $1,000 per month, to cover
transportation expenses in the performance of his job duties.
2
<PAGE>
3.6 Administrative Expenses. The Company will pay Executive
for administrative expenses, such as tax preparation, which Executive incurs, up
to a maximum of $5,000 per year.
3.7 Relocation Expenses. Executive will receive relocation
expenses to move his household from New York to California provided that such
relocation occurs prior to December 31, 1998. The Company will pay the lower of
two submitted bids, pursuant to the Relocation Agreement attached hereto as
Exhibit A.
3.8 Commuting Expenses. The Company will provide Executive or
his immediate family with one round trip per week between California and New
York, for up to six months after the start of Executive's employment.
3.9 Taxation. Any amount received by the Executive for
administrative expenses, car allowance, relocation expenses or commuting
expenses that is required to be so treated will be treated as taxable income and
reflected on the Company's Form W-2 report.
3.10 Compensation Review. The Board will annually review
Executive's salary, performance bonus, and incentive stock options to ensure
that they are commensurate with work performed. In addition, the Company will
annually review and mutually establish with Executive the goals to be used in
evaluating Executive's performance bonus.
4. Stock.
4.1 Stock Options. The Board will grant Executive a
nonstatutory stock option to purchase one hundred seventy thousand (170,000)
shares of the Company's Common Stock under the Company's 1995 Stock Option Plan
(the "Plan"). The exercise price of such option will be the fair market value of
the Common Stock on the date on which Executive begins employment with the
Company (the "Employment Date"). The option will vest over five years, with
thirty four thousand (34,000) shares vesting on the first anniversary of
Employmenet Date, and eight thousand five hundred (8,500) shares vesting every
June 30, September 30, December 30, and March 30 thereafter. Vesting ceases if
Executive's employment terminates at any time for any reason, with the following
exceptions. (a) Executive is retained by the Company in a post-employment
consulting agreement as described in Section 8 below, providing for additional
year of vesting; and (b) if a transaction described in Section 10(b) of the Plan
occurs, and Executive is either demoted or terminated without cause (as defined
in Section 7.2 below) within two years following such transaction, then vesting
of the remaining unvested options will accelerate, such that Executive will be
vested in options with respect to a toal of one hundred seventy thousand
(170,000) shares of the Company's Common Stock. For purposes of this Agreement,
"demoted" means that, without Executive's consent, a material reduction in or
modification to, Executive's base salary, duties and responsibilities, title, or
reporting relationship has occurred.
4.2 Stock Grant. The Board will grant Executive an aggregate
of thirty thousand (30,000) shares of the Company's Common Stock, subject to
applicable securities law restrictions, over two years. Three thousand seven
hundred and fifty (3,750) shares will be granted following the completion of
each quarter of service with the Company in an executive capacity, on June 30,
1998 and 1999; September 30, 1998 and 1999; December 30, 1998 and 1999; and
March 30, 1999 and 2000. Executive will bear all tax responsibilities for these
grants and will make arrangements with the Company to ensure payment of taxes
and compliance with tax withholdings. In lieu of Executive's having to sell
stock in order to make any of the required tax payments, the Company agrees to
lend him, for up to two (2) years, at the minimum interest rate required by the
taxing authorities to avoid the imputation of taxes, an amount equal to the
Executive's state and federal tax withholding obligation arising from the stock
grant, any such loans to be secured by Executive's stock. Granting ceases if
Executive's employment terminates at any time for any reason, with the following
3
<PAGE>
exceptions. If a transaction described in Section 10(b) of the Plan occurs and
Executive is either demoted or terminated without cause (as defined in Section
7.2 below) within two years following such transaction, granting of the
remaining ungranted shares will accelerate such that Executive will be granted a
total of thirty thousand (30,000) shares of the Company's Common Stock. Upon
granting, each individual grant will be fully earned and vested.
5. Proprietary Information Obligations.
5.1 Agreement. Executive agrees to execute and abide by the
Proprietary Information and Inventions Agreement attached hereto as Exhibit B.
