<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1999
REGISTRATION NO. 333-87453
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SYMYX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 77-0397908
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
SYMYX TECHNOLOGIES, INC.
3100 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 764-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN D. GOLDBY
CHIEF EXECUTIVE OFFICER
SYMYX TECHNOLOGIES, INC.
3100 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 764-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MARIO M. ROSATI, ESQ. STANTON D. WONG, ESQ.
CHRISTOPHER D. MITCHELL, ESQ. JOHN L. DONAHUE, ESQ.
JASON M. BRADY, ESQ. WILLIAM A. HINES, ESQ.
ALEXANDER D. PHILLIPS, ESQ. DAWN C. STEELE, ESQ.
PAUL G. CASTOR, ESQ. BLAIR M. WALTERS, ESQ.
WILSON SONSINI GOODRICH & ROSATI PILLSBURY MADISON & SUTRO LLP
PROFESSIONAL CORPORATION 2550 HANOVER STREET
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304
PALO ALTO, CA 94304 (650) 233-4500
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE PRICE(2) REGISTRATION FEE(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value............ 5,307,250 $14.00 $74,301,500 $20,656.00
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 692,250 shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
(3) This amount was previously paid pursuant to Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999
4,615,000 Shares
LOGO
Common Stock
------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $12.00 and $14.00 per share. We have made application to list our common
stock on The Nasdaq Stock Market's National Market under the symbol "SMMX."
The underwriters have an option to purchase a maximum of 692,250 additional
shares to cover over-allotments of shares.
At our request, the underwriters have reserved up to 923,000 shares of
common stock for sale at the initial public offering price to employees,
directors and other persons associated with us, including up to 884,500 shares
reserved for sale to Alejandro Zaffaroni, Peter Schultz and RA Investments, each
of whom is an existing stockholder of ours. These shares are part of the
4,615,000 shares that will be issued through the underwriters. See
"Underwriting."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS SYMYX
--------------- ------------- -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
INVEMED ASSOCIATES
SCHRODER & CO. INC.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............. 3
Risk Factors.................... 6
Forward-Looking Statements...... 16
Use of Proceeds................. 16
Dividend Policy................. 17
Trademarks...................... 17
Capitalization.................. 18
Dilution........................ 19
Selected Financial Data......... 20
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business........................ 30
Management...................... 41
Related Party Transactions...... 50
Principal Stockholders.......... 52
Description of Capital Stock.... 55
Shares Eligible for Future
Sale.......................... 58
Underwriting.................... 60
Notice to Canadian Residents.... 63
Legal Matters................... 64
Experts......................... 64
Additional Information.......... 64
Index to Financial Statements... F-1
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights information we present more fully
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of factors described under the heading "Risk Factors" and elsewhere in this
prospectus.
SYMYX TECHNOLOGIES, INC.
We are a pioneer of high-speed technologies for the discovery of new
materials. Materials and their diverse properties contribute in a vital way to
many of the products we use everyday. Examples include the catalysts used in the
manufacture of major chemicals, plastics and rubbers, the plastics in many of
our household and office goods, luminescent materials in lighting and computer
and television screens, the pigments in paint and the polymers on the bottom of
sneakers.
The chemical and electronics companies that produce these materials are
facing heightened pressure to achieve growth targets and increase profitability.
As a result, these companies need to reduce costs, increase innovation, and
create new businesses based on proprietary materials. We believe that we can
assist chemical and electronics companies by discovering new materials in a more
productive and cost-effective manner than by using traditional methods.
Our proprietary technologies, including instruments, software and methods,
represent complete processes designed to cost-effectively accelerate and
fundamentally change materials discovery. We create hundreds to thousands of
unique materials at one time and screen those materials rapidly and
automatically for desired properties. Our process of simultaneously making and
then screening large numbers of different materials is called the
"combinatorial" approach. We believe our combinatorial approach is up to 100
times faster than traditional research methods and reduces the cost per
experiment to as low as 1% of traditional research methods.
We apply our proprietary combinatorial technologies to discover materials
both for ourselves and in collaboration with major companies. Most of these
companies are in the chemical and electronics industries. Our current partners
include Agfa, BASF, Bayer, Celanese, Ciba Specialty Chemicals, Dow Chemical,
Osram OS (an affiliate of Siemens) and Unilever. These partners, government
agencies and other collaborators have committed a total of over $85 million in
near-term research funding, of which we have recognized revenue of $41 million
through September 30, 1999. If we discover a new material and our partner
commercializes the material, we generally will receive either royalties or
milestone payments.
We are applying our technology to discover a wide range of materials,
including catalysts to manufacture a broad array of chemicals, polymers for
coatings and additives, and materials for electronic applications. These areas
all represent substantial worldwide markets. In addition to our alliances, we
are seeking to meet the growing demand for combinatorial technologies by
offering selective access to some of our equipment and technologies, including
our Discovery Tools.
Dr. Alejandro Zaffaroni and Dr. Peter Schultz founded Symyx in 1994. Dr.
Zaffaroni is also a founder of ALZA, Affymax, Affymetrix and DNAX Research
Institute. The
3
<PAGE> 5
conceptual basis for Symyx draws from Affymax and Affymetrix, which
commercialized the use of high-speed combinatorial methods for pharmaceutical
and genetic research, respectively.
As a pioneer of high-speed materials discovery, we have focused on building
a strong competitive position through both our people and our intellectual
property. We have assembled a diverse technical and scientific team to enable us
to create, validate and apply high-speed discovery technologies. Our team
includes chemists, physicists, engineers and programmers. In addition, we have
filed over 80 patent applications in the United States and more than 110
worldwide, covering combinatorial methodologies, instruments and software and
novel materials.
Our main facility is located at 3100 Central Expressway, Santa Clara, CA
95051 and our telephone number is (408) 764-2000. We were incorporated in
California in September 1994 and reincorporated in Delaware in February 1999.
THE OFFERING
Common stock offered.............. 4,615,000 shares
Common stock to be outstanding
after this offering............... 27,761,014 shares
Use of proceeds................... General corporate purposes, including
working capital.
Proposed Nasdaq National Market
symbol.......................... SMMX
Common stock to be outstanding after this offering is based on 23,146,014
shares of common stock outstanding as of September 30, 1999. It does not
include:
- 2,002,041 shares subject to stock options outstanding as of September 30,
1999; and
- 1,528,521 shares available for future grant or issuance under our stock
option plans as of September 30, 1999.
Except as otherwise indicated, all of the information in this prospectus:
- reflects the automatic conversion of each outstanding share of preferred
stock into 0.7778 shares of common stock immediately prior to the closing
of this offering;
- reflects a 0.7778-for-1 reverse stock split of our outstanding common
stock that was effected on October 22, 1999; and
- assumes no exercise of the underwriters' over-allotment option.
4
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing per share data
below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue............................. $ -- $ 4,806 $13,787 $10,035 $22,530
Operating expenses.................. 3,050 10,893 22,328 16,719 24,250
Loss from operations................ (3,050) (6,087) (8,541) (6,684) (1,720)
Net loss............................ (2,681) (5,596) (8,155) (6,454) (989)
Pro forma basic and diluted net loss
per share......................... $ (0.46) $ (0.05)
Shares used in computing pro forma
basic and diluted net loss per
share............................. 17,737 21,538
</TABLE>
In the "as adjusted" column below, we have adjusted the actual balance
sheet data to give effect to receipt of the net proceeds from the sale in this
offering of 4,615,000 shares of common stock at an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses and assuming the
automatic conversion of each outstanding share of preferred stock into 0.7778
shares of common stock immediately prior to the closing of this offering.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments................... $39,883 $ 94,678
Working capital.......................................... 2,828 57,623
Total assets............................................. 60,627 115,422
Long-term obligations, net of current portion............ 7,014 7,014
Total stockholders' equity............................... 38,365 93,160
</TABLE>
5
<PAGE> 7
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we describe below, that are not presently
known to us or that we believe are immaterial may also impair our business
operations. These risks could, if they occur, harm our business and our
operating results. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment.
WE ARE DEPLOYING NEW TECHNOLOGY IN A NEW BUSINESS AND, AS A RESULT, WE MAY NOT
BE ABLE TO ACHIEVE PROFITABILITY
Our combinatorial materials discovery technologies and processes are new.
To date, our partners have not successfully commercialized as products any
materials that we have discovered using these technologies and processes.
Discovery and development of new materials is a highly uncertain process.
Accordingly, because of these uncertainties, our discovery process may not
result in the identification of development candidates we or our partners will
commercialize. If we are not able to use our technologies to discover new
materials with significant commercial potential, we will be unable to achieve
our objectives or build a sustainable or profitable business.
WE ARE DEPENDENT UPON ACCEPTANCE OF OUR TECHNOLOGY AND APPROACH BY CUSTOMERS,
AND IF WE CANNOT ACHIEVE MARKET ACCEPTANCE FROM POTENTIAL CUSTOMERS, WE WILL BE
UNABLE TO BUILD A SUSTAINABLE OR PROFITABLE BUSINESS
Our ability to succeed is also dependent upon the acceptance by potential
customers of our high throughput screening technology as an effective tool in
the discovery of new materials. Historically, chemical companies have conducted
basic research and discovery activities internally using traditional manual
materials discovery methods. In order for us to achieve our business objectives,
we must convince these companies that our technology and capabilities justify
outsourcing part of their basic research and discovery programs. If we cannot
convince companies in the chemical industry of the effectiveness of our
automated discovery methods, we may be unable to keep our existing customers or
attract additional customers on acceptable terms or develop a sustainable,
profitable business.
WE ARE DEPENDENT ON THE RESEARCH AND DEVELOPMENT ACTIVITIES OF COMPANIES IN THE
CHEMICAL INDUSTRY, AND INDUSTRY DECLINES OR REDUCTIONS IN RESEARCH AND
DEVELOPMENT ACTIVITIES COULD HARM OUR BUSINESS
The market for our discovery services and instrumentation within the
chemical industry depends on our customers' ability and willingness to invest in
research and development. Substantially all of our revenues are attributable to
our research collaborations. Our future revenues will also be dependent on sales
of Discovery Tools and other instrumentation to chemical companies.
Many companies in the chemical industry have, in the past several years,
experienced declining profitability. In addition, many chemical products have
become commodity products which compete primarily on the basis of price. As a
result, some chemical companies have reduced their research and development
activities. If commoditization of
6
<PAGE> 8
chemical products and other pressures affecting the industry continue in the
future, more companies could adopt strategies that involve significant
reductions in their research and development programs. Although we believe that
our approach can help chemical companies increase the efficiency of their
research and development activities, our efforts to convince them of this value
may be unsuccessful. To the extent that chemical companies reduce their research
and development activities, they would be less likely to do business with us.
Decisions by chemical companies to reduce their research and development
activities could therefore reduce our revenues and harm our business and
operating results.
WE CANNOT PREDICT THE PACE, QUALITY OR NUMBER OF DISCOVERIES WE MAY GENERATE,
AND ANY INABILITY OF OURS TO GENERATE A SIGNIFICANT NUMBER OF DISCOVERIES WOULD
REDUCE OUR REVENUES AND HARM OUR BUSINESS
Our future revenues and profitability are dependent upon our ability to
achieve discoveries. Because of the inherently uncertain nature of research
activities, we cannot predict with a high level of precision the pace with which
we may generate discoveries or the quality of any discoveries that we may
generate. Due to the uncertain nature of materials discovery, in which several
hundred thousand compounds must often be screened to identify a single
development candidate, we may not generate the number of discoveries that we
would expect to generate from a given number of experiments. In addition, our
development candidates may not result in products having the commercial
potential we or our collaborators anticipate. In either case, our future
revenues from our research collaborations and from commercialization of products
would likely decline. In addition, our existing and potential new customers may
become reluctant to renew or enter into new agreements with us. As a result, our
failure to generate discoveries and development candidates would reduce our
revenues and harm our business and operating results.
WE ARE DEPENDENT ON OUR COLLABORATIONS WITH MAJOR COMPANIES, AND THE FAILURE OF
OUR COLLABORATIVE PARTNERS TO SUCCESSFULLY COMMERCIALIZE PRODUCTS WOULD REDUCE
OUR REVENUES AND HARM OUR BUSINESS
To date, substantially all of our revenues have come from collaborative
arrangements with chemical and electronics companies. These contracts expire
after a fixed period of time. If they are not renewed or if we do not enter into
new collaborative arrangements, our business and operating results will be
harmed. For example, our contracts with the B.F. Goodrich Company and Hoechst AG
were terminated by mutual agreement as these companies shifted their business
away from chemicals.
For us to achieve and sustain a significant level of profitability, we must
achieve discoveries with significant commercial potential, and our collaborators
must successfully commercialize products based on our discoveries. We will not
receive royalties on sales of products by our collaborators until the
collaborator has commenced commercial sales of a product resulting from the
collaboration. We are dependent upon our collaborative partners to successfully
commercialize products resulting from our collaborations. The failure of our
partners to commercialize development candidates resulting from our research
efforts would reduce our revenues and would harm our business and operating
results.
7
<PAGE> 9
WE INTEND TO CONDUCT PROPRIETARY RESEARCH PROGRAMS, AND ANY CONFLICTS WITH OUR
COLLABORATORS OR ANY INABILITY TO COMMERCIALIZE DEVELOPMENT CANDIDATES RESULTING
FROM THIS RESEARCH WOULD HARM OUR BUSINESS
Our strategy involves conducting proprietary research programs. These
programs are focused on discovery of products for specialty markets that have
fewer barriers to entry for an emerging company. In general, our collaborative
research programs are focused on commodity chemical markets, which are larger
than fine chemical and specialty chemical markets that are the focus of our
proprietary programs. We believe that this differentiation of focus will enable
us to minimize conflicts with our collaborators relating to rights to
potentially overlapping leads developed through our proprietary programs and
through programs funded by a collaborator. However, conflicts between us and a
collaborator could potentially arise, particularly if we were to discover a
material in one of our proprietary programs that was a potential target of one
of our collaborative programs. In this event, we may become involved in a
dispute with our collaborator regarding the material. Disputes of this nature
could harm the relationship between us and our collaborator, and concerns
regarding our proprietary research programs could also affect our ability to
enter into new collaborative relationships. If circumstances surrounding our
proprietary research programs were to affect our existing collaborative
relationships or our ability to enter into new relationships, our revenues and
operating results would decline.
In addition, we will either commercialize development candidates resulting
from our proprietary programs directly or through licensing to other companies.
In order for us to commercialize these development candidates directly, we would
need to develop, or obtain through outsourcing arrangements, the capability to
manufacture, market and sell chemical products. We do not have this capability,
and we may not be able to develop or otherwise obtain the requisite
manufacturing, marketing and sales capabilities. If we are unable to
successfully commercialize products resulting from our proprietary research
efforts, our revenues and operating results would decline.
WE HAVE SOLD ONLY ONE DISCOVERY TOOLS SYSTEM, AND WE CANNOT ASSURE YOU THAT WE
WILL BE ABLE TO BUILD A SUSTAINABLE BUSINESS RELATED TO THE SALE OF ADDITIONAL
SYSTEMS
We have sold only one of our Discovery Tools systems. Because of the high
cost and complexity of these systems, the sales cycle for them is likely to be
long. Sales of these systems will require us to educate our potential customers
about the full benefits of these systems, which may require significant time.
Due to these factors, sales of Discovery Tools systems will be subject to a
number of significant risks over which we have little or no control, including:
- customers' budgetary constraints and internal acceptance review
procedures; and
- potential downturns in general or in industry specific economic
conditions.
If the cycle for Discovery Tools systems lengthens unexpectedly, it could
adversely affect the timing of our revenues.
8
<PAGE> 10
WE WILL NEED TO DEVELOP MANUFACTURING, SALES AND MARKETING CAPABILITIES FOR
DISCOVERY TOOLS, AND IF WE ARE UNABLE TO DO SO, WE WILL BE UNABLE TO BUILD OUR
DISCOVERY TOOLS BUSINESS
In order to successfully market and sell these systems, we will need to
develop the capability to manufacture, market and sell large capital equipment
items. Although we have several business development professionals with
experience in this area, we may need to hire additional personnel. We may not be
able to develop the necessary manufacturing capability or to sell additional
systems and we may not be able to build a sustainable business related to the
sale of these systems. If we are not able to build the business infrastructure
to support our Discovery Tools business, we will be unable to expand this
business. Because we expect future revenue growth from the sale of Discovery
Tools, our revenues may decline or not grow as anticipated if we are unable
build the infrastructure to support this business.
WE INTEND TO COMMERCIALIZE OUR MANUAL LABORATORY INSTRUMENTS THROUGH A THIRD
PARTY ARRANGEMENT, AND IF THIS THIRD PARTY DOES NOT PERFORM EFFECTIVELY, OUR
ABILITY TO GENERATE REVENUE FROM THE SALE OF THESE PRODUCTS WILL BE HARMED
We intend to commercialize our manual laboratory instruments through our
relationship with Argonaut Technologies. The commercial success of these
instruments will depend in large part on their features and price as compared to
competing products and on their ability to achieve market acceptance. In
addition, our ability to realize significant commercial sales of these
instruments will also depend on the efforts of Argonaut in promoting, marketing
and selling these instruments. Argonaut's efforts in this regard will be outside
of our control. Accordingly, to the extent that Argonaut fails to effectively
promote, market and sell our manual instruments, our revenues from the sales of
these instruments, and therefore our operating results, would be harmed.
WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE, CAUSING INVESTOR LOSSES
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
fluctuate significantly or decline. For example, our revenues for the three
months ended September 30, 1999 were $7.8 million, as compared to $3.7 million
for the three months ended September 30, 1998. This increase was primarily due
to revenues from new collaborative relationships. Revenues in future fiscal
periods may be greater or less than revenues in the immediately preceding period
or in the comparable period of the prior year. Some of the factors which could
cause our operating results to fluctuate include:
- expiration of research contracts with major chemical companies, which may
not be renewed or replaced with contracts with other companies;
- the success rate of our discovery efforts associated with milestones and
royalties;
- the timing and willingness of partners to commercialize our discoveries
which would result in royalties;
- the size and timing of customer orders for, and shipments of, Discovery
Tools instrumentation; and
9
<PAGE> 11
- general and industry specific economic conditions, which may affect our
customers' capital investment levels.
A large portion of our expenses, including expenses for facilities,
equipment and personnel, are relatively fixed in nature. Accordingly, in the
event revenues decline or do not grow as anticipated due to expiration of
research contracts, failure to obtain new contracts or other factors, we may not
be able to correspondingly reduce our operating expenses. In addition, we plan
to significantly increase operating expenses in 2000. Failure to achieve
anticipated levels of revenues could therefore significantly harm our operating
results for a particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline, and investors would
experience a decline in the value of their investment.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel, including W. Henry Weinberg, our Senior Vice
President and Chief Technical Officer, and other key scientific and managerial
personnel. We do not have any key-person life insurance relating to our key
personnel. These employees are at-will and not subject to employment contracts.
We may not be successful in attracting and retaining key personnel in the
future.
As we seek to expand our operations, the hiring of qualified scientific and
technical personnel will be difficult due to the limited availability of
qualified professionals. The number of people with experience in the fields of
combinatorial materials science and combinatorial chemistry is limited, and we
face intense competition for these types of employees. We have in the past
experienced difficulty in recruiting qualified personnel. Failure to attract and
retain personnel, particularly scientific and technical personnel, would impair
our ability to grow our business and pursue new discovery initiatives and
collaborative arrangements.
COMPETITION COULD INCREASE, AND COMPETITIVE DEVELOPMENTS COULD RENDER OUR
TECHNOLOGIES OBSOLETE OR NONCOMPETITIVE, WHICH WOULD REDUCE OUR REVENUES AND
HARM OUR BUSINESS
The field of combinatorial materials science is increasingly competitive.
We are aware of several companies that are applying their expertise in
combinatorial chemistry to materials research and development. These companies
include Aperion LLC, a joint venture between CombiChem, Inc. and Catalytica,
Inc., and Cambridge Combinatorial Limited, an affiliate of Oxford Molecular PLC.
We are also aware of some chemical companies that have internal combinatorial
programs. In addition, Shell Chemicals is participating in a consortium in The
Netherlands and BASF is funding a new start-up company in Heidelberg, Germany
named HTE. BASF is also one of our collaborative partners. In addition, academic
and research institutions may seek to develop technologies that would be
competitive with our systems for materials discovery. Because combinatorial
materials science is an emerging field, competition from additional entrants may
increase.
10
<PAGE> 12
Many of our current and potential competitors have greater financial,
manufacturing, marketing and sales resources than we do. In addition, some of
our existing competitors may, individually or together with companies affiliated
with them, have greater human and scientific resources than we do. Our
competitors could develop technologies and methods for materials research and
discovery that render our technologies and systems obsolete or less competitive.
Any competitive developments of this nature would make our technologies and
methodologies less competitive. Accordingly, if competitors introduce new
materials discovery technologies that are faster or more cost-effective than our
technologies, customers may switch to these new technologies. We would then
experience a decline in our revenues and operating results.
ANY INABILITY OF OURS TO KEEP PACE WITH TECHNOLOGICAL ADVANCES AND EVOLVING
INDUSTRY STANDARDS WOULD HARM OUR BUSINESS
The market for our products is characterized by continuing technological
development, evolving industry standards and changing customer requirements. Due
to increasing competition in our field, it is likely that the pace of innovation
and technological change will increase. The introduction of products by our
direct competitors or others embodying new technologies, the emergence of new
industry standards or changes in customer requirements could render our existing
products obsolete, unmarketable or less competitive. Our success depends upon
our ability to enhance existing products and services and to respond to changing
customer requirements. Failure to develop and introduce new products and
services, or enhancements to existing products, in a timely manner in response
to changing market conditions or customer requirements will harm our future
revenues and our business and operating results.
OUR INABILITY TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS
The success of our business depends on our ability to protect our
intellectual property portfolio and obtain patents without infringing the
proprietary rights of others. If we do not effectively protect our intellectual
property, our business and operating results could be harmed.
Patents may not issue from our applications. Even if we are able to obtain
patents covering our technology, the patents may be challenged, circumvented,
invalidated or unenforceable. Competitors may develop similar technology or
design around any patents issued to us or our other intellectual property
rights. Our competitors would then be able to offer research services and
develop, manufacture and sell products which compete directly with our research
services and products. In that case, our revenues and operating results would
decline.
We also seek to protect our technology and processes in part by
confidentiality agreements with our collaborators, employees and consultants. We
also do not provide broad access to our proprietary technologies and processes
to collaborators. However, confidentiality agreements might be breached by
collaborators, former employees or others, and in that event, we might not have
adequate remedies for the breach. Further, our trade secrets might otherwise
become known or be independently discovered by competitors. Unauthorized
disclosure of our trade secrets could enable competitors to use some of our
proprietary technologies. This would harm our competitive position and could
cause our revenues and operating results to decline.
11
<PAGE> 13
LITIGATION OR OTHER PROCEEDINGS OR THIRD PARTY CLAIMS OF INFRINGEMENT COULD
REQUIRE US TO SPEND TIME AND MONEY AND COULD SHUT DOWN SOME OF OUR OPERATIONS
If we became involved in litigation or interference proceedings declared by
the United States Patent and Trademark Office, or oppositions or other
intellectual property proceedings outside of the United States, to defend our
intellectual property rights or as the result of alleged infringement of the
rights of others, we might have to spend significant amounts of money. The
litigation or proceedings could divert our management's time and efforts. An
adverse ruling, including an adverse decision as to the priority of our
inventions, would undercut or invalidate our intellectual property position. An
adverse ruling could also subject us to significant liability for damages or
prevent us from using or marketing systems, processes or products. Any of these
events would have a negative impact on our business and operating results. Even
unsuccessful claims could result in significant legal fees and other expenses,
diversion of management's time and disruptions in our business. Uncertainties
resulting from the initiation and continuation of any patent or related
litigation could harm our ability to compete, pending resolution of the disputed
matter.
We received a communication dated in December 1998 from a company claiming
that our activities may infringe one or more patents held by that company. We
responded in writing to this claim in February 1999 and indicated that we did
not believe we were infringing any of the company's patents. We have not
received any further communications from this company. We may receive
communications from this company or others in the future asserting that our
business or technologies infringe their intellectual property rights.
We believe we have taken adequate measures to assess the validity of our
intellectual property rights. Other than the communication described in the
preceding paragraph, we are not currently involved in any disputes with third
parties regarding intellectual property rights. However, we may become involved
in intellectual property disputes in the future. To settle these disputes, we
may need to obtain licenses to patents or other proprietary rights held by
others. However, these licenses might not be available on acceptable terms, or
at all. In that event, we could encounter delays in system, process or product
introductions while we attempt to design around the patents. Our redesigned
systems, processes or products may be inferior to our original designs or we may
be unable to continue system, process or product development in the particular
field. In either case, our competitive position, business, revenues and
operating results would likely suffer.
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS, AND ANY CLAIMS RELATING TO IMPROPER
HANDLING, STORAGE OR DISPOSAL OF THESE MATERIALS COULD SUBJECT US TO SIGNIFICANT
LIABILITIES
Our business involves the use of a broad range of hazardous chemicals and
materials. Environmental laws impose stringent civil and criminal penalties for
improper handling, disposal and storage of these materials. In addition, in the
event of an improper or unauthorized release of, or exposure of individuals to,
hazardous materials, we could be subject to civil damages due to personal injury
or property damage caused by the release or exposure. A failure to comply with
environmental laws could result in fines and the revocation of environmental
permits, which could prevent us from conducting our business. Accordingly, any
violation of environmental laws or failure to properly handle, store or dispose
of hazardous materials could result in restrictions on our ability to operate
our business and could require us to incur potentially significant costs for
personal injuries, property damage and environmental cleanup and remediation.
12
<PAGE> 14
WE HAVE EXPERIENCED SIGNIFICANT GROWTH, AND WE MUST IMPROVE OUR OPERATIONAL,
FINANCIAL AND MANAGEMENT CONTROLS AND SYSTEMS TO KEEP PACE WITH OUR GROWTH
We have experienced a period of rapid and substantial growth that has
placed and, if such growth continues, will continue to place a strain on our
human and capital resources. If we are unable to manage this growth effectively,
our business, results of operations or financial condition may be materially
adversely affected. We increased the number of our employees from 28 at December
31, 1996 to 152 at September 30, 1999. Our revenues increased from $4.8 million
in 1997 to $13.8 million in 1998 and $22.5 million for the nine months ended
September 30, 1999. Our ability to manage our operations and growth effectively
requires us to continue to improve our operational, financial and management
controls, reporting systems and procedures and hiring programs. Due to the pace
of our growth, we may be unable to successfully implement improvements to our
management information and control systems in an efficient or timely manner and
may discover deficiencies in existing systems and controls.
IF WE, OUR CUSTOMERS AND OUR SUPPLIERS FAIL TO REMEDY YEAR 2000 ISSUES, WE MAY
EXPERIENCE INTERRUPTIONS IN OUR RESEARCH PROGRAMS WHICH COULD HARM OUR BUSINESS
AND OPERATING RESULTS
If we, our customers, our providers of hardware and software, or our
third-party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the interruption of our research
programs. Presently we are unable to quantitatively estimate the duration and
extent of any such interruption, or estimate the effect such interruption may
have on our future revenue.
We cannot assure you that, despite our current assessments of the Year 2000
problems that may affect our business, we will be able to identify and correct
all Year 2000 problems on a timely basis. Similarly, we cannot assure you that
unknown or unanticipated Year 2000 issues will not arise. Accordingly, Year 2000
compliance efforts may involve significant time and expense and the occurrence
of unknown, unanticipated or unremediated Year 2000 problems could harm our
business and operating results. We currently have no contingency plans to
address the risks associated with unremediated Year 2000 problems.
SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US, AND MAY NOT MAKE
DECISIONS THAT ARE IN THE BEST INTERESTS OF ALL STOCKHOLDERS
After this offering, our officers, directors and principal stockholders
(greater than 5% stockholders) will together control approximately 33.0% of our
outstanding common stock. As a result, these stockholders, if they act together,
will be able to exert a significant degree of influence over our management and
affairs and over matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control of Symyx and might affect the market price of our common
stock, even when such a change may be in the best interests of all stockholders.
OUR STOCK PRICE MAY FLUCTUATE SUBSTANTIALLY
Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this
13
<PAGE> 15
offering or, if developed, may not be sustained. We and the representatives of
the underwriters will, through negotiations, determine the initial public
offering price of the shares of common stock. This price will not necessarily
reflect the market price of the common stock following this offering.
The market price for the common stock following this offering will be
affected by a number of factors, including the following:
- the announcement of new products or services by us or our competitors;
- quarterly variations in our or our competitors' results of operations;
- failure to achieve operating results projected by securities analysts;
- changes in earnings estimates or recommendations by securities analysts;
- developments in our industry; and
- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
These factors and fluctuations, as well as general economic, political and
market conditions, may materially adversely affect the market price of our
common stock.
OUR FACILITIES ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE OCCURRENCE
OF AN EARTHQUAKE OR OTHER CATASTROPHIC DISASTER COULD CAUSE DAMAGE TO OUR
FACILITIES AND EQUIPMENT AND HARM OUR BUSINESS
Our facilities are located in the Silicon Valley near known earthquake
fault zones and are vulnerable to damage from earthquakes. In October 1989, a
major earthquake that caused significant property damage and a number of
fatalities struck this area. We are also vulnerable to damage from other types
of disasters, including fire, floods, power loss, communications failures and
similar events. If any disaster were to occur, our ability to operate our
business at our facilities would be seriously, or potentially completely,
impaired. In addition, the unique nature of our research activities and of much
of our equipment could make it difficult for us to recover from a disaster. The
insurance we maintain may not be adequate to cover our losses resulting from
disasters or other business interruptions. Accordingly, an earthquake or other
disaster could harm our business and operating results.
POTENTIAL SALES OF SHARES ELIGIBLE FOR FUTURE SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE
If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. The shares sold in this offering will be freely tradable
immediately upon completion of this offering. In addition, on the 181st day
after completion of this offering, approximately 22,976,457 shares of our common
stock held by existing stockholders will be freely tradable, subject in some
instances to the volume and other limitations of Rule 144. Sales of these shares
and other shares of common stock held by existing stockholders could cause the
market price of our common stock to decline.
14
<PAGE> 16
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL, EVEN IF THIS WOULD BE BENEFICIAL TO
STOCKHOLDERS
Provisions of our amended and restated certificate of incorporation, bylaws
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. These provisions
include:
- a classified board of directors, in which our board is divided into three
classes with three year terms with only one class elected at each annual
meeting of stockholders, which means that a holder of a majority of our
common stock will need two annual meetings of stockholders to gain
control of the board;
- a provision which prohibits our stockholders from acting by written
consent without a meeting;
- a provision which permits only the board of directors, the president or
the chairman to call special meetings of stockholders; and
- a provision which requires advance notice of items of business to be
brought before stockholders meetings.
These provisions can be amended only with the vote of the holders of
66 2/3% of our outstanding capital stock.
AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
If you purchase shares of our common stock in this offering, you will incur
immediate dilution of $9.64 per share in pro forma net tangible book value. If
the holders of outstanding options or warrants exercise those options or
warrants, you will incur further dilution. See "Dilution."
15
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the federal securities laws that relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "intend," "potential" or "continue."
In addition, these forward-looking statements include, but are not limited
to, statements regarding the following:
- our combinatorial materials discovery technologies and processes;
- our ability to realize commercially valuable discoveries in our
collaborations with chemical and electronics companies and in our
proprietary programs;
- our plans to develop our Discovery Tools and instrumentation businesses;
- our intellectual property portfolio; and
- our business strategies and plans.
These statements are only predictions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus or to conform these statements to actual results.
USE OF PROCEEDS
We expect to receive net proceeds of approximately $54.8 million from the
sale of the 4,615,000 shares of common stock, at an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses. If the underwriters'
over-allotment option is exercised in full, our estimated net proceeds will be
$63.2 million.
We expect to use the net proceeds from this offering for general corporate
purposes, including working capital and research and development activities.
Pending use of the net proceeds of this offering, we intend to invest the net
proceeds in interest-bearing, investment-grade securities.
A portion of the net proceeds may be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. From time to time, in the ordinary course of business, we may
evaluate potential acquisitions of these businesses, products or technologies.
We have no current plans, agreements or commitments, and are not currently
engaged in any negotiations regarding any such transaction.
16
<PAGE> 18
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, to support the development
of our business and do not anticipate paying any cash dividends in the
foreseeable future.
TRADEMARKS
Symyx(R) is our registered trademark, and Symyx Technologies(TM), Discovery
Tools(TM), Library Studio(TM), PPR(TM), Endeavor(TM) and the Symyx logo are our
trademarks. Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth:
- the actual capitalization of Symyx at September 30, 1999;
- the pro forma capitalization of Symyx after giving effect to the
conversion of all outstanding shares of our preferred stock into
15,991,849 shares of common stock effective automatically immediately
prior to the closing of this offering; and
- the pro forma as adjusted capitalization after giving effect to the sale
of 4,615,000 shares of common stock in this offering at an assumed
initial public offering price of $13.00 per share and the application of
the net proceeds, after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
You should read this table in conjunction with our financial statements and
the related notes and Selected Financial Data included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Long-term obligations.................................... $ 7,014 $ 7,014 $ 7,014
Stockholders' equity:
Preferred stock, $0.001 par value, 23,650,000 shares
authorized, issuable in series:
Series A convertible, 1,000,000 shares designated,
issued and outstanding, (no shares outstanding pro
forma or pro forma as adjusted)..................... 1 -- --
Series B convertible, 8,650,000 shares designated,
8,600,687 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 9 -- --
Series C convertible, 8,000,000 shares designated,
6,750,284 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 7 -- --
Series D convertible, 6,000,000 shares designated,
4,210,185 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 4 -- --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 7,154,165 shares issued and outstanding
(23,146,014 shares outstanding pro forma and 27,761,014
shares outstanding pro forma as adjusted).............. 7 23 28
Additional paid-in capital............................... 59,995 60,000 114,790
Stockholder notes receivable............................. (731) (731) (731)
Deferred stock compensation.............................. (2,940) (2,940) (2,940)
Unrealized gain (loss) on investments.................... (58) (58) (58)
Accumulated deficit...................................... (17,929) (17,929) (17,929)
-------- -------- --------
Total stockholders' equity..................... 38,365 38,365 93,160
-------- -------- --------
Total capitalization........................... $ 45,379 $ 45,379 $100,174
======== ======== ========
</TABLE>
This table excludes the following shares:
- 2,002,041 shares subject to stock options outstanding as of September 30,
1999; and
- 1,528,521 shares reserved for issuance under our stock option plans as of
September 30, 1999.
For additional information regarding these shares, see Note 4 of Notes to
Financial Statements.
18
<PAGE> 20
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering.
The pro forma net tangible book value of Symyx at September 30, 1999, was
$38.4 million, or $1.66 per share of common stock. Pro forma net tangible book
value per share represents total tangible assets less total liabilities, divided
by the number of outstanding shares of common stock after giving effect to the
conversion of all outstanding shares of our preferred stock into 15,991,849
shares of common stock effective automatically immediately prior to the closing
of this offering. After giving effect to the sale of the 4,615,000 shares of
common stock at an assumed initial public offering price of $13.00 per share,
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses, our pro forma as adjusted net tangible book value
at September 30, 1999, would be $93.2 million or $3.36 per share. This
represents an immediate increase in the pro forma as adjusted net tangible book
value of $1.70 per share to existing stockholders and an immediate dilution of
$9.64 per share to new investors, or approximately 74% of the assumed offering
price of $13.00 per share. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $13.00
Pro forma net tangible book value per share at September 30,
1999........................................................ $1.66
Increase per share attributable to this offering....... 1.70
-----
Pro forma net tangible book value per share after this
offering.................................................. 3.36
------
Dilution per share to new investors......................... $ 9.64
======
</TABLE>
The following table shows on a pro forma as adjusted basis at September 30,
1999, after giving effect to the sale of the 4,615,000 shares of common stock at
an assumed initial public offering price of $13.00 per share, before deducting
estimated underwriting discounts and commissions and estimated offering
expenses, and conversion of all preferred stock into common stock for the number
of shares of common stock purchased from us, the total consideration paid to us
and the average price paid per share by existing stockholders and by new
investors purchasing common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 23,146,014 83.4% $ 54,073,281 47.4% $ 2.34
New investors............ 4,615,000 16.6 59,995,000 52.6 13.00
---------- ----- ------------ -----
Total.......... 27,761,014 100.0% $114,068,281 100.0%
========== ===== ============ =====
</TABLE>
The computations in the table above assume no exercise of any stock options
outstanding at September 30, 1999. As of September 30, 1999, there were options
outstanding to purchase a total of 2,002,041 shares of common stock at a
weighted average exercise price of $2.14 per share. If any of these options are
exercised, there will be further dilution to new public investors.
19
<PAGE> 21
SELECTED FINANCIAL DATA
The statement of operations data for the years ended December 31, 1996,
1997 and 1998 and the nine months ended September 30, 1999, and the balance
sheet data as of December 31, 1997 and 1998 and September 30, 1999 are derived
from our financial statements, which have been audited by Ernst & Young LLP,
independent auditors and are included elsewhere in this prospectus. The
statement of operations data for the period from inception through December 31,
1995 and the balance sheet data as of December 31, 1995 and 1996 are derived
from audited financial statements not included in this prospectus. The financial
data for the nine months ended September 30, 1998 are derived from unaudited
financial statements included elsewhere in this prospectus. We have prepared
this unaudited information on the same basis as the audited financial statements
and have included all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of our financial
position and operating results for such periods. When you read this selected
financial data, it is important that you also read the historical financial
statements and related notes included in this prospectus, as well as the section
of this prospectus related to "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Historical results are not necessarily
indicative of future results. See Note 1 of Notes to Financial Statements for an
explanation of the method used to determine the number of shares used in
computing pro forma net loss per share.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
PERIOD FROM INCEPTION YEAR ENDED DECEMBER 31, SEPTEMBER 30,
(SEPTEMBER 20, 1994) TO --------------------------- -----------------
DECEMBER 31, 1995 1996 1997 1998 1998 1999
----------------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue from collaborations........... $ -- $ -- $ 4,806 $13,787 $10,035 $22,530
Operating expenses:
Research and development............ 27 2,483 8,764 17,640 13,299 16,787
General and administrative.......... 481 567 2,129 4,500 3,350 4,641
Amortization of deferred
compensation...................... -- -- -- 188 70 2,822
------ ------- ------- ------- ------- -------
Total operating expenses.......... 508 3,050 10,893 22,328 16,719 24,250
------ ------- ------- ------- ------- -------
Loss from operations.................. (508) (3,050) (6,087) (8,541) (6,684) (1,720)
Interest income....................... -- 375 843 1,117 773 1,500
Interest and other expense............ -- (6) (352) (731) (543) (769)
------ ------- ------- ------- ------- -------
Net loss.............................. $ (508) $(2,681) $(5,596) (8,155) $(6,454) $ (989)
====== ======= ======= ======= ======= =======
Basic and diluted net loss per
share............................... $(0.40) $ (1.24) $ (1.97) $ (2.13) $ (1.77) $ (0.18)
====== ======= ======= ======= ======= =======
Shares used in computing basic and
diluted net loss per share.......... 1,269 2,168 2,845 3,829 3,656 5,546
====== ======= ======= ======= ======= =======
Pro forma basic and diluted net loss
per share........................... $ (0.46) $ (0.05)
======= =======
Shares used in computing pro forma
basic and diluted net loss per
share............................... 17,737 21,538
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ SEPTEMBER 30,
1995 1996 1997 1998 1999
------ ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments.................. $ 15 $ 9,349 $20,614 $35,121 $39,883
Working capital (deficit)............................... (510) 8,789 9,860 15,701 2,828
Total assets............................................ 19 10,674 34,861 52,903 60,627
Long-term obligations, net of current portion........... -- -- 4,455 7,592 7,014
Total stockholders' equity.............................. (506) 10,283 25,030 36,166 38,365
</TABLE>
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this prospectus,
the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and
similar expressions are included to identify forward-looking statements. Our
actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Symyx was founded in September 1994 and began significant operations in
April 1996. To date, our revenues and cash flow have come from research
collaborations with large chemical and electronics companies and government
grants. Our current corporate partners are Agfa-Gevaert N.V., BASF AG, Bayer AG,
Celanese Ltd., Ciba Specialty Chemicals, Inc., The Dow Chemical Company, Osram
Opto Semiconductors GmbH & Co. OHG and Unilever UK Central Resources Ltd. These
agreements are generally for a two to three year guaranteed term. Five of our
research contracts commenced in the last twelve months, representing over half
of our committed revenue. We expect that our revenues and cash flows for 2000
and 2001 will be comprised in large part of payments to be made under these
agreements. Four of our research contracts may end by their terms in 2000.
Revenue related to these contracts for the nine-month period ended September 30,
1999 was $6.4 million.
We have invested heavily in establishing the technology, instrumentation
and informatics necessary to pursue high throughput discovery for proprietary
materials. These materials include:
- catalysts for commodity chemicals and polyolefins;
- catalysts for fine chemicals;
- specialty polymers; and
- electronic materials.
These investments contributed to revenue increases from no revenue in
fiscal 1996 to $4.8 million in fiscal 1997 to $13.8 million in fiscal 1998 to
$22.5 million in the nine months ended September 30, 1999. Operating expenses
increased from $3.1 million in fiscal 1996 to $10.9 million in fiscal 1997 to
$22.3 million in fiscal 1998 to $24.2 million in the nine months ended September
30, 1999. Our total headcount increased from 28 employees at the end of fiscal
1996 to 76 employees at the end of fiscal 1997 to 108 employees at the end of
fiscal 1998 and to 152 employees at September 30, 1999.
We expect to continue to make significant investments in research and
development, including the development of new instruments and software, to
enhance our technologies. In addition, an important part of our strategy is to
expand our operations and employee base, and to build our resources for research
and development, business development and marketing.
We have incurred significant losses since our inception. As of September
30, 1999, our accumulated deficit was approximately $17.9 million. We expect to
incur additional
21
<PAGE> 23
operating losses over at least the next year as we continue to expand staffing,
equipment and facilities.
SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY
We recognize revenues from research collaboration agreements and government
grants as earned upon achievement of the performance requirements of the
agreements and grants. Payments received which are related to future performance
are deferred and recognized as revenue as the performance requirements are
achieved. As of September 30, 1999, we have deferred revenues of approximately
$9.1 million. The terms of our collaboration agreements generally require us to
perform minimum levels of research. Our sources of potential revenue for the
next several years are likely to be:
- payments under existing and possible future collaborative arrangements;
- government research grants;
- royalties from our partners based on revenues received from any products
commercialized under those agreements;
- sales of Discovery Tools and other instruments; and
- sales of any products discovered in our internal research programs.
See Note 2 of Notes to Financial Statements.
DEFERRED COMPENSATION
Deferred compensation for options granted to employees has been determined
as the difference between the deemed fair market value of our common stock on
the date options were granted and the exercise price. Deferred compensation for
options granted to consultants has been determined in accordance with Statement
of Financial Accounting Standards No. 123 as the fair value of the equity
instruments issued. Deferred compensation for options granted to consultants is
periodically remeasured as the underlying options vest.
In connection with the grant of stock options to employees and consultants,
we recorded deferred stock compensation of approximately $5.2 million in the
nine month period ended September 30, 1999 and $760,000 in the fiscal year ended
December 31, 1998. These amounts were initially recorded as a component of
stockholders' equity and are being amortized by charges to operations over the
vesting period of the options. We recorded amortization of deferred compensation
of approximately $2.8 million for the nine months ended September 30, 1999 and
$188,000 in fiscal 1998. The amortization expense relates to options awarded to
employees and consultants in all operating expense categories. See Note 4 of
Notes to Financial Statements. We anticipate recording additional deferred stock
compensation expense of approximately $465,000 for the three months ending
December 31, 1999.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
Revenues
Our total revenues increased 125% from $10.0 million for the nine months
ended September 30, 1998 to $22.5 million for the nine months ended September
30, 1999. This increase was due primarily to the addition of new research
collaborations and the
22
<PAGE> 24
expansion of existing government grants. Bayer, Celanese and The Dow Chemical
Company accounted for 39%, 38% and none of total revenue for the nine months
ended September 30, 1998, and 32%, 12% and 18% of revenue for the nine months
ended September 30, 1999, respectively. B.F. Goodrich accounted for 13% of
revenue for the nine months ended September 30, 1998. Our collaboration with
B.F. Goodrich was terminated by mutual agreement after B.F. Goodrich merged with
another company and changed its business focus from chemicals to aerospace. B.F.
Goodrich has returned to us all of the intellectual property that was the
subject of the collaboration agreement and will continue to make required
termination payments under the collaboration agreement through December 31,
1999. The termination payments are subject to reduction in some circumstances.
Revenue from research collaborations exceeded research and development
expense for the nine months ended September 30, 1999. This increase was
primarily due to an increase in sponsored research programs as a percentage of
total research and development activities, and higher reimbursement rates under
certain collaboration agreements.
Research and Development Expenses
Our research and development expenses consist primarily of:
- salaries and other personnel-related expenses;
- facility costs;
- supplies; and
- depreciation of facilities and laboratory equipment.
Research and development expenses increased 26% from $13.3 million for the
nine months ended September 30, 1998 to $16.8 million for the nine months ended
September 30, 1999. The increase was due primarily to an increase in salaries
and other personnel costs to support our additional collaborative and internal
research efforts.
Research and development expenses represented 133% of total revenues for
the nine months ended September 30, 1998 and 75% of total revenues for the nine
months ended September 30, 1999. The decrease as a percentage of total revenues
was due primarily to the addition of significant contracts in 1999. Our core
business is research and development. Accordingly, we expect to continue to
devote substantial resources to research and development, and we expect that
research and development expenses will continue to increase in absolute dollars.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, business development, legal and general
management, as well as professional expenses, such as legal and accounting.
General and administrative expenses increased 39% from $3.4 million for the nine
months ended September 30, 1998 to $4.6 million for the nine months ended
September 30, 1999. Expenses increased primarily due to increased staffing
necessary to manage and support our growth.
23
<PAGE> 25
General and administrative expenses represented 33% of total revenues for
the nine months ended September 30, 1998 and 21% of total revenues for the nine
months ended September 30, 1999. The decrease as a percentage of our total
revenues was due primarily to the growth in our total revenues. We expect that
our general and administrative expenses will increase in absolute dollar amounts
as we:
- expand our business development and administrative staff;
- add facilities; and
- incur additional costs related to being a public company, including
directors' and officers' insurance, investor relations programs and
increased professional fees.
Net Interest Income (Expense)
Net interest income (expense) represents interest income earned on our cash
and cash equivalents net of interest expense on equipment financing loans.
Interest income increased from $773,000 for the nine months ended September 30,
1998 to $1.5 million for the nine months ended September 30, 1999. This increase
was due to higher average cash balances. Interest expense increased from
$543,000 for the nine months ended September 30, 1998 to $769,000 for the nine
months ended September 30, 1999. This increase was due to additional equipment
financing loans used to partially fund our acquisition of equipment.
Provision for Income Taxes
We incurred net operating losses in the nine months ended September 30,
1998 and 1999, and consequently we did not pay any federal, state or foreign
income taxes.
As of September 30, 1999, we had a federal net operating loss carryforward
of approximately $13 million. We also had federal research and development
credit carryforwards of approximately $500,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates beginning
in 2010 through 2019. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the "change in the ownership"
provisions of the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credit before utilization. See Note 5 of Notes to Financial
Statements.
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Revenues
We did not have any revenues in fiscal 1996. Our total revenues for fiscal
1997 were $4.8 million and our total revenues for fiscal 1998 were $13.8
million. The increase in each of these periods was due primarily to the addition
of new research collaborations. Bayer, Hoechst, including its wholly-owned
subsidiary Celanese, and B.F. Goodrich accounted for 22%, 76% and 1% of revenue
in fiscal 1997 and 38%, 35% and 12% of total revenue in fiscal 1998,
respectively. Our collaboration with Hoechst was terminated by mutual agreement
in October 1998 following a change in Hoechst's business focus away from
chemicals. One project that was the subject of the Hoechst collaboration
agreement was transferred to Celanese, Hoechst's wholly-owned subsidiary.
Hoescht has returned to us all of the intellectual property that was the subject
of the collaboration agreement in the polyolefin field. That field is the
subject of subsequent agreements with Dow Chemical and Bayer.
24
<PAGE> 26
Research and Development Expenses
Research and development expenses increased from $2.5 million in fiscal
1996, to $8.8 million in fiscal 1997 and to $17.6 million in fiscal 1998. The
increase in each of these periods was due primarily to an increase in
personnel-related costs in each period. Research and development expenses
represented 182% of total revenues in fiscal 1997 and 128% of total revenues in
fiscal 1998. The decrease as a percentage of total revenues was due primarily to
the growth in our total revenues.
General and Administrative Expenses
General and administrative expenses increased from $567,000 in fiscal 1996,
to $2.1 million in fiscal 1997 to $4.5 million in fiscal 1998. Expenses
increased in each period due primarily to increased personnel-related costs
resulting from additional staffing necessary to manage and support our growth.
General and administrative expenses represented 44% of total revenues for fiscal
1997 and 33% of total revenues for fiscal 1998. The decrease as a percentage of
our total revenues was due primarily to the growth in our total revenues.
Net Interest Income (Expense)
Interest income was $375,000 in fiscal 1996, $843,000 in fiscal 1997 and
$1.1 million in fiscal 1998. Changes in interest income were due primarily to
changes in our cash balance during these periods. Interest expense increased
from $6,000 in fiscal 1996 to $352,000 in fiscal 1997 to $731,000 in fiscal 1998
due to additional equipment financing loans used to partially fund leasehold
improvements and acquisition of equipment.
Provision for Income Taxes
We incurred net operating losses in fiscal 1996, 1997 and 1998 and
consequently we did not pay any federal, state or foreign income taxes.
As of December 31, 1998, we had a federal net operating loss carryforward
of approximately $16.2 million. We also had federal research and development
credit carryforwards of approximately $500,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates beginning
in 2010 through 2018. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the "change in the ownership"
provisions of the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credit before utilization. See Note 5 of Notes to Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since 1996, we have financed our operations to date primarily through
private placements of preferred stock, totaling $52.2 million, and, to a lesser
extent, equipment financing loans and research and development funding from
collaborative partners. As of September 30, 1999, we had $39.9 million in cash,
cash equivalents and investments and $2.4 million available under an equipment
financing line of credit.
Our operating activities provided $8.7 million of cash in the nine months
ended September 30, 1999. The source of cash for the nine months ended September
30, 1999 was primarily the receipt of research and development funding from
collaborative partners, partially offset by operating expenses. Cash used in our
operating activities was $6.1 million for the nine months ended September 30,
1998. For fiscal years 1996, 1997
25
<PAGE> 27
and 1998, cash used in our operating activities was $2.5 million, $1.3 million
and $2.9 million, respectively. Uses of cash in operating activities were
primarily to fund net operating losses.
Net cash used in investing activities was $7.3 million in fiscal 1996,
$24.0 million in fiscal 1997, $10.2 million in fiscal 1998 and $9.5 million in
the nine months ended September 30, 1999. Our investing activities provided $5.3
million in the nine months ended September 30, 1998. The fluctuations from
period to period are due primarily to the timing of purchases, sales and
maturity of investment securities and the purchase of property and equipment.
Purchases of property and equipment were $1.3 million in fiscal year 1996, $13.2
million in fiscal year 1997, $5.8 million in fiscal year 1998, $4.7 million in
the nine month period ended September 30, 1998 and $4.1 million in the nine
month period ended September 30, 1999. We expect to continue to make significant
investments in the purchase of property and equipment to support our expanding
operations.
Financing activities provided cash of $13.0 million in 1996, $25.9 million
in 1997, $23.3 million in fiscal 1998, $5.6 million in the nine month period
ended September 30, 1998 and $442,000 in the nine month period ended September
30, 1999. These amounts are primarily the proceeds we received from the sale of
preferred stock, net of issuance costs, equipment and leasehold improvement loan
financings and proceeds from the exercise of stock options. We will repay loan
financings over the next five years as follows: $700,000 in 1999, $3.1 million
in 2000, $3.6 million in 2001, $2.3 million in 2002 and $300,000 in 2003.
Accounts receivable and other current assets increased significantly at
September 30, 1999 as compared to December 31, 1998. The increase in accounts
receivable was due to an increase in government sponsored research funding. The
increase in other current assets was primarily due to an increase in interest
receivable from investments resulting from the timing of interest payments.
Deferred revenue also increased significantly at September 30, 1999 as compared
to December 31, 1998. This increase was due to the timing of the receipt of
several advance payments under collaborative research programs.
As of December 31, 1998 and September 30, 1999, our principal commitments
were $3.0 million and $6.8 million, respectively. Principal commitments
consisted of our obligations under operating leases. We will satisfy these
obligations over the next four years.
We believe that the net proceeds from this offering, together with our
current cash balances and the cash flows generated by operations will be
sufficient to satisfy our anticipated cash needs for working capital and capital
expenditures for at least the next 18 months. However, we may seek additional
financing within this timeframe. We may raise additional funds through public or
private financing, collaborative relationships or other arrangements. We cannot
assure you that additional funding, if sought, will be available on terms
favorable to us. Further, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants. Collaborative arrangements may require us to relinquish our rights to
some of our technologies or products. Our failure to raise capital when needed
may harm our business and operating results.
A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, we may evaluate potential
acquisitions of such businesses,
26
<PAGE> 28
products or technologies. We have no current plans, agreements or commitments,
and are not currently engaged in any negotiations with respect to any such
transaction.
DISCLOSURE ABOUT MARKET RISK
Our exposure to market risk is principally confined to our cash, cash
equivalents and investments which have maturities of less than two years. We
maintain a non-trading investment portfolio of investment grade, liquid debt
securities that limits the amount of credit exposure to any one issue, issuer or
type of instrument. The securities in our investment portfolio are not
leveraged, are classified as available for sale and are therefore subject to
interest rate risk. We currently do not hedge interest rate exposure. If market
interest rates were to increase by 100 basis points, or 1%, from September 30,
1999 levels, the fair value of our portfolio would decline by approximately
$167,000. The modeling technique used measures the change in fair values arising
from an immediate hypothetical shift in market interest rates and assumes ending
fair values include principal plus accrued interest.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
or hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations for any
company using such computer programs or hardware, including, among other things,
a temporary inability to process research data, send invoices or engage in
normal business activities. As a result, many companies' computer systems may
need to be upgraded or replaced in order to avoid "Year 2000" issues.
State of Readiness
We completed an assessment of our information technology systems for year
2000 problems in April 1999. Our internal software development group conducted a
review of our internally developed software, and our information technology
group coordinated a program to assess and document all other systems.
We are a relatively new enterprise and therefore a majority of the computer
hardware and software we use to operate our business has been acquired or
created internally within the past 30 months. While this itself is not
protection against Year 2000 issues, it is a factor to consider when comparing
the efforts required to achieve Year 2000 readiness against other enterprises
with older legacy systems.
Our approach was to prioritize a comprehensive list of all systems on the
basis of their importance to the operation of our business. Working from this
list, we would:
- obtain documentation from third party vendors as to their Year 2000
compliance testing and recommendations;
- devise a review and testing plan for all internal systems;
- conduct the review and testing;
- assess any necessary follow-on actions or remediation required; and
- execute the measures identified.
27
<PAGE> 29
We have completed execution of this process against all software we have
developed for use in research activities, commercial software used in financial
operations and in support of standard employee daily activities and the systems
used to operate building facilities. In some cases, the process resulted in the
determination that the system had no date processing and therefore was not
deemed to be a risk. In other cases, systems were subjected to a detailed
software code review and a "smoke test" consisting of running the system with
the date manually set beyond December 31, 1999.
We have not replaced any of our systems based on the results of our
assessment. However, we have made modifications to the commercial software
installations based on the vendor's and our assessment of Year 2000 problems. We
have replaced the older computer system that operates our building's card key
door access.
Principally because information from third party hardware and software
vendors has continued to change throughout this year, we have determined that an
additional set of compliance tests are prudent. We will conduct a final review
process of all systems in October 1999. Based on the continuing release of
information and recommended remediation activities from the principal vendor of
our enterprise productivity software, Microsoft, we expect to continue to be
required to make changes to our server software throughout the remainder of
1999.
Budget
To date we have incurred expenses relating to Year 2000 compliance of less
than $50,000. We do not expect the remaining planned work to exceed $25,000.
These costs have been included in the operating expenses of 1999.
Reasonably Likely Worst Case Scenario
If we, our customers, our providers of hardware and software, or our
third-party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the interruption of our research
programs, which could have a material adverse affect on our business, financial
conditions and results of operations. Presently we are unable to quantitatively
estimate the duration and extent of any such interruption, or estimate the
effect such interruption may have on our future revenue. However, we believe
that the impact of any Year 2000 issue on our research operations will be
limited to the ongoing execution of new experiments. We do not expect that any
historical data will be affected.
Contingency Plans
We do not believe that we will need to implement a Year 2000 contingency
plan. We expect to complete our Year 2000 plan in October 1999. The effort
required to complete the plan is minimal. Therefore, we believe that we can
complete the planned work within this timeframe. Additionally, we plan on
implementing a company-wide system shutdown on December 31, 1999 and a
controlled startup by the information technology organization on January 2, 2000
prior to the opening of business on January 3, 2000. This will allow us to
immediately identify and address any issues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which will be effective for our fiscal
year 2001. This
28
<PAGE> 30
Statement establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. SFAS 133 is not anticipated to have a significant
impact on our operating results or financial condition when adopted, since we
currently do not engage in hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
entities capitalize certain costs related to internal use software once certain
criteria have been met. We adopted SOP No. 98-1 effective January 1, 1999. The
adoption of SOP No. 98-1 has not had a material impact on our financial
statements.
29
<PAGE> 31
BUSINESS
We are a pioneer of high-speed technologies for the discovery of new
materials. Our proprietary technologies, including instruments, software and
methods, represent a complete platform designed to reduce the cost and time of
new materials discovery. We are able to generate hundreds to thousands of unique
materials at a time and screen those materials rapidly and automatically for
desired properties. We believe our approach is up to 100 times faster than
traditional research methods and reduces the cost per experiment to as low as 1%
of traditional research methods.
We are applying our technology to discover a wide range of material types.
Our efforts can be grouped into four market areas:
- Commodity Chemicals and Polyolefins. These major chemicals, plastics and
rubbers include products such as ethylene glycol, acrylic acid, ethanol,
and polyolefins such as polyethylene, polypropylene and polystyrene.
According to various articles and publications (Townsend Tarnell 1999
Polyethylene Annual Report; Townsend Tarnell 1999 Polypropylene Annual
Report; U.S. Industry & Trade Outlook 1999; and Chemical & Engineering
News), the annual global market for commodity chemicals and polyolefins
is over $500 billion. Opportunities exist for us to add value within this
sector by discovering catalysts that reduce manufacturing costs through
the use of cheaper raw materials and by developing alternatives to the
current multi-step, energy and capital intensive processes. We may also
discover catalysts that create polyolefins with improved properties and
as a result are able to compete against more expensive materials.
- Fine Chemicals. Fine chemicals are developed to achieve specific
performance characteristics and are incorporated into pharmaceutical and
agricultural products. According to Chemical Week and Chemical Marketing
Reporter, the annual worldwide market for fine chemicals is approximately
$65 billion. Due to the diversity and short life cycle of fine chemicals
products and the intense competition between fine chemicals
manufacturers, flexibility and speed in process development and
manufacturing are vital to success. In this market, we add value by
rapidly discovering diverse families of catalysts and improving
production processes.
- Specialty Polymers. Specialty polymers are incorporated into adhesives,
sealants, paints, and coatings in the form of latexes. According to
Chemical Marketing Reporter and the Synthetic Latex Polymers 1993 Report,
the annual worldwide market for latex polymers is estimated to be $10
billion. Within this sector, we seek to discover materials to enhance
product performance and to create new businesses using novel polymer
structures and architectures.
- Electronic and Related Materials. Electronic and related materials
comprise a diverse group of functional materials. Examples include
phosphors for lighting, displays and radiography, thermoelectric
materials for cooling, fuel cells for automotive applications, and
magnetic materials for permanent magnets. According to various articles
and publications (Air Conditioning, Heating and Refrigeration News;
Advanced Materials: Emerging Markets for Today's Industries and
Tomorrow's Products; Fuel Cell Industry Review; Electronic Business; High
Tech Ceramics Reviews; Lamps to 2001; and Display Industry Review), the
annual worldwide market for these materials is estimated to be $37
billion. We seek to discover breakthrough materials with unique and
unmatched functional properties
30
<PAGE> 32
that will enable the creation of new products or dramatically enhance the
performance of existing products.
INDUSTRY BACKGROUND
Chemical companies are under heightened pressure from slowing sales growth
and decreasing profit margins. These indicators reflect maturing end markets,
accelerating price pressures, increasing competitive intensity and industry
consolidation. As a result, chemical companies need to reduce costs, increase
innovation and create new businesses based on proprietary materials. New
products and materials typically carry higher prices and profit margins than the
products and materials they replace. New products and materials are also
critical for attaining and maintaining leading market positions, in creating
barriers to entry and adding value to customer relationships. The transformation
of the existing polyethylene industry by metallocene catalysis, a new catalyst
technology which has enabled the creation of tailored polyethylenes, is an
example of a materials innovation that has resulted in enhanced production
flexibility and product performance within a $50 billion industry.
As the chemical and electronics industries consolidate and become more
globalized, and as their customers become larger and more global as well,
chemical and electronics companies are under increasing pressure to accelerate
the discovery of new products and materials. Traditional materials discovery
relies on an expensive and time-consuming process of trial and error: making one
material; testing it; then making a different material; testing it and so on.
Traditional discovery methods are not fast enough to keep pace with product life
cycles and growth expectations within the chemical and electronics industries.
The development of combinatorial synthesis and rapid screening methods have
the potential to cost-effectively accelerate materials discovery and
fundamentally change the way materials are discovered. We believe combinatorial
technologies leverage the full potential of personnel by increasing their
experimental productivity by a factor of 100 or more. This promise of a far more
efficient discovery method combined with a greater opportunity for product
innovation is attracting increased attention from the chemical and electronics
industries. We believe that few chemical and electronics companies employ
combinatorial synthesis techniques or have the necessary specialized equipment
available for such activities.
SYMYX SOLUTION
Our technology provides complete platforms for materials discovery. Using
our miniaturized, automated technology to execute hundreds to thousands of
experiments at a time, our scientists can dramatically increase the probability
of success and reduce the time and costs per experiment to discover new
materials. Using traditional trial and error methods, a team consisting of a
chemist plus a technician could perform 500 to 1,000 experiments per year. In
our labs, that same team could perform up to 50,000 experiments per year. As a
result, our scientists would generate significantly more data, increase the
possibility of discoveries within that timeframe, and reduce the associated
costs per experiment dramatically.
<TABLE>
<CAPTION>
TRADITIONAL RESEARCH APPROACH SYMYX DISCOVERY TECHNOLOGIES
----------------------------- ----------------------------
<S> <C> <C>
Team....................... 1 chemist + 1 technician 1 chemist + 1 technician
Cost/year.................. $500,000 $500,000
Experiments/year........... 500 - 1,000 20,000 - 50,000
Cost/experiment............ $500 - $1,000 $10 - $25
</TABLE>
31
<PAGE> 33
To achieve these efficiencies, we require extensive capabilities in
materials synthesis, screening and data analysis. A particular challenge is the
ability to screen materials for a wide range of properties. For example:
- to discover a new catalyst we need to screen how well it performs a
specific chemical reaction;
- to discover a new phosphor for lighting applications, we need to screen
optical properties such as color and brightness; and
- to discover a new polymer, we need to screen for physical and mechanical
properties such as molecular weight and toughness.
As a pioneer in combinatorial materials science, we found no existing
technology capable of meeting our synthesis, screening and data analysis
requirements. To address this challenge, we assembled a team of people who have
expertise in the fields of inorganic, physical, polymer and organic chemistries,
physics, engineering and software programming. This team has successfully
designed, built and validated a powerful array of highly specialized proprietary
instruments and software. Our scientists can now synthesize a wide range of
materials and screen for properties including catalytic, chemical, physical,
mechanical, electronic and optical properties. In addition, we continue to
expand our capabilities through the development of new instruments and software
and enhanced versions of existing systems.
SYMYX STRATEGY
Our objective is to be the leading company using high-speed technologies
for the discovery of new materials with commercially valuable properties. Key
strategies that we intend to follow in pursuit of our objective are:
- entering into collaborative research and early-stage licensing agreements
with corporate partners that provide funding for research and discovery
efforts, commercialize our materials and pay royalties on commercial
sales;
- investing in proprietary materials research efforts to discover materials
with near-term commercial potential and then enter into late-stage
licensing arrangements or commercialize materials directly; and
- selling and licensing selected equipment and software to chemical and
other industrial companies for their own use in optimization of existing
materials.
Collaborative Research and Early-Stage Licensing
In collaboration with major chemical and other industrial companies, we
seek to discover:
- new catalysts to manufacture commodity chemicals and polyolefins;
- new polymer formulations and pigments for industrial applications; and
- new phosphors for applications including lighting and displays.
We provide the platform technologies and effort, and our partners have
rights to develop and commercialize resulting materials within their predefined
field of exclusivity. Typically, we enter into collaborative arrangements to
discover materials that require considerable investment in product development
and manufacturing, as well as extensive marketing efforts. Our collaborative
partners have already developed the infrastructure to
32
<PAGE> 34
support these requirements, and may therefore be in a strong position to
commercialize our discoveries.
We receive funding from our collaborative partners through annual research
payments. These payments are made over the term of the research contract, which
is generally two to three years. If a new material is discovered and
commercialized, we will receive either royalties or milestone payments. We
believe that we have the potential for royalties ranging from 3% to 7% on sales
of products incorporating our materials, such as pigments, phosphors and
polymers and 1% to 3% on sales of end products manufactured using our catalysts,
such as high-volume commodity chemicals and polyolefins.
We currently have eight collaborative partners, including Bayer which has
expanded our collaboration three times to date. The table below indicates, for
each of our currently active collaborations, the collaborative partner, date and
field.
<TABLE>
<CAPTION>
DATE(S) OF
PARTNER ALLIANCE FIELD(S)
------- ---------- --------
<S> <C> <C>
Agfa.......... March 1998 X-ray phosphors for radiography
BASF.......... Specialty polymers for industrial
March 1999 formulations
Bayer......... March 1998, Polyolefins, commodity chemicals
May 1998,
January 1999,
September 1999
Celanese...... August 1998 Commodity chemicals
Ciba Specialty
Chemicals... April 1998 Pigments
Dow
Chemical.... January 1999 Polyolefins
Osram OS*..... December 1998 Phosphors for lighting
Unilever...... December 1998 Polymers for product formulations
</TABLE>
- -------------------------
* an affiliate of Siemens
Our collaborations, together with government grants, provide for over $85
million in aggregate commitments for research payments. Through September 30,
1999, we had recognized revenue of $41 million under these agreements with the
remaining amounts scheduled to be paid through 2003. In order to maintain and
grow our research and product pipelines, we intend to continue to enter into new
collaborative arrangements. As a result of these new arrangements, and the
conclusion of existing collaborations upon completion of research or transfer of
development candidates to our collaborative partners for commercialization, our
portfolio of collaborations will change over time. We expect that new
collaborations will come from existing collaborative partners undertaking new
research initiatives as well as new collaborative partners.
One of our most advanced discovery efforts to date has resulted from our
collaboration with Agfa in the area of discovery of new x-ray phosphors for
radiography. Many groups have worked over the past fifteen years to find
alternative materials that perform better than existing materials. Under our
collaboration, we have made and screened over 50,000 phosphors, and we
discovered several that have shown the potential to provide higher resolution,
be easier to manufacture and have a longer shelf life than existing materials.
These materials have been transferred to Agfa, and we have been advised by
33
<PAGE> 35
Agfa that their objective is to have products based on these materials on the
market during 2001.
Symyx Proprietary Materials
We believe that the assets resulting from our investment in proprietary
research programs will be a significant contributor of future value. Our
proprietary research efforts are focused on discovery of products for specialty
markets with well defined materials needs and short-term development and
commercialization cycles.
One significant area of current activity is fine chemicals. In the area of
fine chemicals, we are working to discover families of catalysts that would be
used in the production of pharmaceutical intermediates. Pharmaceutical
intermediates are chemicals that are transformed into a pharmaceutical product.
Another area of activity is specialty polymers. In this area, we have developed
proprietary technology to create polymers with customized, predictable
properties called block co-polymers.
We also have several programs in electronic materials, funded by ourselves
and by the U.S. Office of Naval Research Defense Advanced Research Projects
Agency (known as DARPA) and the United States Department of Energy. Our DARPA
program is funding research relating to thermoelectric materials used for
refrigeration and applications requiring precise active cooling devices. These
applications include computer chips and missile guidance systems. Our DARPA
program is also funding research for magnetic materials used as permanent
magnets in applications including electro-magnetic motors. Our program with the
Department of Energy is funding research relating to materials for fuel cells
for potential use in automobiles. Funding under the DARPA and Department of
Energy programs is structured as grants, and we own the rights to commercialize
materials discovered under these programs.
We expect to commercialize development candidates discovered through our
proprietary materials programs either by manufacturing, marketing, and selling
the product ourselves or through late-stage licensing arrangements. We expect to
be able to obtain significantly higher royalty rates under these late-stage
licenses than under our collaborative agreements because we will have completed
essentially all development work at the time we license the product.
We also have developed a "quick-strike" licensing model in which we would
assume the research risk during a short, well-defined, research period of
approximately three months in exchange for the customer's agreement to make
milestone payments and enter into a license agreement upon completion of
research and technical validation. We expect that royalty rates under these
licenses will be in a range of 4% to 7% of sales, which is attractive to us due
to the breadth and number of projects which we believe we can successfully
complete annually.
Sale of Discovery Tools Systems and Other Equipment
Our scientific and technical team has spent considerable time and resources
developing a broad array of instruments, software and know-how in support of our
research. In addition to our alliances, we are seeking to meet the growing
demand for combinatorial technologies by offering access to some of our
equipment and technology. We believe that these programs will enhance, not
detract from, our collaborative arrangement efforts by reinforcing our position
as the leading source for combinatorial technology in materials science.
34
<PAGE> 36
We have designed the Discovery Tools that we initially plan to sell to
perform an average of 100 experiments per day. We do not expect that our sale of
Discovery Tools will affect our ability to enter into new research
collaborations. Companies enter into collaborations with us to access all of our
tools including our highest throughput screening equipment designed for new
materials discovery, our scientific and technical staff and our libraries of
catalysts and materials. We do not plan to offer access to these resources as
part of our Discovery Tools program.
The Dow Chemical Company is the first customer of our Discovery Tools
business. Dow, an existing collaborative partner, has placed an order for a
system that provides capabilities to make and test polyolefin catalysts. We sell
our Discovery Tools together with a license to associated software, know-how and
patents. Our first offering, purchased by Dow, is a combination of a
multi-channel polymer reactor system together with two screening instruments.
Under the terms of Dow's purchase, Dow will pay us between $5.0 million and $8.5
million over three years for the manufacture, delivery and use of the system.
Additional systems will likely sell for several million dollars and will have a
long sales cycle involving both marketing the system and designing the system to
meet customer requirements.
In addition to the sale of Discovery Tools, we also believe that there is
significant commercial value in the nonautomated laboratory instruments that we
developed to perform small scale parallel synthesis of materials. We have formed
a collaboration with Argonaut Technologies, Inc. to capture this opportunity.
Argonaut is an instrument company that develops and commercializes synthesizers,
instruments, software and chemical resins and reagents to accelerate and
automate chemical synthesis. Argonaut will refine our designs for manual
benchtop instruments, manufacture the instruments and sell them worldwide. In
return, we will receive a portion of the profits from the sale of these
instruments. Our first product, sold with both the Argonaut and Symyx
trademarks, was introduced for sale in August 1999. This instrument, the
Endeavor, is an eight-channel manual reactor used to synthesize polymers and
other chemicals under high pressure. This instrument has a sale price of
approximately $60,000. We expect other manual bench instruments developed by us
and commercialized by Argonaut to have similar sales prices.
TECHNOLOGY
Our scientists begin the discovery process working with our collaborative
partners or our own business development staff to define the research objective
in terms of the specific properties a new material should have to meet the needs
of a given application. We then apply the components of our combinatorial
process, synthesis, screening and informatics, to discover materials that match
these criteria.
[TARGETED NEW MATERIAL DIAGRAM]
Synthesis
The materials research process begins with chemists' theories about what
elements from the periodic table of elements might be combined to create new
materials with desired properties. However, while chemists working in
traditional labs have to choose the few experiments they will perform on a given
day, our chemists have the ability to perform
35
<PAGE> 37
hundreds or thousands of experiments at once. Our chemists are therefore able to
pursue their theories both broadly -- across a wide range of elements -- and
comprehensively -- creating materials with the same components in different
ratios.
A Symyx chemist initiates the synthesis process by using Library Studio, a
computer software package created by our programmers to design the group, or
"library," of materials to be synthesized. These instructions, or "recipes," are
then relayed to automated synthesis instruments. These instruments create the
library on a single substrate such as a three-inch diameter silicon wafer or a
96-well plate. The quantity of each compound synthesized is very small,
generally ranging from micrograms to hundreds of milligrams. This contrasts
dramatically with traditional synthesis, where gram to kilogram quantities of a
material are usually necessary. Libraries synthesized on silicon wafers may
range from a few hundred different candidate materials to as many as 25,000,
depending on the type of material and the type of analysis to be done.
Each material synthesized represents a unique experiment and potential
discovery. The desired end result of these experiments is defined at the outset
of the experiment as a target material having specific performance properties.
Our scientists, in conjunction with our collaborative partners, or independently
for our proprietary discovery programs, set the specific performance properties
and define the desired performance attributes of the target material for a given
application or applications. Generally, these criteria are well beyond the
performance attributes of currently used materials.
Screening
Once created, the library is analyzed for desired properties. As with
synthesis, our technical staff has designed and built a broad array of
instruments and software to evaluate different properties under a wide variety
of process conditions. These properties include catalytic, physical, mechanical,
thermal, chemical, electronic and optical properties. In general, a Symyx
chemist can design, synthesize and screen a library in a single day.
To reach the point of commercialization, a candidate material must progress
through an increasingly exhaustive series of tests, or stages, known as hits,
leads and development candidates.
- Hits. First, we screen materials to identify those that have properties
defined for the target discovery, called "hits." Hits are subjected to
additional testing and optimization, to find a larger number of needed
properties. Hits also identify areas that merit further exploration, and
new libraries are created using this information.
- Leads. Candidate materials that continue to meet or exceed the defined
criteria are then classified as "leads." Leads are then transferred to a
partner or processed internally for additional testing and scale up.
Leads are then tested on a larger scale, as bulk samples of 1 to 100
grams, to confirm that the materials still perform at this "bench scale"
level.
- Development Candidates. Once a lead has passed this bench scale testing
by either a collaborative partner or Symyx, it becomes a development
candidate. Finally, if all is successful, the decision will be made to
commercialize the material.
36
<PAGE> 38
In our experience to date, approximately 0.1% of materials tested become
hits, 10% to 15% of hits become leads and 5% to 10% of leads become development
candidates. The actual number of hits, leads and development candidates that
have been identified in our four target markets through August 1999 is set forth
in the table below.
<TABLE>
<CAPTION>
COMMODITIES, FINE SPECIALTY ELECTRONIC
POLYOLEFINS CHEMICALS POLYMERS MATERIALS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
HITS 466 70 16 183
- ---------------------------------------------------------------------------------------------
LEADS 43 14 6 25
- ---------------------------------------------------------------------------------------------
DEVELOPMENT CANDIDATES 2 2 1 2
- ---------------------------------------------------------------------------------------------
</TABLE>
We have screened over 500,000 compounds in 1999. Of the development
candidates we have generated, three have been transferred to our partners for
further validation. We are developing the other four internally. Further testing
of many of the hits and leads is underway to identify additional development
candidates.
Once a material has been identified as a development candidate, the time to
the first sale or commercial usage may be as short as 1 to 2 years for many
pigments, specialty polymers, fine chemicals catalysts or electronic materials,
such as phosphors. Industrial catalysts to produce high volume commodity
chemicals, on the other hand, may require 5 to 7 or more years to reach the
market because of the extensive process development and capital investment
involved.
Informatics
A critical factor in our discovery process is the ability to retain and
access the huge amounts of data generated by our synthesis and screening
activities. Given the broad acceptance of high-speed combinatorial discovery in
pharmaceuticals, a number of applications exist to support organic chemistry.
However, those solutions were not sufficient to address the storage and
retrieval needs of our diverse array of inorganic, organometallic and polymer
chemistries. To that end, we have devoted considerable resources to build a
proprietary database capable of addressing our unique needs. Our chemists can
query this database to identify materials screened in the past that possess the
property or properties specified. We believe that this database will emerge as a
powerful tool in accelerating materials discovery by enabling our scientists to
benefit from the cumulative effect of all of our research. Although we typically
cannot use leads and development candidates identified in one collaborative
program for other collaborative programs or for our proprietary research,
materials screened in one program without success may have properties that make
them useful in other programs.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success depends upon our proprietary technology. There are five general
patent areas within our combinatorial approach:
- library synthesis methods;
- the libraries themselves;
- screening or characterization methods;
- equipment and software; and
- new materials.
37
<PAGE> 39
We have 76 patent applications pending in the United States, and 30 foreign
patent applications pending. In addition, we have 5 patent applications allowed
in the United States containing over 230 claims. We co-own some of the pending
patent applications and one of the allowed patent applications with Lawrence
Berkeley Laboratory, on behalf of The Regents of the University of California.
We have an exclusive license to these patent applications from Lawrence Berkeley
Laboratory. In addition to patents, we rely on copyright, trademark and trade
secret rights, confidentiality procedures and licensing arrangements to
establish and protect our proprietary rights.
As part of our confidentiality and trade secret protection procedures, we
enter into non-disclosure agreements with our employees, consultants and
potential collaborative partners. Despite these precautions, third parties could
obtain and use our products or technology without authorization, or develop
similar technology independently. It is difficult for us to police unauthorized
use of our products. Effective protection of intellectual property rights is
unavailable or limited in some foreign countries. The protection of our
proprietary rights may be inadequate and our competitors could independently
develop similar technology, duplicate our products or design around any patents
or other intellectual property rights we hold.
COMPETITION
The field of combinatorial materials science is increasingly competitive.
We are aware of several companies that are applying their expertise in
combinatorial chemistry to materials research and development. These companies
include Aperion, a joint venture between CombiChem and Catalytica, and Cambridge
Combinatorial, an affiliate of Oxford Molecular. We are also aware of some
chemical companies with internal combinatorial programs participating in
materials research and development consortiums. In addition, Shell Chemicals is
participating in a consortium in The Netherlands and BASF is funding a start-up
company in Heidelberg, Germany named HTE. BASF is also one of our collaborative
partners. In addition, academic and research institutions may seek to develop
technologies that would be competitive with our systems for materials discovery.
Because combinatorial materials science is an emerging field, competition from
additional entrants may increase.
Some of our competitors may be addressing the same materials targets as
Symyx or our collaborative partners. Many of our current and potential
competitors, either alone or together with their collaborative partners, have
greater financial, manufacturing, marketing and sales resources than we do.
Accordingly, our competitors may succeed in obtaining patent protection or
commercializing products before us. If we commence commercial product sales, we
will be competing against companies with greater marketing, sales and
manufacturing capabilities, areas in which we have limited or no experience.
EMPLOYEES
As of September 30, 1999, we had a total of 152 employees, including 122
scientific and technical employees and 30 people in business development, legal
and general and administrative services. Of our scientific and technical staff,
101 have masters or doctorate degrees. None of our employees is represented by a
labor union, and we consider our employee relations to be good.
LEGAL PROCEEDINGS
We are not currently a party to any material pending legal proceedings.
38
<PAGE> 40
FACILITIES
Our primary offices are located in approximately 38,800 square feet of
space in Santa Clara, California under a lease expiring on November 2007. We
leased a second building of approximately 24,000 square feet also in Santa
Clara, which we expect will be ready for occupancy in January 2000, with a lease
expiring January 2008. In addition, we have a month-to-month lease on a 5,000
square foot facility. We believe that our existing facilities are adequate for
our needs through at least the end of 2000. We believe that any additional space
we may need in the future will be available on commercially reasonable terms.
SCIENTIFIC ADVISORS
We recruited several leading researchers in our fields of interest to serve
as scientific advisors. These advisors have fixed term contracts ranging from
one to three years. In general, they serve on an exclusive basis within a
defined field of collaboration. These advisors received option grants to
purchase our common stock. In addition, some may receive cash compensation, and
they are reimbursed for expenses.
The following individuals are scientific advisors in their respective areas
of specialization:
<TABLE>
<S> <C>
Chairman
Peter Schultz.................. Institute Director, Novartis Institute for Functional
Genomics, Professor of Chemistry at the Scripps
Research Institute
Technical Strategy
Alejandro Zaffaroni............ Managing Director, Technogen Enterprises LLC, a
venture
capital fund
George Whitesides.............. Mallinckrodt Professor of Chemistry, Harvard
University
Catalysis
Michel Boudart................. Keck Professor of Chemical Engineering, Emeritus,
Stanford University
Stephen Buchwald............... Camille Dreyfus Professor of Chemistry,
Massachusetts Institute of Technology
John Groves.................... Hugh Stott Taylor Professor of Chemistry,
Princeton University
Robert Grubbs.................. Victor & Elizabeth Atkins Professor of Chemistry,
California
Institute of Technology
Gregory Kovacs................. Associate Professor, Electrical Engineering, Stanford
University
Fine Chemicals
Mark Gallop.................... Vice President of Chemistry, Xenoport
Abul Iqbal..................... Head of Global Research and Development, Colors
Division,
Ciba Specialty Chemicals
Klaus Kuhlein.................. Director, Operative Research, Member of the
Management
Committee of Aventis Research & Technologies (member
of the Hoechst Group), Retired
David MacMillan................ Assistant Professor, University of California,
Berkeley
</TABLE>
39
<PAGE> 41
<TABLE>
<S> <C>
Polymers
Jean Frechet................... Professor of Chemistry, University of California,
Berkeley
Craig Hawker................... Research Staff Member, IBM Almaden Research Center
Virgil Percec.................. P. Roy Vagelos Chair and Professor of Chemistry,
University of Pennsylvania
Tom Russell.................... Professor, Polymer Science and Engineering,
University of Massachusetts at Amherst
Owen Webster................... DuPont Fellow, Retired
Electronic Materials
Frank DiSalvo.................. John A. Newman Professor of Physical Science,
Cornell University
Theodore Geballe............... Professor of Applied Physics and of Materials Science
and
Engineering, Emeritus, Stanford University
</TABLE>
40
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our executive
officers and directors as of September 30, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven D. Goldby.................... 59 Chairman of the Board and Chief Executive
Officer
Isy Goldwasser...................... 29 President and Chief Operating Officer
W. Henry Weinberg, Ph.D. ........... 54 Senior Vice President and Chief Technical
Officer
Jeryl L. Hilleman................... 42 Senior Vice President and Chief Financial
Officer
Thomas R. Baruch.................... 60 Director
Samuel D. Colella................... 60 Director
Martin Gerstel...................... 58 Director
Baron Gaulthaus Kraijenhoff......... 77 Director
Francois A. L'Eplattenier, Ph.D. ... 60 Director
Kenneth J. Nussbacher............... 46 Director
Mario M. Rosati..................... 53 Director
Peter G. Schultz, Ph.D. ............ 43 Director
Isaac Stein......................... 52 Director
</TABLE>
Steven D. Goldby has served as our Chairman of the Board and Chief
Executive Officer since July 1998. Prior to joining Symyx, Mr. Goldby served as
Chief Executive Officer of MDL Information Systems, Inc. from 1987 to July 1998.
He held numerous management positions at ALZA Corporation from 1968 to 1981
including President of ALZA Pharmaceuticals and President of Dynapol, a
subsidiary of ALZA. Mr. Goldby joined MDL Information Systems in 1982 as a Chief
Operating Officer. He is a director of Aspect Development, Inc. Mr. Goldby holds
an A.B. from the University of North Carolina and a J.D. from Georgetown
University Law School.
Isy Goldwasser has served as our President and Chief Operating Officer
since February 1998. From February 1996 to February 1998, Mr. Goldwasser served
as our Vice President of Corporate Development. From the founding of Symyx until
February 1996, he held a business development position with us in which he was
responsible for applications development, financing and operations. Mr.
Goldwasser holds a B.S. from the Massachusetts Institute of Technology and an
M.S. from Stanford University.
W. Henry Weinberg has served as our Senior Vice President since August 1999
and our Chief Technical Officer since March 1996. Dr. Weinberg also previously
served as our Vice President from March 1996 to August 1999. Dr. Weinberg is
also Adjunct Professor of Chemical Engineering, Materials Engineering, and
Chemistry at the University of California, Santa Barbara. Dr. Weinberg was
Professor of Chemical Engineering, Materials Engineering, and Chemistry at the
University of California, Santa Barbara from 1989 through September 1999. Dr.
Weinberg is a member of the National Academy of Engineering. He holds a B.S.
from the University of South Carolina and a Ph.D. from the University of
California, Berkeley.
Jeryl Lynn Hilleman has served as our Senior Vice President since August
1999 and our Chief Financial Officer since June 1997. Ms. Hilleman also
previously served as our
41
<PAGE> 43
Vice President from June 1997 to August 1999. From 1992 to 1997, Ms. Hilleman
held several senior positions at Geron Corporation, a biopharmaceutical company,
including Vice President, Finance and Administration. Ms. Hilleman holds an A.B.
from Brown University and an M.B.A. from the Wharton School of Business.
Thomas R. Baruch has served as one of our directors since May 1996. Since
1988, Mr. Baruch has been a general partner of CMEA Ventures, a venture capital
firm. From 1990 to 1996, Mr. Baruch also served as a special partner of New
Enterprise Associates. Mr. Baruch serves on the boards of directors of Netro
Corp. and Physiometrix Inc. Mr. Baruch holds a B.S. from Rensselaer Polytechnic
Institute and a J.D. from Capital University.
Samuel D. Colella has served as one of our directors since August 1997.
Since 1984, Mr. Colella has been a general partner of Institutional Venture
Partners. Mr. Colella also serves as Chairman of Onyx Pharmaceuticals. Mr.
Colella holds a B.A. and B.S. from the University of Pittsburgh and an M.B.A.
from Stanford University.
Martin S. Gerstel has served as one of our directors since February 1995.
Mr. Gerstel serves as Chairman of Compugen, Ltd. Previously, Mr. Gerstel
participated in the founding of ALZA Corporation, where he held numerous
positions including President and Chief Operating Officer from 1982 to 1987 and
Co-Chairman and Chief Executive Officer from 1987 to 1993. Mr. Gerstel is a
director of Teva Pharmaceuticals. Mr. Gerstel holds a B.S. from Yale University
and an M.B.A. from Stanford University.
Baron Gualthaus Kraijenhoff has been one of our directors since January
1996. Following his retirement in 1978, Baron Kraijenhoff served as President of
the Supervisory Council of AKZO N.V. since 1980. Baron Kraijenhoff also held
numerous other management positions with AKZO N.V. and its predecessor company,
KZO, including President of the Board of Management of AKZO N.V., President of
the Board of Management of KZO, and Member of the Board of Management of KZO.
Francois A. L'Eplattenier has served as one of our directors since October
1996. Since the merger of Ciba-Geigy with Sandoz to form Novartis in 1996, Dr.
L'Eplattenier has served as Chairman of the Novartis Venture Fund. Since 1988,
Dr. L'Eplattenier has served as a member of the Executive Committee of
Ciba-Geigy, where he is responsible for Research and Development of the Group
world-wide. From 1981 to 1988, Dr. L'Eplattenier served as Head of Research and
Development of Plastics, Pigments and Additives at Geigy. From 1977 to 1981, Dr.
L'Eplattenier served as Head of Central Research of Geigy. Dr. L'Eplattenier
presently is a member of the Board of the Swiss Federal Institute of Technology.
Dr. L'Eplattenier holds an M.S. and Ph.D. from the Swiss Federal Institute of
Technology.
Kenneth J. Nussbacher has served as one of our directors since February
1995. Mr. Nussbacher has been Executive Vice President of Affymetrix since 1995
and was Chief Financial Officer of Affymetrix from 1995 to 1997. From 1989 to
1995, he held several management positions at Affymax, most recently as
Executive Vice President for Business and Legal Affairs and Managing Director of
Affymax Technologies N.V. Mr. Nussbacher holds a B.S. from Cooper Union and a
J.D. from Duke University.
Mario M. Rosati has served as one of our directors since September 1994.
Mr. Rosati has been with the Palo Alto, California law firm of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, since 1971, first as an associate
and then as a member since 1975. Mr. Rosati also serves as a director of Aehr
Test Systems, Genus, Inc., MyPoints.com, Inc., Ross Systems, Inc., Sanmina
Corporation, The Management Network
42
<PAGE> 44
Group, Inc. and Vivus, Inc. Mr. Rosati holds a B.A. from the University of
California, Los Angeles and a J.D. from the University of California, Berkeley,
Boalt Hall School of Law.
Peter G. Schultz, Ph.D. has been one of our directors since January 1996
and is one of our founders. Since November 1998, Dr. Schultz has been Head of
the Novartis Institute for Functional Genomics. From 1985 to 1998, Dr. Schultz
was Professor of Chemistry at the Lawrence Berkeley Laboratories of the
University of California, Berkeley. He holds a B.S. and a Ph.D. from the
California Institute of Technology.
Isaac Stein has been one of our directors since October 1996. Since 1983,
Mr. Stein has been President of Waverley Associates, a private investment firm.
Mr. Stein is also a Managing Director of Technogen Enterprises, L.L.C. and a
director of ALZA Corporation, the Benham Group of mutual funds and CV
Therapeutics, Inc. Mr. Stein holds an B.A. from Colgate University and a J.D.
and an M.B.A. from Stanford University.
BOARD OF DIRECTORS
We currently have ten directors. Upon completion of this offering, our
board of directors will be divided into three classes, each with staggered
three-year terms. As a result, only one class of directors will be elected at
each annual meeting of our stockholders, with the other classes continuing for
the remainder of their respective three-year terms.
Our class I directors, whose terms will expire at the 2000 annual meeting
of stockholders, are Thomas R. Baruch, Samuel D. Colella and Martin Gerstel. Our
class II directors, whose terms will expire at the 2001 annual meeting of
stockholders, are Steven D. Goldby, Baron Gaulthaus Kraijenhoff and Francois A.
L'Eplattenier Ph.D. Our class III directors, whose terms will expire at the 2002
annual meeting of stockholders, are Kenneth J. Nussbacher, Mario M. Rosati,
Peter G. Schulz, Ph.D. and Issac Stein.
BOARD COMMITTEES
Our board of directors currently has an audit committee and a compensation
committee. The audit committee consists of Thomas R. Baruch, Martin Gerstel and
Kenneth J. Nussbacher. The audit committee makes recommendations to the board of
directors regarding the selection of independent auditors, reviews the scope of
audit and other services by our independent auditors, reviews the accounting
principles and auditing practices and procedures to be used for our financial
statements and reviews the results of those audits.
The compensation committee consists of Samuel D. Colella, Mario M. Rosati
and Isaac Stein. The compensation committee makes recommendations to the board
of directors regarding our stock plans and the compensation of officers.
DIRECTOR COMPENSATION
Our non-employee directors are reimbursed for expenses incurred in
connection with attending board and committee meetings but are not compensated
for their services as board or committee members. We have in the past granted
non-employee directors options to purchase our common stock pursuant to the
terms of our stock plans, and our board continues to have the discretion to
grant options to new non-employee directors. Beginning in 2000, our outside
directors will each annually receive automatic, nondiscretionary grants of
options to purchase 7,500 shares of our common stock.
43
<PAGE> 45
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee is currently, or has ever
been at any time since our formation, one of our officers or employees. No
member of the compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more officers
serving as a member of our board of directors or compensation committee.
EXECUTIVE OFFICERS
COMPENSATION
The following table sets forth the compensation paid by us during 1998 to
our Chief Executive Officer and our other executive officers who received salary
compensation of more that $100,000 during 1998:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -----------------------
COMPENSATION RESTRICTED SECURITIES
------------ STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY($) AWARDS($) OPTIONS(#) COMPENSATION($)
--------------------------- --------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Steven D. Goldby....................... $125,040(1) $ 0(2) -- --
Chief Executive Officer and Chairman of
the Board
Isy Goldwasser......................... 171,667 -- 186,666 --
President and Chief Operating Officer
W. Henry Weinberg, Ph.D. .............. 240,533 -- -- $218,620(3)
Senior Vice President and Chief
Technical Officer
Jeryl L. Hilleman...................... 181,667 -- 58,333 --
Senior Vice President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Mr. Goldby joined Symyx in July 1998. His 1998 annual salary was $250,080.
(2) Mr. Goldby purchased 525,000 shares of common stock at a purchase price of
approximately $0.58 per share. The aggregate purchase price was $303,750. If
Mr. Goldby's services to Symyx are terminated, Symyx has the option to
repurchase the shares at $0.58 per share. This option lapses as to a portion
of the shares over time. The repurchase option will lapse for all of the
shares in July 2002. The fair market value of Symyx' common stock as of
December 31, 1998 was $0.96 per share as determined by the board of
directors. The appreciated value of Mr. Goldby's shares as of December 31,
1998 was $200,250. The appreciated value is the difference between $0.58 and
$0.96, $0.38, multiplied by the number of shares, 525,000.
(3) Consists of a $71,250 housing allowance, $139,870 in relocation
reimbursement payments and $7,500 in imputed interest on an interest free
loan.
44
<PAGE> 46
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information relating to stock options
granted during 1998 to our Chief Executive Officer and our other executive
officers who received salary compensation of more than $100,000. In accordance
with the rules of the Securities and Exchange Commission, also shown below is
the potential realizable value over the term of the option (the period from the
grant date to the expiration date) based on assumed rates of stock appreciation
of 5% and 10%, compounded annually. These amounts are mandated by the Securities
and Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will depend on the future
performance of our common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN PRICE PER EXPIRATION ---------------------
NAME GRANTED 1998(1) SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Goldby.............. -- -- -- -- -- --
Isy Goldwasser................ 155,555 13.71% $ 0.39 3/01/08 $38,153 $96,687
31,111 2.74 0.96 12/04/08 18,783 47,600
W. Henry Weinberg, Ph.D. ..... -- -- -- -- -- --
Jeryl L. Hilleman............. 58,333 5.14 0.39 3/01/08 14,307 36,257
</TABLE>
- -------------------------
(1) We granted options to purchase a total of 1,134,890 shares of common stock
during 1998.
AGGREGATE OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for our Chief Executive Officer
and our other executive officers who received salary compensation of more than
$100,000 in 1998, relating to option exercises in 1998 and the number and value
of securities underlying exercisable and unexercisable options held at December
31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Goldby...... -- -- -- -- -- --
Isy Goldwasser........ -- -- 186,666 -- $88,666 --
W. Henry Weinberg..... 233,333 $135,000 -- -- -- --
Jeryl L. Hilleman..... 23,333 13,300 35,000 -- 19,950 --
</TABLE>
- -------------------------
(1) Value realized reflects the fair market value of our common stock underlying
the option on the date of exercise minus the aggregate exercise price of the
option.
(2) Value of unexercised in-the-money options are based on a value of $0.96 per
share, the fair market value of our common stock on December 31, 1998 as
determined by our board of directors. Amounts reflected are based on the
value of $0.96 per share, minus the per share exercise price, multiplied by
the number of shares underlying the option.
45
<PAGE> 47
STOCK PLANS
1996 STOCK PLAN AND 1997 STOCK PLAN
Our 1996 Stock Plan was adopted by our board of directors in January 1996.
This plan provides for the grant of incentive stock options to our employees and
nonstatutory stock options and stock purchase rights to our employees, directors
and consultants. We have reserved an aggregate of 1,153,444 shares of common
stock for issuance under this plan. As of September 30, 1999, 876,024 shares had
been issued pursuant to the exercise of options and stock purchase rights and
options to purchase 156,198 shares of common stock were outstanding. 121,222
shares were available for future grant. We will not grant any additional stock
options under our 1996 Stock Plan. Instead, we will grant options under our 1997
Stock Plan.
Our 1997 Stock Plan was adopted by our board of directors in January 1997.
This plan provides for the grant of incentive stock options to our employees and
nonstatutory stock options and stock purchase rights to our employees, directors
and consultants. As of September 30, 1999, 5,055,556 shares of common stock were
reserved for issuance under this plan. Of these shares, 1,802,414 had been
issued upon exercise of stock options or stock purchase rights, 1,845,843 shares
were subject to outstanding options or stock purchase rights and 1,407,299
shares were available for future grant.
The number of shares reserved for issuance under the 1997 Stock Plan will
increase by the following:
- 121,222 shares which were reserved but unissued under the our 1996 Stock
Plan;
- any shares returned to the 1996 Stock Plan as a result of termination of
options or repurchase of stock purchase rights issued under the 1996
Plan; and
- beginning in fiscal year 2000, an annual increase equal to the lesser of
1.5 million shares, 4% of the outstanding shares on the date of the
annual increase, or a lesser amount determined by our board of directors.
The compensation committee of our board of directors administers the stock
plan and determines the terms of options granted, including the exercise price,
the number of shares subject to individual option awards and the vesting period
of options. The exercise price of nonstatutory options must generally be at
least 85% of the fair market value of the common stock on the date of grant. The
exercise price of incentive stock options cannot be lower than 100% of the fair
market value of the common stock on the date of grant and, in the case of
incentive stock options granted to holders of more than 10% of our voting power,
not less than 110% of the fair market value. The term of an incentive stock
option cannot exceed 10 years, and the term of an incentive stock option granted
to a holder of more than 10% of our voting power cannot exceed five years.
Options granted under our stock plan will accelerate and become fully
vested in the event we are acquired, unless the successor corporation assumes or
substitutes other options in their place. Our board of directors may not,
without the adversely affected optionee's prior written consent, amend, modify
or terminate the stock plan if the amendment, modification or termination would
impair the rights of optionees. Our stock plan will terminate in 2007 unless
terminated earlier by the board of directors.
46
<PAGE> 48
1999 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted our 1999 Employee Stock Purchase Plan in
September 1999. This plan provides our employees with an opportunity to purchase
our common stock through accumulated payroll deductions.
A total of 300,000 shares of common stock has been reserved for issuance
under the purchase plan. In addition, the purchase plan provides for annual
increases in the number of shares available for issuance under the purchase plan
on the first day of each fiscal year, beginning with fiscal 2000, equal to the
lesser of 1% of the outstanding shares of common stock on the first day of the
fiscal year or 350,000 shares or such lesser amount as may be determined by the
board.
The board of directors or a committee appointed by the board administers
the purchase plan. The board or its committee has full and exclusive authority
to interpret the terms of the purchase plan and determine eligibility.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, an employee may not be granted an
option to purchase stock under the purchase plan if such an employee:
- immediately after grant owns stock possessing five percent or more of the
total combined voting power or value of all classes of the capital stock
of ours, or
- whose rights to purchase stock under all employee stock purchase plans of
ours accrues at a rate which exceeds $25,000 worth of stock for each
calendar year.
The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended, contains consecutive, overlapping
24-month offering periods. Each offering period includes four six-month purchase
periods. The offering periods generally start on the first trading day on or
after May 1 and November 1 of each year, except for the first such offering
period which will commence on the first trading day on or after the effective
date of this offering and will end on the last trading day on or before October
31, 2001.