5.2 Remedies. Executive's duties under the Proprietary
Information and Inventions Agreement shall survive termination of his employment
with the Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
6. Outside Activities.
6.1 Except with the prior written consent of the Company's
Board of Directors, Executive will not during the term of this Agreement
undertake or engage in any other employment, occupation or business enterprise,
other than ones in which Executive is a passive investor within the limitations
set forth in Section 6.3 below. Executive may engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of his duties hereunder.
6.2 Except as permitted by Section 6.3, Executive agrees not
to acquire, assume or participate in, directly or indirectly, any position,
investment or interest known by him to be adverse or antagonistic to the
Company, its business or prospects, financial or otherwise.
6.3 During the term of his employment by the Company, except
on behalf of the Company, Executive will not directly or indirectly, whether as
an officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any
4
<PAGE>
capacity whatsoever engage in, become financially interested in, be employed by
or have any business connection with any other person, corporation, firm,
partnership or other entity whatsoever which were known by him to compete
directly with the Company, throughout the world, in any line of business engaged
in (or planned to be engaged in) by the Company; provided, however, that
anything above to the contrary notwithstanding, he may own, as a passive
investor, securities of any competitor corporation, so long as his direct
holdings in any one such corporation shall not in the aggregate constitute more
than 1% of the voting stock of such corporation.
7. Termination Of Employment.
7.1 Termination Without Cause Or With Good Reason.
(a) The Company shall have the right to terminate
Executive's employment with the Company at any time without cause.
(b) In the event Executive's employment is terminated
without cause, or in the event Executive resigns for Good Reason (defined as the
Company's having appointed another person as Chief Executive Officer), the
Company shall provide Executive with the following: (i) a one-year consulting
agreement as described in Sections 8 and 9 below; and (ii) outplacement
services.
7.2 Termination for Cause.
(a) The Company shall have the right to terminate
Executive's employment with the Company at any time for cause.
(b) "Cause" for termination shall be determined by
the Company based on the Board's reasonable belief that one or more of the
following has occurred: (a) Executive's indictment or conviction of any felony
or of any crime involving dishonesty; (b) Executive's participation in any fraud
against the Company; (c) breach of Executive's duties to the Company, including
persistent unsatisfactory performance of job duties, provided that the Company
has provided advance written notice to Executive for at least thirty (30) days
and Executive has not cured such breach to the satisfaction of the Board within
said 30-day period; (d) Executive's intentional damage to any property of the
Company; or (e) conduct by Executive which in the good faith and reasonable
determination of the Board demonstrates gross unfitness to serve, provided that
the Company has provided advance written notice to Executive for at least thirty
(30) days and Executive has not cured such breach to the satisfaction of the
Board within said 30-day period.
(c) In the event Executive's employment is terminated
at any time with cause, he will not be entitled to severance pay, pay in lieu of
notice or any other such compensation.
7.3 Voluntary or Mutual Termination.
(a) Executive may voluntarily terminate his
employment with the Company at any time, after which no further compensation
will be paid to Executive.
5
<PAGE>
(b) In the event Executive voluntarily terminates his
employment, he will not be entitled to severance pay, pay in lieu of notice or
any other such compensation.
8. Post-Employment Consultation.
Upon the termination of Executive's employment with the
Company pursuant to Section 7.1(b), the Company shall retain Executive as a
consultant to be available to render consulting services in Executive's area of
expertise or special competence for one year ("Consulting Period"), for up to
ten (10) hours each month, for which the Company shall pay Executive Executive's
monthly base salary, whether or not Executive shall be called upon to render any
services in any such month. During the Consulting Period, Executive's stock
options and stock grant will continue to vest at the rate in effect at the time
of termination. Vesting of stock options and the stock grant will cease at the
end of the Consulting Period. Any out-of-pocket expenses which Executive's
consulting activities for the Company may require will be reimbursed against
receipts and vouchers therefor in accordance with the Company's policies in
force from time to time.