The purchase plan permits participants to purchase common stock through
payroll deductions of up to 10.0% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings
and commissions but excludes payments for overtime, shift premium payments,
incentive compensation, incentive payments, bonuses and other compensation. The
maximum number of shares a participant may purchase during a single offering
period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the purchase plan is 85.0% of the lower of the fair market value
of the common stock at the beginning or end of the offering period. If the fair
market value at the end of a purchase period is less than the fair market value
at the beginning of the offering period, participants will withdraw from the
current offering period following the exercise and will automatically re-enroll
in a new offering period. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with us.
A participant may not transfer rights granted under the purchase plan other
than by will, the laws of descent and distribution or as otherwise provided
under the purchase plan.
47
<PAGE> 49
The purchase plan provides that, if we merge with or into another
corporation or a sale of substantially all of our assets, a successor
corporation may assume or substitute for each outstanding purchase right. If the
successor corporation refuses to assume or substitute for the outstanding
purchase rights, the offering period then in progress will be shortened, and a
new exercise date will be set.
The purchase plan will terminate in 2009. However, the board of directors
has the authority to amend or terminate the purchase plan, except that, subject
to some exceptions described in the purchase plan, no such action may adversely
affect any outstanding rights to purchase stock under the purchase plan.
401(K) PLAN
In July 1997, our board of directors adopted a Retirement Savings and
Investment Plan covering our full-time employees located in the United States.
This plan is intended to qualify under Section 401(k) of the Internal Revenue
Code of 1986, as amended, so that contributions to this plan by employees, and
the investment earnings thereon, are not taxable to employees until withdrawn.
Pursuant to this plan, employees may elect to reduce their current compensation
by up to the lesser of 20% of their annual compensation or the statutorily
prescribed annual limit ($10,000 in 1999) and to have the amount of such
reduction contributed to this plan. We do not currently make additional matching
contributions on behalf of plan participants.
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with Steven D. Goldby,
Isy Goldwasser, W. Henry Weinberg and Jeryl L. Hilleman. In the event of a
change of control of Symyx (as defined in the agreements) and the actual or
constructive termination of employment, without cause, of the executive within
18 months following the change of control, all outstanding stock options issued
to the executive will be accelerated and all of our rights to repurchase their
restricted stock will lapse. Under these agreements, constructive termination of
employment means the executive's resignation following a reduction in salary, a
material reduction in employment-related responsibilities or a requirement to
relocate outside the Silicon Valley area.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for the following:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
48
<PAGE> 50
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors, executive
officers and controller, in addition to indemnification provided for in our
bylaws. These agreements, among other things, provide for indemnification of our
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in our rights, arising out
of such person's services as a director or executive officer to us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
49
<PAGE> 51
RELATED PARTY TRANSACTIONS
PREFERRED STOCK FINANCINGS
In February 1996, Symyx issued to one investor a total of 1,000,000 shares
of Series A preferred stock at a purchase price of $0.50 per share. In May 1996,
we issued to various investors a total of 8,600,687 shares of Series B preferred
stock at a purchase price of $1.50 per share. In July 1997, we issued to various
investors a total of 6,750,284 shares of Series C preferred stock at a purchase
price of $3.00 per share. In March, April, October and November 1998, we issued
to various investors a total of 4,210,185 shares of Series D preferred stock at
a purchase price of $4.50 per share.
The table below sets forth the directors and holders of more than 5% of our
outstanding stock who invested in, or are beneficial owners of our preferred
stock. The numbers in the table below are on an as converted to common stock
basis at a conversion ratio of 0.7778 shares of common stock for each share of
preferred stock.
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------------------
PREFERRED STOCKHOLDER SERIES A SERIES B SERIES C SERIES D
--------------------- -------- --------- -------- --------
<S> <C> <C> <C> <C>
Holders of More than 5%:
Institutional Venture Partners
Entities............................. -- 1,555,555 842,591 207,406
Venrock Associates Entities........ -- 1,037,036 518,517 120,987
Directors:
Thomas R. Baruch................... -- 272,222 136,111 172,839
Samuel D. Colella.................. -- 1,555,555 842,591 207,406
Baron Gaulthaus Kraijenhoff........ -- 50,555 25,277 9,202
Peter G. Schultz, Ph.D............. 194,444 -- 77,777 --
Isaac Stein........................ 116,665 38,888 19,444 --
</TABLE>
Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock that they will hold following this
offering. See "Description of Capital Stock -- Registration Rights."
LOANS TO OFFICERS
We have implemented a program under which our directors, executive officers
and a number of other key employees are permitted to purchase restricted stock
or to exercise their outstanding options as to both vested and unvested shares,
with unvested shares being subject to a right of repurchase at cost in favor of
Symyx in the event of termination of employment prior to vesting of all shares.
Under this program, the participants paid the exercise price for their
outstanding options pursuant to full recourse promissory notes. The notes bear
interest at rates between 4.6% and 6.0% per annum and are due and payable on the
earlier of 120 days after termination of the participant's employment with us,
or on various dates beginning in February 2003. The principal amounts of each
note payable by a director or executive officer are set forth below:
<TABLE>
<CAPTION>
DIRECTOR OR EXECUTIVE OFFICER NOTE AMOUNT
----------------------------- -----------
<S> <C>
Steven D. Goldby.................................. $303,750
Isy Goldwasser.................................... $ 50,000
W. Henry Weinberg, Ph.D........................... $ 80,000
Jeryl L. Hilleman................................. $ 13,500
</TABLE>
50
<PAGE> 52
In addition, in January 1998, we lent $300,000 to W. Henry Weinberg, Ph.D.
in connection with his employment with us to assist him with relocation
expenses. This loan did not bear interest. Dr. Weinberg repaid this loan in full
in July 1998.
PAYMENTS TO OFFICERS
Since 1996, we have made the following housing allowance and relocation
payments to W. Henry Weinberg, Ph.D. in connection with his employment with us:
- in 1996, $72,592;
- in 1997, $70,752;
- in 1998, $211,120; and
- in 1999 through September 30, 1999, $45,000.
OTHER TRANSACTIONS
Mario M. Rosati, one of our directors, is also a member of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, which has served as our outside
corporate counsel since our formation.
POLICY REGARDING TRANSACTIONS WITH AFFILIATES
It is our policy that future transactions with affiliates, including any
loans we make to our officers, directors, principal stockholders or other
affiliates will be on terms no less favorable to us than we could have obtained
from unaffiliated third parties. These transactions will be approved by a
majority of our board of directors, including a majority of the independent and
disinterested members or, if required by law, a majority of our disinterested
stockholders.
51
<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock, as of September 30, 1999, by the following
individuals or groups:
- each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock;
- each of our executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Unless otherwise indicated, the address for each stockholder on this table
is c/o Symyx Technologies, Inc., 3100 Central Expressway, Santa Clara,
California 95051. Except as otherwise noted, and subject to applicable community
property laws, to the best of our knowledge, the persons named in this table
have sole voting and investing power for all of the shares of common stock held
by them.
This table lists applicable percentage ownership based on 23,146,014 shares
of common stock outstanding as of September 30, 1999, as adjusted to reflect the
conversion of all outstanding shares of preferred stock upon the closing of this
offering, and also lists applicable percentage ownership based on 27,761,014
shares of common stock outstanding after completion of this offering. Options to
purchase shares of our common stock that are exercisable within 60 days of
September 30, 1999 are deemed to be beneficially owned by the persons holding
these options for the purpose of computing percentage ownership of that person,
but are not treated as outstanding for the purpose of computing any other
person's ownership percentage. All of these options are immediately exercisable
for common stock that would be subject to repurchase by us. Shares underlying
options that are deemed beneficially owned are listed in this table separately
in the column labeled "Shares Subject to Options." These shares are included in
the number of shares listed in the column labeled "Total Number."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER TO OPTIONS OFFERING OFFERING
---------------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
Institutional Venture Partners
Entities(1)................... 2,897,216 -- 12.52% 10.44%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Venrock Associates
Entities(2)................. 1,695,983 -- 7.33 6.11
30 Rockefeller Plaza, Room
5508
New York, NY 10122
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER TO OPTIONS OFFERING OFFERING
---------------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS:
Steven D. Goldby(3)........... 493,888 38,888 2.13 1.78
Isy Goldwasser................ 435,554 69,999 1.88 1.56
W. Henry Weinberg, Ph.D....... 719,443 38,888 3.10 2.59
Jeryl L. Hilleman(4).......... 252,775 38,888 1.09 *
Thomas R. Baruch(5)........... 604,505 23,333 2.61 2.18
Samuel D. Colella(6).......... 2,897,216 -- 12.52 10.44
Martin Gerstel(7)............. 174,999 -- * *
Baron Gaulthaus Kraijenhoff... 123,922 -- * *
Francois A. L'Eplattenier..... 38,888 -- * *
Kenneth J. Nussbacher......... 158,665 -- * *
Mario M. Rosati(8)............ 77,777 -- * *
Peter G. Schultz, Ph.D.(9).... 1,205,553 -- 5.21 4.34
Isaac Stein(10)............... 353,888 23,333 1.53 1.27
All directors and executive
officers as a group (13
persons).................... 7,537,073 233,329 32.24% 26.92%
</TABLE>
- -------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 2,723,387 shares held by Institutional Venture Partners VI, L.P.,
57,942 shares held by Institutional Venture Management VI, L.P. and 115,887
shares held by IVP Founders Fund I, L.P.
(2) Includes 1,030,942 shares held by Venrock Associates and 665,041 shares
held by Venrock Associates II, L.P. The general partners of Venrock
Associates and Venrock Associates II, L.P. are Anthony B. Evnin, David R.
Hathaway, Patrick F. Latterell, Ted H. McCourtney, Ray A. Rothrock,
Kimberly A. Rummelsburg and Anthony Sun.
(3) Includes 455,000 shares held by the Steven Goldby and Florence Goldby
Trust, of which Mr. Goldby is trustee.
(4) Includes 198,334 shares held by Jeryl L. Hilleman and William A. Albright,
Jr. as trustees of the Hilleman/Albright Family Trust. Also includes 3,888
shares held by Craig Albright as trustee of the Colin M. Albright 1991
Trust Agreement dated October 3, 1991, 7,777 shares held by Craig Albright
as trustee of the Caroline V. Albright 1995 Trust Agreement dated April 24,
1995, and 3,888 shares held by Craig Albright as trustee of the Evan M.
Albright 1991 Trust Agreement dated October 3, 1991. Ms. Hilleman disclaims
beneficial ownership of an aggregate of 15,553 shares held in trust for the
benefit of her children.
(5) Includes 408,333 shares held by Chemicals and Materials Enterprise
Associates Limited Partnership and 172,839 shares held by CMEA Life
Sciences Fund, L.P. Mr. Baruch is a general partner of each of these
entities and disclaims beneficial ownership of these shares, except to the
extent of his proportionate partnership interest therein.
(6) Includes 2,723,387 shares held by Institutional Venture Partners VI, L.P.,
57,942 shares held by Institutional Venture Management VI, L.P. and 115,887
shares held by IVP Founders Fund I, L.P. Mr. Colella is a general partner
of each of these entities and disclaims beneficial ownership of these
shares except to the extent of his individual partnership interests
therein.
53
<PAGE> 55
(7) Includes 174,999 shares held by Shomar Corporation. Mr. Gerstel and his
wife are the sole owners of this entity.
(8) Includes 70,000 shares held by WS Investment Company 95A. Mr. Rosati is a
general partner of this entity and disclaims beneficial ownership of the
shares held by it, except to the extent of his proportionate partnership
interest therein.
(9) Includes 388,888 shares held by George E. Schultz as trustee of the Schultz
Children's Trust. Dr. Schultz disclaims beneficial ownership of these
shares. Dr. Schultz has expressed an interest in acquiring shares in the
offering.
(10) Includes 311,111 shares held by the Isaac Stein and Madeline Johnson Stein
Revocable Trust, of which Mr. Stein is a trustee, and 19,444 shares held by
Stein Partners, of which Mr. Stein is a general partner.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our certificate of incorporation that becomes effective upon the closing of
this offering authorizes the issuance of 100,000,000 shares of common stock,
$0.001 par value, and authorizes the issuance of 10,000,000 shares of
undesignated preferred stock, no par value. From time to time, our board of
directors may establish the rights and preferences of the preferred stock. As of
September 30, 1999, 23,146,014 shares of common stock were issued and
outstanding and held by approximately 328 stockholders, and options to purchase
2,002,041 shares of common stock were issued and outstanding and held by
approximately 164 optionholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably the
dividends, if any, that are declared from time to time by the board of directors
out of funds legally available for that purpose. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of Symyx, the holders of
common stock are entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of this preferred stock. However, the effects
might include, among other things:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change in control of Symyx without further
action by the stockholders.
Upon the closing of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.
55
<PAGE> 57
REGISTRATION RIGHTS
Pursuant to a registration and information rights agreement entered into
between us and holders of 15,991,849 shares of common stock issuable upon
conversion of our Series A, Series B, Series C and Series D preferred stock, we
are obligated, under limited circumstances and subject to specified conditions
and limitations, to use our best efforts to register the registrable shares.
We must use our best efforts to register shares of the registrable shares:
- if we receive written notice from holders of 40% or more of the
registrable shares requesting that we effect a registration with respect
to not less than 80% of the registrable shares then held by the holders
requesting registration (or a lesser percentage where the reasonably
anticipated price to the public of the sale of the registrable shares
will exceed $10,000,000);
- if we decide to register our own securities (except in connection with
this offering); or
- if (1) we receive written notice from any holder or holders of the
registrable shares requesting that we effect a registration on Form S-3
(a shortened form of registration statement) with respect to shares of
the registrable shares, the reasonably anticipated price to the public of
which exceeds $500,000 and (2) we are then eligible to use Form S-3
(which at the earliest will occur twelve calendar months after the
closing of this offering).
However, in addition to certain other conditions and limitations, if
requested to register shares of registrable shares, we can delay registration
not more than once in any 12-month period and for not more than 90 days.
These registration rights terminate with respect to each registrable share
upon the first to occur of when the holder can transfer his or her registrable
shares pursuant to Rule 144 or five years after the closing of this offering. In
addition, the holders of these registration rights have entered into lockup
agreements and waived their registration rights until 180 days following this
offering.
ANTITAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS
Provisions of Delaware law and our certificate of incorporation and bylaws
could make the following more difficult:
- the acquisition of Symyx by means of a tender offer;
- the acquisition of Symyx by means of a proxy contest or otherwise; or
- the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
Symyx to negotiate first with our board. We believe that the benefits of
increased protection of its potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure Symyx outweigh
the disadvantages of discouraging these proposals because negotiation of any
proposals of this type could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
with our stockholders
56
<PAGE> 58
electing one class each year. See "Management -- Board of Directors." This
system of electing and removing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of Symyx,
because it generally makes it more difficult for stockholders to replace a
majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board or the president may call special meetings of
stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures for stockholder
proposals and for the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.
Delaware Antitakeover Law. Symyx is subject to Section 203 of the Delaware
General Corporation Law, an antitakeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date
the person became an interested stockholder, unless the business combination or
the transaction in which the person became an interested stockholder is approved
in the manner specified in Section 203. Generally, a business combination
includes a merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. Generally, an interested
stockholder is a person who, together with affiliates and associates, owns or
within three years prior to the determination of interested stockholder status
did own 15% or more of a corporation's voting stock. The existence of this
provision may have an antitakeover effect by discouraging takeover attempts not
approved in advance by the board of directors, that might result in a premium
over the market price for the shares of common stock held by stockholders.
Elimination of Stockholder Action by Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
No Cumulative Voting. Our certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of Symyx. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of Symyx.
Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Norwest Bank
Minnesota, N.A. The telephone number for our transfer agent and registrar is
(800) 468-9716.
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "SMMX."
57
<PAGE> 59
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of contractual resale restrictions contained in agreements
between us and our stockholders.
Upon completion of this offering, we will have outstanding 27,761,014
shares of common stock based upon shares outstanding as of September 30, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options prior to completion of this offering. Of these shares,
the 4,615,000 shares sold in this offering will be freely tradable without
restriction under the Securities Act, except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. Of the remaining
23,146,014 shares of common stock, 23,146,014 shares held by existing
stockholders are subject to lock-up agreements with the underwriters and/or us
providing that the stockholder will not offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights to, any shares of
common stock or any securities that are convertible into common stock, owned as
of the date of this prospectus or subsequently acquired, for a period of 180
days after the date of this prospectus without the prior written consent of
Credit Suisse First Boston. As a result of these lock-up agreements,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701 under the Securities Act, none of these shares will be
resellable until 181 days after the date of this prospectus. Credit Suisse First
Boston may, in its sole discretion and at any time without notice, release all
or any portion of the shares subject to lock-up agreements.
Beginning 181 days after the date of this prospectus, approximately
22,976,457 shares will be eligible for sale in the public market. All of these
shares will be subject to volume limitations under Rule 144, except 10,864,573
shares eligible for sale under Rule 144(k) and 2,189,091 shares eligible for
sale under Rule 701. In some cases, these shares are subject to repurchase
rights of Symyx.
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
and except an affiliate, would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 277,610 shares immediately after this offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about Symyx. Under Rule 144(k), a person who is not deemed to have been an
affiliate of Symyx at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner
58
<PAGE> 60
except an affiliate, is entitled to sell those shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of or
consultant to Symyx who purchased shares pursuant to a written compensatory plan
or contact may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell their Rule 701 shares in reliance on Rule
144 without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
their Rule 701 shares. However, all Rule 701 shares are subject to lock-up
agreements and will only become eligible for sale at the earlier of the
expiration of the 180-day lock-up agreements or the receipt of the written
consent of Credit Suisse First Boston more than 90 days after the date of this
prospectus.
After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our employee benefit plans. As of September 30, 1999,
options to purchase a total of 2,002,041 shares were outstanding and 1,528,521
shares were reserved for future issuance under our stock plans. Common stock
issued upon exercise of outstanding vested options or issued pursuant to our
employee stock purchase plan, other than common stock issued to our affiliates,
will be available for immediate resale in the open market following expiration
of the 180-day lock-up agreements.
Also beginning six months after the date of this offering, holders of
15,991,849 restricted shares will be entitled to registration rights on these
shares for sale in the public market. See "Description of Capital
Stock -- Registration Rights." Registration of these shares under the Securities
Act would result in their becoming freely tradable without restriction under the
Securities Act immediately upon the effectiveness of the registration.
59
<PAGE> 61
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Invemed Associates LLC and
Schroder & Co. Inc. are acting as representatives, the following respective
numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Invemed Associates LLC......................................
Schroder & Co. Inc. ........................................
---------
Total............................................. 4,615,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 692,250 additional shares of common stock at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation we will pay:
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us... $ $ $ $
</TABLE>
We estimate that our out-of-pocket expenses for this offering will be
approximately $1 million.
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our executive officers, directors and our existing stockholders have
agreed that we will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to, any
additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock, or publicly disclose
the intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 180 days after the date of this prospectus.
60
<PAGE> 62
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
The underwriters have reserved for sale, at the initial public offering
price, up to 923,000 shares of common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. This group may include Alejandro Zaffaroni, Peter Schultz
and RA Investments, each of whom is an existing stockholder of ours, who have
expressed an interest in acquiring up to 884,500 shares of common stock in the
offering, based upon an assumed initial public offering price of $13.00 per
share. Dr. Schulz is also one of our directors. The number of shares available
for sale to the general public in the offering will be reduced to the extent
these persons purchase these reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
terms as the other shares.
We have made application to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "SMMX."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined by negotiation between
us and the underwriters. The principal factors considered in determining the
public offering price included:
- the history of and prospects for the industry in which we will compete;
- the ability of our management;
- our prospects for our future earnings;
- the present state of our development and our current financial condition;
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and
- the general condition of the securities markets at the time of this
offering.
We can offer no assurances that the initial public offering price will
correspond to the price at which the common stock will trade in the public
market subsequent to the offering or that an active trading market for the
common stock will develop and continue after the offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act:
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
61
<PAGE> 63
Entities and individuals associated with Invemed Associates LLC are record
holders of 1,207,743 shares of our stock. Of these shares, 330,132 shares are
beneficially owned by entities affiliated with Credit Suisse First Boston
Corporation. In addition, an individual associated with Credit Suisse First
Boston Corporation owns 45,371 shares of our stock.
62
<PAGE> 64
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where required
by law, that the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
63
<PAGE> 65
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in our common
stock in their particular circumstances and with respect to the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Symyx by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Pillsbury Madison & Sutro LLP, Palo Alto, California, is acting as
counsel for the underwriters in connection with selected legal matters relating
to the shares of common stock offered by this prospectus. As of September 30,
1999, an investment partnership and a member of Wilson Sonsini Goodrich & Rosati
beneficially owned an aggregate of 77,777 shares of common stock of Symyx. Mario
M. Rosati, one of our directors and our secretary, is a member of Wilson Sonsini
Goodrich & Rosati.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998 and September 30, 1999, and for each of
the three years in the period ended December 31, 1998 and for the nine months
ended September 30, 1999, as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1. This prospectus, which forms a part of the Registration
Statement, does not contain all the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this
prospectus to any contract or other document of Symyx, such references are not
necessarily complete and you should refer to the exhibits attached to the
Registration Statement for copies of the actual contract or document. You may
review a copy of the Registration Statement, including exhibits and schedule
filed therewith, at the Securities and Exchange Commission's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Securities and Exchange
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also obtain copies of such materials from the Public
References Section of the Securities and Exchange Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as Symyx, that file electronically
with the Securities and Exchange Commission.
64
<PAGE> 66
SYMYX TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Stockholders' Equity........................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 67
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Symyx Technologies, Inc.
We have audited the accompanying balance sheets of Symyx Technologies, Inc.
as of December 31, 1997 and 1998 and September 30, 1999, and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998 and the nine months ended
September 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Symyx Technologies, Inc. at
December 31, 1997 and 1998 and September 30, 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 and the nine months ended September 30, 1999, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
October 8, 1999, except as to
the third paragraph of Note 1 for
which the date is October 22, 1999.
F-2
<PAGE> 68
SYMYX TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
-------------------------- SEPTEMBER 30, SEPTEMBER 30, 1999
1997 1998 1999 (NOTE 1)
----------- ------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 3,841,237 $ 14,042,755 $ 13,627,711
Short-term investments.............................. 10,530,855 9,338,897 1,500,000
Accounts receivable................................. -- 626,088 1,093,840
Other current assets................................ 864,387 838,816 1,854,500
----------- ------------ ------------
Total current assets.................................. 15,236,479 24,846,556 18,076,051
Property and equipment, net........................... 13,320,423 16,109,920 17,232,341
Long-term investments................................. 6,241,920 11,738,965 24,755,534
Other assets.......................................... 62,470 208,025 563,479
----------- ------------ ------------
$34,861,292 $ 52,903,466 $ 60,627,405
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities...... $ 1,887,428 $ 1,676,000 $ 1,986,030
Accrued compensation and employee benefits.......... 203,630 416,253 579,808
Deferred rent....................................... 286,988 446,282 469,905
Deferred revenue.................................... 1,883,699 4,171,429 9,129,896
Current portion of equipment and facility loans..... 1,114,638 2,435,836 3,082,678
----------- ------------ ------------
Total current liabilities............................. 5,376,383 9,145,800 15,248,317
Equipment and facility loans.......................... 4,454,943 7,591,793 7,014,264
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value, 23,650,000 shares
authorized, issuable in series:
Series A convertible, 1,000,000 shares designated,
issued and outstanding (no shares outstanding pro
forma); aggregate liquidation preference of
$500,000.......................................... 1,000 1,000 1,000 $ --
Series B convertible, 8,650,000 shares designated,
8,600,687 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $12,901,030......................... 8,601 8,601 8,601 --
Series C convertible, 8,000,000 shares designated,
6,750,284 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $20,250,852......................... 6,750 6,750 6,750 --
Series D convertible, 6,000,000 shares designated,
4,210,185 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $18,945,832......................... -- 4,210 4,210 --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 3,759,772, 6,225,475 and 7,154,165
shares issued and outstanding at December 31, 1997,
December 31, 1998 and September 30, 1999,
respectively (23,146,014 shares outstanding pro
forma).............................................. 3,760 6,225 7,154 23,146
Class B common stock, no par value, no shares
authorized, issued and outstanding (93,333 shares at
December 31, 1997).................................. 93 -- -- --
Additional paid-in capital............................ 33,786,824 54,092,557 59,995,355 59,999,924
Stockholder notes receivable.......................... -- (397,750) (731,350) (731,350)
Deferred stock compensation........................... -- (571,717) (2,939,814) (2,939,814)
Unrealized gain (loss) on investments................. 7,891 (43,823) (58,095) (58,095)
Accumulated deficit................................... (8,784,953) (16,940,180) (17,928,987) (17,928,987)
----------- ------------ ------------ ------------
Total stockholders' equity............................ 25,029,966 36,165,873 38,364,824 $ 38,364,824
----------- ------------ ------------ ============
Total liabilities and stockholder's equity............ $34,861,292 $ 52,903,466 $ 60,627,405
=========== ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 69
SYMYX TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue from
collaborations............... $ -- $ 4,806,301 $13,786,836 $10,035,136 $22,529,624
Operating costs and expenses:
Research and development..... 2,482,776 8,763,679 17,639,884 13,298,523 16,787,169
General and administrative... 567,377 2,129,285 4,500,462 3,350,455 4,640,570
Amortization of deferred
compensation............... -- -- 187,839 69,787 2,822,136
----------- ----------- ----------- ----------- -----------
Total operating expenses..... 3,050,153 10,892,964 22,328,185 16,718,765 24,249,875
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................. (3,050,153) (6,086,663) (8,541,349) (6,683,629) (1,720,251)
Interest income.............. 374,733 842,853 1,117,514 773,315 1,500,160
Interest and other expense... (5,763) (351,725) (731,392) (543,843) (768,716)
----------- ----------- ----------- ----------- -----------
Net income (loss)............ $(2,681,183) $(5,595,535) $(8,155,227) $(6,454,157) $ (988,807)
=========== =========== =========== =========== ===========
Basic and diluted net loss
per share.................. $ (1.24) $ (1.97) $ (2.13) $ (1.77) $ (0.18)
=========== =========== =========== =========== ===========
Shares used in computing
basic and diluted net loss
per share.................. 2,168,095 2,844,646 3,829,060 3,655,774 5,546,445
=========== =========== =========== =========== ===========
Pro forma basic and diluted
net loss per share
(unaudited)................ $ (0.46) $ (0.05)
=========== ===========
Shares used in computing pro
forma basic and diluted net
loss per share
(unaudited)................ 17,736,765 21,538,294
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 70
SYMYX TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER DEFERRED
-------------------- ------------------ PAID-IN NOTES STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION
---------- ------- --------- ------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... -- $ -- 2,076,666 $2,077 $ 593 $ -- $ --
Issuance of common stock........... -- -- 1,231,362 1,231 97,997 -- --
Issuance of Class B common stock... -- -- 116,666 117 1,383 -- --
Issuance of Series A preferred
stock upon conversion of loan from
officer........................... 1,000,000 1,000 -- -- 499,000 -- --
Issuance of Series B preferred
stock for cash, net of issuance
costs of $31,860.................. 8,600,687 8,601 -- -- 12,860,570 -- --
Net income (loss) and comprehensive
income (loss) for year ended
December 31, 1996................. -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- --------- -----------
Balance at December 31, 1996....... 9,600,687 9,601 3,424,694 3,425 13,459,543 -- --
Issuance of common stock........... -- -- 471,188 471 102,954 -- --
Issuance of Series C preferred
stock for cash, net of issuance
costs of $19,268.................. 6,750,284 6,750 -- -- 20,224,834 -- --
Repurchase of common stock (19,444
shares) and Class B common stock
(23,333 shares)................... -- -- (42,777) (43) (507) -- --
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities... -- -- -- -- -- -- --
Net income (loss) for the year
ended December 31, 1997......... -- -- -- -- -- -- --
Comprehensive loss................ -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- --------- -----------
Balance at December 31, 1997....... 16,350,971 16,351 3,853,105 3,853 33,786,824 -- --
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36,148.................. 4,143,518 4,143 -- -- 18,605,542 -- --
Issuance of common stock........... -- -- 1,532,370 1,532 641,542 (397,750) --
Conversion of Class B common stock
to common stock on a 1:10 basis... -- -- 840,000 840 (840) -- --
Issuance of Series D preferred
stock as consideration for
technology rights................. 66,667 67 -- -- 299,933 -- --
Deferred stock compensation........ -- -- -- -- 759,556 -- (759,556)
Amortization of deferred stock
compensation...................... -- -- -- -- -- -- 187,839
Comprehensive income (loss):
Net income (loss) for the year
ended December 31,1998.......... -- -- -- -- -- -- --
Unrealized gain (loss) on
available-for-sale securities... -- -- -- -- -- -- --
Comprehensive income (loss)....... -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- --------- -----------
Balance at December 31, 1998....... 20,561,156 20,561 6,225,475 6,225 54,092,557 (397,750) (571,717)
Issuance of common stock........... -- -- 961,355 961 744,033 (361,050) --
Repurchase of common stock......... -- -- (32,665) (32) (31,468) 27,450 --
Deferred stock compensation........ -- -- -- -- 5,190,233 -- (5,190,233)
Amortization of deferred stock
compensation...................... -- -- -- -- -- -- 2,822,136
Comprehensive income (loss):
Net income (loss) for the nine
months ended September 30,
1999............................ -- -- -- -- -- -- --
Unrealized gain (loss) on
available for sale securities... -- -- -- -- -- -- --
Comprehensive income (loss)....... -- -- -- -- -- -- --
---------- ------- --------- ------ ----------- --------- -----------
Balance as of September 30, 1999... 20,561,156 $20,561 7,154,165 $7,154 $59,995,355 $(731,350) $(2,939,814)
========== ======= ========= ====== =========== ========= ===========
<CAPTION>
UNREALIZED
GAIN TOTAL
(LOSS) ON ACCUMULATED STOCKHOLDERS'
INVESTMENTS DEFICIT EQUITY
----------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1995....... $ -- $ (508,235) $ (505,565)
Issuance of common stock........... -- -- 99,228
Issuance of Class B common stock... -- -- 1,500
Issuance of Series A preferred
stock upon conversion of loan from
officer........................... -- -- 500,000
Issuance of Series B preferred
stock for cash, net of issuance
costs of $31,860.................. -- -- 12,869,171
Net income (loss) and comprehensive
income (loss) for year ended
December 31, 1996................. -- (2,681,183) (2,681,183)
-------- ------------ -----------
Balance at December 31, 1996....... -- (3,189,418) 10,283,151
Issuance of common stock........... -- -- 103,425
Issuance of Series C preferred
stock for cash, net of issuance
costs of $19,268.................. -- -- 20,231,584
Repurchase of common stock (19,444
shares) and Class B common stock
(23,333 shares)................... -- -- (550)
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities... 7,891 -- 7,891
Net income (loss) for the year
ended December 31, 1997......... -- (5,595,535) (5,595,535)
-----------
Comprehensive loss................ -- -- (5,587,644)
-------- ------------ -----------
Balance at December 31, 1997....... 7,891 (8,784,953) 25,029,966
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36,148.................. -- -- 18,609,685
Issuance of common stock........... -- -- 245,324
Conversion of Class B common stock
to common stock on a 1:10 basis... -- -- --
Issuance of Series D preferred
stock as consideration for
technology rights................. -- -- 300,000
Deferred stock compensation........ -- -- --
Amortization of deferred stock
compensation...................... -- -- 187,839
Comprehensive income (loss):
Net income (loss) for the year
ended December 31,1998.......... -- (8,155,227) (8,155,227)
Unrealized gain (loss) on
available-for-sale securities... (51,714) -- (51,714)
-----------
Comprehensive income (loss)....... -- -- (8,206,941)
-------- ------------ -----------
Balance at December 31, 1998....... (43,823) (16,940,180) 36,165,873
Issuance of common stock........... -- -- 383,944
Repurchase of common stock......... -- -- (4,050)
Deferred stock compensation........ -- -- --
Amortization of deferred stock
compensation...................... -- -- 2,822,136
Comprehensive income (loss):
Net income (loss) for the nine
months ended September 30,
1999............................ -- (988,807) (988,807)
Unrealized gain (loss) on
available for sale securities... (14,272) -- (14,272)
-----------
Comprehensive income (loss)....... -- -- (1,003,079)
-------- ------------ -----------
Balance as of September 30, 1999... $(58,095) $(17,928,987) $38,364,824
======== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 71
SYMYX TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------
1996 1997 1998 1998 1999
----------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $(2,681,183) $ (5,595,535) $ (8,155,227) $ (6,454,157) $ (988,807)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 200,334 1,031,258 3,090,533 2,752,648 3,234,303
Deferred compensation amortization........... -- -- 187,839 69,787 2,822,136
Issuance of preferred stock as consideration
for technology rights...................... -- -- 300,000 -- --
Common shares issued and contribution of
capital in consideration of services
rendered................................... 10,000 -- -- -- --
Changes in assets and liabilities:
Other current assets....................... (249,635) (614,752) 25,571 12,484 (1,015,684)
Accounts receivable........................ -- -- (626,088) (424,910) (467,752)
Accounts payable and other current
liabilities.............................. 276,391 1,540,149 (211,428) (1,095,017) 310,030
Deferred revenue........................... -- 1,883,699 2,287,730 (1,205,783) 4,958,467
Deferred rent.............................. -- 286,988 159,294 143,545 23,623
Accrued compensation and employee
benefits................................. 43,870 159,760 212,623 166,686 163,555
Other long-term assets..................... (55,119) (7,351) (145,555) (35,009) (355,454)
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities................................... (2,455,342) (1,315,784) (2,874,708) (6,069,726) 8,684,417
----------- ------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment, net........ (1,329,770) (13,218,044) (5,808,609) (4,747,212) (4,060,959)
Purchase of investments........................ (5,978,859) (35,036,081) (20,053,101) (2,707,714) (14,530,285)
Proceeds from sales of investments............. -- 12,917,486 1,274,879 1,274,879 --
Proceeds from maturities of investments........ -- 11,332,570 14,350,000 11,500,000 9,050,000
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities................................... (7,308,629) (24,004,069) (10,236,831) 5,319,953 (9,541,244)
----------- ------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock, net
of issuance costs............................ 12,869,171 20,231,584 18,609,685 6,233,745 --
Proceeds from issuance of common stock, net of
repurchases.................................. 90,728 102,875 245,324 232,934 372,470
Proceeds from loan from officer................ 696,137 -- -- -- --
Repayment of loan from officer................. (650,000) -- -- -- --
Principal payments on equipment and facility
loans........................................ -- (430,419) (1,166,310) (821,383) (1,956,489)
Proceeds from equipment and facility loans..... -- 6,000,000 5,624,358 -- 2,025,802
----------- ------------ ------------ ------------ ------------
Net cash provided by financing activities...... 13,006,036 25,904,040 23,313,057 5,645,296 441,783
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................. 3,242,065 584,187 10,201,518 4,895,523 (415,044)
Cash and cash equivalents at beginning of
period....................................... 14,985 3,257,050 3,841,237 3,841,237 14,042,755
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period..... $ 3,257,050 $ 3,841,237 $ 14,042,755 $ 8,736,760 $ 13,627,711
=========== ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid.................................. $ 5,763 $ 406,229 $ 733,077 $ 543,035 $ 811,318
=========== ============ ============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Conversion of loan from officer to preferred
stock........................................ $ 500,000 $ -- $ -- $ -- $ --
=========== ============ ============ ============ ============
Exercise of stock options for notes
receivable................................... $ -- -- $ 397,750 $ 397,750 $ 333,600
=========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 72
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Symyx Technologies, Inc. (the "Company"), was incorporated on September 20,
1994 in the state of California to research, develop, manufacture and market
products through the application of combinatorial technologies in the area of
materials science. In February 1999, the Company completed a reincorporation in
the state of Delaware. As a result, the accompanying financial statements have
been retroactively adjusted to reflect the issuance of $.001 par value preferred
stock and common stock. To date, the Company's operations have involved research
and development activities, a significant portion of which has been funded by
collaborative partners. The Company has had no revenues from product sales
through September 30, 1999.
In August 1999, the board of directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If the
initial public offering is closed under the terms presently anticipated, all of
the preferred stock outstanding will automatically convert into 15,991,849
shares of common stock. Unaudited pro forma stockholders' equity, as adjusted
for the assumed conversion of the preferred stock, is set forth on the balance
sheet.
On October 22, 1999, the stockholders approved a nine-for-seven reverse
split of the Company's common stock. All share and per share amounts in the
accompanying financial statements have been adjusted retroactively.
INTERIM FINANCIAL INFORMATION
The financial information for the nine months ended September 30, 1998 is
unaudited but, in the opinion of management, has been prepared on the same basis
as the annual financial statements and includes all adjustments (consisting only
of normal recurring adjustments) that the Company considers necessary for a fair
presentation of the financial position at such date and the operating results
and cash flows for such periods. Results for the interim period are not
necessarily indicative of the results to be expected for any subsequent
nine-month period nor for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.
CASH AND CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents; investments with
maturities between three and twelve months from the date of purchase are
considered to be short-
F-7
<PAGE> 73
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
term investments; investments with maturities greater than twelve months from
the date of purchase are considered to be long-term investments. By policy, the
Company restricts its investments to instruments with maturities of less than
twenty-four months.
The Company invests its excess cash primarily in deposits with banks and
short-term and medium-term marketable securities. These investments primarily
include corporate notes, money market funds and U.S. treasury notes. By policy,
the Company restricts its investments to long-term bank obligations rated "A" or
higher and short-term obligations rated "P1" or higher by Moody's or "A1" or
higher by Standard & Poor's ("S&P"), and corporate obligations, including
intermediate term notes rated "A" or higher and commercial paper rated "P1" or
higher by Moody's, or "A1" or higher by S&P.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such determination as of each balance sheet
date. Through September 30, 1999, the Company has classified its entire
investment portfolio as available-for-sale. Available-for-sale securities are
carried at fair value with unrealized gains and losses reported as a separate
component of stockholders' equity. The estimated fair value amounts have been
determined by the Company using available market information and commonly used
valuation methodologies.
The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are also included in
interest income. The cost of securities sold is based on the specific
identification method. Interest and dividends are included in interest income.
The following is a summary of the fair value of available-for-sale
securities:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
U.S. Treasury securities...... $ 400,001 $ -- $ --
Money market funds............ 3,212,210 11,242,137 9,592,855
U.S. Corporate securities..... 13,359,470 21,267,862 30,125,751
----------- ----------- -----------
Total......................... $16,971,681 $32,509,999 $39,718,606
=========== =========== ===========
</TABLE>
Above amounts are included in the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
Cash and cash equivalents..... $ 198,906 $11,432,137 $13,463,072
Short-term investments........ 10,530,855 9,338,897 1,500,000
Long-term investments......... 6,241,920 11,738,965 24,755,534
----------- ----------- -----------
Total......................... $16,971,681 $32,509,999 $39,718,606
=========== =========== ===========
</TABLE>
F-8
<PAGE> 74
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Following is a reconciliation of cash and cash equivalents:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
---------- ----------- -------------
<S> <C> <C> <C>
Available-for-sale
securities................... $ 198,906 $11,432,137 $13,463,072
Cash and bank accounts......... 3,642,331 2,610,618 164,639
---------- ----------- -----------
Total cash and cash
equivalents.................. $3,841,237 $14,042,755 $13,627,711
========== =========== ===========
</TABLE>
Unrealized gains and losses are not material, and have, therefore, not been
shown separately; however, they have been included as a separate component in
the statement of stockholders' equity. Gross realized gains and losses on sales
of available-for-sale securities were immaterial.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method using a life of three to five years. Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life of
the assets.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
Machinery and equipment....... $ 4,026,939 $ 7,128,440 $ 8,805,463
Computers and software........ 911,380 1,469,014 2,023,136
Leasehold improvements........ 8,442,276 10,412,719 10,740,354
Construction in progress...... 603,623 346,632 1,386,073
Furniture and fixtures........ 273,103 461,443 483,984
----------- ----------- -----------
14,257,321 19,818,248 23,439,010
Less accumulated depreciation
and amortization............ (936,898) (3,708,328) (6,206,669)
----------- ----------- -----------
Property and equipment, net... $13,320,423 $16,109,920 $17,232,341
=========== =========== ===========
</TABLE>
Equipment which has been collateralized as security for the Company's three
loan agreements is included in property and equipment. At December 31, 1997 and
1998, and September 30, 1999, property and equipment collateralized was
$6,000,000, $13,180,000 and $15,200,000 with accumulated depreciation of
$140,000, $3,060,000 and $5,300,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenues from research collaboration agreements and
government grants as earned based upon the performance requirements of the
agreements. Payments received prior to performance are deferred and recognized
as revenue when earned over future performance periods. Collaboration agreements
generally specify minimum levels of research effort required to be performed by
the Company. Payments
F-9
<PAGE> 75
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
received under research collaboration agreements are not refundable if the
research effort is not successful.
RESEARCH AND DEVELOPMENT
Research and development expenditures, including direct and allocated
expenses, are charged to operations as incurred.
STOCK-BASED COMPENSATION
The Company generally grants stock options to its employees for a fixed
number of shares with an exercise price equal to the fair value of the shares on
the date of grant. As allowed under the Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for stock awards to employees. Accordingly, no
compensation expense is recognized in the Company's financial statements in
connection with stock options granted to employees at fair value. Deferred
compensation for options granted to employees is determined as the difference
between the deemed fair market value of the Company's common stock on the date
options were granted and the exercise price.
Deferred compensation for options granted to nonemployees has been
determined in accordance with SFAS 123 as the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured. Deferred compensation for options granted to nonemployees is
periodically remeasured as the underlying options vest.
NET LOSS PER SHARE
Basic and diluted net loss per common share are presented in conformity
with the Statement of Financial Accounting Standards No. 128, "Earnings per
Share," ("SFAS 128") for all periods presented. Following the guidance given by
the Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and convertible preferred stock that has been issued or granted for
nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if these shares had been outstanding for all periods
presented. To date, the Company has not issued or granted shares for nominal
consideration.
In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase. Pro forma basic and
diluted net loss per common share, as presented in the statements of operations,
has been computed for the year ended December 31, 1998 and the nine months ended
September 30, 1999 as described above, and also gives effect to the conversion
of the convertible preferred stock, which will automatically convert to common
stock immediately prior to the completion of
F-10
<PAGE> 76
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the Company's initial public offering, (using the if-converted method) from the
original date of issuance.
The following table presents the calculation of basic, diluted and pro
forma basic and diluted net loss per share (in thousands, except per share
data):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ----------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss................. $(2,681) $(5,596) $(8,155) $(6,454) $ (989)
======= ======= ======= ======= =======
Basic and diluted:
Weighted-average shares
of common stock
outstanding......... 2,923 3,474 4,659 4,458 6,840
Less: weighted-average
shares subject to
repurchase.......... (755) (629) (830) (802) (1,294)
------- ------- ------- ------- -------
Weighted-average shares
used in computing
basic and diluted
net loss per
share............... 2,168 2,845 3,829 3,656 5,546
======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (1.24) $ (1.97) $ (2.13) $ (1.77) $ (0.18)
======= ======= ======= ======= =======
Pro forma:
Net loss............... $(8,155) $ (989)
======= =======
Shares used above...... 3,829 5,546
Pro forma adjustment to
reflect weighted
effect of assumed
conversion of
convertible
preferred stock..... 13,908 15,992
------- -------
Shares used in
computing pro forma
basic and diluted
net loss per
share............... 17,737 21,538
======= =======
Pro forma basic and
diluted net loss per
share............... $ (0.46) $ (0.05)
======= =======
</TABLE>
The Company has excluded all convertible preferred stock, convertible class
B common stock, outstanding stock options, and shares subject to repurchase from
the calculation of diluted loss per common share because all such securities are
antidilutive for all applicable periods presented. The total number of shares
excluded from the calculations of diluted net loss per share, prior to
application of the treasury stock method for options,
F-11
<PAGE> 77
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
was 9,302,409, 15,558,813 and 18,862,072 for the years ended December 31, 1996,
1997 and 1998, respectively, and 19,918,048 and 19,318,912 for the nine months
ended September 30, 1998 and 1999, respectively. Such securities, had they been
dilutive, would have been included in the computations of diluted net loss per
share. See Note 4 for further information on these securities.
COMPREHENSIVE INCOME (LOSS)
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income". The only component of other comprehensive
income (loss) is unrealized gains and losses on available-for-sale securities.
Comprehensive loss has been disclosed in the consolidated statement of
stockholders' equity for all periods presented.
SEGMENT REPORTING
Effective in January 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
The Company has determined that it operates in only one segment. Accordingly,
the adoption of this Statement had no impact on the Company's financial
statements.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which will be effective for the year
ending 2001. This statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments imbedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. The Company believes the
adoption of SFAS 133 will not have a material effect on the financial
statements, since it currently does not engage in hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). "SOP 98-1"
requires that entities capitalize certain costs related to internal-use software
once certain criteria have been met. The adoption of SOP 98-1, as required in
1999, has not had a material impact on the Company's financial position or
results of operations. The Company expenses as incurred the costs associated
with developing software for use in research and development activities in
accordance with Statement of Financial Accounting Standards No. 2, "Accounting
for Research and Development Costs" and related interpretations.
F-12
<PAGE> 78
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. RESEARCH AND DEVELOPMENT ARRANGEMENTS
In March 1998, the Company entered into a collaboration agreement with
Bayer AG that was subsequently expanded in May 1998, January 1999 and September
1999. The January 1999 portion of the expanded collaboration is a new three year
agreement, the September 1999 amendment expands the term of the March 1998
agreement through December 2000. The agreements are noncancellable other than
for material breach or certain other conditions. The partnership is focused on
the discovery of catalysts, polymers, and electronic materials, including x-ray
phosphors. The Company is responsible for performing research at levels defined
in the agreement, including synthesis, screening and informatics. Bayer is
entitled to develop and commercialize materials discovered in or under the
collaboration within the defined field. Under the terms of the expanded
agreement, the Company will receive $36,000,000 in guaranteed research funding
and up to $60,000,000 if extended through mutual agreement. Bayer makes
quarterly research payments to the Company in accordance with the collaboration
agreement. In addition, in 1998 Bayer Innovation, a corporate venture fund of
Bayer AG, made an investment of $5,000,000 in the Company's Series D convertible
preferred stock on the same terms as other financial investors. The Company will
also receive royalties or milestone payments on the sale of any products
developed out of the collaboration. The agreement contains procedures by which
the Company and Bayer will determine royalty rates for the sale or license of
products produced under the agreement. During the year ending December 31, 1998,
the Company recognized net revenue of $5,242,000 in connection with this
collaboration. During the nine months ended September 30, 1999, the Company has
recognized $7,190,000 in connection with this collaboration. Revenue in 1997
included $1,042,000 earned under a related interim agreement with Bayer.
In September 1998, the Company entered into a three-year collaborative
research agreement with Celanese Ltd. ("Celanese"). The agreement is
noncancellable other than for material breach or in certain other conditions.
With sufficient notice, Celanese has the right to extend its period of
exclusivity with respect to the field of research covered by the agreement.
Symyx may receive up to $20,000,000 of research funding under the terms of this
agreement. The collaboration is focused on heterogeneous catalysis for commodity
chemical applications, a program that began as part of a February 1997 broad
research collaboration with Hoechst AG. The program was transferred from Hoechst
to its chemical and acetate products subsidiary, Celanese, in keeping with
Hoechst's decision to focus exclusively on life sciences. The Company is
responsible for performing research at levels defined in the agreement,
including synthesis, screening and informatics. Celanese is entitled to develop
and commercialize materials discovered in or under collaboration within the
defined field. The Company will receive royalties on the sale of products
commercialized under this agreement. The agreement contains procedures by which
the Company and Celanese will determine royalty rates for the sale or license or
products under the agreement. During the year ended December 31, 1998 and the
nine months ended September 30, 1999, the Company recognized net revenue of
$4,783,000 and $2,750,000, respectively, in connection with the Celanese/Hoechst
collaboration. The Company previously had a collaboration with Hoechst pursuant
to which approximately $3,667,000 of research revenue was earned in 1997.
Separately, in 1998 Hoechst's subsidiary, Aventis Research and Technologies,
made an equity investment of $1,800,000
F-13
<PAGE> 79
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
in the Company's Series D convertible preferred stock on the same terms as other
financial investors. Included in this amount is 51,993 shares of Series D
convertible preferred stock valued at $300,000 that was granted in consideration
for the transfer of certain rights to technology, the value of which was
included in research and development expense.
During 1998, the Company was awarded grants from the U.S. Office of Naval
Research Defense Advanced Research Projects Agency (DARPA) and the U.S.
Department of Energy. During the nine months ended September 30, 1999, the
Company was awarded one additional grant from both the U.S. Office of Naval
Research Defense Advanced Research Projects Agency (DARPA) and the U.S.
Department of Energy. Under these collaboration arrangements, the Company will
be reimbursed for research costs over various periods as specified in the
agreements. During the years ended December 31, 1997 and 1998, and the nine
months ended September 30, 1999, revenue recognized in the aggregate under these
grants was approximately $60,000, $1,011,000 and $1,997,000, respectively.
In January 1999, the Company entered into a three-year collaboration
agreement with the Dow Chemical Company to develop polyolefin catalysts
primarily directed toward the identification of new catalyst systems for the
production of a wide range of plastic products. The agreement is noncancellable
other than for material breach or in certain other conditions. The Company is
responsible for performing research at levels defined in the agreement,
including synthesis screening and information. Dow is entitled to develop and
commercialize materials discovered in or under the collaboration within the
defined field. Under the terms of the agreement, the Company will receive
$18,000,000 in guaranteed research payments and fees, as well as royalties from
polyolefin products sales resulting from the collaboration. During the nine
months ended September 30, 1999, the Company has recognized $4,125,000 in
connection with this collaboration.
In December 1997, the Company entered into a six-month interim research
funding agreement with The B.F. Goodrich Company to research polymers. The
Company received $1,005,000 of research funding under the terms of this
agreement. In August 1998, the interim agreement was expanded to a two-year
collaborative research agreement. Under the terms of the expanded agreement, the
Company would receive $3,810,000 of research funding of which $1,417,000 was
received. The collaboration agreement was terminated by mutual agreement in
April 1999. In consideration of the early termination of the agreement, the
Company will receive up to $1,273,000 in three payments through December 1999.
During the year ended December 31, 1998 and the nine months ended September 30,
1999, the Company recognized $1,722,000 and $1,615,000, respectively, in
connection with the interim, collaboration and termination agreements. The
remaining payments due under the termination agreement are subject to reduction
in certain circumstances.
During 1998 and the first nine months of 1999, the Company entered into
multiyear research agreements with several additional corporations. Under these
collaboration agreements, the Company will receive research funding over various
periods and would be entitled to milestone payments or royalties for any
products developed out of the collaboration. Revenue recognized in aggregate
under these collaborations was approxi-
F-14
<PAGE> 80
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
mately $1,028,000 and $4,853,000 during the year ended December 31, 1998 and the
nine months ended September 30, 1999, respectively.
3. FACILITY LEASE AND OTHER COMMITMENTS
The Company entered into an 11 year operating lease agreement for its
facility commencing February 1, 1997, with rent payments commencing July 1,
1998. In May 1999, the Company entered into an eight-and-a-half-year operating
lease agreement for an additional facility commencing October 1999.
Rent expense, which is being recognized on a straight-line basis over the
lease term, was approximately $142,000, $348,000, and $308,000 for the years
ended December 31, 1996, 1997, and 1998, respectively, and $226,000 and $250,000
for the nine months ended September 30, 1998 and 1999, respectively. Future
commitments under the operating lease for the facility are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
1999.......................................... $ 255,793 $ 192,468
2000.......................................... 274,270 683,984
2001.......................................... 293,546 717,761
2002.......................................... 313,182 751,904
2003.......................................... 332,859 786,084
Thereafter.................................... 1,562,634 3,692,934
---------- ----------
$3,032,284 $6,825,135
========== ==========
</TABLE>
In connection with the build out of the Company's facility, the Company
entered into a loan and security agreement in January 1997 for up to $6,000,000
(of which $5,000,000 may be used for leasehold improvements). Amounts drawn
under the loan bear a weighted-average interest rate of 13.9%, have a term of 48
months and are secured by the building improvements financed. The Company issued
155,555 shares of common stock to the lender at $0.19 per share in January 1997
in connection with this arrangement. As of December 31, 1998, the Company has
drawn the full amount available under the arrangement.
In December 1998, the Company entered into loan and security arrangements
for up to $10,000,000 with Transamerica Business Credit and LMSI Venture
Finance. Amounts drawn under the loans will bear interest rates of approximately
8.5% to 10.0%, have a term of 48 months, and are secured by equipment financed
by proceeds under the agreements. Under these agreements, $5,624,000 was drawn
in 1998. An additional $2,026,000 was drawn under the agreement during the nine
months ended September 30, 1999.
F-15
<PAGE> 81
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Future principal payments under the loan agreements are as follows as of
September 30, 1999:
<TABLE>
<S> <C>
1999...................................................... $ 738,315
2000...................................................... 3,171,133
2001...................................................... 3,571,254
2002...................................................... 2,302,383
2003...................................................... 313,857
-----------
Total principal payments.................................. $10,096,942
===========
</TABLE>
The carrying value of these loans approximates their fair value based on a
comparison to debt arrangements with similar terms and conditions.
4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Concurrent with the Series D convertible preferred stock financing in 1998,
the Company's Articles of Incorporation were amended. The Company is authorized
to issue two classes of capital stock, designated, respectively, "common stock"
and "preferred stock" with total authorized shares of 50,000,000 and 23,650,000,
respectively.
In September 1999, the board of directors approved an amendment to the
Company's articles of incorporation to authorize 10,000,000 shares of
undesignated preferred stock, for which the board of directors is authorized to
fix the designation, powers, preferences and rights and an increase in the
authorized number of shares of common stock to 100,000,000 shares.
Each share of Series A, B, C, and D preferred stock is convertible into
shares of common stock on a 0.7778-for-one basis, subject to adjustment
resulting from future issuances of certain equity securities at a lower price
per share. No such adjustments have been made to date. The preferred shares
automatically convert into common stock immediately prior to the closing of an
underwritten public offering of common stock under the Securities Act of 1933 in
which the Company receives at least $10,000,000 in aggregate gross proceeds and
the price per share is at least $6.00 (subject to adjustment for a
recapitalization or certain other stock adjustments).
Series A, B, C, and D preferred stockholders are entitled to annual
noncumulative dividends at an annual rate of $0.05, $0.15, $0.30, and $0.50 per
share, respectively, before and in preference to any dividends paid on common
stock, when, as and if declared by the board of directors. No dividends have
been declared or paid as of December 31, 1998 or September 30, 1999.
The Series A, B, C, and D preferred stockholders are entitled to receive,
upon liquidation, a distribution of $0.50, $1.50, $3.00, and $4.50 per share,
respectively (subject to adjustment for a recapitalization) plus all declared
but unpaid dividends. Thereafter, the remaining assets and funds, if any, shall
be distributed to the common stockholders.
F-16
<PAGE> 82
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
If, upon liquidation, the assets and funds distributed among the preferred
stockholders are insufficient to permit the entitled payment, the entire assets
and funds of the Company legally available for distribution shall be distributed
ratably among the holders of Series A, B, C, and D preferred shares in
proportion to the aggregate preferential amounts owed to each such holder.
The preferred stockholders have voting rights equal to the common shares
they would own upon conversion.
COMMON STOCK
Included in the common shares outstanding at December 31, 1997 and 1998 and
September 30, 1999 are 736,048, 1,141,539 and 1,329,688 shares of common stock
subject to repurchase rights, which generally expire ratably over four or five
years from date of issuance. Certain of these shares were issued pursuant to
full-recourse notes receivable which bear interest at rates between 4.6% and
6.0% per annum and are due and payable on the earlier of 120 days after
termination of the participant's employment with the Company, or on various
dates beginning in February 2003. In 1998, the Company sold 525,000 shares of
common stock to its Chief Executive Officer concurrent with the commencement of
his employment. The shares are subject to the Company's right of repurchase, in
the event of termination, which lapses over a four year period.
As of September 30, 1999, the Company has reserved shares of common stock
for future issuance as follows:
<TABLE>
<S> <C>
Stock option plans................................. 3,530,562
Preferred stock.................................... 15,991,849
----------
19,522,411
==========
</TABLE>
CLASS B COMMON STOCK
In 1996, the Company issued 116,666 shares of Class B common stock to a
founder and director of the Company. The Class B shares were convertible at the
option of the holder at an initial conversion ratio of one-for-one, subject to
adjustment for subsequent issuances of common stock or equity securities
convertible into common stock, up to a maximum exchange ratio of one-for-ten.
The purpose of the arrangement was to accommodate the founder's employment
agreement with a third party institution which precluded ownership in companies
above a specified percentage. In December 1998, all class B common stock was
converted into common stock at a conversion ratio of 1 for 10. On an
as-converted basis, the founder paid the same consideration per share of common
stock as other founding stockholders. The original transaction was accounted for
as the sale of convertible equity securities, and no accounting recognition was
given to the conversion of the Class B common stock.
F-17
<PAGE> 83
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STOCK OPTION PLANS
The Company's 1996 Stock Option Plan was adopted in March 1996 and provides
for the issuance of options for up to 1,153,444 shares of common stock to
employees and consultants.
During 1997, the Company's board of directors approved the adoption of the
1997 Stock Option Plan with terms and conditions the same as those of the 1996
Stock Option Plan (collectively, the "Plans"). The 1997 Stock Option Plan
provides for the issuance of options for up to 5,055,556 shares of common stock
to employee and consultants. In September 1999, the Company's board of directors
approved an annual increase, beginning in fiscal year 2000, in the number of
shares of common stock reserved for issuance under the 1997 Stock Plan equal to
the lesser of 1,500,000 shares, 4% of the outstanding shares on the date of the
annual increase, or a lesser amount as determined by the board of directors.
Stock options granted under the Plans may be either incentive stock options
or nonstatutory stock options. Incentive stock options may be granted to
employees with exercise prices of no less than the fair value and nonstatutory
options may be granted to employees or consultants at exercise prices of no less
than 85% of the fair value of the common stock on the grant date, as determined
by the board of directors. The options expire no more than 10 years after the
date of grant or earlier if employment or relationship as a director or
consultant is terminated. If, at the time the Company grants an option, the
optionee owns stock representing more than 10% of the total combined voting
power of all classes of stock of the Company, the option price shall be at least
110% of the fair value on the date of grant and shall not be exercisable more
than five years after the date of grant. The board of directors shall determine
the times during the term when the options may be exercised and the number of
shares for which an option may be granted. Options may be granted with different
vesting terms from time to time but will provide for annual vesting of at least
20% of the total number of shares subject to the option. The Company allows
early exercise of options, subject to repurchase rights until such options are
fully vested.
F-18
<PAGE> 84
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A summary of activity under the 1996 and 1997 Stock Option Plans is as
follows:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
---------------------------------------------
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE EXERCISE
SHARES PRICE PRICE
---------- -------------- ---------
<S> <C> <C> <C>
Options granted..................... 1,130,733 $0.01 - $0.19 $0.19
Options exercised................... (238,515) $0.19 $0.19
----------
Balance at December 31, 1996........ 892,218 $0.01 - $0.19 $0.19
Options granted..................... 1,611,997 $0.19 - $0.39 $0.32
Options exercised................... (315,643) $0.01 - $0.39 $0.23
Options canceled.................... (46,988) $0.19 $0.19
----------
Balance at December 31, 1997........ 2,141,584 $0.01 - $0.39 $0.28
Options granted..................... 1,205,430 $0.39 - $0.96 $0.71
Options exercised................... (1,162,909) $0.19 - $0.96 $0.28
Options canceled.................... (229,885) $0.19 - $0.58 $0.26
----------
Balance at December 31, 1998........ 1,954,220 $0.19 - $0.96 $0.54
Options granted..................... 1,233,771 $0.96 - $11.57 $3.35
Options exercised................... (961,365) $0.19 - $ 3.86 $0.77
Options canceled.................... (224,585) $0.19 - $ 1.93 $0.63
----------
Balance at September 30, 1999....... 2,002,041 $0.19 - $11.57 $2.14
==========
</TABLE>
At December 31, 1996, 1997, 1998, and September 30, 1999, vested and
outstanding options for 60,660, 542,676, 282,412, and 349,353 shares were
exercisable at weighted-average exercise prices of $0.19, $0.30, $0.35, and
$1.99, respectively. The weighted-average grant date fair value of options
granted during the years ended December 31, 1996, 1997, 1998 and the nine months
ended September 30, 1999 was $0.10, $0.16, $0.35, and $1.67, respectively. At
December 31, 1998, options for shares of common stock available for future
grants under the 1996 and 1997 Stock Option Plans are 121,222 and 860,838,
respectively. At September 30, 1999, options for shares of common stock
available for future grants under the 1996 and 1997 stock option plans are
121,222 and 1,407,299, respectively.
F-19
<PAGE> 85
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
An analysis of options outstanding at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS VESTED
WEIGHTED- -----------------------------
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- VESTED AT WEIGHTED-
EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
PRICE 1998 LIFE EXERCISE PRICE 1998 EXERCISE PRICE
- ------------- -------------- ----------- -------------- ------------ --------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.19 436,291 7.92 $0.19 127,590 $0.19
$0.38 854,736 8.98 $0.38 132,871 $0.38
$0.58 15,554 9.35 $0.58 -- $0.58
$0.96 647,639 9.66 $0.96 21,951 $0.96
--------- -------
$0.19 - $0.96 1,954,220 8.97 $0.54 282,412 $0.35
========= =======
</TABLE>
An analysis of options outstanding at September 30, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS VESTED
WEIGHTED- ------------------------------
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- VESTED AT WEIGHTED-
EXERCISE SEPTEMBER 30, CONTRACTUAL AVERAGE SEPTEMBER 30, AVERAGE
PRICE 1999 LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------------- -------------- ----------- -------------- ------------- --------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.19 219,812 7.06 $0.19 92,196 $ 0.19
$0.38 385,257 8.18 $0.38 87,881 $ 0.38
$0.57 - $ 0.96 602,621 9.05 $0.95 86,953 $ 0.94
$1.92 - $ 3.85 581,248 9.58 $3.05 43,791 $ 2.71
$6.42 - $11.57 213,103 9.89 $7.35 38,532 $11.51
--------- ---- ----- ------- ------
2,002,041 8.91 $2.14 349,353 $ 1.99
</TABLE>
Pro forma net loss information is required by SFAS 123, computed as if the
Company had accounted for its employee stock options granted under the fair
value method of that Statement. The fair value for these options was estimated
at the date of grant using the minimum value method with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Expected dividend yield......... 0% 0% 0% 0%
Risk-free interest rate......... 6.29% 6.11% 5.25% 5.5%
Expected life................... 5 years 5 years 5 years 5 years
</TABLE>
F-20
<PAGE> 86
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Had the Company valued its stock options according to the fair value
provisions of SFAS 123, pro forma net income (loss) and pro forma net income
(loss) per share would have been as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -------------
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Net income (loss):
As reported..................... $(2,681) $(5,596) $(8,155) $ (989)
======= ======= ======= =======
Pro forma for SFAS 123........ $(2,688) $(5,640) $(8,226) $(1,091)
======= ======= ======= =======
Basic and diluted net income
(loss) per share:
As reported................... $ (1.24) $ (1.97) $ (2.13) $ (0.18)
======= ======= ======= =======
Pro forma for SFAS 123........ $ (1.24) $ (1.98) $ (2.15) $ (0.20)
======= ======= ======= =======
</TABLE>
During the year ended December 31, 1998 and during the nine months ended
September 30, 1999, in connection with the grant of certain share options to
employees, the Company recorded deferred stock compensation of $605,000 and
$4,112,000, respectively, representing the difference between the exercise price
and the deemed fair value of the Company's common stock on the date such stock
options were granted. During the periods ended December 31, 1998 and September
30, 1999, the Company also recorded deferred compensation with respect to stock
options granted to consultants totaling $155,000 and $1,078,000, respectively.
Options granted to consultants are generally variable awards and are re-valued
at the end of each accounting period in accordance with SFAS 123 and EITF 96-18
using a Black-Scholes model and the following weighted-average assumptions for
1998 and 1999: estimated volatility of 0.5, risk-free interest rate of 5.0%, no
dividend yield; and an expected life of the option equal to the full term,
generally ten years from the date of grant. The resulting values are charged to
expense as they are earned. Deferred compensation is included as a reduction of
stockholders' equity and is being amortized to expense on a graded vesting
method. During the year ended December 31, 1998 and during the nine months ended
September 30, 1999, the Company recorded amortization of deferred stock
compensation expense of approximately $188,000 and $2,822,000, respectively. At
September 30, 1999, the Company had a total of approximately $2.9 million
remaining to be amortized over the corresponding vesting period of each
respective option, generally five years.
STOCK PURCHASE PLAN
In September 1999, the Company's board of directors adopted the 1999
Employee Stock Purchase Plan (the "Purchase Plan"). A total of 300,000 shares of
the Company's common stock have been reserved for issuance under the Purchase
Plan. The Purchase Plan permits eligible employees to purchase common stock at a
discount, but only through payroll deductions, during concurrent 24-month
offering periods. Each offering period will be divided into four consecutive
six-month purchase periods. The price at which stock is purchased under the
Purchase Plan is equal to 85% of the fair market value of the common stock on
the first or last day of the offering period, whichever is lower. The initial
offering period will commence on the effective date of the offering contemplated
by this
F-21
<PAGE> 87
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prospectus. In addition, the Purchase Plan provides for annual increases in the
number of shares available for issuance under the Purchase Plan on the first day
of each fiscal year, beginning with fiscal 2000, equal to the lessor of 1% of
the outstanding shares of common stock on the first day of the fiscal year,
350,000 shares, or a lesser amount as determined by the board of directors.
5. INCOME TAXES
Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the years ended December
31, 1997, December 31, 1998 and the period ended September 30, 1999.
As of September 30, 1999, the Company had a federal net operating loss
carryforward of approximately $13,000,000. The Company also had federal research
and development credit carryforwards of approximately $500,000. The net
operating loss and credit carryforwards will expire at various dates beginning
in 2010 through 2019, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Deferred tax assets and liabilities reflect the net tax effects of net
operating loss and credit carryforwards and of temporary differences between the
carrying amounts of assets and liabilities for financial reporting and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......... $ 2,800 $ 5,800 $ 4,600
Tax credit carryforwards................. 300 800 800
Capitalized research & development....... 200 300 200
Other.................................... 100 500 600
------- ------- -------
Total deferred tax assets................ 3,400 7,400 6,200
Valuation allowance for deferred tax
assets................................. (3,400) (7,400) (6,200)
------- ------- -------
Net deferred tax assets.................. $ -- $ -- $ --
======= ======= =======
</TABLE>
SFAS No. 109 provides for the recognition of deferred tax assets if
realization of such assets is more likely than not. Based upon the weight of
available evidence, which includes the Company's historical operating
performance and the reported cumulative net losses in all prior year, the
Company has provided a full valuation allowance against its net deferred tax
assets.
The net valuation allowance increased by $1,000,000 and $1,200,000 during
the years ended December 31, 1996 and 1997, respectively.
F-22
<PAGE> 88
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
The Company has implemented a program under which directors, executive
officers and certain other employees are permitted to purchase restricted stock
or to exercise stock options pursuant to full recourse promissory notes. The
notes bear interest between 4.6% and 6.0% per annum and are due and payable on
the earlier of 120 days after termination of employment or on various dates
beginning February 2003. In 1998 and the nine months ended September 30, 1999,
loans were made in the amount of $397,750 and $333,600, respectively, pursuant
to this program. In addition, in 1998, the Company loaned $300,000 to an officer
in connection with certain relocation expenses. The loan was repaid in full in
July 1999.
F-23
<PAGE> 89
Inside Front Cover
Depiction of the various stages of the Symyx Complete Discovery Process. The
various stages are: Target New Material; Synthesis; Screening; Informatics; New
Materials Discovery.
Gate Fold
Depiction of four markets targeted by Symyx. Depiction of differences between
Symyx High Speed Discovery methods and traditional methods for materials
discovery. Depiction of Symyx strategies.
Page 35
Depiction of the various stages of the Symyx Complete Discovery Platform. The
various stages are: Target New Material; Synthesis; Screening; Informatics; New
Materials Discovery.
<PAGE> 90
SYMYX LOGO
SYMYX STRATEGIC ALLIANCES
We have alliances with these leading industrial companies, largely in the
chemicals and electronic sectors:
<TABLE>
<C> <S>
AGFA LOGO Agfa-Gevaert N.V. is a world leading imaging company.
BAYER LOGO Bayer AG is an international, research based company with
major businesses in life sciences, chemicals and polymer
technologies.
BASF LOGO The BASF Group is one of the leading companies in the
chemical industry with products ranging from basic chemicals
through innovative specialties and polymers to crop
protection and pharmaceuticals.
CELANESE LOGO Celanese Chemicals is one of the leading global
manufacturers of organic based chemicals for industrial
processing.
CIBA LOGO Ciba Specialty Chemicals is a global leader in the
discovery, development and manufacture of innovative
materials that provide color, performance and care for
plastics, coatings, and other products.
DOW CHEMICAL LOGO The Dow Chemical Company is a global science and technology
based company that develops and manufactures a portfolio of
chemical, plastic and agricultural products and services for
customers in 168 countries around the world.
OSRAM LOGO Osram Opto Semiconductors is a joint venture of the Siemens
subsidiary Osram GmbH and Infineon Technologies, the former
Semiconductor Group of Siemans AG. Osram is one of the
largest companies in the world for optoelectronic
semiconductors.
UNILEVER LOGO Unilever sells over 1,000 consumer product brands in 88
countries world-wide.
</TABLE>
<PAGE> 91
LOGO
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by Symyx in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC Registration Fee....................................... $ 20,656
NASD Filing Fee............................................ 7,931
Nasdaq National Market Listing Fee......................... 95,000
Printing and Engraving Expenses............................ 200,000
Legal Fees and Expenses.................................... 300,000
Accounting Fees and Expenses............................... 250,000
Transfer Agent and Registrar Fees and Expenses............. 25,000
Blue Sky fees and expenses................................. 10,000
Miscellaneous Expenses..................................... 91,413
----------
Total............................................ $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our certificate of incorporation and our bylaws provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General Corporation
Law. We have also entered into agreements with our directors and executive
officers that require Symyx, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors and executive officers to the fullest extent permitted by Delaware
law. We have also purchased directors and officers liability insurance, which
provides coverage against certain liabilities including liabilities under the
Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Within the last three years, and through September 30, 1999, we have
issued and sold the following unregistered securities:
(1) Since our inception, we have issued and sold an aggregate of
4,508,392 shares of common stock to the founding officers and directors of
Symyx and to certain other individuals at purchase prices ranging from
$0.001 to $0.96 per share.
(2) Since our inception, we have granted options to purchase 5,181,931
shares of common stock to employees, directors and consultants under our
1996 and 1997 stock plans at exercise prices ranging from $0.01 to $11.57
per share. Of the 5,181,931 shares granted, 2,002,041 remain outstanding,
2,678,432 shares of common stock have
II-1
<PAGE> 93
been purchased pursuant to exercises of stock options and 501,458 shares
have been canceled and returned to the 1996 and 1997 stock plans.
(3) In February 1996, we sold 1,000,000 shares of Series A preferred
stock at a price of $0.50 per share to one investor.
(4) In May 1996, we sold an aggregate of 8,600,687 shares of Series B
preferred stock at a price of $1.50 per share to approximately 101
investors.
(5) In July 1997, we sold an aggregate of 6,750,284 shares of Series C
preferred stock at a price of $3.00 per share to approximately 108
investors.
(6) In March, April, October and November 1998, we sold an aggregate
of 4,210,185 shares of Series D preferred stock at a price of $4.50 per
share to approximately 74 investors.
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Symyx, to
information about us.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1(a) Amended and Restated Certificate of Incorporation, as
currently in effect
*3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
*3.2(a) Bylaws of Symyx as currently in effect
*3.2(b) Bylaws of Symyx as in effect upon completion of the offering
*4.1 Specimen Common Stock Certificate
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
*10.1 Restated Investors Rights Agreement dated March 27, 1998
*10.2 1996 Stock Plan and forms of agreements thereunder
*10.3 1997 Stock Plan and forms of agreements thereunder
*10.4 1999 Employee Stock Purchase Plan
*10.5 Form of Director and Executive Officer Indemnification
Agreement
*10.6 Form of Change of Control Agreement between Symyx and the
following individuals: Steven D. Goldby, Isy Goldwasser,
Jeryl L. Hilleman, and W. Henry Weinberg
</TABLE>
II-2
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*10.7 Standard Industrial/Commercial Single-Tenant Lease dated
November 15, 1996 between Symyx and Patrick and Bette Ng,
Co-Trustees for The Ng Living Trust, for office space
located at 3100 Central Expressway, Santa Clara, California,
and addenda and inserts thereto
*10.7(a) First Amendment to Lease between Symyx and Patrick and Bette
Ng, Co-Trustees for The Ng Living Trust
10.8 Collaboration Agreement dated March 1, 1998 between Symyx
and Bayer AG
10.8(a) Amendment No. 1 dated May 1, 1998 to Collaboration Agreement
between Symyx and Bayer AG
10.8(b) Amendment No. 2 dated November 1, 1998 to Collaboration
Agreement between Symyx and Bayer AG
10.8(c) Amendment No. 3 dated January 1, 1999 to Collaboration
Agreement between Symyx and Bayer AG
10.8(d) Amendment No. 4 dated September 15, 1999 to Collaboration
Agreement between Symyx and Bayer AG
10.9 Celanese-Symyx Collaboration Agreement dated August 1, 1998
between Symyx and Celanese Ltd.
10.10 Collaborative Research and License Agreement dated January
1, 1999 between Symyx and The Dow Chemical Company
10.11 License Agreement dated June 22, 1995 between Symyx and
Lawrence Berkeley Laboratory, on behalf of The Regents of
the University of California
*10.12 License and Supply Agreement effective August 6, 1999
between Symyx and Argonaut Technologies, Inc.
*23.1 Consent of Ernst & Young LLP, Independent Auditors
*23.2 Consent of Counsel (included in exhibit 5.1)
*24.1 Power of Attorney
*27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
(b) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by Symyx for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Symyx, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Symyx of expenses incurred or paid by a director, officer or controlling person
of Symyx in the successful defense of any action, suit or proceeding) is
II-3
<PAGE> 95
asserted by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by Symyx is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
We hereby undertake that:
(a) We will provide to the underwriters at the closing as specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by Symyx pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(c) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Symyx Technologies, Inc. has duly caused this Amendment No. 4 to the
Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on the 16th day of November, 1999.
SYMYX TECHNOLOGIES, INC.
By: /s/ STEVEN D. GOLDBY
-----------------------------------
Steven D. Goldby
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended this
Amendment No. 4 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ STEVEN D. GOLDBY Chief Executive Officer November 16, 1999
- ------------------------------------ and Chairman of the Board
Steven D. Goldby (Principal Executive
Officer)
/s/ JERYL L. HILLEMAN Senior Vice President and November 16, 1999
- ------------------------------------ Chief Financial Officer
Jeryl L. Hilleman (Principal Financial and
Accounting Officer)
*THOMAS R. BARUCH Director November 16, 1999
- ------------------------------------
Thomas R. Baruch
*SAMUEL D. COLELLA Director November 16, 1999
- ------------------------------------
Samuel D. Colella
*MARTIN GERSTEL Director November 16, 1999
- ------------------------------------
Martin Gerstel
*BARON GAULTHAUS KRAIJENHOFF Director November 16, 1999
- ------------------------------------
Baron Gaulthaus Kraijenhoff
*FRANCOIS A. L'EPLATTENIER Director November 16, 1999
- ------------------------------------
Francois A. L'Eplattenier
*KENNETH J. NUSSBACHER Director November 16, 1999
- ------------------------------------
Kenneth J. Nussbacher
</TABLE>
II-5
<PAGE> 97
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
*MARIO M. ROSATI Director November 16, 1999
- ------------------------------------
Mario M. Rosati
*PETER G. SCHULTZ Director November 16, 1999
- ------------------------------------
Peter G. Schultz
Director
- ------------------------------------
Isaac Stein
</TABLE>
*By: /s/ STEVEN D. GOLDBY
-----------------------------------------
Steven D. Goldby
(Attorney-In-Fact)
II-6
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1(a) Amended and Restated Certificate of Incorporation, as
currently in effect
*3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
*3.2(a) Bylaws of Symyx as currently in effect
*3.2(b) Bylaws of Symyx as in effect upon completion of the offering
*4.1 Specimen Common Stock Certificate
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
*10.1 Restated Investors Rights Agreement dated March 27, 1998
*10.2 1996 Stock Plan and forms of agreements thereunder
*10.3 1997 Stock Plan and forms of agreements thereunder
*10.4 1999 Employee Stock Purchase Plan
*10.5 Form of Director and Executive Officer Indemnification
Agreement
*10.6 Form of Change of Control Agreement between Symyx and the
following individuals: Steven D. Goldby, Isy Goldwasser,
Jeryl L. Hilleman, and W. Henry Weinberg
*10.7 Standard Industrial/Commercial Single-Tenant Lease dated
November 15, 1996 between Symyx and Patrick and Bette Ng,
Co-Trustees for The Ng Living Trust, for office space
located at 3100 Central Expressway, Santa Clara, California,
and addenda and inserts thereto
*10.7(a) First Amendment to Lease between Symyx and Patrick and Bette
Ng, Co-Trustees for The Ng Living Trust
10.8 Collaboration Agreement dated March 1, 1998 between Symyx
and Bayer AG
10.8(a) Amendment No. 1 dated May 1, 1998 to Collaboration Agreement
between Symyx and Bayer AG
10.8(b) Amendment No. 2 dated November 1, 1998 to Collaboration
Agreement between Symyx and Bayer AG
10.8(c) Amendment No. 3 dated January 1, 1999 to Collaboration
Agreement between Symyx and Bayer AG
10.8(d) Amendment No. 4 dated September 15, 1999 to Collaboration
Agreement between Symyx and Bayer AG
10.9 Celanese-Symyx Collaboration Agreement dated August 1, 1998
between Symyx and Celanese Ltd.
10.10 Collaborative Research and License Agreement dated January
1, 1999 between Symyx and The Dow Chemical Company
10.11 License Agreement dated June 22, 1995 between Symyx and
Lawrence Berkeley Laboratory, on behalf of The Regents of
the University of California
*10.12 License and Supply Agreement effective August 6, 1999
between Symyx and Argonaut Technologies, Inc.
*23.1 Consent of Ernst & Young LLP, Independent Auditors
*23.2 Consent of Counsel (included in exhibit 5.1)
*24.1 Power of Attorney
*27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
<PAGE> 1
EXHIBIT 10.8
COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the "Agreement"), effective as of March 1, 1998
(the "Effective Date"), is made by and between Symyx Technologies, a California
corporation, having a principal place of business at 3100 Central Expressway,
Santa Clara, California 95051 ("Symyx"), and Bayer AG, a German corporation,
having a principal place of business at D-51368 Leverkusen, Germany (the
principal contributor and participant within Bayer) and its Affiliates
(collectively, "Bayer").
BACKGROUND
A. Symyx owns and is developing novel, proprietary methods for the
combinatorial preparation and screening of novel materials;
B. Bayer is a worldwide-represented German chemical and pharmaceutical
corporation with diversified business units across multiple industry
segments and interests in actively developing and utilizing novel
technologies and materials;
C. Symyx and Bayer desire to collaborate to conduct materials discovery
research and development focused on specific catalysts, polymers,
luminescent materials, and x-ray phosphors, as well as such additional
materials and activities as may be agreed upon by the parties;
D. Symyx and Bayer have entered into that certain Interim Research Funding
Agreement effective as of September 1, 1997, as amended by that certain
Amendment to Interim Research Funding Agreement effective as of December
1, 1997 (as amended, the "Interim Research Funding Agreement"); and
E. On or before March 31, 1998, Bayer and Symyx may enter into a Preferred
Stock Purchase Agreement pursuant to which Bayer would agree to
purchase, and Symyx would agree to sell, shares of Symyx Series D
Preferred Stock, and Symyx would grant Bayer an option to acquire
additional shares of Symyx Preferred Stock at the time of Symyx's
initial public offering.
NOW, THEREFORE, for and in consideration of the covenants, conditions
and undertakings set forth herein, it is agreed by and between the parties as
follows:
ARTICLE 1
DEFINITIONS
As used herein, the terms in this Agreement shall have the meanings set
forth in Exhibit A.
ARTICLE 2
RESEARCH PROGRAM
2.1 Research Activities. Subject to the terms and conditions set forth
herein, the parties shall conduct collaborative research in connection with the
Research Program. The parties intend to conduct the Research Program on a
collaborative basis, and agree to cooperate in the identification of Lead
Compounds.
2.1.1 Symyx Responsibilities. During the term of the Research
Program, Symyx
-1-
<PAGE> 2
shall use its reasonable efforts to identify Lead Compounds in accordance with
applicable Project Plans and, in that regard, to prepare and screen Libraries in
the Research Program, one or more of which Libraries may, in Symyx's discretion,
be prepared by Symyx outside the Research Program but used for screening in the
course of performing the Research Program. Symyx shall keep the RFC responsible
for a particular Field fully informed of its activities in respect of each
Project within such Field. Notwithstanding any other provision of this
Agreement, Symyx shall not, without its consent, be required to perform research
activities other than in accordance with the Project Plans, or utilize a total
number of Symyx Full-Time Equivalent ("FTE") research positions in excess of the
number of FTE's funded in the Research Expenses and paid for by Bayer.
2.1.2 Bayer Responsibilities. During the term of the Agreement,
Bayer shall use its reasonable efforts to (i) provide Symyx with background
information and technical information available to Bayer that is necessary to
Symyx in setting up and conducting the Projects within the Research Program, and
(ii) provide other support and assistance necessary for the conduct of the
Research Program as set forth in the Project Plans or as mutually agreed by the
parties, including but not limited to providing chemical reagents,
characterization protocols, and other relevant information for the conduct of
the Research Program. Bayer shall keep Symyx fully informed of Bayer's testing
and development of Agreement Compounds and/or Program Technology, during the
term of the Research Program, Bayer shall keep the RFC responsible for each
Project apprised of the progress and technical issues relating to the
development of Agreement Compounds and commercialization of Products, or
commercial exploitation of Program Technology, resulting from such Project.
2.1.3 Interim Research. It is understood and agreed that
research activities performed under the Interim Agreement shall be considered to
be work performed in the Research Program for all purposes of this Agreement,
including without limitation royalty obligations set forth herein; provided,
however, that payments made from Bayer to Symyx under the Interim Research
Funding Agreement shall not offset or reduce the payments provided under Article
6 of this Agreement.
2.2 Fields and Projects.
2.2.1 Initial Fields. The Research Program shall initially
include the following Fields: (i) the Electroluminescent Field, which shall be
defined as electroluminescent materials and electroluminescent devices for
back-light and display applications; (ii) the Catalysis Field, which shall be
defined as catalysts for conversion of benzene to aniline; and (iii) the X-Ray
Phosphors Field, which shall be defined as x-ray phosphors for general
radiography applications.
(a) Addition of Butyl Rubber Field. Upon written
agreement of the parties, including approval by Prof. Dr. Rudolf Casper
representing the Bayer Rubber Business Group, on or before May 1, 1998 setting
forth mutually agreeable terms which may include amendments to sections of this
Agreement, the Research Program may be expanded to include the Butyl Rubber
Field, which shall be defined as catalysts or improvements of process parameters
(i.e., reagents, formulations or conditions) for synthesizing poly(isobutylene)
or butyl rubber through high temperature polymerization of isobutylene in
non-halogenated solvents. It is understood that upon addition of the Butyl
Rubber Field to the Research Program, Symyx will dedicate six (6) FTEs to
research activities in the Butyl Rubber Field during the period from May 1, 1998
to March 1, 1999, and will dedicate seven (7) FTEs to research activities in the
Butyl Rubber Field during the period from March 1, 1999 to March 1, 2000.
-2-
<PAGE> 3
(b) Bayer Election to Reduce Catalysis Field. In the
event that the Research Program has not been expanded to include one or more
Projects concerning catalysts for selective oxidation reactions (including
without limitation the Projects described in Section 2.3) on or before June 1,
1998, then Bayer may elect to reduce the number of Symyx FTEs within the
Catalysis Field from nine (9) FTEs to five (5) FTEs for the period from the
effective date of such reduction to March 1, 1999, and from twelve (12) FTEs to
eight (8) FTEs for the period from March 1, 1999 to March 1, 2000. In the event
that Bayer so elects to reduce the Catalysis Field, (i) the funding payments
from Bayer to Symyx will be reduced as set forth in Section 6.2.1(a), and (ii)
Symyx shall not be obligated to utilize more than an average of five (5) FTEs
per year in the Catalysis Field from the effective date of such election to
March 1, 1999 and eight (8) FTEs per year in the Catalysis Field from March 1,
1999 to March 1, 2000.
2.2.2 Addition and Expansion of Fields. Upon mutual written
agreement of the parties, the Initial Fields may be expanded to include
additional Projects or the Research Program may be expanded to include one or
more additional Fields. In conjunction with expansion of the Research Program to
include a new Field, it is understood that the parties will need to reach
agreement regarding the description or definition of the Field, funding for
research in the Field, identification of one or more Projects to be conducted
within the Field, and the term of such Projects, among other things. It is
understood that the parties may agree to reallocate or rebudget resources when
the parties agree to add a new Field or Project to the Research Program, and
that if the parties agree to such reallocation, the addition of a new Field or
Project will not necessarily require an increase in total funding from Bayer.
2.2.3 Projects; Project Plans. A brief description of the
initial Projects in each Field and the Project Plans for each of these initial
Projects have been agreed in writing prior to the Effective Date.
2.2.4 Identification of Lead Compounds. The procedure for the
identification of Lead Compounds by Symyx is set forth on Exhibit B hereto.
2.2.5 Termination of Fields. Fields may be terminated by
unanimous agreement of the Executive Committee. The RFC for a particular Field
may recommend to the Executive Committee that the research activities with
respect to such Field should be terminated. At the request of either party, the
Executive Committee will discuss possible reallocation of resources consistent
with maintained funding by Bayer at the levels set forth in Section 6.2.1;
provided, it is understood that if the Executive Committee does not agree upon
such reallocation and still terminates a Field, the funding payments from Bayer
to Symyx will decrease proportionally to the number of FTE's no longer being
used for such Field. The parties will attempt to implement a smooth transition
in connection with any such termination or reallocation, including provision of
reasonable resources and time frames for wind-down or scale-back of the Project
in such Field.
2.3 Option to Expand Catalysis Field. It is understood that existing
obligations of Symyx prevent Symyx from including within the Catalysis Field
certain research projects concerning (i) direct oxidation of propylene to
propylene oxide and (ii) direct oxidation of benzene to phenol (each project a
"Catalyst Option Project"). If Symyx obtains the right to include one or both
Catalyst Option Projects within the Catalysis Field, Symyx will give Bayer
written notice (the "Availability Notice") identifying the Catalyst Option
-3-
<PAGE> 4
Project(s) available and shall, for the period commencing with delivery of the
Availability Notice and ending three (3) months after the Availability Notice
was sent (the "Negotiation Period"), negotiate with Bayer in good faith
concerning terms upon which such projects may be included within the Catalysis
Field. Symyx may, in its discretion, continue to conduct such Catalyst Option
Project and perform related research activities during the Negotiation Period,
but Symyx will not enter into an agreement to conduct such Catalyst Option
Project for another party during the Negotiation Period. It is understood that
neither party is obligated to agree to include either or both such Projects
within the Catalysis Field, and that if the parties do not mutually agree upon
terms for including one or both Catalyst Option Projects during the Negotiation
Period described above, Symyx shall be free to perform the Option Projects on
its own or with third parties without obligation to Bayer. It is further
understood that the parties may agree to reallocate resources among the various
Projects within the Research Program if either or both Catalyst Option Projects
are to be included within the Catalysis Field, and that the parties will attempt
to implement a smooth transition in connection with any such reallocation,
including provisions of reasonable resources and time frames for wind-down or
scale-back of other Projects within the Catalysis Field.
2.4 Research Program Term.
2.4.1 Initial Term. The Research Program shall commence on the
Effective Date and, unless extended pursuant to Section 2.4.2, terminate two (2)
years from the Effective Date of this agreement, (the "Initial Research Term").
The "Research Program Term" shall mean the Initial Research Term and any
Extended Research Term set forth in Section 2.4.2.
2.4.2 Extension of Research Program Term. Both parties intend to
identify and propose additional Projects (including appropriate product driven
targets) that will justify the extension of the Research Program, and agree that
not less than six (6) months before expiration of the Initial Research Term and
any Extended Research Term, the Executive Committee will meet to discuss
possible Projects for extension of the Research Program. Upon written agreement
of the parties, the Research Program Term may be extended up to three (3) years
(the "Extended Research Term"). Except as the parties may otherwise agree, the
funding for the Extended Research Term, if any, shall be not less than Seven
Million US dollars ($7,000,000) from March 1, 2000 to February 28, 2001, not
less than Ten Million US dollars ($10,000,000) from March 1, 2001 to February
28, 2002, and not less than Twelve Million US dollars ($12,000,000) from March
1, 2002 to February 28, 2003.
2.5 Field Exclusivity. Subject to Bayer's continuing payment to Symyx of
Research Expenses for a Field, Symyx will not conduct research in such Field for
any third party or on its own behalf, during the Research Program Term, other
than under this Agreement. During the period for which Bayer originally
committed to make Research Funding Payments for a given Field (as set forth in
this Agreement for Initial Fields and as agreed by the parties for any
additional Fields), Symyx will give Bayer thirty (30) days written notice in the
event exclusivity set forth in this Section 2.5 no longer applies for such Field
due to Bayer discontinuing payment, and on request of Bayer, the parties will
discuss what payments, if any, are needed to maintain exclusivity; provided,
however, that Symyx shall not be required to provide such notice to Bayer if the
parties have agreed in writing that the exclusivity set forth in this Section
2.5 no longer applies for such Field.
-4-
<PAGE> 5
2.6 Targeted Libraries. During the term of the Research Program and for
a period of ten (10) years thereafter, Symyx shall not use Targeted Libraries
for any purpose other than conducting the Research Program without the written
consent of Bayer. At any time, Symyx shall have the right to use libraries
that are not Targeted Libraries (or derived from Targeted Libraries using
Confidential Information of Bayer) for its own purposes or in collaboration
with third parties, whether or not such libraries contain compounds that may
also be in Targeted Libraries. It is understood that libraries which are not
Targeted Libraries are regularly used by Symyx and, subject to the rights
granted to Bayer under this Agreement, that Symyx can use and screen such
libraries for specific uses on its own behalf or for third parties.
2.7 Records. Symyx and Bayer shall maintain records of the Research
Program (or cause such records to be maintained) in sufficient detail and in
good scientific manner as will properly reflect all work done and results
achieved in the performance of the Research Program (including information
sufficient to establish dates of conception and reduction to practice of
inventions).
2.8 Activities Following Research Program. Except as expressly provided
otherwise under the terms of this Agreement, Bayer shall, at Bayer's or its
Sublicensees' expense, be responsible for conducting all development of
Agreement Compounds and Products within the Field following the completion of
the Research Program and all commercialization of Products in the Field to which
Bayer retains rights under this Agreement, and, subject to and in accordance
with the licenses, rights and obligations set forth in this Agreement, Bayer
shall have the right in its exclusive discretion to conduct such development and
commercialization.
ARTICLE 3
MANAGEMENT AND INFORMATION
3.1 Executive Committee.
3.1.1 Responsibility. Symyx and Bayer shall establish a
committee (the "Executive Committee") to (i) oversee and to direct the overall
relationship between Symyx and Bayer, (ii) add, modify and terminate Fields and
Projects within such Fields, (iii) approve budgets for conduct of the Research
Program, (iv) identify and recommend additional fields for potential expansion
or extension of the Research Program, and (v) resolve any issues which a
Research Field Committee is unable or not authorized to resolve, and (vi) review
and modify as necessary the Lead Compound identification and approval process.
3.1.2 Membership. The Executive Committee shall be comprised of
three (3) representatives from each party, with each party's representatives
selected by the party. Either party may replace their respective Executive
Committee members at any time, upon written notice to the other party. It is
understood that Bayer's representatives on the Executive Committee may include
one representative from Central Research and each business group and Affiliate
of Bayer participating in a Project, up to a total of three (3) persons.
3.1.3 Meetings. The Executive Committee shall meet at least
twice per year at locations agreed by the parties, or more frequently as decided
by the Executive Committee. With the consent of the parties, other
representatives of Symyx or Bayer may attend Executive Committee meetings as
nonvoting observers. Each party shall be responsible for all of its own expenses
associated with attendance of such meetings. Executive Committee members may
participate in any such meeting in person, by telephone, or by televideo
conference. Symyx shall prepare minutes of each Executive Committee meeting,
which minutes shall be approved and signed by Executive Committee
representatives of each party.
3.1.4 Decision Making. Decisions of the Executive Committee
shall be made by unanimous approval. In the event the Executive Committee is
unable to resolve an issue, it will
-5-
<PAGE> 6
be referred to the responsible representative of the Board of Directors of Bayer
and the Chairman of the Board of Symyx for resolution, and such persons shall
discuss such matter within thirty (30) days.
3.1.5 Additional Fields and Projects. The Executive Committee
shall consider and evaluate proposed additional fields and projects for the
potential expansion or extension of the Research Program proposed by
representatives of either party. If the Executive Committee determines that the
addition of a given field or Project or extension of an existing Field is
appropriate and desirable, the Executive Committee will recommend such
additional field or project, or such extension of a Field, to the parties and
the parties will negotiate in good faith the terms and conditions upon which
such additional field or Project may be added or extended; however, it is
understood that neither party shall be obligated to agree to or accept such
terms and conditions. It is understood that Symyx shall not be obligated to
perform any additional research activities without its prior consent.
3.2 Research Field Committees.
3.2.1 Responsibilities. Bayer and Symyx will establish a
committee for each Field to oversee and review the technical direction of
research activities within a Field (the "Research Field Committee," or "RFC").
The responsibilities of each Research Field Committee shall include: (i)
establishing and modifying the Lead Criteria for each Project in the applicable
Field, (ii) determining whether a particular compound identified in a Project in
that Field meets the Lead Criteria, in accordance with the procedure set forth
in Exhibit B to this Agreement, (iii) defining the activities and milestones for
each Project in the Field, (iv) monitoring and reporting research progress for
the Field for which it is responsible, and ensuring open exchange between both
parties, (v) preparing and prioritizing lists of potential additional Projects
for the Field, (vi) evaluating results of Projects in the Field and potential
modifications to Project Plans, (vii) making recommendations regarding the
approval of budgets for Projects in the Field, and (viii) coordinating all
patent activities arising from Projects in the Field. From time to time, a RFC
may invite additional non-voting experts and establish subcommittees, such as a
patent committee, to oversee particular tasks or activities. The RFC may, by
unanimous agreement, amend the Project Plans of Projects within the applicable
Field, provided, however, that the RFC shall not alter the funding for any
Project without the prior agreement of the Executive Committee.
3.2.2 Membership. Each RFC shall include an equal number of
representatives from Bayer and Symyx, up to three (3) persons from each, each
party's representatives selected by that party. The parties will each designate
one of their own representatives as the leader of their representatives on the
RFC to help coordinate activities of the RFC. Symyx and Bayer may each replace
its RFC representatives and leaders at any time, upon written notice to the
other party. Each RFC shall be chaired as agreed by the parties.
3.2.3 Meetings. During the term of the applicable Project, each
RFC shall meet quarterly at regular intervals, or more frequently as agreed by
the RFC, at such locations as the parties agree. With the consent of the
parties, other representatives of Symyx or Bayer may attend RFC meetings as
nonvoting observers. Each party shall be responsible for all of its own expenses
associated with attendance of such meetings. RFC members may participate in any
-6-
<PAGE> 7
such meeting in person, by telephone, or by televideo conference. Symyx shall
prepare minutes of each RFC meeting, which minutes shall be approved and signed
by RFC representatives of each party, and will prepare a list of action items
determined by the RFC in each formal meeting for submission to the Executive
Committee.
3.2.4 Decision Making. Decisions of each RFC shall be made by
unanimous approval. In the event that unanimous agreement on any matter is not
achieved within the RFC, the matter will be referred to the Executive Committee
for resolution.
ARTICLE 4
INTELLECTUAL PROPERTY
4.1 Program Technology. Subject to 4.3, title to all inventions and
other intellectual property made by employees or agents of Bayer and Symyx in
the course of and in connection with the Research Program shall be deemed owned
jointly by Symyx and Bayer, excluding Combinatorial Chemistry Technology. It is
understood that, except as otherwise expressly provided in this Agreement, both
Bayer and Symyx may use, sublicense, commercialize, or otherwise exploit all
such jointly-owned technology without the consent of, or obligation to account
to, the other party.
4.2 Law. Inventorship of inventions and other intellectual property
rights conceived and/or reduced to practice pursuant to this Agreement shall be
determined in accordance with applicable law in the country where the invention
is made, subject to the express provisions of this Agreement regarding rights of
ownership and grant of licenses.
4.3 Combinatorial Chemistry Technology. Symyx shall retain sole
ownership of, and all rights to, Combinatorial Chemistry Technology, and any
inventions or discoveries conceived or reduced to practice or otherwise
developed by Symyx and/or Bayer relating to Combinatorial Chemistry Technology,
developed in connection with the conduct of the Research Program.
4.4 Reserved Rights. Symyx shall not have any right to combinatorial
technologies developed by Bayer outside the Research Program, and Bayer shall
not have any obligation to disclose the same to Symyx. Bayer shall not have any
right in or to any Combinatorial Chemistry Technology or to Symyx Technology or
any intellectual property developed by Symyx outside the Research Program,
except as expressly set forth in this Agreement, and Symyx shall not have any
obligation to disclose the same to Bayer.
4.5 Notice of Inventions. Symyx and Bayer shall promptly report to the
RFC of each Field any inventions relating to Lead Compounds or Program
Technology or Combinatorial Chemistry Technology made in the course of
performing the Research Program.
4.6 Cooperation. Each of Bayer and Symyx shall keep the other informed
as to the status of patent and patent prosecution matters defined in this
Article 4, including without limitation, by providing the other the opportunity
to fully review and comment on any documents as far in advance as possible of
filing dates and prosecution deadlines, and providing the other copies of any
substantive documents that such party receives from such patent offices promptly
after receipt, including notice of all official actions, interferences,
reissues, re-examinations,
-7-
<PAGE> 8
oppositions, potential litigation, or requests for patent term extensions. Bayer
and Symyx shall each reasonably cooperate with and assist the other at its own
expense in connection with such activities, at the other party's request.
4.7 Patent Prosecution.
4.7.1 Patent Committee. The Executive Committee may establish a
committee (the "Patent Committee") to facilitate the filing, prosecution, and
maintenance of patent applications and patents within the Program Technology.
The Patent Committee shall be comprised of an equal number of representatives
from each party, and each party shall designate one person to serve as the
Patent Committee Leader for that party. The Patent Committee shall be
responsible to discuss issues of patent strategy, including without limitation,
issues of where to file patent applications, whether to abandon patent
applications, and how the costs of such prosecution and maintenance will be
funded. The Patent Committee shall also endeavor to open and facilitate
appropriate lines of communication between the parties, the Executive Committee,
and the RFC's regarding the filing, prosecution, and maintenance of patent
applications and patents within the Program Technology. Decisions of the Patent
Committee shall be made by unanimous approval. In the event the Patent Committee
cannot resolve an issue by unanimous agreement, the matter will be referred to
the Executive Committee for resolution.