9. Post-Employment Activities.
If the Company retains Executive as a consultant pursuant to
Section 8 above, then the following restrictions shall apply so long as the
Company retains Executive as a consultant:
9.1 Absent the Company's prior written approval upon
instructions of its Board of Directors, Executive will not directly or
indirectly engage in activities (similar or reasonably related to those in which
Executive shall have engaged hereunder during the two years immediately
preceding the termination of Executive's employment with the Company) nor render
services (similar or reasonably related to those which Executive shall have
rendered hereunder during such two years) in either case to any firm or business
organization which directly competes with the Company in any line of business
engaged in (or planed to be engaged in) by the Company, whether now existing or
hereafter established, nor shall Executive engage in such activities nor render
such services to any other person or entity engaged or about to become engaged
in such activities to, for or on behalf of any such firm or business
organization, nor shall Executive entice, induce or encourage any of the
company's other employees to engage in any activity which, were it done by
Executive, would violate any provision of the Proprietary Information Agreement
or this Section 9.
9.2 The Company upon instruction of its Board of Directors may
give Executive written approval(s) to engage personally in any activity or
render services referred to in Section 9.1 if it secures written assurances
(satisfactory to the Company and its counsel) from Executive and from the
prospective employer(s) that the integrity of the Proprietary Information
Agreement will not in any way be jeopardized by such activities, provided the
burden of so establishing the foregoing to the satisfaction of the Company and
said counsel shall be upon Executive and his prospective employer(s).
6
<PAGE>
9.3 The provisions of Section 6.3 shall be applicable to
Executive and Executive shall comply therewith. As applied to such consulting
period, the term "any line of business engaged in (or planned to be engaged in)
by the Company", as used in Section 6.3, shall be applied as at the date of
termination of Executive's employment.
10. Noninterference.
For two (2) years immediately following the termination of
employment hereunder, Executive agrees not to interfere with the business of the
Company by:
(a) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in order
to become an employee, consultant or independent contractor to or for any
competitor of the Company; or
(b) directly or indirectly soliciting the business of any
customer of the Company, for products or services competitive with Molecular
Devices products or services, which customer at the time of termination or one
year immediately prior thereto was listed on the Company's customer list.
11. General Provisions.
11.1 Notices. Any notices provided hereunder must be in
writing and shall be deemed effective upon the earlier of personal delivery
(including personal delivery by fax) or the third day after mailing by first
class mail, to the Company at its primary office location and to Executive at
his address as listed on the Company payroll.
11.2 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
11.3 Waiver. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
11.4 Complete Agreement. This Agreement and its Exhibits,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing approved by the Board.
11.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
7
<PAGE>
11.6 Headings. The headings of the sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
11.7 Successors and Assigns. This Agreement is intended to
bind and inure to the benefit of and be enforceable by Executive and the
Company, and their respective successors, assigns, heirs, executors and
administrators, except that Executive may not assign any of his duties hereunder
and he may not assign any of his rights hereunder without the written consent of
the Company, which shall not be withheld unreasonably.
11.8 Choice of Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of California, without regard to conflict of laws principles.
In Witness Whereof, the parties have executed this Agreement on the day
and year first above written.
Molecular Devices Corporation
By: Andre F. Marion
------------------------------
Date: 3/6/98
---------------------------
Accepted and agreed this 11th day of March, 1998.
/s/ Joseph D. Keegan
- ---------------------------------
Joseph D. Keegan
8
<PAGE>
EXHIBIT A
MOLECULAR DEVICES CORPORATION
RELOCATION AGREEMENT
Effective on March 11, 1998, I, Joseph D. Keegan hereby agree to the following
terms and conditions with respect to all relocation costs paid to me or on my
behalf by Molecular Devices Corporation in connection with my relocation from
New York to my new home in California (the "Relocation Costs"):
1. If I remain a full-time Molecular Devices Corporation employee for
twelve months from the effective date stated above, I shall have no
obligation to repay any of the Relocation Costs.
2. If my employment terminates within one year from the effective date, I
agree to repay to Molecular Devices Corporation a portion of the
Relocation Costs, or other amounts paid to federal or state tax
agencies as withholding, to be calculated as follows:
For each full month of full-time employment, Molecular Devices
Corporation will forgive 1/12 of my Relocation Costs. The
remaining unforgiven Relocation Costs are due and payable to
Molecular Devices on demand.
3. I understand that all reimbursements and allowances paid to me as
Relocation Costs, including amounts withheld as payroll deductions in
connection with my relocation must be included as a part of my gross
income and therefore may be subject to tax. If I am required under
paragraph 2 of this agreement to repay Relocation Costs to Molecular
Devices Corporation, I will repay the entire amount determined under
paragraph 2, and amounts withheld as payroll deductions.
4. I understand that nothing in this agreement assures me of a continuing
position with Molecular Devices Corporation, or in any way changes the
Molecular Devices Corporation's right to end the employment
relationship as it deems necessary.
5. If I am obligated under this agreement to repay Molecular Devices
Corporation for Relocation Costs, I hereby authorize Molecular Devices
Corporation to deduct the entire amount due from my final paycheck,
including from any vacation pay due.
6. Before submitting expenses for reimbursement as Relocation Costs, I
will inform Molecular Devices Corporation whether my spouse is eligible
for relocation benefits from another employer, and if so, the terms of
those benefits. If my spouse is eligible for any of the same relocation
benefits which the Molecular Devices Corporation has offered me, I will
only receive one-half of any such benefits from the Molecular Devices
Corporation.
9
<PAGE>
/s/ Joseph D. Keegan 3/11/98
- --------------------------------- ------------------------------
Joseph D. Keegan Date
<PAGE>
EXHIBIT B
MOLECULAR DEVICES CORPORATION
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Molecular
Devices Corporation (the "Company"), and the compensation now and hereafter paid
to me, I hereby agree as follows:
1. Nondisclosure
1.1 Recognition of Company's Rights; Nondisclosure. At all times during
my employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 Proprietary Information. The term "Proprietary Information" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
tangible and intangible information relating to antibodies and other biological
materials, cell lines, samples of assay components, media and/or cell lines and
procedures and formulations for producing any such assay components, media
and/or cell lines, formulations, products, processes, know-how, designs,
formulas, methods, developmental or experimental work, clinical data,
improvements, discoveries, plans for research, new products, marketing and
selling, business plans, budgets and unpublished financial statements, licenses,
prices and costs, suppliers and customers, and information regarding the skills
and compensation of other employees of the Company. Notwithstanding the
foregoing, it is understood that, at all such times, I am free to use
information which is generally known in the trade or industry, which is not
gained as result of a breach of this Agreement, and my own, skill, knowledge,
know-how and experience to whatever extent and in whichever way I wish.
1.3 Third Party Information. I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information ("Third Party Information") subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than Company personnel who
need to know such information in connection with their work for the Company) or
use, except in connection with my work for the Company, Third Party Information
1
<PAGE>
unless expressly authorized by an officer of the Company in writing.
1.4 No Improper Use of Information of Prior Employers and Others.
During my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. Assignment of Inventions.
2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.
2.2 Prior Inventions. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Attachment B (Previous Inventions) attached hereto a complete list
of all Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived, developed or reduced
to practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"Prior Inventions"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Attachment B but am only to disclose a cursory name for
each such invention, a listing of the party(ins) to whom it belongs and the fact
that full disclosure as to such inventions has not been made for that reason. A
space is provided on Attachment B for such purpose. If no such disclosure is
attached, I represent that there are no Prior Inventions. If, in the course of
my employment with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Company Inventions without the Company's prior written
consent.
2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I
hereby assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions."
2.4 Nonassignable Inventions. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Attachment A (Limited
2
<PAGE>
Exclusion Notification) and agree that my signature acknowledges receipt of the
notification.
2.5 Obligation to Keep Company Informed. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.
2.6 Government or Third Party. I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 Enforcement of Proprietary Rights. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. Records. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
3
<PAGE>
shall be available to and remain the sole property of the Company at all times.
4. Additional Activities. I agree that during the period of my employment by the
Company I will not, without the Company's express written consent, engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, my employment by the Company. I agree further that for the period
of my employment by the Company and for one (l) year after the date of
termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.
5. No Conflicting Obligation. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.
6. Return of Company Documents. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.
7. Legal and Equitable Remedies. Because my services are personal and unique and
because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.