4.7.2 Responsibilities.
(a) Inventions by Symyx. Except as provided in Section 4.7.3,
Symyx shall, in its discretion, be responsible for preparing, filing,
prosecuting and maintaining patent applications and patents relating to
inventions within the Program Technology made by employees or agents of Symyx,
but not Bayer, in the course of performing the Research Program, and conducting
any interferences, re-examinations, reissues and oppositions relating to such
patent applications and patents, as it deems appropriate, at Symyx's expense.
(b) Inventions Made Jointly.
(i) The parties will cooperate to file, prosecute and
maintain patent applications covering inventions with the Program Technology
made jointly by employees or agents of Bayer and employees or agents of Symyx in
countries agreed by the parties. The parties shall agree which parties shall be
responsible for conducting such activities with respect each such invention.
Except as otherwise expressly provided in this Agreement, the parties will share
equally all expenses and fees associated with the filing, prosecution, issuance
and maintenance of any patent application and resulting patent for each such
invention in the agreed countries.
(ii) In the event that either party wishes to seek
patent protection with respect to any inventions with the Program Technology
made jointly by employees or agents of Bayer and employees or agents of Symyx in
a country the other is not interested in pursuing patent protection, it shall
notify the other party hereto. If the other party wishes to seek patent
protection with respect to such a jointly-made invention in such country or
countries, it may file, prosecute and maintain patent applications and patents
with respect thereto, at its own expense.
-8-
<PAGE> 9
(c) Inventions by Bayer. Bayer shall, in its discretion, be
responsible for preparing, filing, prosecuting and maintaining worldwide in such
countries it deems appropriate, patent applications and patents relating to all
inventions within the Program Technology made by employees or agents of Bayer,
but not Symyx, in the course of performing the Research Program, and conducting
any interferences, re-examinations, reissues and oppositions relating thereto as
it deems appropriate, at Bayer's expense.
4.7.3 Symyx Election Not to Prosecute; Bayer Right to Prosecute.
(a) Symyx Election. In the event that Symyx desires to
discontinue prosecution of a patent application filed by Symyx (or filed jointly
by Symyx and Bayer) pursuant to Section 4.7.2(a) or 4.7.2(b), or desires not to
file or conduct any further activities with respect to a patent application or
patent subject to such sections, Symyx shall notify the Patent Committee or
Executive Committee, and the parties will discuss the appropriate means to
proceed with respect to such patent or patent application. In the event the
Patent Committee, the Executive Committee, and the management of the parties
cannot within sixty (60) days determine an appropriate means to proceed with
respect to such patent or patent application, that is mutually agreeable to the
parties, then Symyx may elect upon sixty (60) days prior notice to discontinue
prosecution of any patent applications filed by Symyx pursuant to Section
4.7.2(a) above and/or not to file or conduct any further activities with respect
to the patent applications or patents subject to such Section.
(b) Bayer Prosecution. In the event Symyx declines to
file or, or having filed, fails to further prosecute or maintain any patent
applications or patents as described in Section 4.7.3(a), or declines or fails
to conduct any proceedings including, but not limited to, interferences,
re-examinations, reissues, oppositions relating thereto, then, subject to
Symyx's agreements with third parties, Bayer shall have the right to prepare,
file, prosecute and maintain such patent applications and patents in such
countries worldwide it deems appropriate, and conduct such proceedings at its
sole expense, and shall consult with Symyx in connection with all such
activities. In such case, Symyx shall immediately execute all necessary
documents that may be required in order to enable Bayer to file, prosecute and
maintain such patent application and to conduct any such proceedings. If such
patent or patent application is filed, prosecuted or maintained by Bayer and if
Bayer sells Products the manufacture, use, or sale of which is covered by such
patent and no other patent within the Program Technology in the country where
such Products are made or sold, then Bayer may credit its costs and expenses in
filing, prosecuting, or maintaining such patent or patent application
("Expenses") against royalties owed to Symyx for such Product under this
Agreement as follows: for patents and patent applications under Section 4.7.2(a)
one hundred percent (100%) of such Expenses, and for patents and patent
applications under Section 4.7.2(b) fifty percent (50%) of such Expenses;
provided, however, that the royalties paid to Bayer shall not be so reduced any
given quarter to less than fifty percent (50%) of the amount that would
otherwise be due to Symyx. Nothing in this Section 4.7.3 shall affect the
ownership rights set forth in this Article 4 or the licenses granted by the
parties in Article 5 of this Agreement.
4.8 Copies. Bayer shall promptly provide to Symyx and the Patent
Committee a copy of any patent applications filed by Bayer and its Affiliates
which are Sublicensees after the publication thereof during the term of this
Agreement with respect to any Program Technology,
-9-
<PAGE> 10
including without limitation, Agreement Compounds. Symyx shall promptly provide
to Bayer and the Patent Committee a copy of any patent applications filed by
Symyx after the publication thereof during the term of this Agreement relating
to any Program Technology, including without limitation, Agreement Compounds.
4.9 Enforcement and Defense.
4.9.1 Enforcement. Each party shall promptly notify the other of
its knowledge of any potential infringement of the Program Technology by a third
party.
(a) If such infringement relates to a Product subject to this
Agreement, the parties shall be entitled to jointly bring legal action necessary
to enforce patents claiming inventions within the Program Technology for use in
the Field. The EC will discuss whether to jointly bring action to abate such
infringement. If the parties agree to jointly bring action to abate such
infringement, the parties shall share the expenses (including without limitation
attorneys' and expert fees) incurred in connection with such action, with Symyx
paying one-quarter (1/4) of such expenses and Bayer paying three-quarters (3/4)
of such expenses. Any recovery by the parties in any such action shall be shared
as follows: first, each party shall recover its expenses incurred in such
action, and then the remainder shall be shared by the parties with Bayer
receiving three-quarters (3/4) of such amount and Symyx receiving one-quarter
(1/4) of such amount.
(b) If either party notifies the other that it does not wish to
take legal action against an infringement described in Section 4.9.1(a), or if
the parties do not within six (6) months of the date they both have knowledge of
the potential infringement agree to jointly take legal action, then either party
shall have the right, but not the obligation, to independently take such action
to abate such infringement at its own expense. If Symyx independently brings
such action, Symyx shall control and be responsible for all expenses incurred in
connection with such action and may retain all recoveries related to such
action. If Bayer independently takes such action and Symyx does not take such
action, then Bayer will have the right to choose to: (i) not offset any
reasonable expenses incurred in connection with such action against royalties
due Symyx with respect to a Product which utilizes the infringed patent in the
affected country, or (ii) offset one-half of the reasonable expenses incurred in
connection with such action against royalties due Symyx with respect to a
Product which utilizes the infringed patent in the affected country, up to
one-half of such royalties due in any year. In the event Bayer elects not to
offset expenses as described in this Section 4.9.1(b)(i) above, Bayer will
retain all recoveries related to such action. In the event Bayer elects to
offset expenses as described in this Section 4.9.1(b)(ii), any recovery by Bayer
in such action shall be divided as follows: first, Bayer shall recover its
reasonable expenses incurred in such an action, second, Bayer shall reimburse
Symyx for any royalties for which Bayer took an offset, and third, Bayer may
retain three-quarters (3/4) of any remainder and shall pay to Symyx one-quarter
(1/4) of such remainder.
(c) If there is an infringement which does not relate to a
Product of a patent covering a joint invention within the Program Technology,
the parties shall discuss whether to jointly bring an action to abate such
infringement. In the event that the parties do not wish to jointly bring such an
action either party may seek to abate such infringement; provided, in such
event, should the alleged third party infringer assert that one or more of the
parties to this
-10-
<PAGE> 11
Agreement are necessary or indispensable to such proceedings, the other party
hereto agrees to join in and participate in such proceedings, at the expense of
and to the extent requested by the party initially participating in such suit.
4.9.2 Infringement Claims. If the manufacture, sale or use of
any Product pursuant to this Agreement because of the practice of the Program
Technology or the Bayer Technology results in any claim, suit or proceeding
alleging patent infringement against Symyx or Bayer (or its Sublicensees), such
party shall promptly notify the other party hereto in writing setting forth the
facts of such claims in reasonable detail. The Patent Committee or EC will
discuss whether the parties should work together in responding to such action.
Except as the parties may otherwise agree, the defendant shall have the
exclusive right and obligation to defend and control the defense of any such
claim, suit or proceeding, at its own expense, using counsel of its own choice;
provided, however, it shall not enter into any settlement which admits or
concedes that any aspect of the Bayer Technology (in the case of Symyx) and the
Program Technology (in the case of Bayer) is invalid or unenforceable, without
the prior written consent of such other party. The defendant shall keep the
other party hereto reasonably informed of all material developments in
connection with any such claim, suit or proceeding. Each party agrees that it
will provide reasonable assistance and cooperation if the other party is a
defendant in such an action, including reasonable access to documents, records,
and witnesses at the defendant's expense. In the event Bayer disagrees Bayer
Technology (in the case of Symyx) or Symyx disagrees the Program Technology (in
the case of Bayer) is invalid or unenforceable, the parties shall meet to
discuss and reach agreement. In the event agreement on this matter is not
achieved within fifteen (15) days, the matter will be referred to the Chief
Executive Officer of Symyx and the head of the corresponding Bayer business unit
for resolution.
ARTICLE 5
LICENSES
5.1 Program Technology.
5.1.1 Bayer Field License. Subject to the terms and conditions
of this Agreement, Symyx agrees to grant and hereby grants to Bayer an
exclusive, worldwide, royalty-bearing license, with the right to sublicense,
under Symyx's interest in the Program Technology solely to develop, make, have
made, import, use, offer for sale, and sell Products for use in the applicable
Field.
5.1.2 Bayer Out of Field License. Symyx agrees to grant and
hereby grants to Bayer an exclusive, worldwide, royalty-free license, with the
right to sublicense, under Symyx's interest in Program Technology which was
invented solely by Bayer employees and agents, to use such Program Technology
outside of the Field and to develop, make, have made, import, use, offer for
sale, and sell products other than for use in the applicable Field.
5.1.3 Symyx Out of Field License. Bayer agrees to grant and
hereby grants to Symyx an exclusive, worldwide, royalty-free license, with the
right to sublicense, under Bayer's interest in Program Technology which was
invented solely or jointly by Symyx employees and agents, to use such Program
Technology outside of the Field and to develop, make, have made, import, use,
offer for sale, and sell products other than for use in the applicable Field.
-11-
<PAGE> 12
5.2 Bayer Right of First Negotiation. Subject to Symyx's obligations to
third parties, Bayer will have on a right of first negotiation to negotiate with
Symyx to acquire an exclusive, worldwide, royalty-bearing license under Symyx's
interest in Program Technology, with the right to sublicense, to develop, make,
have made, import, use, offer for sale and sell products other than Products, as
follows: (i) Symyx will provide notice if it wishes to pursue a particular
product using Program Technology solely or jointly invented by Symyx employees,
and in such event within sixty (60) days the parties shall commence
negotiations; (ii) such negotiations shall continue for six (6) months from the
date of such notice, or such longer period as the parties may agree; (iii) if
Symyx and Bayer do not reach agreement within such six (6) months period, or
such longer period as the parties may agree, Symyx may develop or commercialize
such products (other than Products) with a third party or pursue such product
itself without obligation to Bayer.
5.3 Sublicenses. Subject to the terms and conditions of this Agreement
Bayer shall have the right to sublicense the rights granted in Sections 5.1.1.,
5.1.2 and 5.4 to third parties, including Affiliates of Bayer; provided that the
terms of each such sublicense are consistent with the terms of this Agreement.
It is understood that any such sublicense shall be subject and subordinate to
the terms and conditions of this Agreement, and that Bayer shall remain
responsible for all applicable financial and other obligations under this
Agreement for each such Sublicensee, including without limitation royalty
payments due to Symyx hereunder with respect to sales of Products by any such
Sublicensee. Bayer shall provide to Symyx at least the following information
with respect to each of Bayer's sublicensees: (i) the identity of each
sublicensee, and (ii) a description of the rights granted including scope as to
both subject matter and territory.
5.4 Symyx Technology. In the event that any patent rights within Symyx
Technology are necessary for the development and manufacture or
commercialization of a Product to which Bayer has a license pursuant to Section
5.1, Symyx will grant to Bayer a non-exclusive, worldwide royalty-free license,
with the right to sublicense, under patent rights within Symyx Technology as of
the Effective Date, solely to make, have made, import, use, offer for sale and
sell such Product, in each case solely to the extent that Symyx has the right to
grant such rights and solely to the extent that such license is necessary to
enable Bayer or its sublicensee to exercise the rights granted in the licenses
described in Section 5.1.
5.5 Bayer Technology. Bayer agrees to grant, and hereby grants, to Symyx
a nonexclusive, royalty-free license under the Bayer Technology to conduct the
research activities in the Research Program. Notwithstanding Section 5.1 above,
Symyx shall retain the right under the Program Technology to make, have made and
use Agreement Compounds for its own research purposes (i.e., to develop, improve
and validate its technology and intellectual property).
5.6 Access to Combinatorial Chemistry. It is understood that Bayer and
Symyx may, in the future, be interested in entering into an agreement on
mutually agreeable terms and conditions whereby Bayer may obtain access to part
of Symyx's Combinatorial Chemistry Technology. If Bayer desires to acquire
access to part of the Combinatorial Chemistry Technology, Bayer may give Symyx
written notice thereof. If Symyx is willing to grant, and has the right to
grant, Bayer access to such technology, both parties will negotiate in good
faith to try to determine mutually agreeable terms of an agreement whereby Bayer
may obtain a non-
-12-
<PAGE> 13
exclusive royalty-bearing license to such part of the Combinatorial Chemistry
Technology; however, it is understood that nothing herein shall obligate either
party to negotiate, or enter into, such an agreement. It is understood that
unless and until Symyx and Bayer enter into a written agreement granting such
rights to Bayer, Symyx shall have the right, at any time and in its sole
discretion, to develop, commercialize, sublicense to third parties (on an
exclusive or nonexclusive basis), assign to third parties, or otherwise exploit
Combinatorial Chemistry Technology without obligation to Bayer.
5.7 Permitted Uses. Except as otherwise agreed in writing, neither Bayer
nor its Affiliates nor Sublicensees shall develop or commercialize any Agreement
Compound or Product except pursuant to the licenses set forth in Section 5.1.1
and 5.1.2 of this Agreement.
5.8 No Conflict. During the term of this Agreement, Symyx shall not
grant any license which Symyx, at the time, knows conflicts with the rights
granted to Bayer in Sections 5.1.1, 5.1.2, 5.2 and 5.4.
5.9 Third Party Rights. It is understood that Symyx is in the business
of conducting research and development with third parties, and that Symyx will
grant such third parties rights after the Effective Date to acquire licenses for
compounds derived from libraries similar to Bayer's rights under this Article 5.
It is understood and agreed that, even if Symyx complies with its obligations
under this Agreement, compounds provided to third parties in the course of
Symyx's other business activities may result in third party patent applications
and patents, including patent applications and patents owned by such third
parties, or owned jointly by Symyx and such third parties, which could conflict
with patent applications and patents owned by Bayer, or jointly owned by Bayer
and Symyx hereunder. In such event, Symyx agrees on request of Bayer to talk to
such third party and discuss with such third party and Bayer the possibility of
obtaining rights or licenses for Bayer with respect to such conflicting patents
or patent applications.
ARTICLE 6
PAYMENTS
6.1 "Research Expenses" shall be equal to the total number of Symyx
Full-Time Equivalent ("FTE") research positions on all Projects in the Research
Program multiplied by Symyx's FTE rate ($260,000 per FTE per year as of the
Effective Date, which rate will be increased annually to reflect changes in the
Consumers Price Index, All Consumers, as published by the U.S. Bureau of Labor
Statistics using 1998 as the base year).
6.2 Research Program Payments.
6.2.1 Amounts. Bayer agrees to pay to Symyx Research Expenses
for the conduct of the Research Program for a total of $4,095,000 (four million
ninety-five thousand dollars) for year 1, and at least $4,160,000 (four million
one hundred sixty thousand dollars) for year 2, respectively, payable quarterly
in advance. The specific distribution of resources among the Fields of the
Research Program will be as set forth in Exhibit C, except as the parties may
otherwise agree in writing.
(a) Decrease in Catalysis Field. In the event that Bayer
elects to reduce
-13-
<PAGE> 14
the number of FTEs in the Catalysis Field as set forth in Section 2.2.1(b),
then the Research Expenses paid to Symyx by Bayer shall decrease by Seven
Hundred Eighty Thousand US Dollars ($780,000) for the first year of the Research
Program and by One Million Forty Thousand US Dollars ($1,040,000) for the second
year of the Research Program; provided, however, it is understood and agreed
that if Bayer elects to so reduce the number of FTEs for the Catalysis Field
after June 1, 1998, then the amount of the reduction in Research Payments under
this Section 6.2.1(a) shall be pro-rated so as to reflect the reduction in the
number of FTEs utilized in conducting the Projects in the Catalysis Field from
the effective date of such reduction.
(b) Additional of Butyl Rubber Field. In the event that
the Butyl Rubber Field is added to the Research Program as set forth in Section
2.2.1(b), with the number of FTEs set forth therein, then the Research Expenses
paid to Symyx by Bayer shall increase by One Million Three Hundred Thousand US
Dollars ($1,300,000) in the first year of the Research Program and by One
Million Eight Hundred Twenty Thousand US Dollars ($1,820,000) in the second year
of the Research Program.
6.2.2 Quarterly Payments. The amounts to be paid in connection
with the Research Program with respect to each twelve (12) month period shall be
paid quarterly in advance. The initial payment shall be made no later than five
(5) business days after March 1, 1998. Subsequent payments shall be made on or
before the applicable quarterly anniversaries of March 1, 1998. All such
payments are non-refundable and noncreditable.
6.2.3 Modifications. Research Program Payments may only be
changed with unanimous approval of the Executive Committee.
6.3 Royalties.
6.3.1 General Principles. Bayer shall pay to Symyx royalty
payments in respect of sales and commercialization of Agreement Compounds and
Products on an Agreement Compound-by-Agreement Compound or Product-by-Product
basis. Unless the parties have agreed upon an applicable alternative royalty as
set forth in Sections 6.4, 6.5, 6.6 or 6.7, the amount of such royalty payments
for each Agreement Compound or Product shall be determined in accordance with
the principles and procedures set forth in this Section 6.3.
6.3.2 Added Value Royalty Rate. Symyx shall be entitled to
royalty payments equivalent to twenty five percent (25%) of the added value
realized by Bayer and its Affiliates, on an Agreement Compound-by-Agreement
Compound or Product-by-Product basis, with respect to Bayer's (and its
Affiliates') sale, use, commercialization, or licensing to third parties of: (a)
Agreement Compounds, (b) Products, and (c) Program Technology and Symyx
Technology licensed by Symyx to Bayer. Using the procedures set forth in Section
6.3.3 below, the parties will determine a fixed royalty rate to be paid to Symyx
on Net Sales of Products from each Project such that the payments to Symyx shall
approximate twenty five percent (25%) of the added value ("the Added Value
Royalty Rate").
6.3.3 Procedure for Calculating Added Value Royalty Rate. The
Added Value Royalty Rate with respect to a particular Agreement Compound,
Product, or Technology shall be negotiated and agreed upon by the parties at the
time that Bayer makes the formal internal decision to develop such Agreement
Compound, Product or Program Technology, and, in any event, the Added Value
Royalty Rate shall be agreed upon by the parties before Bayer (or any of its
Affiliates) sells, commercializes or licenses such Agreement Compound, Product,
or Program
-14-
<PAGE> 15
Technology. The Added Value Royalty Rate shall be determined by the following
procedure:
(i) Apportionment of Added Value. For purposes of this
Section 6.3, "Added Value" shall mean the difference for a business unit between
Net Income from the use or sale of an Agreement Compound, Product, or Program
Technology and the Net Income without the use or sale of such Agreement
Compound, Product, or Program Technology, determined in accordance with
Generally Accepted Accounting Principles (GAAP), on a consistent basis, it being
understood that "Added Value" as used in this Section 6.3.3(i) refers to the
portion of the difference in the Net Income which is attributable to the use or
sale of Agreement Compounds, Products, or Program Technology, and not to changes
in manufacturing processes or other variables which are unrelated to Agreement
Compounds, Products or Program Technology. By way of example and without
limitation, in determining the overall Added Value received by Bayer, the
parties shall consider changes in Product sales volume, Product pricing and
Product production costs (due to changes in raw materials costs, capital costs,
processing costs, yield or otherwise), in each case, attributable to the use or
sale of the Agreement Compound, Product, or Program Technology.
(ii) Bayer Forecasts;. The negotiation of the Added
Value Royalty Rate in accordance with this Section 6.3.3 will take into
consideration Bayer's bona fide internal pro forma forecasts of Product
profitability for a period of ten (10) years, or longer, beginning with the
first year of commercial sales, if such forecasts (i) are approved by, and used
for internal purposes by, Bayer's Board of Directors or Board Committee and (ii)
are acceptable to the Chief Executive Officer of Symyx. If a dispute arises
regarding acceptability of Bayer's forecasts and projections and the parties
cannot therefore agree upon the royalty rate to be applied, the dispute shall be
settled by binding arbitration as set forth in 6.3.3(v), below.
(iii) Development Expenses. It is further understood
that when evaluating Added Value, development expenses with respect to a
particular Agreement Compound, Product, or Program Technology will be
depreciated over the life of the applicable projection, and will be limited to
the amount of development expenses approved by the Board of Directors or
appropriate Board Committee (or, if approval of the Board of Directors or Board
Committee is not required, by such other internal approval mechanism as is
required) at the time of first deciding to develop or implement such Agreement
Compound, Product, or Program Technology.
(iv) Maximum and Minimum Rates. Notwithstanding the
above, the parties agree the Added Value Royalty Rate with respect to any
Product which is a Commodity Product shall be in the range of one quarter of
one percent (0.25%) to three percent (3%), and with respect to any Product which
is a Specialty Product shall be in the range of three percent (3%) to fifteen
percent (15%), except as otherwise provided in Section 6.11.
(v) Disputes in Determining Royalties. In the event the
parties do not, within ninety (90) days from their first meeting with respect to
a particular Agreement Compound, Product or Technology pursuant to this Section
6.3, reach agreement upon the royalty amounts which Bayer will pay to Symyx with
respect to any Product, the matter shall be submitted to final binding
arbitration pursuant to Section 14.14 of this Agreement; provided, however, that
the arbitration shall be conducted by one neutral arbitrator with expertise and
business experience in the chemical industry. The arbitrator shall be instructed
that the sharing of
-15-
<PAGE> 16
value set forth in this Section 6.3.3 shall be the basis of the arbitrator's
decision.
(vi) Impracticality. In the event that Bayer believes in
good faith that the agreed split of value added Net Income will make it
commercially impracticable to sell Products for use in manufacturing it may
notify Symyx. In such a case, Symyx will be open to discussing this issue on a
case-by-case basis.
6.3.4 Application of Added Value Royalty Rate. Once the Added
Value Royalty Rate for a particular Product is established, actual royalties
paid by Bayer to Symyx shall be determined by applying the Added Value Royalty
Rate to actual Net Sales of such Product.
6.3.5 Single Royalty; Non-royalty Sales. No royalty shall be
payable under this Section 6.3 with respect to sales of Products among Bayer and
its Affiliates for resale; and in no event shall more than one royalty be due
hereunder with respect to any Product unit even if covered by more than one
patent included in the Program Technology.
6.4 Alternative to Royalties. In lieu of the royalty payments outlined
in 6.3, the parties may discuss and mutually agree upon alternative payments
that Bayer may pay to Symyx with respect to any specified Agreement Compound,
Product or group of Products (the ,,Alternative Royalty Model"). It is
anticipated that alternative payments will include, among other things: (A) a
cash milestone payment to Symyx upon discovery of a Lead Compound, (B) a cash
milestone payment to Symyx upon Bayer's decision to develop a Lead Compound, and
(C) either (x) a lump sum cash payment upon first sale of a Product or (y)
royalties with respect to sales of such Product.
6.5 Alternative Royalties for Aniline Project. The Alternative Royalty
Model will apply under this Agreement to Agreement Compounds, Products and
Technology discovered and developed in conjunction with the Aniline Project in
the Catalysis Field, with compensation as follows:
(A) Upon identification of a Lead Compound and validation of
the Lead Compound by Bayer or its Affiliates, Bayer will
pay Symyx $250,000 (two hundred fifty thousand dollars).
Bayer will validate Lead Compounds identified by Symyx
within 30 days;
(B) Upon the earlier of (i) Bayer's (or its Affiliates')
internal decision to pursue process development of a
Lead Compound or (ii) commencement of process
development, Bayer will pay Symyx $375,000 (three
hundred seventy five thousand dollars). Bayer will pay
Symyx an additional $375,000 (three hundred seventy five
thousand dollars) on or before the first anniversary of
such decision; and
(C) Upon the decision of Bayer (or any Affiliate of Bayer)
to build (or have a third party build on behalf of Bayer
or any Affiliate of Bayer) a full scale plant for
production of aniline which uses an Agreement Compound,
Product, or Program Technology with a production
capacity equal to or greater than one hundred thousand
(100,000) metric tons per year, Bayer shall pay to Symyx
on the date of the first covered use or sale of such
Product a lump sum of $5,000,000 (five million dollars).
-16-
<PAGE> 17
If the decision of Bayer (or any Affiliate of Bayer) to build (or have a third
party build on behalf of Bayer or any Affiliate of Bayer) a full scale plant for
production of aniline which uses an Agreement Compound, Product, or Program
Technology with a production capacity equal to or greater than one hundred
thousand (100,000) metric tons per year occurs before some or all of the amounts
specified in (A) and (B) have been paid to Symyx, the amounts in (A) and (B)
that have not already been paid to Symyx will become due.
6.6 Royalties for X-Ray Phosphors Field.
6.6.1 Digital Radiography Based on Storage Phosphors. The
parties agree that Bayer shall pay to Symyx a running royalty of three percent
(3%) of Net Sales of Digital Detectors based on storage phosphors which
incorporate, use, or are made using Agreement Compounds, Products, and/or
Program Technology in the X-Ray Phosphors Field or from the X-Ray Phosphors
Project.
6.6.2 Other Applications. The parties agree that where Agreement
Compounds, Products and/or Program Technology in the X-Ray Phosphors Field or
from the X-Ray Phosphors Project are made, used, or sold for applications other
than applications where the three percent (3%) running royalty set forth in
Section 6.6.1 applies, the royalty model set forth in Section 6.3 shall apply,
and the parties shall determine the applicable royalty rate as set forth
therein.
6.7 Royalties for Electroluminescent Field
6.7.1 The parties agree that Bayer shall pay to Symyx a running
royalty of three percent (3%) of Net Sales of pastes and inks used to make
electroluminescent devices such as displays or backlights which incorporate,
use, or are made using Agreement Compounds, Products, and/or Program Technology
in the Electroluminescent Field.
6.7.2 In the event Bayer or Symyx believes the royalty in this
Section 6.7.1 above does not reflect 25% of Added Value, then either party may
elect to have the royalty determined on a Product-by-Product basis pursuant to
the Added Value model provided in Section 6.3.
6.8 Royalties for New Projects. The parties will agree on the method of
compensation for Products stemming from projects pursued under an expansion of
this Agreement, prior to the addition of such Project in the corresponding
Field.
6.9 Royalty Term. Bayer's obligation to pay royalties to Symyx shall
continue for each Product, on a country-by-country basis, until the later of (i)
ten (10) years after the first commercial sale of such Product, or (ii) the
expiration of the last to expire issued patent covering such Product on a
country-by-country basis.
6.10 Sublicenses. In the event that Bayer or its Affiliate
grants a Sublicense under the Program Technology or Symyx Technology to a third
party (other than an Affiliate of Bayer), Bayer shall pay to Symyx twenty-five
percent (25%) of all license fees, royalties, and other consideration (including
the fair market value of any noncash consideration) received by Bayer and its
Affiliates from each Sublicensee in respect of each such license or sublicense
under the Program
-17-
<PAGE> 18
Technology or Symyx Technology, in addition to any royalties due to Symyx under
Section 6.3, 6.4, 6.5, 6.6 or 6.7. Such fees, royalties, and consideration shall
in all cases be negotiated at arms-length.
6.11 Third Party Royalties. Bayer is responsible for all payments due to
third parties for the manufacture, sale, or use of Products by Bayer, its
Affiliates or Sublicensees.
6.12 Trade Secret Royalties. The parties acknowledge and agree that the
principal value contributed by Symyx is accelerated time to market, enhanced
probability of success and the potential for multiple Agreement Compounds and
that Symyx and/or Bayer may not own or control patents that cover the
manufacture, use or sale of a particular Product. Bayer acknowledges and agrees
that the value Bayer receives hereunder is in the conduct of research by Symyx
and access to the Agreement Compounds, and accordingly Bayer shall pay the
royalties at the rates specified in Section 6.3 (or an alternative amount agreed
by the parties under Section 6.4, 6.5, 6.6, 6.7, or 6.8), regardless of whether
the applicable Agreement Compound or Product is covered by a patent application
or patent within the Program Technology or Bayer Technology; provided, however,
that if the applicable Agreement Compound or Product is not covered by a patent
application or patent within the Program Technology or Bayer Technology, then
the minimum royalties set forth in 6.3.3(iv) shall not apply.
6.13 Products Without Patent Protection. If no patent or pending patent
application within the Program Technology claims the method of making, use or
sale of a Product or an Agreement Compound used in making a Product, Symyx and
Bayer will use reasonable and appropriate efforts to maintain applicable trade
secret protection, if any, of such Product or its manufacture.
ARTICLE 7
EQUITY
7.1 Stock Purchase. On or before March 31, 1998, Bayer will have the
option of purchasing up to US$ 5,000,000 of Symyx Series D Preferred Stock;
provided, Bayer and Symyx enter into a Preferred Stock Purchase Agreement of
substantially the form set forth in Exhibit D.
ARTICLE 8
PAYMENTS; BOOKS AND RECORDS
8.1 Royalty Reports and Payments. After the first commercial sale of a
Product on which royalties are payable by Bayer or its Sublicensees hereunder,
Bayer shall make quarterly written reports to Symyx within ninety (90) days
after the end of each calendar quarter, stating in each such report, separately
for Bayer and each Sublicensee, the number, description, and aggregate Net
Sales, by country, of each Product sold during the calendar quarter upon which a
royalty, or royalty alternative payment, is payable under Section 6.3, 6.4, 6.5,
6.6, or 6.7 above. Concurrently with the making of such reports, Bayer shall pay
to Symyx all royalties or royalty alternative payments due at the rates
specified in such Sections.
8.2 Payment Method. All payments due under this Agreement shall be made
by bank
-18-
<PAGE> 19
wire transfer in immediately available funds to a bank account designated by
Symyx. All payments hereunder shall be made in U.S. dollars. In the event that
the due date of any payment subject to Article 6 hereof is a Saturday, Sunday or
national holiday, such payment may be paid on the following business day. Any
payments that are not paid within ten (10) days of the date such payments are
due under this Agreement shall bear interest at the prime rate (as reported by
the Bank of America, San Francisco, California, on the date such payment is due)
plus an additional two percent (2%), calculated on the number of days such
payment is delinquent; provided, however, that if the interest rate specified
herein exceeds the maximum rate permitted by law, then Bayer shall only be
obligated to pay interest at the maximum rate permitted by law. Nothing in this
Section 8.2 shall prejudice any other rights or remedies available to Symyx
hereunder or at law or equity.
8.3 Currency Conversions. If any currency conversion shall be required
in connection with the calculation of royalties hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
8.4 Records; Inspection. Bayer and its Sublicensees shall keep complete,
true and accurate books of account and records for the purpose of determining
the royalty amounts payable under this Agreement. Such books and records shall
be kept at the principal place of business of such party, as the case may be,
for at least three (3) years following the end of the calendar quarter to which
they pertain. Such records will be open for inspection during such three (3)
year period by a public accounting firm to whom Bayer has no reasonable
objection, solely for the purpose of verifying royalty statements hereunder.
Such inspections may be made no more than once each calendar year, at reasonable
times and on reasonable notice. Inspections conducted under this Section 8.4
shall be at the expense of Symyx, unless a variation or error producing an
increase exceeding five percent (5%) of the amount stated for any period covered
by the inspection is established in the course of any such inspection, whereupon
all reasonable costs relating to the inspection for such period and any unpaid
amounts that are discovered will be paid promptly by Bayer together with
interest thereon from the date such payments were due at the prime rate (as
reported by the Bank of America, San Francisco, California), plus an additional
two percent (2%). Symyx agrees to hold in strict confidence all information
concerning royalty payments and reports, and all information learned in the
course of any audit or inspection, except to the extent necessary for Symyx to
reveal such information in order to enforce its rights under this Agreement or
if disclosure is required by law. The public accounting firm employees shall
sign a customary confidentiality agreement as a condition precedent to their
inspection, and shall report to Symyx only that information which would be
contained in a properly prepared royalty report by Bayer.
8.5 Tax Matters. All royalty amounts and other payments required to be
paid to Symyx pursuant to this Agreement shall be paid with deduction for
withholding for or on account of any taxes (other than taxes imposed on or
measured by net income) or similar governmental charge imposed by a jurisdiction
other than the United States ("Withholding Taxes") to the extent Symyx and/or
its Affiliates or their successors has the lawful rights to utilize the
Withholding Taxes paid by Bayer as a credit against Symyx's and/or its
Affiliates regular U.S. tax liability. Bayer shall provide Symyx a certificate
evidencing payment of any Withholding Taxes
-19-
<PAGE> 20
hereunder.
ARTICLE 9
DUE DILIGENCE
9.1 Due Diligence. Bayer shall use reasonable and diligent efforts to
develop Agreement Compounds and commercialize Products in the relevant markets
of the world. The parties may mutually agree on reasonable specific criteria to
establish due diligence for each Project.
9.2 Exceptions. Bayer may elect not to develop a particular Agreement
Compound, or commercialize corresponding Products, if:
(i) the Agreement Compound lacks performance criteria for further
development; or
(ii) there is an Agreement Compound being developed by Bayer for the
same Product; or
(iii) Bayer elects not to develop the Agreement Compound for
reasonable business reasons, provided that Bayer notifies Symyx
in writing within sixty (60) days of making such election and
provides to Symyx an explanation of the applicable business
reasons.
9.3 Lack of Diligence.
9.3.1 In the event that Bayer fails to use reasonable and
diligent efforts with respect to the development of a particular Agreement
Compound or commercialization of a Product, or formally terminates development
of such Agreement Compound, Bayer may retain its rights under this Agreement
with respect to such Agreement Compound if, and for so long as, the criteria set
forth in Section 9.2(i) or (ii) are satisfied.
9.3.2 Unless the terms of Section 9.3.3 apply and Bayer pays the
exclusivity payment set for therein, in the event that (i) Bayer fails to use
reasonable and diligent efforts with respect to the development and
commercialization of a particular Agreement Compound, or formally terminates
development of such Agreement Compound, and (ii) the criteria set forth in
Section 9.2(i) and (ii) are not satisfied, then (A) Bayer will lose its
corresponding rights under Section 5.1 with respect to such Agreement Compound,
and (B) Symyx will have the option to acquire an exclusive license under Bayer's
interest in the Program Technology to manufacture, use and sell such Agreement
Compound within the Field. On request by Symyx, the parties will negotiate the
terms of such exclusive license in good faith. If the parties cannot agree on
terms, the parties will submit proposed terms to arbitration, and Symyx will
have the right, but not the obligation, to take the license on the terms
specified by the arbitrator.
9.3.3 Exclusivity Payment. In the event that Bayer elects not to
develop a particular Agreement Compound on the grounds set forth in Section
9.2(iii), Bayer shall choose either (i) to pay an exclusivity payment to Symyx
as set forth in this Section 9.3.3 in order to retain exclusive rights to such
Agreement Compound or (ii) to make the remedies set forth in
-20-
<PAGE> 21
Section 9.3.2, above, available to Symyx. It is understood and agreed that if
Bayer desires to pay the exclusivity payment as set forth in this Section 9.3.3,
Bayer shall so notify Symyx in the written notice specified in Section 9.2(iii),
above, and pay the exclusivity payment to Symyx no later than twenty (20)
business days following such notice. In the event that Bayer fails (i) to so
notify Symyx or (ii) to make such payment, then the remedies set forth in
Section 9.3.2 shall apply. If Bayer elects to pay an exclusivity payment, the
amount of each such exclusivity payment, which will be in addition to any
research payments due under the agreement, will be equal to the total amount of
research funding provided by Bayer for conducting research in the Field within
which the Agreement Compound was identified up to the date when Bayer elects to
make the exclusivity payment. Such exclusivity payments shall be nonrefundable;
however, in the event that Bayer makes an exclusivity payment for an Agreement
Compound and Bayer or its Affiliates subsequently develop or commercialize such
Agreement Compound, then such exclusivity payment may be credited against
royalty payments that may be due to Symyx under this Agreement on Net Sales of
Products that (i) incorporate such Agreement Compound used in the Field or (ii)
are manufactured using such Agreement Compound in the Field.
9.4 Reports. During the term of this Agreement, Bayer shall provide
Symyx with written quarterly reports within thirty (30) days of the end of each
six (6) month period providing at least the following information, (i)
description of the status of the research and development activities conducted
with respect to each Agreement Compound while in development; and (ii) the
status of all patent applications claiming such Agreement Compounds. The reports
as described in this Section shall contain sufficient information to allow Symyx
to monitor Bayer's compliance with this Agreement. Until first commercial
introduction of each royalty-bearing Product, Bayer shall keep Symyx apprised of
the status of the commercial development of all such Products by semi-annually
providing Symyx with a written report detailing such activities with respect to
each such Product during the term of this Agreement. All reports and information
provided under this Section 9.4 shall be deemed Confidential Information of
Bayer.
ARTICLE 10
CONFIDENTIALITY
10.1 Confidential Information. Except as otherwise expressly provided
herein, the parties agree that, until the later of (i) ten (10) years after the
Effective Date or (ii) five (5) years after termination of this Agreement, the
receiving party shall not, except as expressly provided in this Article 10,
disclose to any third party or use for any purpose any Confidential Information
furnished to it by the disclosing party hereto pursuant to this Agreement,
except to the extent that it can be established by the receiving party by
competent proof that such information:
(i) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure;
(ii) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(iii) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
-21-
<PAGE> 22
(iv) was independently developed by the receiving party as
demonstrated by documented evidence prepared contemporaneously with such
independent development; or
(v) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third party who had no obligation to the
disclosing party not disclose such information to others.
10.2 Permitted Use and Disclosures. Each party hereto may (i) use
Confidential Information disclosed to it by the other in conducting the Research
Program and (ii) use or disclose Confidential Information disclosed to it by the
other party, to the extent such information is within the Program Technology and
such use or disclosure is reasonably necessary and permitted in (A) the exercise
of such rights granted hereunder, (B) filing or prosecuting patent applications,
(C) prosecuting or defending litigation, (D) complying with applicable
governmental regulations or court order or otherwise submitting information to
tax or other governmental authorities, or (E) making a permitted sublicense or
otherwise exercising license rights expressly granted by the other party
pursuant to the terms of this Agreement; provided that if a party is required to
make any such disclosure, other than pursuant to a confidentiality agreement, it
will give reasonable advance notice to the other party of such disclosure and,
save to the extent inappropriate in the case of patent applications, will use
its reasonable best efforts to secure confidential treatment of such information
in consultation with the other party prior to its disclosure (whether through
protective orders or otherwise) and disclose only the minimum necessary to
comply with such requirements.
10.3 Nondisclosure of Terms. Each of the parties hereto agrees not to
disclose the terms of this Agreement to any third party without the prior
written consent of the other party hereto, which consent shall not be
unreasonably withheld, except to such party's attorneys, advisors, investors and
others on a need to know basis under circumstances that reasonably ensure the
confidentiality thereof, or as customary in connection with a public offering of
Symyx stock, or to the extent required by law. Notwithstanding the foregoing,
the parties shall agree upon a press release and timing to announce the
execution of this Agreement, and thereafter, Symyx and Bayer may each disclose
to third parties the information contained in such press release without the
need for further approval by the other. In addition, Bayer and Symyx may make
public statements regarding the progress of the Research Program and the
achievement of milestones with respect thereto, following consultation and
mutual agreement, the consent of neither party not to be unreasonably withheld.
10.4 Publication. Any manuscript by Symyx or Bayer describing the
scientific results of the Research Program to be published during the term of
the Research Program or within three (3) year after the end of the Research
Program shall be subject to the prior review of the parties at least ninety (90)
days prior to submission. Further, to avoid loss of patent rights as a result of
premature public disclosure of patentable information, the receiving party shall
notify the disclosing party in writing within thirty (30) days after receipt of
any disclosure whether the receiving party desires to file a patent application
on any invention disclosed in such scientific results. In the event that the
receiving party desires to file such a patent application, the disclosing party
shall withhold publication or disclosure of such scientific results until the
earlier of (i) the time a patent application is filed thereon, or (ii) the time
the parties determine, after
-22-
<PAGE> 23
consultation, that no patentable invention exists, or (iii) ninety (90) days
after receipt by the disclosing party of the receiving party's written notice of
the receiving party's desire to file such patent application, or such other
period as is reasonable for seeking patent protection. Further, if such
scientific results contain the information of the receiving party that is
subject to use and nondisclosure restrictions under this Article 10, the
disclosing party agrees to remove such information from the proposed publication
or disclosure.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
11.1 Bayer. Bayer represents and warrants that: (i) it has the authority
and right to enter into this Agreement and to perform all of its obligations
hereunder; and (ii) this Agreement is a legal and valid obligation binding upon
it and enforceable in accordance with its terms.
11.2 Symyx. Symyx represents and warrants that: (i) it has the authority
and right to extend the rights granted in this Agreement, (ii) this Agreement is
a legal and valid obligation binding upon it an enforceable in accordance with
its terms; (iii) it has the full right to enter into this Agreement, and to
fully perform its obligations hereunder; (iv) it has not previously granted, and
during the term of this Agreement will not knowingly or intentionally make any
commitment or grant any rights which are inconsistent in any material way with
the rights and licenses granted herein; and (v) to the best of its knowledge as
of the Effective Date, there are no existing or threatened actions, suits or
claims pending against it with respect to the Symyx Technology.
11.3 Disclaimer. Bayer and Symyx specifically disclaim any
representation, warranty or guarantee that the Research Program will be
successful, in whole or in part. It is understood that the failure of the
parties to successfully identify Agreement Compounds in the course of the
Research Program will not, alone, constitute a breach of any representation or
warranty or other obligation under this Agreement. EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH IN THIS AGREEMENT, SYMYX AND BAYER AND THEIR RESPECTIVE AFFILIATES
MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND,
EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PROGRAM TECHNOLOGY, SYMYX
TECHNOLOGY, BAYER TECHNOLOGY, LIBRARIES, AGREEMENT COMPOUNDS, INFORMATION
DISCLOSED HEREUNDER OR AGREEMENT PRODUCTS INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF ANY
PROGRAM TECHNOLOGY, SYMYX TECHNOLOGY OR BAYER TECHNOLOGY, PATENTED OR
UNPATENTED, OR NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES.
-23-
<PAGE> 24
ARTICLE 12
INDEMNIFICATION
12.1 Bayer. Bayer agrees to indemnify, defend and hold Symyx and its
Affiliates and their directors, officers, employees, agents and their respective
successors, heirs and assigns (the "Symyx Indemnitees") harmless from and
against any losses, costs, claims, damages, liabilities or expense (including
reasonable attorneys' and professional fees and other expenses of litigation)
(collectively, "Liabilities") arising, directly or indirectly out of or in
connection with third party claims, suits, actions, demands or judgments,
including without limitation, personal injury, product liability, patent
infringement (other than claims of infringement of Symyx patents licensed to
Bayer under this Agreement) and trade secret misappropriation matters, suits,
actions or demands relating to (i) any Agreement Compounds or Products
developed, manufactured, used, sold or otherwise distributed by or on behalf of
Bayer, its Sublicensees or other designees (including, without limitation,
product liability claims and patent infringement claims ) other than claims of
infringement of Symyx patents licensed to Bayer under this Agreement), (ii)
Bayer's performance of the Research Program, and (iii) any breach by Bayer of
the representations and warranties made in this Agreement, except, in each case,
to the extent such Liabilities result from the gross negligence or intentional
misconduct of Symyx.
12.2 Symyx. Symyx agrees to indemnify, defend and hold Bayer, its
Affiliates and Sublicensees and their respective directors, officers, employees,
agents and their respective heirs and assigns (the "Bayer Indemnitees") harmless
from and against any losses, costs, claims, damages, liabilities or expense
(including reasonable attorneys' and professional fees and other expenses of
litigation) (collectively, "Liabilities") arising, directly or indirectly out of
or in connection with third party claims, suits, actions, demands or judgments,
including without limitation personal injury and product liability matters,
suits, actions, demands relating to (i) any product developed, manufactured,
used, sold or otherwise distributed by or on behalf of Symyx, its Affiliates,
licensees or other designees (other than Bayer, its Affiliates and Sublicensees)
pursuant to Section 5.1.3 herein (including, without limitation, product
liability and patent infringement claims), and (ii) any breach by Symyx of its
representations and warranties made in this Agreement, except, in each case, to
the extent such Liabilities result from the gross negligence or intentional
misconduct of Bayer.
12.3 Procedure. In the event that any Indemnitee (either a Bayer
Indemnitee or a Symyx Indemnitee) intends to claim indemnification under this
Article 12 it shall promptly notify the other party in writing of such alleged
Liability. The indemnifying party shall have the right to control the defense
thereof with counsel of its choice as long as such counsel is reasonably
acceptable to Indemnitee; provided, however, that any Indemnitee shall have the
right to retain its own counsel at its own expense, for any reason, including if
representation of any Indemnitee by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party reasonably represented by such
counsel in such proceeding. The affected Indemnitee shall cooperate with the
indemnifying party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 12. The Indemnitee shall not,
except at its own cost, voluntarily make any payment to incur any expense with
respect to any claim or suit without the prior written consent of the
indemnifying party, which such party shall not be required to give.
-24-
<PAGE> 25
ARTICLE 13
TERMINATION
13.1 Term of Agreement. The term of this Agreement shall commence on the
Effective Date, and shall continue in full force and effect on a
country-by-country and Product-by-Product basis until Bayer and its Affiliates
and Sublicensees have no remaining royalty payment obligations in a country,
unless terminated earlier as provided in this Article 13.
13.2 Breach.
13.2.1 Termination of Agreement. Either party to this Agreement
may terminate this Agreement as to any other party hereto in the event such
other party shall have materially breached or defaulted in the performance of
any of its material obligations hereunder, and such default shall have continued
for sixty (60) days after written notice thereof was provided to the breaching
party by the non-breaching party. Any termination shall become effective at the
end of such sixty (60) day period unless the breaching party (or any other party
on its behalf) has cured any such breach or default prior to the expiration of
the sixty (60) day period; provided, however, in the case of a failure to pay
any amount due hereunder, such default may be the basis of termination fifteen
(15) business days following the date that notice of such default was provided
to the breaching party.
13.2.2 Termination of Research Program. If, during the Research
Program Term, Symyx shall have materially breached or defaulted in the
performance of any of its material obligations hereunder, and such breach or
default shall have continued for sixty (60) days after written notice thereof
was provided to Symyx, Bayer may, in its discretion, choose to either (i)
terminate the Agreement or (ii) upon written notice to Symyx, terminate the
Research Program without terminating the Agreement. Any such termination of the
Agreement or the Research Program shall become effective at the end of such
sixty (60) day period unless Symyx (or any other party on its behalf) has cured
any such breach or default prior to the expiration of the sixty (60) day period.
In the event Bayer terminates the Research Program and not the Agreement, as set
forth in this section 13.2.2, Bayer shall not be obligated to pay the Research
Expenses as set forth in Sections 6.1 and 6.2 for research conducted after such
termination. It is understood that among other things, termination of the
Research Program without termination of the Agreement, as set forth in this
Section 13.2.2 shall not constitute termination of the licenses set forth in
Article 5 or the payment obligations set forth in Article 6 (other than Research
Expenses); provided, however, "Program Technology" shall not include any Patent
Rights or Know-How or other inventions, discoveries, data, or information, or
intellectual property rights in and to such inventions, discoveries, data, or
information made, conceived, reduced to practice, or otherwise developed solely
or jointly by Symyx, after termination of the Research Program.
13.3 Termination for Insolvency. If voluntary or involuntary proceedings
by or against a party are instituted in bankruptcy under any insolvency law, or
a receiver or custodian is appointed for such party, or proceedings are
instituted by or against such party for corporate reorganization, dissolution,
liquidation or winding-up of such party, which proceedings, if involuntary,
shall not have been dismissed within sixty (60) days after the date of filing,
or if such party makes an assignment for the benefit of creditors, or
substantially all of the assets of such party are seized or attached and not
released within sixty (60) days thereafter, the other party
-25-
<PAGE> 26
may immediately terminate this Agreement effective upon notice of such
termination.
13.4 Effect of Expiration or Termination.
13.4.1 Accrued Rights and Obligations. Expiration or termination
of this Agreement for any reason shall not release either party hereto from any
liability or obligation which, at the time of such termination, has already
accrued to the other party or which is attributable to a period prior to such
termination nor preclude either party from pursuing any rights and remedies it
may have hereunder or at law or in equity with respect to any breach of these
Agreement.
13.4.2 Stock on Hand. In the event of the cancellation or
termination of any license rights with respect to a Product prior to the
expiration of this Agreement, inventory of the Product on hand at the time of
such cancellation or termination may be sold for up to six (6) months after date
of such cancellation or termination, subject to Articles 6 and 8 and the other
applicable terms of this Agreement.
13.4.3 Licenses.
(i) In the event of a termination by Symyx pursuant to
Section 13.2 or 13.3, the licenses and rights granted Bayer herein, other than
the license set forth in Section 5.1.2, shall terminate.
(ii) If Bayer's rights terminate with respect to a
particular Agreement Compound and/or Product for failure to meet the diligence
requirements of Section 9.1, and more than one Product is being commercially
developed or exploited by Bayer or its Sublicensees hereunder, then Symyx shall
be entitled to terminate this Agreement only with respect to the applicable
Agreement Compounds and Products.
13.5 Survival. Sections 2.6, 2.7, 2.8, 5.1.2, 5.1.3, 5.7, 5.9, 6.3, 6.4,
6.5, 6.6, 6.7, 6.9, 6.10, 11.3, 13.4, 13.5 and Articles 4, 8, 10, 12, 14 of this
Agreement shall survive the expiration or termination of this Agreement for any
reason.
ARTICLE 14
MISCELLANEOUS
14.1 Governing Laws. This Agreement and any dispute arising from the
construction, performance or breach hereof shall be governed by and construed
and enforced in accordance with, the laws of the state of California, without
reference to conflicts of laws principles.
14.2 No Implied Licenses. Only the licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect. No other
license rights shall be created by implication, estoppel or otherwise.
14.3 Waiver. It is agreed that no waiver by either party hereto of any
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or default.
-26-
<PAGE> 27
14.4 Assignment. This Agreement shall not be assignable by either party
to any third party hereto without the written consent of the other party hereto,
except either party may assign this Agreement, without such consent, to an
entity that acquires all or substantially all of the business or assets of such
party to which this Agreement pertains, whether by merger, reorganization,
acquisition, sale, or otherwise. This Agreement shall be binding upon and accrue
to the benefit any permitted assignee, and any such assignee shall agree to
perform the obligation of the assignor.
14.5 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint ventures of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.
14.6 Performance Warranty. Bayer hereby warrants and guarantees the
performance of any and all rights and obligations of this Agreement by its
Affiliates and Sublicensees.
14.7 Compliance with Laws. In exercising their rights under this
license, the parties shall fully comply in all material respects with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under this
license including, without limitation, those applicable to the discovery,
development, manufacture, distribution, import and export and sale of Products
pursuant to this Agreement.
14.8 Export Control Regulations. The rights and obligations of the
parties under this Agreement, shall be subject in all respects to United States
laws and regulations as shall from time to time govern the license and delivery
of technology and products abroad, including the United States Foreign Assets
Control Regulations, Transaction Control Regulations and Export Control
Regulations, as amended, and any successor legislation issued by the Department
of Commerce, International Trade Administration, or Office of Export Licensing.
Without in any way limiting the provisions of this Agreement, Bayer agrees that,
unless prior authorization is obtained from the Office of Export Licensing, it
shall not export, reexport, or transship, directly or indirectly, to any
country, any of the technical data disclosed to Bayer by Symyx if such export
would violate the laws of the United States or the regulations of any department
or agency of the United States Government.
14.9 Patent Marking. Bayer agrees to mark and have its Sublicensees mark
all Products sold pursuant to this Agreement in accordance with the applicable
statute or regulations relating to patent marking in the country or countries of
manufacture and sale thereof.
14.10 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or by registered or
certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in
writing to the other parties hereto and shall be deemed to have been given upon
receipt.
-27-
<PAGE> 28
Symyx: Symyx Technologies
3100 Central Expressway
Santa Clara, CA 95051 USA
Attn: Chief Financial Officer
Bayer: Bayer AG
D-51368 Leverkusen
Germany
Attn: Head of Central Research
Copy: Patents & Licensing Department
14.11 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect to
the fullest extent permitted by law without said provision, and the parties
shall amend the Agreement to the extent feasible to lawfully include the
substance of the excluded term to as fully as possible realize the intent of the
parties and their commercial bargain.
14.12 Force Majeure. Neither party shall lose any rights hereunder or be
liable to the other party for damages or losses (except for payment obligations)
on account of failure of performance by the defaulting party if the failure is
occasioned by war, strike, fire, Act of God, earthquake, flood, lockout,
embargo, governmental acts or orders or restrictions, failure of suppliers, or
any other reason where failure to perform is beyond the reasonable control and
not caused by the negligence, intentional conduct or misconduct of the
non-performing party and such party has exerted all reasonable efforts to avoid
or remedy such force majeure; provided, however, that in no event shall a party
be required to settle any labor dispute or disturbance.
14.13 Complete Agreement. This Agreement with its Exhibits, and Stock
Purchase Agreement executed by the parties of even date herewith constitutes the
entire agreement, both written and oral, between the parties with respect to the
subject matter hereof, and all prior agreements respecting the subject matter
hereof, either written or oral, express or implied, shall be abrogated,
canceled, and are null and void and of no effect. The Interim Research Funding
Agreement is hereby terminated and superseded by this Agreement; provided,
however that all information and materials subject to the confidentiality
provisions of the Interim Research Funding Agreement shall be treated as
Confidential Information subject to this Agreement. No amendment or change
hereof or addition hereto shall be effective or binding on either of the parties
hereto unless reduced to writing and executed by the respective duly authorized
representatives of Symyx and Bayer.
14.14 Dispute Resolution. Any dispute under this Agreement which is not
settled by mutual consent shall be finally settled by binding arbitration,
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by three (3) neutral arbitrators appointed in accordance
with said rules, unless the parties agree to conduct such arbitration with a
single arbitrator. The arbitration shall be held in San Francisco, California,
and the arbitrators shall be independent experts with a background suitable for
the matters in dispute. The arbitrators shall determine what discovery will be
permitted, consistent with the goal of limiting the cost and time which the
parties must expend for discovery; provided the arbitrators shall permit such
discovery as they deem necessary to permit an equitable resolution of the
-28-
<PAGE> 29
dispute. Any written evidence originally in a language other than English shall
be submitted in English translation accompanied by the original and a true copy
thereof. The costs of arbitration, including administrative and arbitrators'
fees, shall be shared equally by the parties. Each party shall bear its own
costs and attorneys' and witness' fees. A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
thirty (30) days following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written opinion. Any
arbitration subject to this Section 14.14 shall be completed within one (1) year
from the filing of notice of a request for such arbitration. The award shall be
final and binding upon the parties hereto.
14.14.1 Derivative Compound Disputes. In the event of dispute
whether a compound is a Derivative Compound, either party may notify the other
party of such dispute in writing (each such notice a "Dispute Notice"). The
parties agree to confer to determine whether such dispute can be resolved by
mutual agreement. Each party may, no later than sixty (60) days after receipt of
the Dispute Notice, at is own discretion and expense, obtain and submit to the
other the non-binding opinion of no more than two (2) independent scientists
regarding such dispute, and the parties agree to review and consider any such
opinions offered by the other party in considering whether such dispute can be
resolved by mutual agreement. If the parties have not reached mutual agreement
regarding such dispute within ninety (90) days after receipt of the Dispute
Notice, the dispute shall be settled by binding arbitration as set forth above
in this Section 14.14.
14.15 Remedies. It is understood that the remedies provided in Section
9.3 shall not prejudice any other rights or remedies available to Symyx
hereunder or at law or equity, and shall not preclude Symyx from pursuing any
rights and remedies available to Symyx with respect to any breach of this
Agreement.
14.16 Headings. The captions to the several Section hereof are not part
of this Agreement, but are included merely for convenience of reference and
shall not affect its meaning or interpretation.
14.17 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same agreement.
-29-
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.
SYMYX TECHNOLOGIES BAYER AG
By: /s/ ISY GOLDWASSER By: /s/ H.J. ROSENKRANZ
------------------------- -----------------------------
Title: President Title: Head of Central Research
---------------------- --------------------------
Date: 2/27/98 Date: 3/3/1998
----------------------- ---------------------------
By: /s/ W. VAN KERCKHOFF
--------------------------
Title: Lic. Manager
--------------------------
Date: 03/03/1998
---------------------------
Exhibit A - Definitions
Exhibit B - Procedure for Lead Compound Identification
Exhibit C - Description of Initial Fields and Projects
Exhibit D - Stock Purchase Agreement
-26-
<PAGE> 31
EXHIBIT A
DEFINITIONS
1.1 "Agreement Compound" shall mean any Lead Compound or Derivative Compound.
1.2 "Bayer Technology" shall mean all patents, copyrights, trade secrets,
know-how, data, and other intellectual property of any kind owned, in whole or
part, or controlled by Bayer during the term of this Agreement which relates to
an invention conceived and reduced to practice outside the Research Program by
Bayer. For purposes of clarification, Bayer Technology includes process
development performed by or under authority of Bayer or its Affiliates outside
of the Research Program. Bayer Technology excludes Combinatorial Chemistry
Technology developed in connection with the conduct of the Research Program.
1.3 "Combinatorial Chemistry Technology" shall mean techniques, methodologies,
synthetic routes or instrumentation useful for the simultaneous, parallel or
automated: (i) synthesis, (ii) processing, (iii) analysis, or (iv)
characterization of more than ten (10) compounds on a single monolithic
substrate, as well as patent rights and other intellectual property rights in
and to Combinatorial Chemistry Technology.
1.4 "Commodity Product" shall mean chemicals and materials which are fungible
products (i.e., products which are directly interchangeable in the marketplace)
for which there are three or more manufacturers, no one of which has more than
forty percent (40%) market share.
1.5 "Confidential Information" shall mean (i) any proprietary or confidential
information or material in tangible form disclosed hereunder that is marked as
"Confidential" at the time it is delivered to the receiving party, (ii)
proprietary or confidential information disclosed orally hereunder which is
identified as confidential or proprietary when disclosed and such disclosure of
confidential information is confirmed in writing within thirty (30) days by the
disclosing party (iii) written information that is marked as "Confidential" that
contains financial projections, business plans, marketing plans, cost
projections, or manufacturing plans or other confidential business information
related to commercialization or development of Products or Agreement Compounds.
Data generated in the course of the Research Program concerning the activity of
Agreement Compounds within the applicable Field shall be treated as Confidential
Information with respect to provisions regarding disclosure of Confidential
Information.
1.6 "Derivative Compound" shall mean any compound which is derived from a Lead
Compound or another Derivative Compound by Symyx or Bayer or by a third party
under authority from Bayer or Symyx. As used in this Section 1.6, a compound
shall be deemed to have been "derived from" such other compound if it:
(i) is synthesized based on structure and/or performance data
related to a Lead Compound or Derivative Compound; or
(ii) is included within the scope of any claim of a pending patent
application or issued patent claiming one or more compounds,
mixtures or compositions of matter within (i) above, or filed as
a result of the conduct of the Research Program; and
-30-
<PAGE> 32
(iii) is first synthesized or identified by Bayer prior to the tenth
anniversary of the termination of the Research Program.
1.7 "Executive Committee" or "EC" shall have the meaning set forth in Section
3.1.
1.8 "Field" shall mean a defined, mutually agreed, area of research within the
Research Program focused on the development of Agreement Compounds for the
production of one or more Products. The initial Fields for this Agreement are
described in Section 2.2.1. Each Field may include one or more Projects.
1.9 "Lead Compound" shall mean a compound contained in a library prepared by or
on behalf of Symyx under the Research Program, or screened by Symyx under the
Research Program, that meets the specific physical and/or chemical properties
established as Lead Criteria by the Research Committee. Any compound that (i) is
identified in a Project as having activity within the applicable Field and (ii)
thereafter enters development, or is sold or otherwise commercialized, by Bayer
or its Affiliates or Sublicensees shall also be deemed a Lead Compound for all
purposes of this Agreement.
1.10 "Lead Criteria" shall mean the specific physical and chemical properties
established by the RFC in the applicable Project Plan for identifying a Lead
Compound.
1.11 "Manufacturing Costs" shall mean (i) all direct and indirect costs related
to the manufacture by Bayer or its Affiliates of Products, including costs for
personnel, materials, quality control, regulatory compliance, administrative
expenses, subcontractors, fixed and variable manufacturing overhead costs and
business unit or division costs reasonably allocable to the manufacture of
Products, as determined and allocated in accordance with generally accepted
accounting principles, consistently applied, excluding costs for excess
manufacturing capacity not reasonably related to projected demand for Products,
or (ii) with respect to Products purchased from a third party vendor, reasonable
amounts actually paid to the vendor for such Products in arm's length
transactions.
1.12 "Net Income" shall mean the Net Sales with respect to a Product, less: (a)
Manufacturing Costs for such Product; and (b) reasonable expenses incurred by
Bayer in connection with the marketing, shipping or sale of the Product, and
general and administrative expenses relating thereto, all as determined and
allocated in accordance with generally accepted accounting principles,
consistently applied.
1.13 "Net Sales" shall mean the invoice price of any Product sold by Bayer or
its Affiliates to bona fide independent third parties, less, to the extent
included in such invoice price the total of: (1) ordinary and customary trade
discounts actually allowed; (2) credits, rebates and returns; (3) freight and
duties paid for and separately identified on the invoice or other documentation
maintained in the ordinary course of business, and (4) excise taxes, other
consumption taxes, customs duties and other compulsory payments to governmental
authorities actually paid and separately identified on the invoice or of the
documentation maintained in the ordinary course of business. Net Sales shall
also include the amount of fair market value of all other consideration received
by Bayer or its Affiliates in respect of Products, whether such consideration is
in cash,
-31-
<PAGE> 33
payment in kind, exchange or another form.
1.14 "Product" shall mean any product within the scope of a Field which
incorporates an Agreement Compound or utilizes an Agreement Compound in its
manufacture or is made utilizing a method or process within the Program
Technology. (cf. 6.11 and 6.12)
1.15 "Program Technology" shall mean any Patent Right and Know-How conceived,
reduced to practice, or otherwise developed by the parties in connection with
the conduct of the Research Program. For purposes of clarification, Program
Technology includes process development performed by or under authority of Symyx
or Bayer, or jointly by Symyx and Bayer, in the course of performing the
Research Program. Program Technology shall not include any Symyx Technology,
Bayer Technology or Combinatorial Chemistry Technology.
1.15.1 "Know-How" shall mean all data, instructions, processes, formulas
and information, including, without limitation, chemical, physical and
analytical, safety, manufacturing and quality control data and information which
is necessary for the development, manufacture or use of Agreement Compounds or
Products. Know-How does not include any inventions included in the Patent
Rights.
1.15.2 "Patent Rights" shall mean (i) any patent or patent application
claiming an invention conceived and reduced to practice by Symyx or Bayer, or
jointly by the parties, in the course of performing the Research Program which
claims an Agreement Compound or a Product, or method or process for the
synthesis of an Agreement Compound or Product, or a composition-of-matter
containing an Agreement Compound or Product, or a method or process for the use
of an Agreement Compound in or for the manufacture of a Product, and (ii) any
divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions or other governmental actions which extend any of the subject matter
of the patent applications or patents in (i) above, and any substitutions,
confirmations, registrations or revalidations of any of the foregoing.
1.16 "Project" shall mean a research effort within a Field focused on the
identification and development of Lead Compounds with mutually agreed upon
characteristics, or uses, for the manufacture of Product(s). Projects shall
include the initial Projects referenced in Section 2.2.3, and any additional
Projects that become part of the Research Program in accordance with Section
3.1.1.
1.17 "Project Plan" shall mean the written overall plan to be prepared annually
by the applicable RFC for the research to be conducted with respect to a
particular Project in a given year, which shall include a budget, time lines,
staffing requirements and research objectives, as may be amended by the RFC from
time to time.
-32-
<PAGE> 34
1.18 "Research Expenses" shall have the meaning set forth in Section 6.1.
1.19 "Research Field Committee" or "RFC" shall have the meaning set forth in
Section 3.2.1.
1.20 "Research Program" shall mean all research activities conducted by Symyx
and Bayer on a collaborative basis under this Agreement, with the goal of
discovering Agreement Compounds within the Fields, in accordance with the
Project Plans.
1.21 "Research Program Term" shall have the meaning described in Section 2.4.1.
1.22 "Sublicensee" shall mean, with respect to a particular Product, a third
party to whom Bayer (or its Affiliate) has granted a license or sublicense to
develop, make, import, use, offer for sale or sell such Product (each such
license or sublicense referred to in this Agreement as a "Sublicense"). As used
in this Agreement, "Sublicensee" shall also include a third party to whom Bayer
has granted the right to distribute such Product, provided that such third party
has the primary responsibility for marketing and promotion at its expense of
such Product within the field or territory for which such distribution rights
are granted.
1.23 "Specialty Product" shall mean chemicals and materials which are not
Commodity Products.
1.24 "Symyx Technology" shall mean all patents, copyrights, trade secrets,
know-how, data, and other intellectual property of any kind owned or controlled
by Symyx during the term of this Agreement which relates to an invention
conceived and reduced to practice outside the Research Program by Symyx. Symyx
Technology excludes Combinatorial Chemistry Technology.
1.25 "Targeted Library" shall mean a Library of compounds prepared by Symyx for
use in optimizing compounds pursuant to the Research Program which was prepared
using Confidential Information provided to Symyx by Bayer, in writing, for the
express purpose of facilitating such optimization, as evidenced in an
acknowledgment letter signed by Symyx or in the approved minutes of a meeting
between the parties. It is understood that "Targeted Library" shall include only
those Libraries made using such Confidential Information and shall not include
libraries prepared using (A) Confidential Information that falls within one or
more exceptions set forth in Section 10.1(i)-(v) or (B) data generated by Symyx
in the course of performing the Research Program.
-33-
<PAGE> 35
EXHIBIT B
PROCEDURE FOR LEAD COMPOUND IDENTIFICATION
1. At such time as Symyx has identified a compound which it believes may meet
the Lead Criteria for a particular project, it shall provide the data and
results supporting such conclusion to the applicable RFC.
2. Symyx will, on request of Bayer, use reasonable efforts to provide reasonable
quantities of such compound for Bayer to confirm whether it meets the applicable
Lead Criteria.
3. The RFC shall review the results provided by Symyx and Bayer with respect to
a particular Lead Compound, and if such results indicate that the applicable
Lead Criteria have been satisfied, the RFC shall deem such compound to be a Lead
Compound for all purposes of this Agreement.
4. In the event that the RFC requests further information or the conduct of
further studies to confirm whether a particular Lead Compound meets the
applicable Lead Criteria, Symyx and Bayer shall use reasonable efforts to
prepare any such information and conduct any such studies.
-31-
<PAGE> 36
EXHIBIT C
INITIAL FIELDS
Electroluminescent Field: 5.5 FTEs until 9/1/98. Parties may agree on terms to
extend 1 year.
Catalysis Field: 9 FTEs for year 1; 12 FTEs for year 2.
X-ray Phosphors Field: 4 FTEs for years 1 and 2.
-32-
<PAGE> 37
EXHIBIT D
[PREFERRED STOCK PURCHASE AGREEMENT]
-33-
<PAGE> 38
STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the ____ day of _________ 1998, by and between Symyx Technologies
(the "Company"), a California corporation, located at 3100 Central Expressway,
Santa Clara, California 95051, and the investors listed on the signature pages
hereto, individually an "Investor" and collectively the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series D Preferred Stock.
(a) The Company will have authorized before Closing (as
defined below) the sale and issuance of up to 1,500,000 shares of Series D
Preferred Stock (the "Shares"), with the Shares having the rights, preferences,
privileges and restrictions as set forth in the Company's Amended and Restated
Articles of Incorporation in the form attached hereto as Exhibit A (the
"Articles"), and the Company shall adopt and file the Articles with the
Secretary of State of California on or before the Closing.
(b) Subject to the terms and conditions of this
Agreement, the Company shall sell and issue to each Investor, and each Investor
shall purchase from the Company, the number of Shares set forth on such
Investor's signature page to this Agreement at a purchase price of $4.50 per
share.
1.2 Closing. The purchase and sale of the Shares shall take
place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California, at 10:00 a.m., on _________, 1998, or at such other time
and place as the Company and the Investors may agree upon orally or in writing
(which time and place are designated as the "Closing"). At the Closing the
Company shall deliver to each Investor a certificate representing the Shares
purchased by such Investor, and the Investor shall deliver to the Company a wire
transfer of immediately available funds payable to the Company's order in the
aggregate amount of the purchase price for the Shares.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit B, which exceptions shall be deemed to
be representations and warranties as if made hereunder:
-34-
<PAGE> 39
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company
consists, or will consist immediately prior to the Closing, of:
(a) 19,150,000 shares of Preferred Stock (the "Preferred
Stock"), of which 1,000,000 have been designated Series A Preferred Stock,
8,650,000 shares have been designated Series B Preferred Stock, 8,000,000 shares
have been designated Series C Preferred Stock and 1,500,000 shares have been
designated Series D Preferred Stock. Immediately prior to the Closing, 1,000,000
shares of Series A Preferred Stock, 8,600,687 shares of Series B Preferred
Stock, 6,750,284 shares of Series C Preferred Stock and no shares of Series D
Preferred Stock will be outstanding.
(b) (i) 150,000 shares of Class B Common Stock, of which
120,000 shares are issued and outstanding, and (ii) 50,000,000 shares of Common
Stock (the "Common Stock"), of which ____________ shares are issued and
outstanding as of ______________.
(c) Except as set forth in the Schedule of Exceptions,
there are no outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Restated
Investor Rights Agreement attached hereto as Exhibit C (the "Rights Agreement"),
the performance of all obligations of the Company hereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Shares
being sold hereunder and the Common Stock issuable upon conversion of the Shares
has been taken or will be taken prior to the Closing. This Agreement constitutes
a valid and legally binding obligation of the Company, enforceable in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights and to the availability of specific performance.
-35-
<PAGE> 40
2.5 Valid Issuance of Preferred and Common Stock.
(a) The Shares that are being purchased hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable free from any liens or encumbrances other than those created by
the holders thereof and free of any restriction on transfer other than those
under this Agreement and under applicable federal and state securities laws.
Based in part upon the representations of the Investor in this Agreement, the
Shares will be issued in compliance with all applicable federal and state
securities laws. The Common Stock issuable upon conversion of the Shares
purchased under this Agreement (the "Conversion Stock") have been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Articles, shall be duly and validly issued, fully paid and nonassessable,
and issued in compliance with all applicable securities laws, as presently in
effect, of the United States and each of the states whose securities laws govern
the issuance of any of the Shares hereunder.
(b) The outstanding shares of Common Stock are all duly
and validly authorized and issued, fully paid and nonassessable, and were issued
in compliance with all applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, and other applicable Blue Sky Laws, which filing will
be effected within 15 days of the sale of Shares hereunder.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement or the right of the Company to enter into it, or
to consummate the transactions contemplated hereby, or which might result,
either individually or in the aggregate, in any material adverse changes in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
-36-
<PAGE> 41
2.8 Patents and Trademarks. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted as set forth in the
business plan delivered to Investor without any known conflict with or
infringement of the rights of others. The patents, patent applications,
trademarks, service marks, trade names and copyrights owned by the Company and
that the Company has rights to use are set forth on the Schedule of Exceptions.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed in the business plan delivered to Investor,
would violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of the Company or that would conflict with the Company's
business as proposed to be conducted as set forth in the business plan delivered
to Investor. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed in the business plan delivered to
Investor, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.9 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provisions of its Articles of Incorporation or Bylaws or of any material
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
-37-
<PAGE> 42
2.10 Agreements; Actions.
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of $100,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or (iii)
obligations of, or payments by, the Company to any officer, director, employee
or family member of any such individual.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $100,000 or
in excess of $500,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
(d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Articles of Incorporation or Bylaws, which materially adversely affects its
business as now conducted and as proposed to be conducted as set forth in the
business plan delivered to Investor.
2.11 Disclosure. The Company has fully provided the Investor
with all the information which the Investor has requested for deciding whether
to purchase the Shares. To the Company's knowledge, neither this Agreement, any
other written statements or certificates made or delivered in connection
herewith, when taken as a whole, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading in light of the circumstances under which they were
made.
2.12 Registration Rights. Except as provided in the Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.13 Title to Property and Assets. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
-38-
<PAGE> 43
2.14 Tax Returns, Payments and Elections. The Company has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due, except those contested by it in good faith which are
listed in the Schedule of Exceptions. The provision for taxes of the Company as
shown in the financial statements is adequate for taxes due or accrued as of the
date thereof. The Company has not elected pursuant to the Internal Revenue Code
of 1986, as amended (the "Code"), to be treated as a Subchapter S corporation or
a collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a material adverse effect on the Company, its
financial condition, its business as presently conducted or proposed to be
conducted as set forth in the business plan delivered to Investor or any of its
properties or material assets.
2.15 Financial Statements. The Company has delivered, or will
deliver prior to the Closing, to each Investor its unaudited financial
statements as of December 31, 1997 (the "Financial Statements"). The Financial
Statements have been prepared on a consistent basis throughout the periods
indicated and with each other. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject to normal year-end audit
adjustments, which are neither individually nor in the aggregate material.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise.
2.16 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974, as amended.
2.17 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.18 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company is terminable at the
will of the Company.
-39-
<PAGE> 44
3. Representations and Warranties of the Investor. Each Investor hereby
represents and warrants that:
3.1 Authorization. All action on the part of the Investor for
the authorization, execution, delivery and performance by the Investor of this
Agreement has been taken, and this Agreement constitutes the valid and legally
binding obligation of the Investor, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. The Investor confirms
that the Shares purchased hereunder and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Investor represents that it has full power and authority to
enter into this Agreement.
3.3 Disclosure of Information. The Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. The Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Shares. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Investor to rely thereon.
3.4 Experience. Such Investor is an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act. Such Investor has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests.
3.5 Restricted Securities. The Investor understands that the
Shares it is purchasing and the Common Stock issuable upon the conversion
thereof are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company 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 this connection, the Investor represents that it is familiar
with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Shares (or the Common Stock
issuable upon the conversion thereof) unless and until:
-40-
<PAGE> 45
(a) There is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, the Investor shall have furnished the Company with an
opinion of counsel, satisfactory to the Company, that such disposition will not
require registration of such shares under the Act. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
3.7 Legends. It is understood that the certificates evidencing
the Shares (or the Common Stock issuable upon conversion thereof) may bear one
or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. 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 AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California or any other applicable state, including any legend required by the
California Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
3.8 Additional Representations of Foreign Investors. If the
Purchaser does not reside in and is not a citizen of the United States, for the
purpose of this Section 3 the Purchaser shall be deemed a "Foreign Investor;"
and the Purchaser represents, warrants and covenants to the Company, in addition
to the other representations, warranties and covenants set forth in this Section
3, the following:
(a) Neither the Foreign Investor nor any person for the
account of whom such Foreign Investor is acting, including the estate of any
such person, a trust of which any such person is a beneficiary, or a
corporation, partnership, trust or other entity organized under the laws of the
United States of America, its territories and possessions and all areas under
the jurisdiction of the United States of America, is a citizen or resident of
the United States of America (a "U.S. Person").
(b) Such Foreign Investor will not sell, transfer or
otherwise dispose of the Shares for a period of ninety (90) days after the
closing, and such Foreign Investor will not thereafter sell or otherwise
transfer the Shares to a U.S. Person unless the Company has received an opinion
of
-41-
<PAGE> 46
counsel, satisfactory to the Company, that such transfer will not be in
violation of the Securities Act or any applicable state securities laws.
(c) The Foreign Investor understands that the Company
will not allow any transfer or other disposition of the Shares unless the
proposed transferee shall have executed an instrument containing the
representations set forth in the foregoing paragraphs (a) and (b) of this
Section 3.0 or the Company shall have received an opinion of counsel
satisfactory to the Company to the effect that such proposed transfer would not
be in violation of the Securities Act or any applicable state securities law.
(d) The share certificate(s) of a Foreign Investor
evidencing the Shares shall bear the following legend in addition to any other
legend required under this Agreement:
THE SHARES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES ("STATE ACT") AND MAY NOT BE TRANSFERRED
OR OTHERWISE DISPOSED OF FOR A PERIOD OF NINETY (90) DAYS AFTER THE DATE ON THE
FACE HEREOF, AND THEREAFTER MAY NOT BE TRANSFERRED TO A CITIZEN OR RESIDENT OF
THE UNITED STATES OF AMERICA, INCLUDING THE ESTATE OF ANY SUCH PERSON, A TRUST
OF WHICH ANY SUCH PERSON IS A BENEFICIARY, OR A CORPORATION, PARTNERSHIP, TRUST
OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF THE UNITED STATES OF AMERICA, ITS
TERRITORIES AND POSSESSIONS AND ALL AREAS UNDER THE JURISDICTION OF THE UNITED
STATES OF AMERICA, UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER, THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE
ACT OR ANY APPLICABLE STATE ACT.
4. California Commissioner of Corporations. THE SALE OF THE SECURITIES
THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF THE
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
the Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment or written waiver on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true in all material
respects on and as of the Closing with
-42-
<PAGE> 47
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
5.2 Performance. The Company 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 it on or before the Closing.
5.3 Compliance Certificate. The President or Chief Financial
Officer of the Company shall deliver to the Investor at the Closing a
certificate certifying that the conditions specified in Sections 5.1 and 5.2
have been fulfilled and stating that there shall have been no adverse change in
the business, affairs, prospects, operations, properties, assets or condition of
the Company since the date of this Agreement.
5.4 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
5.5 Restated Investor Rights Agreement. The Company and the
Investor shall have entered into the Restated Investor Rights Agreement in the
form of Exhibit C.
5.6 Opinion of Company Counsel. The Investor shall have received
from counsel to the Company an opinion addressed to them, dated the Closing
Date, in the form of Exhibit D.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor 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 unless consented to in writing by the
Company:
6.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 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.
6.2 Payment of Purchase Price. The Investors shall have
delivered the purchase price for the Shares.
6.3 Amended and Restated Articles. The Articles shall have been
accepted for filing by the California Secretary of State.
7. Covenants of the Company.
-43-
<PAGE> 48
7.1 Delivery of Financial Statements. The Company shall deliver
to each Investor which holds, together with its affiliates, an aggregate of
500,000 shares of Series D Preferred Stock (or Common Stock issued or issuable
upon conversion of such Series D Preferred Stock):
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, statements of
operations and cash flow for such fiscal year, a balance sheet of the Company as
of the end of such year, and a schedule as to the sources and applications of
funds for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by independent public accountants of nationally
recognized standing selected by the Company;
(b) within forty five (45) days of the end of each
fiscal quarter, and until a public offering of Common Stock of the Company, an
unaudited statement of operations and balance sheet for and as of the end of
such quarter, in reasonable detail and prepared in accordance with GAAP, subject
to year end audit adjustments and the absence of footnotes;
(c) with respect to the financial statements called for
in subsection (c) of this Section 8.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods and fairly present the financial condition of the
Company and its results of operation for the period specified, subject to
year-end audit adjustments and the absence of footnotes;
7.2 Termination of Covenants. The covenants set forth in
Sections 7.1, and 7.2 shall terminate as to Investors and be of no further force
or effect when the sale of securities pursuant to a registration statement filed
by the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting requirements of Sections
12(g) or 15(d) of the Securities Exchange Act of 1934, whichever event shall
first occur.
8. Investors Rights Agreement. The Company's Investors Rights Agreement
dated July 29, 1997 (the "Prior Rights Agreement") is hereby amended and
restated in its entirety to read as set forth in Exhibit C hereto. By execution
of this Agreement, each Investor (i) consents to such amendment and restatement
of the Prior Rights Agreement and (ii) agrees to become a party to and be bound
by the Rights Agreement in the form set forth in Exhibit C hereto with the same
force and effect as if such Investor had executed a separate signature page to
such Rights Agreement.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing for a period of two years.
-44-
<PAGE> 49
9.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
9.4 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated on the first page of this Agreement, or at such other address as such
party may designate by ten (10) days' advance written notice to the other
parties.
9.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
9.8 Amendments and Waivers. This Agreement may only be amended
or waived in writing signed by both parties hereto.
9.9 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
-45-
<PAGE> 50
10. Right to Purchase Common Stock
10.1 Right to Purchase Common Stock. In connection with the
execution of that certain Collaboration Agreement dated as of March 1, 1998 by
and between Bayer INNOVATION ("Bayer") and the Company, Bayer shall hereby be
entitled to subscribe for and purchase from the Company, at a price per share
equal to the initial price per share to the public (without any reduction for
fees or discounts to Underwriters) of the Company's Common Stock in an initial
public offering of the Company's Common Stock pursuant to an effective
registration Statement under the Securities Act of 1933, as amended (the "Act")
(a "Public Offering") payable in cash or check (the "Option Share Price"), at
any time after the date the Company proposes to effect a Public Offering and
before the date on which the Company files an initial registration statement
under Act with respect to such Public Offering, at least the number of shares
which can be purchased for $2,000,000 at the Option Share Price but no more than
the number of shares which can be purchased for $4,000,000 at the Option Share
Price of fully paid and non-assessable shares of the Company's Common Stock (the
"Section 10 Common Stock"), subject to the terms and conditions set forth in
this Section 10 and pursuant to an executed Common Stock Purchase Agreement
substantially in the form of Exhibit E hereto (the "Common Stock Purchase
Agreement").
10.2 Notices. In the event that the Company shall propose at any
time to effect a Public Offering, the Company shall send to Bayer at least ten
(10) days' prior written notice of the date when an initial registration
statement under the Act shall be filed by the Company with respect to such
Public Offering.
10.3 Conditions to Both Bayer's and the Company's Obligations.
The obligations of Bayer to purchase and of the Company to issue and sell the
Section 10 Common Stock are subject to the fulfillment, on or prior to the
closing date of the Common Stock Purchase Agreement, of all of the following
conditions, any of which may be waived in whole or in part by mutual agreement
of Bayer and the Company:
(a) The closing of the Company's initial Public Offering
shall have occurred.
(b) The purchase of the Section 10 Common Stock by Bayer
under the Common Stock Purchase Agreement shall be legally permitted by all laws
and regulations to which Bayer or the Company are subject.
(c) All of the conditions contained in the Common Stock
Purchase Agreement shall have been fulfilled.
10.4 Miscellaneous.
(a) The Company covenants that it will at all times
reserve and keep available, solely for the purpose of issue upon the exercise
hereof, a sufficient number of shares of
-46-
<PAGE> 51
Common Stock to permit the issuance of the Section 10 Common Stock. Such shares
when issued in compliance with the provisions of this Section 10 will be duly
authorized, validly issued, fully paid and nonassessable.
(b) The terms of this Section 10 shall be binding upon
and shall inure to the benefit of any successors or assigns of the Company. The
stock purchase rights granted to Bayer under this Section 10 may only be
exercised by Bayer and are not transferable without the express written consent
of the Company.
(c) Until the closing of the Common Stock Purchase
Agreement, Bayer shall not be entitled to vote or receive dividends with respect
to the Section 10 Common Stock or be deemed to be a Common Stock shareholder of
the Company for any purpose, nor shall anything contained in this Section 10 be
construed to confer upon Bayer any rights of a Common Stock shareholder of the
Company or any right, with respect to the Section 10 Common Stock, to vote, give
or withhold consent to any corporate action, receive notice of meetings, receive
dividends or subscription rights, or otherwise.
[remainder of page intentionally left blank]
-47-
<PAGE> 52
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYMYX TECHNOLOGIES
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INVESTOR:
BAYER AG
a German corporation, having a principal place of business at D-51368
Leverkusen, Germany
By:
-------------------------------------
(sign here)
Name:
-----------------------------------
(print name of signor here)
Title:
----------------------------------
(print title of signor here)
No. of shares:
--------------------------
Total purchase price
at US$4.50 per share: US$_______________
-48-
<PAGE> 1
EXHIBIT 10.8(a)
AMENDMENT NO. 1 TO COLLABORATION AGREEMENT
This Amendment No. 1 to Collaboration Agreement (the "Amendment"),
effective as of May 1, 1998 (the "Amendment Effective Date"), is entered into by
and between Symyx Technologies ("Symyx"), a California corporation having a
principal place of business at 3100 Central Expressway, Santa Clara, California,
and Bayer AG ("Bayer"), a German corporation having a principal place of
business at D-51368 Leverkusen, Germany, and amends that certain Collaboration
Agreement entered into by and between Symyx and Bayer effective as of March 1,
1998 (the "Collaboration Agreement").
WHEREAS, Symyx and Bayer desire to amend the Collaboration Agreement to
provide for research in the Butyl Rubber Field as set forth more fully below;
NOW THEREFORE, the parties hereby agree as follows:
1. All capitalized terms not defined in this Amendment shall have the meanings
given to them in the Collaboration Agreement.
2. Section 2.2.1(a) of the Collaboration Agreement is amended to read in its
entirety as follows:
(a) Addition of Butyl Rubber Field.
(i) The Research Program shall include the Butyl Rubber
Field, which shall be defined as catalysts and process technology for
synthesizing poly(isobutylene) or butyl rubber through the high
temperature polymerization of isobutylene in non-halogenated solvents.
(ii) Symyx agrees to dedicate six (6) FTEs to research
activities in the Butyl Rubber Field during the period from May 1, 1998
to February 28, 1999, and will dedicate seven (7) FTEs to research
activities in the Butyl Rubber Field during the period from March 1,
1999 to March 1, 2000.
(iii) Bayer agrees to pay Symyx Research Expenses for
research activities in the Butyl Rubber Field as set forth in Section
6.2.1(b) and to pay Symyx royalties in accordance with Section 6.14.
(iv) Following termination of research activities within
the Butyl Rubber Field, the corresponding Research Field Committee will
prepare a summary of Program Technology generated in the course of the
research activities for the Butyl Rubber Field.
3. Section 6.2.1(b) is amended to read in its entirety as follows:
(b) In addition to the other Research Expenses to be
paid to Symyx by Bayer as set forth in this Section 6.2.1, Bayer shall
pay to Symyx Research Expenses of (i) One Million Three Hundred Thousand
US Dollars ($1,300,000) for the research activities in the Butyl Rubber
Field between May 1, 1998 and February 28, 1999 and (ii) One Million
Eight Hundred Twenty Thousand US Dollars ($1,820,000) for the research
activities in the Butyl Rubber Field between March 1, 1999 and March 1,
2000.
-1-
<PAGE> 2
4. Article 6 is amended by addition of the following new Section 6.14:
6.14 Royalties for Butyl Rubber Field.
(a) The parties agree the royalty model set forth in
Section 6.3 shall apply to the Butyl Rubber Field, and the parties shall
determine the applicable Added Value Royalty Rate in accordance with
Section 6.3.3; provided, however, that the maximum and minimum royalty
rates set forth in Section 6.3.3(iv) shall not apply to the Added Value
Royalty Rate for the Butyl Rubber Field, and further provided that
notwithstanding Section 6.3.3(i), "Added Value" for the Butyl Rubber
Field shall mean the difference between the Manufacturing Costs of
producing butyl rubber or poly(isobutylene) using a process which
utilizes an Agreement Compound or Program Technology and the
Manufacturing Costs of producing butyl rubber or poly(isobutylene) using
the process Bayer would use without access to Agreement Compounds and
Program Technology. By way of example and without limitation, in
determining the overall Added Value received by Bayer in the Butyl
Rubber Field, the parties shall consider, among other things, changes in
capital costs, raw material costs, processing costs, operating costs,
yield, Product sales volume, and Product pricing, in each case,
attributable to the use of Agreement Compounds, Products, or Program
Technology.
(b) Bayer may elect, upon prior notice to Symyx, to have
the forecasts and projections Bayer proposes to use in determining the
Added Value Royalty Rate for the Butyl Rubber Field (the Butyl Rubber
Projections) subject to restricted access by Symyx personnel as follows:
(i) Bayer shall disclose the Butyl Rubber Projections to one employee of
Symyx designated by the Chief Executive Officer of Symyx (the
"Designated Employee"); (ii) the Designated Employee shall not disclose
the figures contained in the Butyl Rubber Projections (other than the
proposed Added Value Royalty Rate and the projected net sales) to other
Symyx personnel without Bayer's consent; provided, however, that the
Designated Employee may disclose the Butyl Rubber Projections to Symyx's
attorneys and the auditor described in (iii), below; and (iii) Symyx
may, at Bayer's expense, have the Butyl Rubber Projections and the
related calculation of the Added Value Royalty Rate reviewed by an
independent auditor selected by Symyx, which auditor shall agree not to
disclose the figures contained in the Butyl Rubber Projections (other
than the proposed Added Value Royalty Rate and the projected net sales)
to Symyx personnel other than the Designated Employee without Bayer's
consent.
5. Except as specifically modified or amended hereby, the Collaboration
Agreement shall remain in full force and effect and, as modified or
amended, is hereby ratified, confirmed and approved. No provision of
this Amendment may be modified or amended except expressly in a writing
signed by both parties nor shall any terms be waived except expressly in
a writing signed by the party charged therewith. This Amendment shall be
governed by, construed and enforced in accordance with the laws of the
State of California, without reference to conflicts of laws principles.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties has executed this Amendment as
of the date indicated on this Amendment.
BAYER AG SYMYX TECHNOLOGIES
By: /s/ RUDOLF CASPER By: /s/ ISY GOLDWASSER
-------------------------- ------------------------
Name: Prof. Dr. Rudolf Casper Name: Isy Goldwasser
-------------------------- ------------------------
Title: Director R/D Title: President & COO
-------------------------- ------------------------
Date: 3.6.1998 Date: May 28, 1998
-------------------------- ------------------------
By: /s/ I.V. KOPP
--------------------------
Name: Dr. Kopp
--------------------------
Title: Licensing Manager
--------------------------
Date: June 3, 1998
--------------------------
<PAGE> 1
EXHIBIT 10.8(b)
AMENDMENT NO. 2 TO COLLABORATION AGREEMENT
BAYER AG - SYMYX TECHNOLOGIES
This Amendment No. 2 to Collaboration Agreement (the "Second
Amendment"), effective as of November 1, 1998, is entered into by and between
Symyx Technologies ("Symyx"), a California corporation having a principal place
of business at 3100 Central Expressway, Santa Clara, California 95051 ("Symyx"),
and Bayer AG, a German corporation, having a principal place of business at
D-51368 Leverkusen, Germany, and amends that certain Collaboration Agreement
entered into by and between Symyx and Bayer effective as of March 1, 1998, as
previously amended by Amendment No 1 to Collaboration Agreement effective as of
May 1, 1998 (the "Collaboration Agreement").
WHEREAS, Symyx and Bayer desire to amend the Collaboration Agreement to
provide for research concerning catalysts for oxidation of benzene into phenol,
as more fully set forth below;
NOW THEREFORE, the parties hereby agree as follows:
1. All capitalized terms not defined in this Second Amendment shall have
the meanings given to them in the Collaboration Agreement.
2. Section 2.2.1(b) is amended to read in its entirety as follows:
(b) Addition of Phenol Project. Effective as of
September 1, 1998, the Catalysis Field shall also include the Phenol
Project, which shall be directed to discovery, creation, identification
and research of catalysts for direct oxidation of benzene to phenol.
3. Section 2.3 is amended to read in its entirety as follows:
2.3 Option to Expand Catalysis Field. It is understood that
existing obligations of Symyx prevent Symyx from including within the
Catalysis Field certain research projects concerning direct oxidation of
propylene to propylene oxide (the "Catalysis Option Project"). If Symyx
obtains the right to include the Catalysis Option Project within the
Catalysis Field, Symyx will give Bayer written notice (the "Availability
Notice") and shall, for the period commencing with delivery of the
Availability Notice and ending three (3) months after the Availability
Notice was sent (the "Negotiation Period"), negotiate with Bayer in good
faith concerning terms upon which such project may be included within
the Catalysis Field. Symyx may, in its discretion, continue to conduct
such Catalysis Option Project and perform related research activities
during the Negotiation Period, but Symyx will not enter into an
agreement to conduct such Catalysis Option Project for another party
during the Negotiation Period. It is understood that neither party is
obligated to agree to include such Project within the Catalysis Field,
and that if the parties do not mutually agree upon terms for including
the Catalysis Option Project during the Negotiation Period described
above, Symyx shall be free to perform the Catalysis Option Project on
its own or with third parties without obligation to Bayer. It is further
understood that the parties may agree to reallocate resources among the
various Projects within the Research Program if the Catalysis Option
Project is to be included within the Catalysis Field, and that the
parties will attempt to implement a smooth transition in connection with
any such reallocation, including provisions of reasonable resources and
time frames for wind-down or scale-back of other Projects within the
Catalysis Field.
4. The following new sentence is added to the end of Section 5.2:
-1-
<PAGE> 2
"Notwithstanding any other provision of this Agreement, Bayer shall not
have a right of first negotiation with respect to Program Technology
that is identified, discovered or reduced to practice in connection with
the Phenol Project, and Bayer agrees not to perform research or use any
Lead Compound from the Phenol Project other than in connection with
oxidation of benzene to phenol, unless Symyx provides written consent."
5. Section 6.2.1 is amended by the deletion of subsection 6.2.1(a).
6. Section 6.5 is amended to read in its entirety as follows:
6.5 Aniline Project and Phenol Project.
6.5.1 Alternative Royalties for Aniline Project. The
Alternative Royalty Model will apply under this Agreement to Agreement
Compounds, Products and Technology discovered and developed in
conjunction with the Aniline Project in the Catalysis Field, with
compensation as follows:
(A) On or before April 1, 1999, the RFC shall
agree upon (i) the criteria for a Lead Compound in the Aniline Project,
(ii) the criteria for a "Validated Discovery" in the Aniline Project and
(iii) the criteria for determining whether a Validated Discovery in the
Aniline Project is sufficiently different from any previously identified
Validated Discovery to justify a separate payment under Section
6.5.1(B). It is understood that the RFC may, from time to time, revise
the criteria for new Validated Discoveries based upon changes in the
competitive market place or such other reasons as the RFC may agree.
Bayer will conduct the testing of potential Validated Discoveries and
provide the results of such testing to the RFC within a time frame equal
to the later of (i) ninety (90) days of receiving a Lead Compound from
Symyx or, (ii) thirty (30) days added to the actual running time for the
test performed on a potential Validated Discovery. The RFC will promptly
review such results and determine whether the potential Validated
Discovery meets the criteria agreed upon by the RFC and, if one or more
Validated Discoveries have already been identified in the Aniline
Project, whether the Validated Discovery is "different" from the prior
Validated Discoveries;
(B) Bayer shall pay Symyx $250,000 (two hundred
fifty thousand dollars) for each different Validated Discovery
identified by Symyx or Bayer in the Aniline Project that meets the
criteria agreed upon by the RFC;
(C) Upon the decision of Bayer, or any Affiliate
of Bayer, to build, have built, use or run any pilot production facility
for production of aniline (or other production plant experiments by
Bayer of its Affiliates) that uses an Agreement Compound, Product, or
Program Technology, Bayer shall pay to Symyx a lump sum of $750,000
(seven hundred fifty thousand dollars); provided, however, that if Bayer
has previously paid Symyx for two (2) or more Validated Discoveries in
the Aniline Project, the payment under this Section 6.5.1(C) shall be
reduced to $500,000 (five hundred thousand dollars); and
-2-
<PAGE> 3
(D) Upon the decision of Bayer (or any Affiliate
of Bayer) to build (or have a third party build on behalf of Bayer or
any Affiliate of Bayer) a full scale plant for production of aniline
which uses an Agreement Compound, Product, or Program Technology with a
production capacity equal to or greater than one hundred thousand
(100,000) metric tons per year, Bayer shall pay to Symyx on the date of
the first covered use or sale of such Product a lump sum of $5,000,000
(five million dollars).
If the decision of Bayer (or any Affiliate of Bayer) to build (or have a
third party build on behalf of Bayer or any Affiliate of Bayer) a
full-scale plant for production of aniline which uses an Agreement
Compound, Product, or Program Technology with a production capacity
equal to or greater than one hundred thousand (100,000) metric tons per
year occurs before some or all of the amounts specified in (B) and (C)
have been paid to Symyx with respect to such Agreement Compound,
Product, or Program Technology, a Validated Discovery shall be deemed to
have been identified, and the amounts in (B) and (C) that have not
already been paid to Symyx will become due. In addition, if the amount
in (C) is paid, then as of the date of such payment, Bayer shall have no
further obligation to make additional payments under (B) for Validated
Discoveries identified after such date.
6.5.2 Alternative Royalties for Phenol Project. The
Alternative Royalty Model will apply under this Agreement to Agreement
Compounds, Products and Technology discovered and developed in
conjunction with the Phenol Project in the Catalysis Field, with
compensation as follows:
(A) On or before April 1, 1999, the RFC shall
agree upon (i) the criteria for a Lead Compound in the Phenol Project,
(ii) the criteria for a "Validated Discovery" in the Phenol Project
and (iii) the criteria for determining whether a Validated Discovery in
the Phenol Project is sufficiently different from any previously
identified Validated Discovery to justify a separate payment under
Section 6.5.2(B). It is understood that the RFC may, from time to time,
revise the criteria for new Validated Discoveries based upon changes in
the competitive market place or such other reasons as the RFC may agree.
Bayer will conduct the testing of potential Validated Discoveries and
provide the results of such testing to the RFC within a time frame equal
to the later of (i) ninety (90) days of receiving a Lead Compound from
Symyx or, (ii) thirty (30) days added to the actual running time for the
test performed on a potential Validated Discovery. The RFC will promptly
review such results and determine whether the potential Validated
Discovery meets the criteria agreed upon by the RFC and, if one or more
Validated Discoveries have already been identified in the Phenol
Project, whether the Validated Discovery is "different" from the prior
Validated Discoveries;
(B) Bayer shall pay Symyx $250,000 (two hundred
fifty thousand dollars) for each different Validated Discovery
identified by Symyx or Bayer in the Phenol Project that meets the
criteria agreed upon by the RFC;
(C) Upon the decision of Bayer, or any Affiliate
of Bayer, to build, have built, use or run any pilot production facility
for production of phenol (or other production plant experiments by
Bayer of its Affiliates) that uses an Agreement Compound, Product, or
Program Technology, Bayer shall pay to Symyx a lump sum of $750,000
(seven hundred fifty thousand dollars); provided, however, that if Bayer
has
-3-
<PAGE> 4
previously paid Symyx for two (2) or more Validated Discoveries in the
Phenol Project, the payment under this Section 6.5.2(C) shall be
reduced to $500,000 (five hundred thousand dollars); and
(D) Upon the decision of Bayer (or any Affiliate
of Bayer) to build (or have a third party build on behalf of Bayer or
any Affiliate of Bayer) a full scale plant for production of phenol
which uses an Agreement Compound, Product, or Program Technology with a
production capacity equal to or greater than one hundred thousand
(100,000) metric tons per year, Bayer shall pay to Symyx on the date of
the first covered use or sale of such Product a lump sum of $5,000,000
(five million dollars).