8. Notices. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.
9. Notification of New Employer. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.
10. General Provisions.
10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement
will be governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Santa Clara County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.
10.2 Severability. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been
4
<PAGE>
contained herein. If moreover, any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
10.3 Successors and Assigns. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
10.6 Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
This Agreement shall be effective as of the first day of my employment
with the Company, namely: March 30, 1998.
5
<PAGE>
I have read this Agreement carefully and understand its terms. I have
completely filled out Exhibit B to this Agreement.
Dated: 3/11/98
--------------------------
/s/ Joseph D. Keegan
- --------------------------------
Joseph D. Keegan
Accepted and Agreed To:
MOLECULAR DEVICES CORPORATION
By: Andre F. Marion
-----------------------------
Title: President/CEO
--------------------------
556 Kingsley Ave.
- --------------------------------
(Address)
Palo Alto, Ca. 94301
- --------------------------------
Dated: 3/6/98
--------------------------
6
<PAGE>
ATTACHMENT A
LIMITED EXCLUSION NOTIFICATION
This is to notify you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:
1. Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;
2. Result from any work performed by you for the Company.
To the extent a provision in the foregoing Agreement purports to
require you to assign an invention otherwise excluded from the preceding
paragraph, the provision is against the public policy of this state and is
unenforceable.
This limited exclusion does not apply to any patent or invention
covered by a contract between the Company and the United States or any of its
agencies requiring full title to such patent or invention to be in the United
States.
I acknowledge receipt of a copy of this notification.
By:
Joseph D. Keegan
3/11/98
Date:
Witnessed by:
_________________________________________
(Printed Name of Representative)
7
<PAGE>
ATTACHMENT B
TO: Molecular Devices Corporation
FROM: Joseph D. Keegan
DATE: 3/11/98
SUBJECT: Previous Inventions
1. Except as listed in Section 2 below, the following is a complete list of all
inventions or improvements relevant to the subject matter of my employment by
Molecular Devices (the "Company") that have been made or conceived or first
reduced to practice by me alone or jointly with others prior to my engagement by
the Company:
: No inventions or improvements.
: See below:
__________
__________
__________
: Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the disclosure
under Section 1 above with respect to inventions or improvements generally
listed below, the proprietary rights and duty of confidentiality with respect to
which I owe to the following party(ins):
Invention or Party(ies) Relationship
Improvement
1. -------------------------- ------------------- ------------------
2. -------------------------- ------------------- ------------------
3. -------------------------- ------------------- ------------------
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet as of June 30, 1998 and the
Consolidated Statement of Income for the six months ended June 30, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 29,786
<SECURITIES> 0
<RECEIVABLES> 10,163
<ALLOWANCES> 180
<INVENTORY> 3,668
<CURRENT-ASSETS> 47,275
<PP&E> 6,395
<DEPRECIATION> 4,906
<TOTAL-ASSETS> 47,275
<CURRENT-LIABILITIES> 6,162
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 41,104
<TOTAL-LIABILITY-AND-EQUITY> 47,275
<SALES> 22,213
<TOTAL-REVENUES> 22,213
<CGS> 8,223
<TOTAL-COSTS> 8,223
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,386
<INCOME-TAX> 2,074
<INCOME-CONTINUING> 3,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,312
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This RESTATED schedule contains summary financial information extracted
from the Condensed Consolidated Balance Sheet as of June 30, 1997 and the
Consolidated Statement of Income for the six months ended June 30, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 22,134
<SECURITIES> 0
<RECEIVABLES> 7,993
<ALLOWANCES> 185
<INVENTORY> 3,765
<CURRENT-ASSETS> 36,509
<PP&E> 5,735
<DEPRECIATION> 4,175
<TOTAL-ASSETS> 38,279
<CURRENT-LIABILITIES> 6,133
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 32,137
<TOTAL-LIABILITY-AND-EQUITY> 38,279
<SALES> 18,117
<TOTAL-REVENUES> 18,124
<CGS> 7,066
<TOTAL-COSTS> 7,066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,778
<INCOME-TAX> 1,436
<INCOME-CONTINUING> 2,342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,342
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.24
</TABLE>