If the decision of Bayer (or any Affiliate of Bayer) to build (or have a
third party build on behalf of Bayer or any Affiliate of Bayer) a
full-scale plant for production of aniline which uses an Agreement
Compound, Product, or Program Technology with a production capacity
equal to or greater than one hundred thousand (100,000) metric tons per
year occurs before some or all of the amounts specified in (B) and (C)
have been paid to Symyx with respect to such Agreement Compound,
Product, or Program Technology, a Validated Discovery shall be deemed to
have been identified, and the amounts in (B) and (C) that have not
already been paid to Symyx will become due. In addition, if the amount
in (C) is paid, then as of the date of such payment, Bayer shall have no
further obligation to make additional payments under (B) for Validated
Discoveries identified after such date.
7. Exhibit A is amended by addition of the following new Section 1.26:
1.26 "Affiliate" shall mean any individual or entity directly
or indirectly controlling, controlled by or under common control with,
Symyx Technologies or Bayer AG. For purposes of this Agreement, the
direct or indirect ownership of fifty percent (50%) or more of the
outstanding voting securities of an entity, or the right to receive
fifty percent (50%) or more of the profits or earnings of an entity
shall be deemed to constitute control, or if not meeting the preceding
requirements, any company owned or controlled by, or owning or
controlling, Bayer or Symyx at the maximum control or ownership right
permitted in a country where such company exists. Such other
relationship as in fact results in actual control over the management,
business and affairs of an entity shall also be deemed to constitute
control.
8. Except as specifically modified or amended hereby, the Collaboration
Agreement shall remain in full force and effect and, as modified or
amended, is hereby ratified, confirmed and approved. No provision of
this Amendment may be modified or amended except expressly in a writing
signed by both parties nor shall any terms be waived except expressly in
a writing signed by the party charged therewith. This Amendment shall be
governed by, construed and enforced in accordance with the laws of the
State of California, without reference to conflicts of laws principles.
-4-
<PAGE> 5
IN WITNESS WHEREOF, each of the parties has executed this Amendment as of the
date indicated on this Amendment.
BAYER AG SYMYX TECHNOLOGIES
By: /s/ DAHME By: /s/ ISY GOLDWASSER
--------------------- ---------------------
Name: DAHME Name: ISY GOLDWASSER
--------------------- ---------------------
Title: Managing Director Title: President & COO
--------------------- ---------------------
Date: November 12, 1998 Date: November 10, 1998
--------------------- ---------------------
By: /s/ ENGELS
---------------------
Name: Engels, Hans W.
---------------------
Title: VP - PU Research
---------------------
Date: November 19, 1998
---------------------
<PAGE> 1
EXHIBIT 10.8(c)
AMENDMENT NO. 3 TO COLLABORATION AGREEMENT
This Amendment No. 3 to Collaboration Agreement (the "Amendment No. 3")
effective as of January 1, 1999, is entered into by and between Symyx
Technologies ("Symyx") and Bayer AG ("Bayer"), and amends that certain
Collaboration Agreement entered into by Bayer and Symyx effective as of March 1,
1998, as previously amended by Amendment No. 1 to Collaboration Agreement
effective as of May 1, 1998 and Amendment No. 2 to Collaboration Agreement
effective as of November 1, 1998 (the "Collaboration Agreement").
1. All capitalized terms not defined in this Amendment No. 3 shall have the
meanings given to them in the Collaboration Agreement.
2. Section 2.2.1 is amended by the addition of new Section 2.2.1(c):
(c) Addition of Polyolefin Project.
(i) Effective as of January 1, 1999, the Research Program
shall include the Polyolefin Field, which is defined as
set forth in Exhibit E.
(ii) FTEs and Experiments. During each calendar year quarter
from January 1, 1999 to December 31, 2001, Symyx shall,
in its discretion taking into consideration what is
required to achieve the objectives of the Project Plan
for the Polyolefin Field, either (i) utilize ten (10)
FTEs to conduct the research in the Polyolefin Field or
(ii) conduct at least seven thousand five hundred
(7,500) separate Program Experiments in the Research
Program. Each FTE utilized by Symyx shall be qualified
for the activities assigned to him or her. As used
herein, a "Program Experiment" shall include (A) an
attempt to synthesize a compound, mixture or composition
of matter for use as a potential catalyst and (B) an
attempt to carryout a polymerization reaction related to
the Polyolefin Field using such compound, mixture or
composition of matter and (C) measurement of a property
of either the potential catalyst or resulting polymer,
if any (e.g., activity of potential catalyst or
physical/chemical properties of polymer). It is
understood and agreed that if different potential
catalysts are used in different experiments, or if two
or more experiments are run using the same potential
catalyst in an attempted polymerization reaction that
is run with different monomers or different reaction
parameters, or if measurement is made of different
properties, then such experiments shall be deemed to be
separate Program Experiments. The Program Experiments
conducted by Symyx during the Research Program for the
Polyolefin Field will be selected consistent with
the objectives set forth in the Project Plan for the
Polyolefin Field.
(iii) Bayer agrees to pay Symyx (i) Research Expenses for
research activities in the Polyolefin Field as set forth
in Section 6.2.1(c), (ii) royalties with respect to
Products in accordance with Section 6.15, and (iii) a
technology access payment in accordance with Section
6.16.
(iv) Following termination of research activities within the
Polyolefin Field, the corresponding Research Field
Committee will prepare a summary of Program Technology
generated in the course of the research activities for
the Polyolefin Field.
3. Section 2.4 is amended to read in its entirety as follows:
2.4 Research Program Term
2.4.1 Initial Term.
-1-
<PAGE> 2
(a) Fields Other Than the Polyolefin Field. The
Research Program, other than research activities
in the Polyolefin Field, shall commence on the
Effective Date and, unless extended pursuant to
Section 2.4.2, terminate two (2) years from the
Effective Date of this Agreement (the "Initial
Program Term"). The "Research Program Term"
shall mean the Initial Program Term and any
Extended Research Term set forth in Section
2.4.2.
(b) Research in Polyolefin Field. The research
activities in the Research Program for the
Polyolefin Field shall commence on January 1,
1999 and continue until December 31, 2001 (the
"Polyolefin Project Term").
2.4.2 Extension of Research Program Term. Both parties intend
to identify and propose additional Projects (including
appropriate product driven targets) that will justify
the extension of the Research Program, and agree that
not less than six (6) months before expiration of the
Initial Research Term and any Extended Research Term,
the Executive Committee will meet to discuss possible
Projects for extension of the Research Program. Upon
written agreement of the parties, the Research Program
Term (for activities in the Research Program other than
research in the Polyolefin Field) may be extended up to
three (3) years (the "Extended Research Term"). Except
as the parties may otherwise agree, the funding for
activities (other than research activities in the
Polyolefin Field) in the Research Program during the
Extended Research Term, if any, shall be not less than
Seven Million US Dollars ($7,000,000) from March 1, 2000
to February 28, 2001, not less than Ten Million US
Dollars ($10,000,000) from March 1, 2001 to February 28,
2002, and not less than Twelve Million US Dollars
($12,000,000) from March 1, 2002 to February 28, 2003.
4. Add the following new Section 2.9 to Article 2:
2.9 Other Polyolefin Research by Symyx. It is understood that Symyx
will conduct research activities outside the Research Program
("Other Polyolefin Research") during the Research Program Term
for itself and/or Third Parties for the purpose of identifying
catalysts for making polyolefins other than in the Polyolefin
Field. In the event some Symyx employees work on both the
Research Program and the Other Polyolefin Research, Symyx shall
use good faith commercially reasonable efforts to avoid
potential conflicts or overlaps between the Research Program and
Other Polyolefin Research and misappropriation of any
Confidential Information. It is understood that the library
compounds are regularly used by Symyx and that Symyx can use and
screen the library compounds for any use on its own behalf or
for Third Parties, including without limitation for Other
Polyolefin Research, except to the extent that Symyx has granted
to Bayer exclusive rights to screen and optimize the library
compounds in the Polyolefin Field as set forth in Section 5.1.1.
5. Add the following new Section 2.10 to Article 2:
2.10 EDPM. For a period of two (2) years commencing on January 1,
1999, Symyx will not conduct research on its own behalf or on
behalf of any third party for the purpose of discovering or
developing catalysts to make ethylene propylene diene monomer
polymers ("EPDM"), except as provided in this Section 2.10. If
Symyx wishes to work on catalysts for the purpose of making
EPDM, either on its own behalf or on behalf of a third party,
Symyx will notify Bayer in writing. Whether or not Bayer
receives a notice from Symyx, if Bayer wishes to either fully
fund the work by Symyx in this EPDM
-2-
<PAGE> 3
program, if there is no third party, or share the cost of the
program, if there is a third party, Bayer may so notify Symyx in
writing and the parties will negotiate terms for such EPDM
program. The results of such negotiations will require either
shifting resources from the Research Program, or require
additional funding. If Bayer does not wish to participate in the
EPDM program, and Bayer does not give Symyx written consent to
conduct such program on its own behalf or on behalf of a third
party, then Symyx shall not conduct or initiate the EPDM program
prior to January 1, 2001. Bayer understands that Symyx may have
similar obligations to a third party in connection with the
Other Polyolefin Research described in Section 2.9 with respect
to EPDM. Notwithstanding the foregoing, in the event that a
third party provides to Symyx compounds and/or potential
catalysts for making EPDM, Symyx may work with such third party
at any time to conduct research activities directed solely
towards the optimization of such compounds and/or potential
catalysts for making EPDM.
6. Section 4.1 is amended to provide in its entirety as follows:
4.1 Program Technology.
4.1.1 All Fields Except Polyolefin Field. Except as provided
in Sections 4.1.2 and 4.3, title to all inventions and
other intellectual property made by employees or agents
of Bayer and Symyx in the course of and in connection
with the Research Program shall be deemed owned jointly
by Symyx and Bayer, excluding Combinatorial Chemistry
Technology. It is understood that, except as otherwise
expressly provided in this Agreement, both Bayer and
Symyx may use, sublicense, commercialize, or otherwise
exploit all such jointly-owned technology without the
consent of, or obligation to account to, the other
party.
4.1.2 Polyolefin Field. Bayer shall own any inventions or
discoveries conceived and reduced to practice and other
intellectual property otherwise developed solely by
personnel of Bayer or Bayer's Affiliates in the course
of the Research Program relating to the Polyolefin Field
("Bayer Polyolefin Inventions"). Symyx shall own any
inventions or discoveries conceived and reduced to
practice and other intellectual property otherwise
developed solely by Symyx personnel in the course of the
Research Program relating to the Polyolefin Field
("Symyx Polyolefin Inventions"). Bayer and Symyx shall
jointly own any inventions or discoveries conceived
and/or reduced to practice in the course of the Research
Program relating to the Polyolefin Field where personnel
of Symyx and of Bayer have each made inventive
contributions to such inventions which would result in
them being determined to be joint inventors in
accordance with United States patent law and other
intellectual property otherwise developed jointly by
personnel of Symyx and Bayer ("Joint Polyolefin
Inventions").
7. Section 5.1.2 is amended to provide in its entirety as follows:
-3-
<PAGE> 4
5.1.2 Bayer Out of Field License. Except with respect to
Program Technology conceived or reduced to practice or
otherwise developed in connection with the research
conducted in the Polyolefin Field in connection with the
Research Program, Symyx agrees to grant and hereby
grants to Bayer an exclusive, worldwide, royalty-free
license, with the right to sublicense, under Symyx's
interest in Program Technology which was invented solely
by Bayer employees and agents, to use such Program
Technology outside of the Field and to develop, make,
have made, import, use, offer for sale, and sell
products other than for use in the applicable Field.
8. Section 5.1.3 is amended to provide in its entirety as follows:
5.1.3 Symyx Out of Field License. Except with respect to
Program Technology conceived or reduced to practice or
otherwise developed in connection with the research
conducted in the Polyolefin Field in connection with the
Research Program, Bayer agrees to grant and hereby
grants to Symyx an exclusive, worldwide, royalty-free
license, with the right to sublicense, under Bayer's
interest in Program Technology which was invented solely
or jointly by Symyx employees and agents, to use such
Program Technology outside of the Field and to develop,
make, have made, import, use, offer for sale, and sell
products other than for use in the applicable Field.
Bayer, Bayer's Affiliates, Symyx, and Symyx's Affiliates
shall each have the right to use Joint Polyolefin
Inventions for internal research purposes outside of the
scope of the Polyolefin Field; provided, however, that
Symyx shall have the sole right to grant and authorize
licenses and sublicenses under such Joint Polyolefin
Inventions to third parties outside of the scope of the
Polyolefin Field. It is further understood and agreed
that Symyx shall have the right to grant third parties
licenses under Joint Polyolefin Inventions outside of
the scope of the Polyolefin Field that are exclusive
even as to Bayer and Symyx, and it is specifically
understood and agreed that Symyx may grant exclusive
licenses under such Joint Polyolefin Inventions outside
of the Polyolefin Field to certain third parties in
connection with the Other Polyolefin Research described
in Section 2.9, and that Symyx shall not be required to
pay any amounts to Bayer hereunder in connection with
such licenses.
9. Section 5.2 is amended to provide in its entirety as follows:
5.2 Bayer Right of First Negotiation. Subject to Symyx's obligations
to third parties, Bayer will have a right of first negotiation
to negotiate with Symyx to acquire an exclusive, worldwide,
royalty-bearing license under Symyx's interest in Program
Technology with the right to sublicense, to develop, make, have
made, import, use, offer for sale and sell products other than
Products, as follows: (i) Symyx will provide notice if it wishes
to pursue a particular product using Program Technology solely
or jointly invented by Symyx employees, and in such event within
sixty (60) days the
-4-
<PAGE> 5
parties shall commence negotiations; (ii) such negotiations
shall continue for six (6) months from the date of such notice,
or such longer period as the parties may agree; (iii) if Symyx
and Bayer do not reach agreement within such six (6) month
period, or such longer period as the parties may agree, Symyx
may develop or commercialize such products (other than Products)
with a third party or pursue such product itself without
obligation to Bayer. However, notwithstanding any other
provision of this Agreement, Bayer shall not have a right of
first negotiation with respect to Program Technology that is
identified, discovered or reduced to practice in connection with
the Phenol Project or the research in the Polyolefin Field, and
Bayer agrees (i) not to perform research or use any Lead
Compound from the Phenol Project other than in connection with
oxidation of benzene to phenol and (ii) not to perform research
or use any Lead Compound from the research in the Polyolefin
Field other than in connection with polymerization of
polyolefins within the Polyolefin Field, unless Symyx provides
written consent.
10. Section 5.6 is amended to read in its entirety as follows:
5.6 Combinatorial Chemistry Access & Bayer/Symyx Interface
5.6.1 Access to Combinatorial Chemistry. The parties agree
that on a case by case basis, Bayer may make a written
request to purchase and/or license a piece of equipment
used within the Research Program. In the event that
Symyx receives such a request and may license and/or
sell such equipment without violating any obligations
Symyx may have to third parties, Symyx agrees for a
period of ninety (90) days after receipt of such notice
to negotiate the terms and conditions of such a sale
and/or license including, when applicable, Symyx
resources needed to assemble such equipment. It is
understood and agreed that neither Symyx nor Bayer is
obligated to accept or agree upon the terms of such a
proposed sale and/or license. The transfer of equipment
and/or technology contained in such a license will
include terms for training and transfer of know-how
necessary to operate the equipment. In addition, it is
understood that Symyx has, at its own expense, been
developing and intends to continue to develop a
48-channel parallel polymerization reactor and related
analysis tools (including ambient and high temperature
molecular weight determination modules, a high
throughput thermal analysis module, and certain related
software) for synthesizing, screening or identifying
polymerization catalysts (collectively, the "Discovery
Tools"), and that Symyx will offer some or all of these
Discovery Tools to Bayer and/or Bayer Affiliates, either
through sale of equipment and supplies and/or licenses
to intellectual property or some other means selected at
Symyx's discretion. Symyx agrees to negotiate in good
faith with Bayer to enter into a written agreement
setting forth mutually agreeable terms and conditions on
which Symyx will license and/or sell Discovery Tools on
a non-exclusive basis. It is understood and agreed that
the terms for sale of Discovery Tools by Symyx to Bayer
are to be mutually agreed in writing and this Agreement
does not itself obligate Symyx to sell or Bayer to
purchase such Discovery Tools, or obligate either Symyx
or Bayer to accept or agree to terms and conditions of
any such sale and/or license.
-5-
<PAGE> 6
5.6.2 Bayer/Symyx Interface. It is foreseeable that during the
course of the Research Program the focus of Symyx will
relate mostly to the identification of Lead Compounds
using high-throughput synthesis and screening
technologies. Bayer's input in each project will
increase as potential Lead Compounds are identified and
further targeted/focus libraries are designed and
screened. The optimization, validation, and in-depth
testing of Lead Compounds is Bayer's responsibility.
This work will be done with equipment developed by Bayer
independently from the Research Program or with
equipment acquired from Symyx as mentioned in 5.6.1
above. For the purpose of enhancing the efficiency of
the Research Program, the parties agree personnel will
be temporarily transferred during the course of the
collaboration. At least one Bayer scientist will be
located in Symyx's laboratory for an anticipated period
of 6 months per year. Transfer of personnel will occur
once a legal infrastructure relating to confidentiality
and intellectual property can be agreed upon by Bayer
and Symyx. The parties will establish the required legal
structure by August 30, 1999. In addition, Bayer and
Symyx agree to construct a well defined interface and a
new working philosophy which provides Bayer with access
to combinatorial chemistry. The parties will negotiate
in good faith, without obligation to agree, the terms
for implementing such new working philosophy by August
30, 1999.
11. Section 5.1 is amended by addition of the following new Section 5.1.4:
5.1.4 License for EPDM. Within six months after the end of the
Polyolefin Research Term, Bayer may identify and notify
Symyx of up to five Lead Compounds which Bayer may use
in a chemical synthesis program or modify using Program
Technology to produce Agreement Compounds for EPDM. For
so long as Bayer retains a license under Section 5.1.1
to use any Lead Compound from the research activities in
the Polyolefin Field to manufacture, use and sell
Products within the Polyolefin Field, and on the terms
and conditions set forth in this Agreement, Symyx agrees
that Bayer shall also have a non-exclusive, worldwide,
royalty-bearing, license under Symyx's interest in the
Program Technology to use any Lead Compound or
Derivative Compounds based on the up to five Lead
Compounds so notified by Bayer to develop, make, have
made, use, sell, offer for sale, and import EPDM as a
Product under this Agreement. Bayer understands and
acknowledges that Symyx may grant similar rights
regarding EPDM to a third party in connection with the
Other Polyolefin Research described in Section 2.9, and
that one or more Lead Compounds or Derivative Compounds
to which Bayer obtains a license in the Polyolefin Field
may be licensed to the third party for use outside of
the Polyolefin Field, and that both Bayer and such third
party may acquire licenses from Symyx to use one or more
of the same Lead Compound(s) or Derivative Compound(s)
to make EPDM.
12. Section 6.2.1 is amended by the addition of new Section 6.2.1(c) as
follows:
-6-
<PAGE> 7
(c) Additional Research Funding for the Polyolefin Field. In
addition to the other Research Expenses to be paid to
Symyx by Bayer pursuant to this Section 6.2.1, Bayer
shall pay to Symyx Research Expenses for research
activities in the Polyolefin Field of (i) Three Million
Five Hundred Thousand US Dollars ($3,500,000) for the
research activities in the Polyolefin Field between
January 1, 1999 and December 31, 1999, and (ii) Three
Million Eight Hundred Fifty Thousand US Dollars
($3,850,000) for the research activities in the
Polyolefin Field between January 1, 2000 and December
31, 2000, and (iii) Four Million Two Hundred Thirty Five
Thousand US Dollars ($4,235,000) for the research
activities in the Polyolefin Field between January 1,
2001 and December 31, 2001.
13. Article 6 is amended by the addition of new Section 6.15:
6.15 Royalties for Polyolefin Field.
(a) The parties agree the royalty model set forth in Section
6.3 shall apply to the Polyolefin Field, and the parties
shall determine the applicable Added Value Royalty Rate
in accordance with Section 6.3.3
(b) Bayer may elect, upon prior notice to Symyx, to have the
forecasts and projections Bayer proposes to use in
determining the Added Value Royalty Rate for the
Polyolefin Field (the "Polyolefin Projections") subject
to restricted access by Symyx personnel as follows: (i)
Bayer shall disclose the Polyolefin Projections to one
employee of Symyx designated by the Chief Executive
Officer of Symyx (the "Designated Employee"); (ii) the
Designated Employee shall not disclose the figures
contained in the Polyolefin Projections (other than the
proposed Added Value Royalty Rate and the projected net
sales) to other Symyx personnel without Bayer's consent;
provided, however, that the Designated Employee may
disclose the Polyolefin Projections to Symyx's attorneys
and the auditor described in (iii), below; and (iii)
Symyx may, at Bayer's expense, have the Polyolefin
Projections and the related calculation of the Added
Value Royalty Rate reviewed by an independent auditor
selected by Symyx, which auditor shall agree not to
disclose the figures contained in the Polyolefin
Projections (other than the proposed Added Value Royalty
Rate and the projected net sales) to Symyx personnel
other than the Designated Employee without Bayer's
consent.
14. Article 6 is amended by the addition of new Section 6.16:
6.16 Combinatorial Polyolefin Technology Access Fee. In addition to
the other payments to Symyx provided herein, Bayer shall pay to
Symyx a combinatorial polyolefin technology access fee of Four
Million Five Hundred Thousand US Dollars ($4,500,000). An
initial payment of One Million Five Hundred Thousand US Dollars
($1,500,000) shall be paid to Symyx on or before January 1,
2000, and the remaining Three Million US Dollars ($3,000,000)
shall be paid to Symyx on or before January 1, 2001. It is
understood and agreed that the combinatorial polyolefin
technology access fee is noncreditable and shall be
non-refundable.
-7-
<PAGE> 8
16. Article 6 is amended by the addition of new Section 6.17:
6.17 Special Bayer Compounds. In the event Bayer wishes to include a
compound identified by Bayer independently into a Field within
the Research Program ("Special Bayer Compound"), Bayer shall
notify Symyx in writing without revealing the identity of the
compound. In the event that Symyx receives such notification,
Symyx agrees for a period of ninety (90) days after receipt of
such notice to negotiate special royalty terms and conditions
applicable only to the Special Bayer Compound under which Bayer
would agree to include the Special Bayer Compound within the
appropriate Field of the Research Program. It is understood and
agreed that neither Symyx nor Bayer is obligated to accept or
agree upon the terms of such a proposed royalty readjustment and
the parties must agree in writing before a Special Bayer
Compound is included in the Research Program. This procedure
will be followed on a case-by-case basis.
17. Exhibit E attached to this Amendment No. 3 is hereby incorporated into
the Collaboration Agreement as Exhibit E.
18. Except as specifically modified or amended hereby, the Collaboration
Agreement, as modified or amended by Amendment No. 1 to Collaboration
Agreement and Amendment No. 2 to Collaboration Agreement, shall remain
in full force and effect and, as modified or amended, is hereby
ratified, confirmed and approved. No provision of this Amendment No. 3
may be modified or amended except expressly in a writing signed by both
parties nor shall any terms be waived except expressly in a writing
signed by the party charged therewith. This Amendment No. 3 shall be
governed in accordance with the laws of the State of California, without
regard to principles of conflicts of laws.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this Amendment No. 3 as of
the date indicated on this Amendment No. 3.
BAYER AG SYMYX TECHNOLOGIES
By: /s/ RUDOLF CASPER /s/ ISY GOLDWASSER
--------------------------------- ------------------------------
Name: Prof. Dr. Casper Isy Goldwasser
--------------------------------- ------------------------------
Title: President & COO
--------------------------------- ------------------------------
Date: March 5, 1999 March 2, 1999
--------------------------------- ------------------------------
By: /s/ H.J. ROSENKRANZ
---------------------------------
Name: Prof. Dr. Hans-Juergen Rosenkranz
---------------------------------
Title: Head of Central Research
---------------------------------
Date: March 5, 1999
---------------------------------
SYMYX CONFIDENTIAL
-9-
<PAGE> 10
EXHIBIT E
POLYOLEFIN FIELD
THE POLYOLEFIN FIELD SHALL BE DEFINED AS:
(1) The discovery, development and use of catalysts for the Coordination
Polymerization of a conjugated diene with vinyl acetate or any acrylate;
(2) The discovery, development and use of catalysts for the Coordination
Polymerization of ethylene and/or (alpha)-olefins with acrylonitrile or an
acrylonitrile derivative;
(3) The discovery, development and use of catalysts for the Coordination
Polymerization of ethylene and/or (alpha)-olefins with cyclic comonomers.
Cyclic monomers contain an olefin in the ring structure. Styrene and
substituted vinyl aromatic analogs are not considered cyclic monomers. It
is understood that EPDM (ethylene propylene diene monomer) polymers are
excluded from this definition.
(4) The discovery, development and use of catalysts for the Coordination
Polymerization of styrene and/or substantial styrene and/or substituted
styrene analogs with acrylonitrile or an acrylonitrile derivative;
(5) The discovery, development and use of catalysts for the Coordination
Polymerization of ethylene and/or (alpha)-olefins with vinyl acetate or
any acrylate to form copolymers comprised of either more than 20 mole % of
the comonomer or less than 80 mole % of the comonomer.
1) For clarity, Coordination Polymerization shall mean a metal mediated
polymerization that proceeds by a polymerization reaction other than free
radical, controlled free radical, and carbocationic mechanisms.
2) For Fields (1), (2), and (4) it is understood that non-conjugated dienes
may be optionally incorporated into the polymerization reaction.
3) The chemicals mentioned above have the following chemical structures:
[GRAPHIC] [GRAPHIC] [GRAPHIC] [GRAPHIC]
(alpha)-Olefins Acrylonitrile Acrylates Vinyl Acetate
[GRAPHIC] [GRAPHIC] [GRAPHIC]
Substituted Conjugated Dienes Acrylonitrile Derivatives
Vinyl Aromatic Analogs
[GRAPHIC]
Non-Conjugated Diene
- --------------------------------------------------------------------------------
R(1) = linear, branched, or cyclic saturated hydrocarbon moiety. Excluding
acrylates, R(1) may also be a hydrogen moiety. For conjugated dienes, any two
R(1) may be joined through a covalent bond. For substituted vinyl aromatic
analogs, Ar = unsubstituted aromatic hydrocarbyl moiety or an aromatic
moiety substituted with hydrocarbyl or halogen substituents. For non-conjugated
dienes, R(7) may also be an unsubstituted aromatic hydrocarbyl moiety or an
aromatic moiety substituted with hydrocarbyl or halogen substituents.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.8(d)
AMENDMENT NO. 4 TO COLLABORATION AGREEMENT
BAYER AG - SYMYX TECHNOLOGIES
This Amendment No. 4 to Collaboration Agreement (the "Fourth
Amendment"), effective as of September 15, 1999, is entered into by and between
Symyx Technologies ("Symyx"), a Delaware corporation having a principal place of
business at 3100 Central Expressway, Santa Clara, California 95051 ("Symyx"),
and Bayer AG, a German corporation, having a principal place of business at
D-51368 Leverkusen, Germany, and amends that certain Collaboration Agreement
entered into by and between Symyx and Bayer effective as of March 1, 1998, as
previously amended by Amendment No 1 to Collaboration Agreement effective as of
May 1, 1998, Amendment No. 2 to Collaboration Agreement effective as of November
1, 1998 and Amendment No. 3 to Collaboration Agreement effective as of January
1, 1999 (the "Collaboration Agreement").
WHEREAS, Symyx and Bayer desire to amend the Collaboration Agreement to
provide for continuation of the Research Program in the Butyl Rubber and
Catalysis Fields (as defined in the Collaboration Agreement) for an additional
year, as more fully set forth below;
NOW THEREFORE, the parties hereby agree as follows:
1. All capitalized terms not defined in this Fourth Amendment shall have
the meanings given to them in the Collaboration Agreement.
2. Section 2.2.1(b) is amended to read in its entirety as follows:
(b) Phenol Project. Effective September 1, 1998, the
Catalysis Field shall also include the Phenol Project,
which shall be directed to discovery, creation,
identification and research of catalysts for direct
oxidation of benzene to phenol, and effective as of
February 28, 2000, the Phenol Project shall no longer be
part of the Catalysis Field. It is understood and agreed
that research activities of Symyx, if any, after
February 28, 2000 directed to discovery, creation,
identification and research of catalysts for direct
oxidation to phenol shall not be, nor be deemed to be,
part of the Research Program under this Agreement.
3. Section 2.2 is amended by addition of the following new Section 2.2.6:
2.2.6 Symyx Right to Terminate Catalysis Field. Symyx shall
have the right to terminate the Catalysis Field,
effective any time after April 1, 2000, upon thirty (30)
days written notice to Bayer. Symyx's decision to
terminate the Catalyst Field will be based on Symyx's
opinion that (i) the technical results from the Aniline
Project do not merit continuing high-throughput
research, (ii) there is a lack of commitment or too long
of a period required to validate and develop Lead
Compounds within the Catalyst Field, (iii) the Catalyst
Field is unlikely to remain active through December 31,
2002, (iv) the economic advantage of a new aniline
process based on the best Lead Compounds is unlikely to
lead to a commercial process. In the event that Symyx
terminates the Catalysis Field as set forth in this
Section 2.2.6, then (i) Symyx shall no longer be
obligated to conduct research activities hereunder in
the Catalysis Field following the effective date of such
termination, (ii) research activities of Symyx, if any,
following the effective date of such termination
directed to the discovery, creation, identification and
research of catalysts for conversion of benzene to
aniline shall not be, nor be deemed to be, part of the
Research Program under this Agreement, and (iii) the
payments from Bayer to Symyx set forth in Section
6.2.1(d) shall continue without any changes.
It is understood and agreed that Bayer and Symyx will
evaluate the results in the Catalyst Field and the
Rubber Field prior to February 28, 2000 to determine if
the distributions of funds outlined in Section 6.2.1(d)
should be partly or fully shifted from the Rubber Field
to the Catalyst Field. Any such change must be agreed
upon in writing by both parties.
4. Section 2.4 is amended to read in its entirety as follows:
2.4 Research Program Term
2.4.1 Initial Term.
(a) Fields Other Than the Polyolefin Field. The
Research Program, other than research activities
in the Polyolefin Field, shall commence on the
Effective Date and, unless extended pursuant to
Section 2.4.2, terminate on December 31, 2000
(the "Initial Program Term"). The
-1-
<PAGE> 2
"Research Program Term" shall mean the Initial
Program Term and any Extended Research Term set
forth in Section 2.4.2.
(b) Research in Polyolefin Field. The research
activities in the Research Program for the
Polyolefin Field shall commence on January 1,
1999 and continue until December 31, 2001 (the
"Polyolefin Project Term").
2.4.2 Extension of Research Program Term. Both parties intend
to identify and propose additional Projects (including
appropriate product driven targets) that will justify
the extension of the Research Program, and agree that
not less than six (6) months before expiration of the
Initial Research Term and any Extended Research Term,
the Executive Committee will meet to discuss possible
Projects for extension of the Research Program. Upon
written agreement of the parties, the Research Program
Term (for activities in the Research Program other than
research in the Polyolefin Field) may be extended up to
two (2) years (the "Extended Research Term"). Except as
the parties may otherwise agree, the funding for
activities (other than research activities in the
Polyolefin Field) in the Research Program during the
Extended Research Term, if any, shall be not less than
Ten Million US Dollars ($10,000,000) from January 1,
2001 to December 31, 2001, and not less than Twelve
Million US Dollars ($12,000,000) from January 1, 2002 to
December 31, 2002.
5. Section 6.2.1 is amended by the addition of the following new Section
6.2.1(d):
(d) Research Funding for Year 3. In addition to the other
Research Expenses to be paid to Symyx by Bayer pursuant
to this Section 6.2.1, Bayer shall pay to Symyx research
funding at a rate of Three Hundred Fifty Thousand US
Dollars ($350,000) per FTE per year in accordance with
the payment schedule set forth below, for research
activities between March 1, 2000 and December 31, 2000.
Symyx shall allocate FTEs during such period as follows:
7 FTEs: Butyl Rubber Field
7 FTEs: Catalysis Field (Aniline Project)
Payment Schedule:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
RUBBER CATALYST TOTAL QUARTERLY
DATE FIELD FIELD PAYMENT
-----------------------------------------------------------------------------
<S> <C> <C> <C>
On or before March 1, 2000 $612,500 $158,333 $770,833
-----------------------------------------------------------------------------
On or before June 1, 2000 $612,500 $0 $612,500
-----------------------------------------------------------------------------
On or before September 1, 2000 $612,500 $0 $612,500
-----------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
On or before December 1, 2000 $204,167 $0 $204,167
-----------------------------------------------------------------------------
</TABLE>
6. Except as specifically modified or amended hereby, the Collaboration
Agreement, as modified or amended by Amendment No. 1 to Collaboration
Agreement, Amendment No. 2 to Collaboration Agreement and Amendment No.
3 to Collaboration Agreement, shall remain in full force and effect and,
as modified or amended, is hereby ratified, confirmed and approved. No
provision of this Fourth Amendment may be modified or amended except
expressly in a writing signed by both parties nor shall any terms be
waived except expressly in a writing signed by the party charged
therewith. This Fourth Amendment shall be governed by, construed and
enforced in accordance with the laws of the State of California, without
reference to conflicts of laws principles.
-3-
<PAGE> 4
IN WITNESS WHEREOF, each of the parties has executed this Fourth
Amendment as of the date indicated in the initial paragraph of this Fourth
Amendment.
BAYER AG SYMYX TECHNOLOGIES
By: /s/ H.J. ROSENKRANZ By: /s/ ISY GOLDWASSER
------------------------ ------------------------
Name: Prof. Dr. H.J. Rosenkranz Name: Isy Goldwasser
------------------------ ------------------------
Title: Head of Central Research Title: President & COO
------------------------ ------------------------
Date: 1999-09-13 Date: 9/15/99
------------------------ ------------------------
By: /s/ I.V. Kopp
-------------------------
Name: Dr. Kopp
-------------------------
Title: Manager Patents and Licensing
------------------------------
Date: September 13, 1999
----------------------------
-2-
<PAGE> 1
EXHIBIT 10.9
CELANESE-SYMYX COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the "Agreement"), effective as of August
1, 1998 (the "Effective Date"), is made by and between Symyx Technologies, Inc.,
a California corporation, having a principal place of business at 420 Oakmead
Parkway, Sunnyvale, California 94086 ("Symyx"), and Celanese Ltd., having a
principal place of business at 1601 West LBJ Freeway, Dallas, Texas 75234
("Celanese").
BACKGROUND
A. Symyx owns and is developing novel, proprietary methods for the
combinatorial preparation and screening of novel materials;
B. Symyx entered into a Collaboration Agreement dated May 1, 1997
("CA1") with Corporate Research & Technology of Hoechst AG, now
known as Aventis Research & Technology ("AR&T"), which agreement
reflected their mutual desire to collaborate to conduct
materials discovery research and development focused on the
discovery and enhancement of commercial catalysts, polymers,
additives and other materials;
C. AR&T and Celanese, both wholly owned directly or indirectly by
Hoechst AG, have agreed to divide among themselves the rights
and obligations originally assumed by AR&T in CA1;
D. Symyx desires to collaborate with Celanese and is willing for
Celanese and AR&T to divide among them the rights and obligation
of AR&T in CA1; and
E. Concurrently with the execution of this Agreement, Symyx and
AR&T have entered into an amendment of CA1 for the purpose of
permitting Symyx to enter into this Agreement and convey to
Celanese certain rights and licenses granted herein on the terms
and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the covenants, conditions
and undertakings set forth herein, it is agreed by and between the parties as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the terms set forth in Exhibit A hereto will
have the meanings set forth therein.
ARTICLE 2
-1-
<PAGE> 2
RESEARCH PROGRAM
2.1 Research Activities. The parties shall conduct collaborative
research in connection with the Research Program.
2.1.1 Collaborative Research. The parties intend to conduct
the Research Program on a collaborative basis, and to cooperate to identify Lead
Compounds in the Active Projects.
2.1.2 Symyx Responsibilities. During the term of the Research
Program Symyx shall use its reasonable efforts to identify Lead Compounds in
Active Projects. In this regard, Symyx will prepare and screen Libraries in the
Research Program, one or more of which Libraries may be prepared by Symyx
outside the Research Program and, at Celanese's request, shall provide to
Celanese gram size samples of any Lead Compound, at no additional charge. Symyx
will use commercially reasonable efforts to provide ten (10) gram size samples;
however, if such sample cannot be provided at a commercially reasonable cost,
Symyx will so notify Celanese and the parties shall meet to discuss how to
proceed. Symyx shall keep the Research Field Committee ("RFC", as defined
hereafter, Section 3.2.1) responsible for a particular Active Field fully
informed of its activities in respect of each Active Project within such Active
Field. It is understood that the Libraries are regularly used by Symyx and,
subject to the rights granted to Celanese under this Agreement, that Symyx can
use and screen the Libraries for any use on its own behalf or for third parties.
2.1.3 Celanese Responsibilities. Celanese shall use reasonable
efforts, to provide Symyx with support and assistance useful or necessary for
the conduct of the Research Program. Celanese shall keep the RFC responsible for
an Active Project apprised of the progress and technical issues relating to the
development of Agreement Compounds and commercialization of Products resulting
from such Active Project.
As used herein, Agreement Compound shall mean any Lead Compound or
Derivative Compound, except that Agreement Compound shall not include
any compound or mixture or composition of matter which (i) is publicly
known prior to the date of identification in the Research Program to be
useful for the applicable Active Project, without breach of this
Agreement, (ii) with respect to a Derivative Compound identified during
or after the term of the Research Program, is publicly known prior to
the date of identification that such Derivative Compound is useful for
the applicable Active Project, without breach of this Agreement, or
(iii) is independently developed by Celanese outside the Research
Program, without any reference to or use of any Symyx Technology or
Program Technology. Any disputes will be settled in accordance with
Sections 4.9 and 14.12.
-2-
<PAGE> 3
As used herein, Product shall mean any product which (i) incorporates an
Agreement Compound, or (ii) utilizes an Agreement Compound in its
manufacture, or (iii) is made utilizing a patentable method or
patentable process within the Program Technology as to which Symyx has
an interest.
2.2 Active Fields.
2.2.1 (a) Initial Active Fields. The Research Program shall
initially include only research activities related to the Celanese Group.
(b) Field Minimum Term. The Field Minimum Term for
the Celanese Group is three (3) years, which period shall commence February 1,
1998.
As used herein Field Minimum Term shall mean with respect to any Active
Field, the minimum time required to conduct a comprehensive evaluation
of the utility of combinatorial technologies within such Active Field,
as established by the Executive Committee or as expressly set forth
herein.
2.2.2 Active Field Exclusivity.
(a) Subject to Celanese's continuing payment to
Symyx of the Field Minimum Funding payments for the applicable Active Field,
Symyx will not conduct research on any Active Project or Inactive Project within
such Active Field for any third party or on its own behalf other than under this
Agreement.
(b) Provided that Celanese provides four (4) years
of funding for a particular Active Field, Celanese can unilaterally extend
exclusivity for such Active Field for two (2) additional years by providing
Symyx notice at least nine (9) months before the end of such four year period,
that it will continue funding in such Field for two (2) more years, at an annual
level of funding equal to one hundred twenty-five percent (125%) of the
applicable Field budget in Year 4.
(c) If Celanese satisfies the Program Minimum
Funding requirements for four (4) consecutive years, Celanese shall have the
right to unilaterally extend exclusivity for any Field which is an Active Field
at the end of such period for a period of an additional two (2) years by
continuing funding for such Active Field at an annual level of funding equal to
either (i) one hundred twenty-five percent (125%) of the funding level for the
Active Field in the fourth year of the Research Program, or (ii) the funding
level agreed by the parties for the Active Field in the two (2) year extension
period, whichever is greater. It is understood and agreed that there shall be no
extension of exclusivity for any Inactive Fields pursuant to this Section
2.2.2(c).
2.2.3 Field Reactivation.
-3-
<PAGE> 4
(a) During the period that Celanese is paying the
Program Minimum Funding, Celanese may inactivate any Active Field, and in such
event such Active Field shall be added to Exhibit E as an Inactive Field. Symyx
shall use reasonable efforts to wind down research in such Field as soon as
practicable; provided, Celanese recognizes that any inactivation of an Active
Field may require staffing changes and be disruptive, and agrees to cooperate
with Symyx to minimize the effects of any such inactivation on Symyx. Celanese
shall have a right of first negotiation to activate any such Inactive Field as
set forth in Section 2.3.2.
(b) Subject to Symyx's agreements with third
parties, if Celanese meets the aggregate Program Minimum Funding requirements
set forth in Section 5.1.1(b) for four (4) years, then Celanese shall have a
right of first negotiation after Celanese ceases funding research in an Active
Field to reactivate a formerly Active Field, on a Field-by-Field basis, for a
period equal to one-half the duration of the time that Celanese and CR&T funded
research in such Field. This right, if exercised in conjunction with an
extension of Field exclusivity available pursuant to Section 2.2.2(b) above, can
provide Celanese with exclusivity in a Field for nine and one-half (9.5) years.
To exercise this right, Celanese shall notify Symyx that it wishes to reactivate
a formerly Active Field, and in such event within thirty (30) days the parties
shall commence negotiations with respect to activation of such Inactive Field.
Such negotiations shall continue for ninety (90) days from the date of such
notice, or such longer period as the parties may agree. If Symyx and Celanese do
not reach agreement regarding the activation of an Inactive Field within such
ninety (90) day period, or such longer period as the parties may agree, Symyx
may offer the Inactive Field to a third party or pursue research in such
Inactive Field itself, and Celanese shall have no further rights with respect
thereto.
2.3 Inactive Fields.
2.3.1 Exclusive Rights. Celanese shall have exclusive rights
with respect to each of the Inactive Fields listed on Exhibit D for such time as
it meets the Program Minimum Funding requirements of Article 5, and Symyx shall
not conduct research in any such Inactive Field on behalf of any third party or
on its own behalf; provided, Symyx may conduct feasibility studies with respect
to any one or more of the Inactive Fields listed on Exhibits D and E but may not
spend more than five hundred thousand dollars ($500,000) per feasibility study
for any such Inactive Field. Symyx shall notify Celanese upon the initiation of
each such feasibility study.
2.3.4 Right of First Negotiation. Celanese shall have a right
of first opportunity to negotiate with Symyx to activate any Inactive Field on
Exhibit E. Celanese will have a right of first negotiation to activate an
Inactive Field and conduct research with respect thereto in connection with the
Research Program. Celanese or Symyx may notify the other that it wishes to
pursue a particular Inactive Field, and in such event within thirty (30) days
the parties shall commence negotiations with respect to activation of such
Inactive Field. Such negotiations shall continue for ninety (90) days from the
date of such notice, or such longer period as the parties may agree. If Symyx
and Celanese do not reach agreement regarding the activation of an Inactive
Field within such ninety (90) day period, or such longer period as the parties
may agree,
-4-
<PAGE> 5
Symyx may offer the Inactive Field to a third party or pursue research in such
Inactive Field itself, and Celanese shall have no further rights with respect
thereto.
2.3.5 Loss of Inactive Field Exclusivity.
(a) Celanese Competing Research. Notwithstanding
Sections 2.3.1 and 2.3.2 above, in the event that Celanese itself initiates or
supports a research effort by or on behalf of any third party with respect to
any Inactive Field on Exhibits D and E, and such effort will entail the use of
combinatorial chemistry and more than three (3) internal professional scientists
and more than two (2) technicians, Celanese shall immediately notify Symyx and
identify such Inactive Field. In such event, any such Inactive Field which is
listed on Exhibits D or E shall be deleted from such Exhibit and no longer be
subject to this Agreement, and Symyx may conduct research in such Inactive Field
itself or with third parties without restriction.
(b) Funding below Program Minimum Funding.
Notwithstanding Sections 2.3.1 and 2.3.2 above, in the event that after the
Field Minimum Term Celanese reduces its funding below the Program Minimum
funding level set forth in Section 5.1.1(d), then Celanese shall lose all rights
to any Inactive Fields then listed on Exhibits D and E.
2.3.6 Activation of Inactive Field. The Executive Committee
(as defined hereafter, Section 3.1.1) shall determine whether to activate any
Inactive Field and convert it into an Active Field. At such time as the
Executive Committee determines that an Inactive Field should be pursued in the
Research Program, it shall activate such field substantially in accordance with
Exhibit C on terms substantially identical to existing Active Fields.
2.3.7 Adding Inactive Fields. In the event that Celanese
wishes to propose as additional potential Inactive Fields other areas for
inclusion on Exhibits D or E, Symyx agrees to consider such proposals in good
faith.
2.4 Projects.
2.4.1 Identification of Lead Compounds. The procedure for the
identification of Lead Compounds by Symyx is set forth on Exhibit B hereto.
2.4.2 Inactive Projects. Inactive Projects may be activated by
Celanese or the RFC for a particular Active Field as set forth on Exhibit C
hereto.
2.4.3 Termination of Active Projects.
(a) RFC. The RFC for a particular Active Field may
recommend to the EC that the research activities with respect to a particular
Active Project should be terminated. If the EC approves such a termination, the
RFC for the applicable Active Field shall
-5-
<PAGE> 6
rebudget all remaining Active Projects within the Active Field. Any Active
Project terminated by the applicable RFC shall be deemed an Inactive Project.
(b) Celanese. In the event that the RFC fails to
agree to terminate a particular Active Project, during the period that Celanese
is paying Field Minimum Funding for the applicable Active Field, Celanese has
the right to terminate any Active Project within such Active Field. In any such
event, promptly following Celanese's notice that it intends to terminate a
particular Active Project, the RFC for the applicable Active Field shall
rebudget all remaining Active Projects within the Active Field. Symyx shall use
reasonable efforts to cease research with respect to such Active Project as soon
as practicable.
2.5 Records; Inspection
(a) Research Program. Symyx and Celanese shall maintain
records of the Research Program (or cause such records to be maintained) in
sufficient detail and in good scientific manner as will properly reflect all
work done and results achieved in the performance of the Research Program
(including information sufficient to establish dates of conception and reduction
to practice of inventions).
(b) Research Program Expenditures. Symyx shall keep
complete, true and accurate books of account and records for the purpose of
determining Symyx's Research Expenses incurred in connection with the
performance of the Research Program. Symyx shall make quarterly written reports
to the EC with regard to all Research Expenses expended in a particular quarter,
by Active Field, within ninety (90) days after the end of such calendar quarter.
Such books and records shall be kept at the principal place of business of Symyx
for at least two (2) years following the end of each calendar year. Such records
will be open for inspection during such two (2) year period, by an independent
auditor of Celanese, for the purpose of verifying the financial reports
submitted by Symyx. Such inspections may be made no more than once each calendar
year, at reasonable times mutually agreed by Symyx and Celanese. Celanese's
auditor will be obliged to execute a reasonable confidentiality agreement prior
to commencing any such inspection.
2.6 Post-Research Program Activities. Celanese shall, at Celanese's
or its Sublicensees' expense, be responsible, on a Lead Compound-by-Lead
Compound basis, for conducting all development of Agreement Compounds and
Products following the commencement of Celanese's internal analysis with respect
to a particular Lead Compound, and all commercialization of Products to which
Celanese retains rights under this Agreement.
2.7 Limited Activities
2.7.1 Active Projects. With respect to three (3) Active
Projects designated by Celanese in each Active Field prior to activation of the
applicable Active Project and with the approval of Symyx, with respect to which,
in each case, Celanese has disclosed to Symyx
-6-
<PAGE> 7
Confidential Information of Celanese on an Active Project-by-Active Project
basis, after each such Active Project terminates, Symyx agrees:
(a) not to conduct research in such formerly Active
Project on its own behalf or on behalf of a third party for a period of three
(3) years from the date of termination of such Active Project; and
(b) not to license or otherwise use Program
Technology generated in the course of such formerly Active Project for purposes
of pursuing such formerly Active Project for a period of three (3) years from
the date of termination of such formerly Active Project, without the express
written consent of a duly authorized Officer of Celanese.
2.7.2 Exclusive Commercial Development by Celanese. In the
event that Celanese is diligently developing a particular Agreement Compound or
commercializing a particular Product or otherwise retaining exclusive rights to
such Agreement Compound or Product as provided in Article 4 and Sections 7.1,
7.1.1, 7.2.1 or 7.2.2, Symyx shall not enter into an agreement with a third
party, or conduct any activity on its own behalf or on behalf of a third party,
where such agreement or activity has the purpose of developing products which
compete in the same primary market, for the same end use and for at least some
of the same customers as such Agreement Compound or Product.
ARTICLE 3
MANAGEMENT
3.1 Executive Committee.
3.1.1 Responsibility. Symyx and Celanese shall establish an
Executive Committee (the "EC") to (i) oversee the direction of the overall
relationship between Symyx and Celanese, (ii) activate and terminate Fields and
Projects within such Fields including establishing Field and/or Product Group
Definitions, (iii) approve budgets for Active Projects (including without
limitation, any capital expenditures or other expenses (e.g., payments to third
parties for licenses from third parties) necessary to conduct such Active
Projects), and (iv) resolve any issues which a RFC is unable to resolve. The EC
shall have the authority, but not the obligation, to convert one or more
Inactive Fields into Active Fields.
3.1.2 Membership. The EC is comprised of an equal number of
representatives from each of Celanese and Symyx, with each party's
representatives selected by the party. Either party may replace their respective
EC members at any time, upon written notice to the other party.
3.1.3 Meetings. EC shall meet at least twice per year at
locations agreed by the parties. With the consent of the parties, other
representatives of Symyx or Celanese may attend
-7-
<PAGE> 8
EC meetings as nonvoting observers. Each party shall be responsible for all of
its own expenses associated with attendance of such meetings. EC members may
participate in any such meeting in person, by telephone, or by televideo
conference. Symyx shall prepare minutes of each EC meeting, which minutes shall
be approved and signed by EC representatives of each party.
3.1.4 Decision Making. A quorum of the EC shall require a
majority of the members of the EC, including at least one member representing
Celanese and one representing Symyx. Decisions of the EC shall be made by
unanimous approval. In the event the EC is unable to resolve an issue, it will
be referred to the President of Celanese and the Chairman of the Board of Symyx
for resolution, and such persons shall meet to discuss such matter within thirty
(30) days. Any matter such persons are unable to resolve will be submitted to
binding arbitration pursuant to Section 14.12.
3.2 Research Field Committees.
3.2.1 Responsibilities. Celanese and Symyx will establish a
Research Field Committee ("RFC") to oversee, review and recommend direction of
each Active Field. The responsibilities of each Research Field Committee shall
include: (i) establishing the criteria for a Lead Compound, (ii) monitoring and
reporting research progress for the Active Field for which it is responsible,
and ensuring open exchange between both parties regarding such Active Projects,
(iii) preparing and prioritizing lists of Inactive Projects for the Active
Field, (iv) making recommendations regarding the activation of Inactive Projects
within the Active Field, (v) making recommendations regarding the approval of
Project Plans, and the approval of budgets for Active Projects, (vi)
coordinating all patent activities in accordance with Article 8 hereof, (vii)
determining if any Active Project has been successfully concluded and become a
finished project, and (viii) determining the specific criteria for demonstrating
Proof of Principle for the Active Field.
3.2.2 Membership. Each RFC shall include an equal number of
representatives of each of Celanese and Symyx, up to three (3) persons from each
party, each party's representatives selected by that party. Symyx and Celanese
may each replace its RFC representatives at any time, upon written notice to the
other party. Each RFC shall be chaired as agreed by the parties. From time to
time, the RFC may establish subcommittees, such as a Patent Committee, to
oversee particular projects or activities, and such subcommittees will be
constituted as the RFC agrees.
3.2.3 Meetings. During the term of the applicable Active
Project, each RFC shall meet quarterly at regular intervals, or more frequently
as agreed by the parties, at such locations as the parties agree. With the
consent of the parties, other representatives of Symyx or Celanese may attend
RFC meetings as nonvoting observers. Each party shall be responsible for all of
its own expenses associated with attendance of such meetings. RFC members may
participate in any such meeting in person, by telephone, or by televideo
conference. Symyx shall
-8-
<PAGE> 9
prepare minutes of each RFC meeting, which minutes shall be approved and signed
by RFC representatives of each party.
3.2.4 Decision Making. A quorum of the RFC shall require a
majority of the members of the RFC, including at least one member representing
Celanese and one representing Symyx. Decisions of each RFC shall be made by
unanimous approval. In the event that unanimous agreement on any matter is not
achieved within the RFC, the matter will be referred to the EC for resolution.
ARTICLE 4
LICENSES
4.1 License; Option
4.1.1 Exclusive License Grant to Celanese. Symyx agrees to
grant and does hereby grant to Celanese an exclusive, worldwide, royalty-bearing
license, with unrestricted right of sublicense, to Symyx's interest in Agreement
Compounds and Program Technology (excluding any CC Technology) for purposes of
commercializing, including all associated activities, any and all Products which
result from the conduct of, and are within the scope of, an Active Project. At
such time as Celanese's exclusivity for a particular Active Field terminates,
the licenses granted above shall continue in full force and effect.
4.1.2 Option to Celanese. Celanese shall have options to
acquire exclusive worldwide, royalty-bearing licenses equivalent in scope to
those set forth in Section 4.1.1 above, with unrestricted right of sublicense,
to Symyx's interest in Agreement Compounds and Program Technology (excluding any
CC Technology) for purposes of commercializing, including all associated
activities:
(a) any and all Products which are or were within
the scope of an Inactive Project within a Product Group Definition of a
particular Active Field, until Celanese's exclusivity with respect to the
applicable Active Field terminates as provided in Section 2.2; and
(b) Products identified with respect to any Active
Field, for use within any one or more of the Inactive Fields listed on Exhibit
D, until Celanese's exclusivity with respect to the Inactive Fields listed on
Exhibit D terminates as provided in Section 2.3.
Celanese may exercise such options during the applicable option period with
notice to Symyx.
4.1.3 Initial Product Group Definitions. The Product Group
Definition as of the Effective Date of this Agreement is the Celanese Group
definition.
-9-
<PAGE> 10
4.2 Nonexclusive License Grant to Celanese. Symyx agrees to grant
and does hereby grant to Celanese a non-exclusive, worldwide, royalty-free
license, with the right of sublicense, as to any patent rights within the Symyx
Technology or Program Technology described in the following sentence, in each
case, solely to the extent such license is necessary to enable Celanese or its
Sublicensee to exercise the rights and privileges granted in Sections 4.1.1 and
4.1.2. Such license shall extend to any Symyx Technology or Program Technology
owned or controlled by Symyx as of the Effective Date, and to the extent that
Symyx has the right to grant such rights, to any such Symyx Technology or
Program Technology owned or controlled by Symyx after the Effective Date.
4.3 Sublicensees. Celanese shall provide Symyx with at least the
following information with respect to each of Celanese's sublicensees:
(a) the identity of such Sublicensee;
(b) a description of the rights granted including scope as
to both subject matter and territory; and
(c) a description of the information and materials furnished
each sublicensee to the extent such items relate to this Agreement.
Each sublicense granted by Celanese shall be written and shall be and
consistent with all the terms and conditions of this Agreement and subordinate
thereto. Celanese shall remain responsible to Symyx for the compliance of each
Sublicensee with the financial and other obligations due under this Agreement.
Notwithstanding the above, such sublicenses may impose financial obligations on
such sublicensee different than those imposed on Celanese herein. No sublicense
granted by Celanese may be further assigned or further transferred by any
sublicensee without the prior written consent of Symyx, which consent shall not
be unreasonably withheld; provided, any such a sublicense may be further
assigned by a Sublicensee without the consent of Symyx in connection with a
transfer of substantially all the business of such Sublicensee to which such
sublicense relates.
4.4 Permitted Uses. Celanese further agrees not to use or
commercialize Agreement Compounds, except as licensed under Section 4.1.1 or
4.1.2 of this Agreement, or as licensed under a separate agreement between the
parties.
4.5 Research License. Notwithstanding Section 4.1 above, Symyx shall
retain the right to make, have made and use all library compounds for its own
research purposes (i.e., to develop, improve and validate its technology and
intellectual property). However, if such research would adversely affect
Celanese's exclusive rights under this Agreement, Symyx shall not conduct such
research or have such research conducted on its behalf.
-10-
<PAGE> 11
4.6 Third Party Rights. It is understood that Symyx is in the
business of conducting research and development with third parties, and that
Symyx will grant such third parties rights after the Effective Date to acquire
licenses for compounds derived from such libraries similar to Celanese's rights
under this Article 4. It is understood and agreed that, even if Symyx complies
with its obligations under this Agreement, compounds provided to third parties
in the course of Symyx's other business activities may result in third party
patent applications and patents, including patent applications and patents owned
by such third parties, or owned jointly by Symyx and such third parties, which
could conflict with patent applications and patents owned by Celanese, or
jointly owned by Celanese and Symyx hereunder. Symyx shall use reasonable care
to avoid any such conflict and shall at a minimum take the steps enumerated in
Section 4.7.
4.7 No Conflict. During the term of this Agreement Symyx shall not
grant any license which conflicts with the rights granted to Celanese in
Sections 4.1.1, 4.1.2 and 4.2 and shall not grant any rights inconsistent with
the exclusive rights set forth in Article 2, including Sections 2.7.1 and 2.7.2.
When entering into an agreement with a third party (the "Partner") to perform
research funded by the Partner and grant the Partner licenses under intellectual
property arising from such research (such an agreement a "Collaboration
Agreement"), Symyx will use reasonable efforts to obtain provisions prohibiting
such Partners from commercializing technology so developed except as permitted
under the Collaboration Agreement or other written agreement with Symyx. In the
event that Symyx does not obtain such a provision in one or more Collaboration
Agreements, the license granted to Celanese under Section 4.1.1 above shall be
modified to the extent necessary to provide that, subject to all rights and
licenses, if any, granted by Symyx to third parties prior to such time, Celanese
shall have a nonexclusive license (subject to the royalty provisions and other
terms and conditions of this Agreement) under technology that (i) results from
the conduct of, and are within the scope of, an Active Project and (ii) is
exclusively licensed to Celanese under Section 4.1.1 ("Active Project
Technology"), to use Derivative Compounds to commercialize Products that are
outside the scope of that Active Project.
4.8 Notice to Celanese. In the event that during the term of the
Research Program Symyx elects to sell or grant a license, as the case may be,
with respect to its core technology relating to the synthesis, deposition,
processing, screening and analysis of combinatorial compound libraries directly
applicable to polymers or catalysts, Symyx shall notify Celanese and provide
Celanese an opportunity to negotiate for ninety (90) days to acquire such a
license.
4.9 Independent Development. Celanese shall notify Symyx within
thirty (30) days following the commencement of the Lead Compound evaluation
activity (or any equivalent process conducted by a third party with access to or
knowledge of any Agreement Compounds, Program Technology or Symyx Technology
under license from Celanese) with respect to any compound, mixture or
composition of matter developed by Celanese within ten (10) years of the
commencement of the Lead Compound evaluation activity with respect to the Lead
Compound or Derivative Compound from which such Agreement Compound was derived,
where such compound, mixture or composition of matter bears a reasonable
relationship to an Agreement
-11-
<PAGE> 12
Compound on a structural and functional basis. If Celanese believes any such
compound, mixture or composition of matter is not an Agreement Compound, it
shall provide Symyx with a detailed explanation why such compound, mixture or
composition of matter is not an Agreement Compound. In the event that Celanese
fails to notify Symyx within the thirty (30) day period specified above that it
believes any such compound, mixture or composition of matter is not an Agreement
Compound, Celanese shall bear the burden of establishing that it independently
developed such Agreement Compound without any reference to or use of any Symyx
Technology or Program Technology. If a dispute arises between the parties
regarding whether a particular, mixture or composition of matter compound is an
Agreement Compound, the dispute shall be settled by binding arbitration pursuant
to Section 14.12 herein. In any such arbitration, Celanese shall bear the burden
of establishing that it independently developed such Agreement Compound without
any reference to or use of any Symyx Technology or Program Technology. Celanese
may demonstrate such independent development with (i) experimental data showing
the compound, mixture or composition of matter was synthesized and tested by
Celanese for the identical use for which it is being developed, prior to the
date of identification of such compound in the Research Program, or (ii) patents
or patent applications which claim such compound, mixture or composition of
matter for the identical use for which it is being developed, which patent
applications or patents were filed by Celanese or a third party prior to the
date of identification of such compound in the Research Program.
4.10 CA1; Coordination of AR&T Rights.
4.10.1 Allocation by Celanese and AR&T. It is understood that
Celanese and AR&T have agreed upon the allocation, as between Celanese and AR&T,
of rights to technology arising from the Research Program and/or from research
activities under the CA1. To the extent there is any dispute regarding the
allocation of such rights, or any inconsistency or overlap in the rights granted
to Celanese and AR&T, it is understood and agreed that the matter is to be
resolved (whether by negotiation and agreement or otherwise) by and between
Celanese and AR&T, or their successors or assigns.
4.10.2 Role of Symyx. It is understood and agreed that Symyx is
not responsible for the allocation of rights as between Celanese and AR&T. In
the event that Symyx believes that taking any action under the terms of this
Agreement, including without limitation Sections 4.1.2, 4.8, 10.3.2, or Article
8, may conflict with the rights and obligations set forth in CA1, Symyx may
notify Celanese and shall not be required to take such action without written
authorization from Celanese and AR&T. Notwithstanding any other provision of
this Agreement, Symyx shall have no liability whatsoever related to the
allocation of rights between Celanese and AR&T, including, without limitation,
for any claim arising from the grant or alleged grant of inconsistent rights to
Celanese and AR&T. Symyx shall not be required without its consent to join any
lawsuit or other legal proceeding between AR&T and Celanese (or successors or
assigns of either of them) concerning any dispute over rights granted under this
Agreement and/or the CA1.
-12-
<PAGE> 13
ARTICLE 5
PAYMENTS
5.1 Research Program Payments. Celanese agrees to pay to Symyx
Research Expenses for the conduct of the Research Program, in a total not less
than the Field Minimum Funding for all Active Fields. At a minimum, Celanese
shall fund the conduct of the Research Program for a minimum of three (3) years
in the aggregate amount of eleven million four hundred and fifty thousand
dollars ($11.45 million), and may provide funding for further years, subject to
the terms and conditions herein. All funds are to be used for the Research
Program as budgeted by the applicable RFC.
5.1.1 Field Minimum Funding.
(a) To maintain exclusivity for the Celanese Group,
Celanese agrees to maintain the total research support for the Celanese Field at
or above the following Field Minimum Funding levels:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Year 1 (Feb. 1, '98 - Jan.31, `99) $3.0 million
Year 2 $3.75 million
Year 3 $4.7 million
Year 4 $5.85 million
</TABLE>
For purposes of achieving the Field Minimum Funding level for Year 1, Celanese
shall receive credit for amounts spent by AR&T in Year 1 pursuing research in
the "Oxidation Product Group" pursuant to the terms of CA1.
(b) Program Minimum Funding. In order to maintain
the rights set forth in Section 2.3 above for the Inactive Fields listed on
Exhibits D and E during the Research Program, Celanese shall: (i) initiate and
continue research support in the Celanese Group as set forth in Sections
5.1.1(a) above, (ii) initiate support of additional projects in the Celanese
Group or in another Active Field such that the total Research Expense support
for the Research Program remains at or above the following minimum Program
Minimum Funding levels:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Year 1 (Feb. 1, '98 - Jan.31, `99) $3.0 million
Year 2 $3.75 million
Year 3 $5.7 million
Year 4 $7.35 million
</TABLE>
-13-
<PAGE> 14
Assumed herein, Research Expenses shall mean Symyx's actual total direct
and indirect fully burdened costs of conducting Active Projects in
connection with the Research Program. Research Expenses are equal to the
total number of Symyx Full-Time Equivalent ("FTE") research positions on
Active Projects multiplied by Symyx's FTE rate ($270,000 per FTE per
year as of the Effective Date, which rate shall be increased annually
after July 1, 2000, to reflect changes in the Consumer Price Index, All
Consumers, as published by the U.S. Bureau of Labor Statistics using
1998 as the base year). Research Expenses do not include capital
expenditures directly related to the development or use of CC Technology
by Symyx (i.e., the combinatorial deposition, synthesis,
characterization, and analysis of libraries).
(c) Modifications. The Field Minimum Funding amounts
in this Section 5.1.1 may only be changed with unanimous approval of the EC.
5.1.2 Reconciliation. Symyx shall endeavor to expend Research
Expenses in the quarter for which they are paid. In the event the Research
Expenses budgeted and paid by Celanese for any quarter for a particular Active
Field are not expended on such Active Field during that quarter, the remainder
shall be carried forward and may be expended on the Active Field during the
subsequent periods. Notwithstanding the above, in the event that five hundred
thousand dollars ($500,000) or more in Research Expenses remains unexpended at
the end of any quarter, then Symyx shall notify the EC and the EC shall
determine how future Research Expense payments shall be adjusted so that the
aggregate unexpended amount of Research Expense payments will be reduced to less
than five hundred thousand dollars ($500,000) in the next quarter. In the event
of a dispute regarding Symyx's expenditure of Research Expenses provided by
Celanese for a particular Active Field, Celanese may, with notice to Symyx,
limit its Research Expenses for such Active Field to the applicable Field
Minimum Funding until such dispute is resolved pursuant to arbitration;
provided, in such event Symyx shall have no obligation to conduct any research
activities in connection with such Active Field which cannot be fully supported
by such Field Minimum Funding.
5.1.3 Quarterly Payments. Celanese will make payments for the
Research Program equal to the greater of (i) the total Field Minimum Funding for
all Active Fields, or (ii) the budgeted Research Expenses approved by the EC.
The amounts to be paid in connection with the Research Program with respect to
each twelve (12) month period shall be paid quarterly in advance. The initial
payment was made under the CA1 on or about February 1, 1997, and payments under
this Agreement shall be made on or before the applicable quarterly anniversaries
of that date. All such payments are non-refundable.
5.2 Royalties.
5.2.1 General Principles. Celanese shall pay to Symyx (i) a
royalty on Net Sales of Products by Celanese and its Affiliates, at a royalty
rate determined on a Product-by-Product
-14-
<PAGE> 15
basis in accordance with this Section 5.2.1, and (ii) a share of payments from
Sublicensees as set forth in Section 5.2.1(iv).
(a) Determining Royalty Rate for Net Sales of
Product. At least twelve (12) months prior to the first commercial sale of each
particular Product, Symyx and Celanese shall meet to determine a fixed royalty
rate that will be payable to Symyx with respect to Net Sales of the applicable
Product. The royalty rate for each Product shall be determined by the parties as
set forth in this Section 5.2.1 with the goal of providing Symyx twenty-five
percent (25%) of the Added Value to Celanese and its Affiliates with respect to
commercialization of: (A) Agreement Compounds and Products (regardless of
whether the applicable Agreement Compound or Product is covered by a patent
application or patent within the Symyx Technology, Program Technology or
Celanese Technology) or (B) Program Technology (in the case of processes and
methods, limited to patentable processes and methods) licensed by Symyx to
Celanese. In the case of manufacture or sale of Products by Celanese or Celanese
Affiliates, "Added Value" shall mean the difference for a business unit between
projected Net Income from the use or sale of a Product or Program Technology,
and the projected Net Income without the use or sale of such Product or Program
Technology, determined in accordance with Generally Accepted Accounting
Principles (GAAP), on a consistent basis. By way of example and without
limitation, in determining the overall Added Value received by Celanese, the
parties shall consider changes in Product sales volume, Product pricing and
Product production costs (due to changes in raw materials costs, capital costs,
processing costs, yield or otherwise), in each case, attributable to the use of
the Products or their manufacture. In the case of a Product previously produced
by Celanese, the Added Value shall be measured against the projected Net Income
utilizing the preexisting technology, whether the Product or Program Technology
is put to use in an existing plant or in a new facility. In the case of a
Product not previously produced by Celanese, the Executive Committee shall meet
prior to activating the project to determine how the Added Value concept should
be defined for that Product should the project be successful. Once the projected
Added Value related to the particular Product has been determined, the parties
will then decide on the royalty rate to be paid by Celanese on Net Sales of such
Product so as to provide Symyx twenty-five percent (25%) of the projected Added
Value over the course of the projected royalty payments; provided, however, that
in no event shall the royalty rate so determined by the parties be (i) less than
one-quarter of one percent (0.25%) or greater than three percent (3%) with
respect to a Product that is a Commodity Chemical, or (ii) less than five
percent (5%) or greater than fifteen percent (15%) with respect to a Product
that is a Specialty Chemical.
(b) Celanese Internal Documentation. The royalty
rate used to calculate the royalty payments due Symyx with respect to a
particular Product shall be agreed by the parties prior to the date of
commercialization, and shall be based on the expectation of the Added Value to
be realized by Celanese, as demonstrated in Celanese's internal pro forma ten
(10) year forecasts of Product profitability as well as other relevant sources
of information. Such forecasts shall start with the first year of commercial
sales, and prior to their consideration, such forecasts and other relevant
information shall have been approved by the chief executive officers of Celanese
and Symyx .
-15-
<PAGE> 16
(c) Arbitration. In the event the parties do not
reach agreement on the royalties Celanese will pay to Symyx with respect to any
particular Product within ninety (90) days from the parties' first meeting
regarding such Product pursuant to Section 5.2.1(i), above, the determination of
a royalty rate may be submitted to binding arbitration by either party pursuant
to Section 14.12; provided, the arbitration to be conducted by one neutral
arbitrator with expertise in the chemical industry. The arbitrator in an
arbitration pursuant to this Section 5.2.1(iii) shall be instructed that the
sharing of Added Value as set forth in this Section 5.2.1 shall be the basis of
the arbitrator's decision, which decision regarding the royalty shall be limited
to setting an appropriate royalty rate for the Product.
(d) Sharing of Sublicense Revenues. In addition to
the royalty paid to Symyx on Net Sales of Products by Celanese and its
Affiliates, Celanese shall share payments received from Sublicensees with Symyx
as follows: If Celanese does not manufacture a particular Product but grants a
third party a license thereto, Celanese shall pay to Symyx twenty-five per cent
(25%) of the Added Value attributable to any Product royalties and license and
other fees received from such third party with respect to the grant of such a
license, which shall in all cases be negotiated at arms-length; provided,
Celanese shall have no obligation to pay to Symyx such amounts for the license
or commercialization of intellectual property, which if used by Celanese would
not result in a payment obligation to Symyx hereunder. In cases where Celanese
licenses a third party in an arm's-length transaction, Added Value shall mean
pro forma Net Income attributable to royalties on Net Sales of the Products, and
license and other fees received by Celanese from such third party with respect
to the grant of such a license.
(e) Timing. Royalties payable to Symyx by Celanese
will accrue from the first commercial sale of each Product, but Celanese will
not be obligated to commence making royalty payments to Symyx until the first
year of forecasted profitability based on pro forma ten (10) year forecasts
(starting from the first year of commercial sales) prepared by Celanese at the
time Celanese makes a decision to commercialize a particular Product; provided,
however, that Celanese shall commence royalty payments for a particular Product
no later than the third anniversary of the first commercial sale of such
Product, whether or not such date is before the first date of forecasted
profitability. When Celanese commences paying royalties to Symyx, it shall pay
not only the then-current royalty payments due, but also any accrued but unpaid
royalties attributable to the period prior to the commencement of Celanese's
obligation to begin making royalty payments; provided, Celanese shall not be
required to pay to Symyx more than fifty percent (50%) of the forecasted net
income for the applicable Product before the third anniversary of the first
commercial sale. Any accrued, unpaid royalties shall be carried forward until
paid.
(f) Lead Compound Evaluation Activity Expenses.
Expenses incurred by Celanese as part of it's Lead Compound evaluation activity
prior to commercial (i.e., repeat) sales will not be included in the pro forma
forecast for purposes of determining profitability.
-16-
<PAGE> 17
(g) Unexpected Results. In the event that Celanese
believes in good faith that the agreed split of value added Net Income will make
it commercially impracticable to sell Products for use in manufacturing it may
notify Symyx. In such a case, Symyx will be open to rediscussing this issue on a
case-by-case basis. In addition, if either party determines after five years of
payment of royalties on Net Sales of Products by Celanese and its Associates
hereunder, that the royalty rate (i) is projected over the life of the royalty
payment to exceed 50% of the Added Value, and the rate is above the minimum set
out in Section 5.2.1(a), above, or (ii) is projected over the life of the
royalty payment to provide less than 12.5% of the Added Value, and the royalty
rate is below the maximum set out in Section 5.2.1(a), above, then notice shall
be given to the other party, and Celanese and Symyx shall discuss what action,
if any, the parties mutually agree to take with regard to such calculation.
5.2.2 Royalty Credits. Celanese shall have the right to credit
against royalties due Symyx pursuant to Section 5.2.1 above with respect to a
particular Product, two and one-half million dollars ($2,500,000) of any
expenses incurred by Celanese in the Lead Compound evaluation activity directly
to develop such Product, subject to the following: (i) Celanese shall provide
Symyx documentation, reasonably acceptable to Symyx, of such expenses, and (ii)
in any quarter, the royalty due Symyx shall not be reduced by such credit by
more than fifty percent (50%) of the amount otherwise due Symyx. The two and
one-half million dollar evaluation expense credit referred to above shall be
increased annually after July 1, 2000, to reflect changes in the Consumer Price
Index, All Consumers, as published by the U.S. Bureau of Labor Statistics using
1998 as the base year.
5.2.3 Royalty Term. Celanese's obligation to pay royalties to
Symyx shall continue for each Product until the later of (i) twelve (12) years
after the first commercial sale of such Product, or (ii) the expiration of the
last to expire issued patent covering such Product within the Program
Technology, or the Celanese Technology described in subsections 1.5(i) or (iii).
Notwithstanding any other provision of this Agreement, all royalty obligations
of Celanese or its sublicensee for a particular Product shall cease twenty (20)
years from the date of the first commercial sale of such Product.
5.2.4 Fully-Paid Licenses. Upon expiration of the royalty
obligations with respect to a particular Product, Celanese shall retain fully
paid licenses under the intellectual property licensed in Section 4.1.1 for the
sole purpose of continued manufacture and sale of such Product.
5.2.5 Third Party Royalties. Celanese is responsible for all
payments due to third parties for the manufacture, sale, or use of Products by
Celanese, its Affiliates or Sublicensees.
5.2.6 Competing Products. If a third party commercializes a
product which incorporates or is made using a compound, which would be a
Derivative Compound under the terms of this Agreement if developed by Celanese
or its designee, and such product
-17-
<PAGE> 18
is competitive with a Product subject to this Agreement which incorporates or is
made using a Derivative Compound, Celanese may notify Symyx, and in such event,
the parties agree to renegotiate in good faith the royalty due from Celanese to
Symyx with respect to such Product. In any such negotiation, the parties shall
consider relevant factors, including, without limitation, (i) the principles set
forth in Section 5.2.1 (i), and (ii) the commercial impact of the competing
product on the relevant Product.
ARTICLE 6
PAYMENTS; BOOKS AND RECORDS
6.1 Royalty Reports and Payments. After the first commercial sale of
a Product on which royalties are payable by Celanese or its Sublicensees
hereunder, Celanese shall make quarterly written reports to Symyx within ninety
(90) days after the end of each calendar quarter, stating in each such report,
separately for Celanese and each Sublicensee, the number, description, and
aggregate Net Sales of each Product sold during the calendar quarter upon which
a royalty is payable under Section 5.2.1 above. Concurrently with the making of
such reports, Celanese shall pay to Symyx royalties due at the rates specified
in such Sections.
6.2 Payment Method. All payments due under this Agreement shall be
made by bank wire transfer in immediately available funds to a bank account
designated by Symyx. All payments hereunder shall be made in U.S. dollars. In
the event that the due date of any payment subject to Article 6 hereof is a
Saturday, Sunday or national holiday, such payment may be paid on the following
business day. Any payments that are not paid within ten (10) days of the date
such payments are due under this Agreement shall bear interest to the extent
permitted by applicable law at the prime rate (as reported by the Bank of
America, San Francisco, California, or successor company, on the date such
payment is due) plus an additional two percent (2%), calculated on the number of
days such payment is delinquent.
6.3 Place of Royalty Payment and Currency Conversions. If any
currency conversion shall be required in connection with the calculation of
royalties hereunder, such conversion shall be made using the selling exchange
rate for conversion of the foreign currency into U.S. Dollars, quoted for
current transactions reported in The Wall Street Journal for the last business
day of the calendar quarter to which such payment pertains.
6.4 Records; Inspection. Celanese and its Sublicensees shall keep
complete, true and accurate books of account and records for the purpose of
determining the royalty amounts payable under this Agreement. Such books and
records shall be kept at the principal place of business of such party, as the
case may be , for at least two (2) years following the end of the calendar
quarter to which they pertain. Such records will be open for inspection during
such two (2) year period by a public accounting firm to whom Celanese has no
reasonable objection, solely for the purpose of verifying royalty statements
hereunder. Such inspections may be made no more than once each calendar year, at
reasonable times and on reasonable notice. Inspections
-18-
<PAGE> 19
conducted under this Section 6.4 shall be at the expense of Symyx, unless a
variation or error producing an increase exceeding five percent (5%) of the
amount stated for any period covered by the inspection is established in the
course of any such inspection, whereupon all reasonable costs relating to the
inspection for such period and any unpaid amounts that are discovered will be
paid promptly by Celanese together with interest thereon from the date such
payments were due at the prime rate (as reported by the Bank of America, San
Francisco, California, or successor company), plus an additional two percent
(2%) per annum. Symyx agrees to hold in strict confidence all information
concerning royalty payments and reports, and all information learned in the
course of any audit or inspection, except to the extent necessary for Symyx to
reveal such information in order to enforce its rights under this Agreement or
if disclosure is required by law. The public accounting firm employees shall
sign a customary confidentiality agreement as a condition precedent to their
inspection, and shall report to Symyx only that information which would be
contained in a properly prepared royalty report by Celanese.
6.5 Tax Matters. All royalty amounts and other payments required to
be paid to Symyx pursuant to this Agreement shall be paid with deduction for
withholding for or on account of any taxes (other than taxes imposed on or
measured by net income) or similar governmental charge imposed by a jurisdiction
other than the United States ("Withholding Taxes") to the extent Symyx and/or
its Affiliates or their successors has the lawful rights to utilize the
Withholding Taxes paid by Celanese as a credit against Symyx's and/or its
Affiliates regular U.S. tax liability. Celanese shall provide Symyx a
certificate evidencing payment of any Withholding Taxes hereunder.
ARTICLE 7
DUE DILIGENCE
7.1 Due Diligence. Celanese shall use reasonable and diligent
efforts, on an Agreement Compound-by-Agreement Compound and Product-by-Product
basis, to develop and commercialize Products. The following parameters shall be
used to evaluate Celanese's diligence prior to the commencement of
commercialization.
7.1.1 Lead Compound Validation Activity.
(a) Within six (6) months of having a sufficient
quantity to test, Celanese will confirm whether or not the Lead Compound meets
the criteria set by the RFC and shall notify Symyx if such Lead Compound is of
sufficient interest to warrant consideration of Celanese starting an expanded
evaluation project (such notice referred to as a "Validation Notice"); provided,
Celanese shall have no obligation within any twelve (12) month period to perform
such validation activity for more than eight (8) Agreement Compounds provided by
Symyx, with a minimum of one Agreement Compound in each Active Project for which
Symyx provides a potential Lead Compound.
-19-
<PAGE> 20
(b) If Celanese validates that a Lead Compound meets
Celanese's criteria, then it must proceed with its expanded evaluation activity
within six (6) months of such a determination, except as provided in 7.1.1(a) or
in Section 7.2.1 below.
7.1.2 Lead Compound Evaluation Activity. Celanese commits to
evaluate and develop Lead Compounds that are judged to meet the established
criteria, or for which Celanese sends a Validation Notice, with the same
diligence and discipline as other projects that are active within Celanese's
research centers.
7.2 Lack of Diligence.
7.2.1 Exceptions. Celanese may elect not to develop a
particular Agreement Compound (i.e., may (i) not commence the Lead Compound
evaluation activity with respect to such Agreement Compound, or (ii) drop such
Agreement Compound from the Lead Compound evaluation activity), if:
(a) the Agreement Compound lacks the requisite
performance criteria for further development; or
(b) the Field Minimum Funding is being met for the
Active Field to which such Agreement Compound relates; or
(c) there is an Agreement Compound already in the
Lead Compound evaluation activity being developed for the same Product or a
substantially identical Product; or
(d) Symyx and Celanese have agreed on terms on which
Symyx will have the right to license a third party to commercialize such
Agreement Compound; or
(e) Celanese elects not to develop the Agreement
Compound for reasonable business reasons, provided, that Celanese treats such
Agreement Compound in the same manner it treats its own potential products of
comparable value, stage of development and patent protection.
7.2.2 Remedies. In the event that Celanese fails to meet its
obligations set out in Section 7.1, as modified by Section 7.2.1, with respect
to a particular Agreement Compound or Product, then Celanese and Symyx will
negotiate in good faith compensation to be paid to Symyx for such failure. In
the event that Celanese has breached its diligence obligations and the parties
are unable to agree on such compensation, then upon the first occurrence of a
lack of diligence with respect to any Agreement Compound or Product in a
particular Field, Celanese shall lose its right to receive the two and one-half
million dollar ($2,500,000) credit for Lead Compound evaluation activity
expenses provided in Section 5.2.2 with respect to each of the first three (3)
Products in such Field; provided that upon the second occurrence of a lack of
diligence
-20-
<PAGE> 21
with respect to an Agreement Compound or Product in the same Field, Symyx may
terminate Celanese's license and rights with respect to such Agreement Compound
or Product.
7.3 Reports. During the term of this Agreement, Celanese shall
provide Symyx with written quarterly reports within thirty (30) days of the end
of each six (6) month period providing at least the following information, (i)
description of the status of the research and development activities conducted
with respect to each Agreement Compound; and (ii) the status of all patent
applications claiming such Agreement Compounds. The reports as described in this
Section shall contain sufficient information to allow Symyx to monitor
Celanese's compliance with this Agreement. Until first commercial introduction
of each royalty-bearing Product, Celanese shall keep Symyx apprised of the
status of the commercial development of all such Products by semi-annually
providing Symyx with a written report detailing such activities with respect to
each such Product during the term of this Agreement. All reports and information
provided under this Section 7.3 shall be deemed Confidential Information of
Celanese.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 Ownership of Inventions.
8.1.1 Research Program. Title to all inventions and other
intellectual property made by employees of Celanese, but not Symyx, in the
course of and in connection with the Research Program ("Celanese Inventions")
shall be deemed owned by Celanese. Title to all inventions and other
intellectual property made solely by employees of Symyx, but not Celanese, in
the course of an in connection with the Research Program ("Symyx Inventions")
shall be deemed owned by Symyx. Title to all inventions and other intellectual
property made jointly by employees of Celanese and Symyx in the course of and in
connection with the Research Program ("Joint Inventions") shall be deemed owned
jointly by Symyx and Celanese.
8.1.2 Law. Inventorship of inventions and other intellectual
property rights conceived and/or reduced to practice pursuant to this Agreement,
and rights of ownership with respect thereto, shall be determined in accordance
with U.S. patent laws.
8.1.3 Reserved Rights. Symyx shall not have any right to
combinatorial technologies developed by Celanese outside the Research Program,
and Celanese shall not have any obligation to disclose the same to Symyx.
Celanese shall not have any right in or to any Symyx Technology or any
intellectual property developed by Symyx outside the Research Program, except as
expressly set forth in this Agreement, and Symyx shall not have any obligation
to disclose the same to Celanese.
-21-
<PAGE> 22
8.1.4 CC Technology. Article 10 below contains those terms and
conditions which relate specifically to inventions relating to Combinatorial
Chemistry ("CC") Technology made by the parties during the term of the Research
Program and for one year thereafter.
8.2 Notice of Inventions. Symyx and Celanese shall report to the RFC
of each Active Field any inventions relating to Lead Compounds or Program
Technology made in the conduct of the Research Program.
8.3 Patent Prosecution.
8.3.1 Responsibilities.
(a) Symyx Inventions. Symyx shall have the first
right to be responsible for preparing, filing, prosecuting and maintaining
patent applications and patents relating to Symyx Inventions included within the
Program Technology, and conducting any interferences, re-examinations, reissues
and oppositions relating to such patent applications and patents, as it deems
appropriate, at Symyx's expense; provided, however, that if Symyx elects not to
conduct any or all such activities, then Symyx shall allow Celanese, in its
discretion and at its expense, to conduct the activities that Symyx has elected
not to conduct, in which event Celanese shall conduct such activities with
patent counsel reasonably acceptable to Symyx and Celanese.
(b) Joint Inventions.
(i) The parties will cooperate to file,
prosecute and maintain patent applications covering the Joint Invention(s) in
countries agreed by the parties. The parties shall agree which parties shall be
responsible for conducting such activities with respect to a particular Joint
Invention. Subject to Section 8.3.1(b)(ii) below, the parties will share equally
all expenses and fees associated with the filing, prosecution, issuance and
maintenance of any patent application and resulting patent for a Joint Invention
in the agreed countries.
(ii) In the event that either party wishes to
seek patent protection with respect to any Joint Invention in a country the
other is not interested in pursuing patent protection, it shall notify the other
party hereto. The party wishing to seek patent protection with respect to such
Joint Invention in such country or countries, may file, prosecute and maintain
patent applications and patents with respect thereto, at its own expense.
(c) Celanese Inventions. Celanese shall be
responsible, at its expense, for preparing, filing, prosecuting and maintaining
worldwide in such countries it deems appropriate, patent applications and
patents relating to all Celanese Inventions, and conducting any interferences,
re-examinations, reissues and oppositions relating thereto as it deems
appropriate.
-22-
<PAGE> 23
8.3.2 Symyx Failure to Prosecute. Symyx may elect upon ninety
(90) days prior notice to discontinue prosecution of any patent applications
filed by Symyx pursuant to Section 8.3.1(a) above and/or not to file or conduct
any further activities with respect to the patent applications or patents
subject to such Section. In the event Symyx declines to file or, having filed,
fails to further prosecute or maintain any patent applications or patents
described herein, conduct any proceedings including, but not limited to,
interferences, re-examinations, reissues, oppositions relating thereto, then,
subject to Symyx's agreements with third parties, Celanese shall have the right
to prepare, file, prosecute and maintain such patent applications and patents in
such countries worldwide it deems appropriate, and conduct such proceedings at
its sole expense, and shall consult with Symyx in connection with all such
activities. In such case, Symyx shall immediately execute all necessary
documents that may be required in order to enable Celanese to file, prosecute
and maintain such patent application and to conduct any such proceedings.
8.4 Cooperation. Each of Celanese and Symyx shall keep the other
fully informed as to the status of patent matters described in this Article 8,
including without limitation, by providing the other the opportunity to fully
review and comment on any documents as far in advance as possible of filing
dates and prosecution deadlines, and providing the other copies of any
substantive documents that such party receives from such patent offices promptly
after receipt, including notice of all official actions, interferences,
reissues, re-examinations, oppositions, potential litigation, or requests for
patent term extensions. Celanese and Symyx shall each reasonably cooperate with
and assist the other at its own expense in connection with such activities, at
the other party's request.
8.5 Copies. Celanese shall promptly provide to Symyx a copy of any
patent applications filed by Celanese and its Affiliates which are Sublicensees
after the publication thereof during the term of this Agreement with respect to
any Program Technology, including without limitation, Agreement compounds. Symyx
shall promptly provide to Celanese a copy of any patent applications filed by
Symyx after the publication thereof during the term of this Agreement relating
to any Program Technology, including without limitation, Agreement Compounds.
8.6 Notice. Symyx shall give Celanese immediate notice of any claim
of patent infringement or trade secret misappropriation it may receive which in
any way relates to this Agreement.
8.7 Enforcement and Defense.
8.7.1 Enforcement. Each party shall promptly notify the other
of its knowledge of any potential infringement of the Program Technology by a
third party.
(a) If such infringement relates to a Product
subject to this Agreement, the parties shall be entitled jointly bring legal
action necessary to enforce patents claiming
-23-
<PAGE> 24
Symyx Inventions and Joint Inventions against such infringement, unless Symyx
reasonably believes that joint enforcement with respect to any patent claiming a
Symyx Invention could have an adverse impact on Symyx, in which case Symyx shall
have the sole right to bring legal action to enforce such patent. If the parties
agree to jointly bring action to abate such infringement, the parties shall
share the expenses (including without limitation attorneys' and experts' fees)
incurred in connection with such action, with Symyx paying one-quarter (1/4) of
such expenses and Celanese paying three-quarters (3/4) of such expenses. Any
recovery by the parties in any such action shall be shared as follows: first,
each party shall recover its expenses incurred in such action, and then the
remainder shall be shared by the parties with Celanese receiving three-quarters
(3/4) of such amount and Symyx receiving one-quarter (1/4) of such amount.
(b) If the parties do not agree to jointly take
legal action within six (6) months of the date that they both have knowledge of
the potential infringement, then Symyx shall have the right, but not the
obligation, to independently take such action to abate such infringement. Symyx
shall control and be responsible for all expenses incurred in connection with
such action and may retain all recoveries related to such action.
(c) If Symyx fails to commence an independent action
to halt a commercially significant infringement within the period described in
Section 8.7.1(b), then Celanese shall have the right, at its expense, to take
such action. In such event, Celanese will have the right to offset one-half of
the reasonable expenses incurred in connection with such action against
royalties due Symyx with respect to a Product which utilizes the infringed
patent in the affected country, up to one-half of such royalties due in any
year. Any recovery by Celanese in such action shall be divided as follows:
first, Celanese shall recover its reasonable expenses incurred in such an
action, second, Celanese shall reimburse Symyx for any royalties for which
Celanese took an offset, and third, Celanese may retain three-quarters (3/4) of
any remainder and shall pay to Symyx one-quarter (1/4) of such remainder.
(d) If there is an infringement which does not
relate to a Product of a patent covering a Joint Invention, the parties shall
discuss whether to jointly bring an action to abate such infringement. In the
event that the parties do not wish to jointly bring such an action either party
may seek to abate such infringement; provided, in such event, should the alleged
third party infringer assert that one or more of the parties to this Agreement
are necessary or indispensable to such proceedings, the other party hereto
agrees to join in and participate in such proceedings, at the expense of and to
the extent requested by the party initially participating in such suit.
8.7.2 Infringement Claims. If the manufacture, sale or use of
any Product pursuant to this Agreement because of the practice of the Program
Technology or the Celanese Technology results in any claim, suit or proceeding
alleging patent infringement against Symyx or Celanese (or its Sublicensees),
such party shall promptly notify the other party hereto in writing setting forth
the facts of such claims in reasonable detail. The defendant shall have the
-24-
<PAGE> 25
exclusive right and obligation to defend and control the defense of any such
claim, suit or proceeding, at its own expense, using counsel of its own choice;
provided, however, it shall not enter into any settlement which admits or
concedes that any aspect of the Celanese Technology (in the case of Symyx) and
the Program Technology (in the case of Celanese) is invalid or unenforceable,
without the prior written consent of such other party. The defendant shall keep
the other party hereto reasonably informed of all material developments in
connection with any such claim, suit or proceeding.
ARTICLE 9
CONFIDENTIALITY
9.1 Confidential Information. Except as otherwise expressly provided
herein, the parties agree that, for ten (10) years from receipt of such
Confidential Information, the receiving party shall not, except as expressly
provided in this Article 9, disclose to any third party or use for any purpose
not permitted by Section 9.2 any confidential information furnished to it by the
disclosing party hereto pursuant to this Agreement ("Confidential Information")
except to the extent that it can be established by the receiving party by
competent proof that such information:
(a) was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
(d) was independently developed by the receiving party as
demonstrated by documented evidence prepared contemporaneously with such
independent development; or
(e) was disclosed to the receiving party, other than under
an obligation of confidentiality, by a third party who had no obligation to the
disclosing party not disclose such information to others.
9.2 Permitted Use and Disclosures. Each party hereto may use or
disclose information disclosed to it by the other party, to the extent such use
or disclosure is reasonably necessary and permitted in the exercise of such
rights granted hereunder in commercializing Products as provided in Article 4,
or in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or court order or
otherwise submitting information to tax or other governmental authorities, or
making a permitted sublicense or otherwise exercising license rights expressly
granted by the other party pursuant to
-25-
<PAGE> 26
the terms of this Agreement, provided that if a party is required to make any
such disclosure, other than pursuant to a confidentiality agreement, it will
give reasonable advance notice to the other party of such disclosure and, save
to the extent inappropriate in the case of patent applications, will use its
reasonable best efforts to secure confidential treatment of such information in
consultation with the other party prior to its disclosure (whether through
protective orders or otherwise) and disclose only the minimum necessary to
comply with such requirements.
9.3 Nondisclosure of Terms. Each of the parties hereto agrees not to
disclose the terms of this Agreement to any third party (other than a parent
company or Affiliate which has agreed to be bound by the confidentiality
provisions of this Agreement) without the prior written consent of the other
party hereto, which consent shall not be unreasonably withheld, except to such
party's attorneys, advisors, investors and others on a need to know basis under
circumstances that reasonably ensure the confidentiality thereof, or to the
extent required by law. Notwithstanding the foregoing, the parties shall agree
upon a press release and timing to announce the execution of this Agreement,
together with a corresponding Q&A outline for use in responding to inquiries
about the Agreement, thereafter, Symyx and Celanese may each disclose to third
parties the information contained in such press release and Q&A without the need
for further approval by the other. In addition, Celanese and Symyx may make
public statements regarding the progress of the Research Program and the
achievement of milestones with respect thereto, following consultation and
mutual agreement, the consent of neither party not to be unreasonably withheld.
9.4 Publication.
(a) Review; Patentable Inventions and Confidential
Information. Any manuscript by Symyx or Celanese (the "Publishing Party")
describing the scientific results of the Research Program (or the manufacturing
processes or conditions related thereto), which are to be published during the
term of the Research Program or within one (1) year after the end of the
Research Program shall be subject to the prior review of the other party (the
"Non-Publishing Party") at least ninety (90) days prior to submission. Further,
to avoid loss of patent rights as a result of premature public disclosure of
patentable information, the Non-Publishing Party shall notify the Publishing
Party in writing within thirty (30) days after receipt of any disclosure whether
the Non-Publishing Party desires to file a patent application on any invention
disclosed in such scientific results. In the event that the Non-Publishing Party
desires to file such a patent application, the Publishing Party shall withhold
publication or disclosure of such scientific results until the earlier of (i) a
patent application is filed thereon, or (ii) the parties determine after
consultation that no patentable invention exists, or (iii) ninety (90) days
after receipt by the publishing party of the Non-Publishing Party's written
notice of the Non-Publishing Party's desire to file such patent application, or
such other period as is reasonable for seeking patent protection. Further, if
such scientific results contain the information of the Non-Publishing Party that
is subject to use and nondisclosure restrictions under this Article 9, the
Publishing Party agrees to remove such information from the proposed publication
or disclosure.
-26-
<PAGE> 27
(b) Publication Decision. If the Non-Publishing Party
desires to prevent publication of some or all of the scientific results (or the
manufacturing processes or conditions related thereto), which are contained in a
proposed manuscript submitted for review by the Publishing Party pursuant to
Section 9.4(a), the Non-Publishing Party may so notify the Publishing Party (and
representatives of both parties on the Executive Committee) in writing within
fifteen (15) days of receiving the proposed disclosure from the Publishing
Party. If, within forty-five (45) days after the Non-Publishing Party received
the proposed disclosure, the Executive Committee reaches a unanimous decision
regarding publication of such disclosure, then the decision of the Executive
Committee shall control; provided, however, that if the Executive Committee does
not reach unanimous agreement regarding the proposed disclosure within such
forty-five (45) day period, then one party (the "Deciding Party") shall have the
right to decide whether the Publishing Party will have the right to publish the
proposed disclosure (the "Decision") as follows:
(i) the Deciding Party shall promptly, and in any
event within five (5) days after the end of the forty-five (45) day period
described above, give written notice to the other party stating its Decision on
whether the Publishing Party may publish some or all (or none) of the scientific
results in the proposed disclosure;
(ii) if the Deciding Party does not provide written
notice of its Decision within such five-day period, then the Decision shall be
deemed to be in favor of the other party's most recent proposal;
(iii) if the Deciding Party makes the Decision in its
own favor, then the other party shall have the right to be the Deciding Party
with respect to the next proposed publication upon which the Executive Committee
does not reach agreement;
(iv) if the Deciding Party is the Publishing Party,
and the Deciding Party decides to permit publication of material opposed by the
other party in its most recent proposal, then the Deciding Party shall be deemed
to have made the Decision in its own favor;
(v) if the Deciding Party is the Non-Publishing
Party, and the Deciding Party decides not to permit the publication of some
material the other party proposed to publish in its most recent proposal, then
the Deciding Party shall be deemed to have made the Decision in its own favor;
(vi) Celanese shall be the first Deciding Party; and
(vii) if the Deciding Party is the Publishing Party,
the Decision by the Deciding Party alone shall not operate as a waiver of the
Non-Publishing Party's rights regarding patentable inventions and confidential
information set forth in Section 9.4(a).
-27-
<PAGE> 28
It is understood that regardless of the permitted scope of disclosure agreed
upon by the Executive Committee or decided by the Deciding Party, the Publishing
Party shall have no obligation to publish or make the proposed disclosure.
ARTICLE 10
COMBINATORIAL CHEMISTRY TECHNOLOGY
In addition to the other terms and conditions herein, the following
terms and conditions shall apply with respect to Combinatorial Chemistry ("CC")
Technology.
10.1 Celanese Independent CC Technology Projects. During the period
that Celanese is funding the Research Program under this Agreement, Celanese
shall not conduct its own research relating to CC Technology directed to the
Active Fields or the Fields listed on Exhibits D or E hereto. Notwithstanding
the above, during the term of the Research Program Celanese may conduct
independent internal research in CC Technology with up to three (3) internal
professional scientists and up to two (2) technicians, and may collaborate with
third parties during such period. At no time shall Celanese disclose or transfer
to any Celanese employee involved in an independent internal CC Technology
program or to any third party (including without limitation any Affiliate), any
information relating to CC Technology developed in whole or in part by Symyx or
developed in connection with the Research Program, and Celanese shall take all
necessary and appropriate steps to ensure no such disclosure or transfer occurs.
10.2 Independent CC Technology. No right, ownership interest or
license is granted under this Agreement as to any proprietary CC Technology of
either party existing as of the Effective Date or developed independently of the
other party during the term of this Agreement. Intellectual property shall be
deemed to be independently developed if is conceived, reduced to practice or
otherwise developed solely by individuals without knowledge of the proprietary
information of the other party, provided reasonably the party asserting
independent development shall have the burden of establishing such independent
development.
10.3 Research Program CC Technology. Patented inventions, to the
extent they relate to CC Technology conceived or reduced to practice in
connection with the Research Program and during the term thereof and for one (1)
year thereafter (e.g., applies to inventions made by any Celanese employee with
access to Symyx proprietary information), shall be subject to the following:
10.3.1 Celanese Patents.
(a) Celanese may practice any such patent solely
owned by it which claims an invention relating to CC Technology internally, but
may not sublicense such patent to any person or entity. Celanese shall grant and
hereby grants to Symyx a co-exclusive,
-28-
<PAGE> 29
worldwide, royalty-free license to any such patent without right of sublicense
except as follows: Symyx may grant sublicenses under any such patent to its
Affiliates or in connection with collaborative arrangements with third parties
for the development and commercialization of products, as opposed to the
identification of active compounds solely by such third party.
(b) If the parties agree that a particular CC
Technology patent solely owned by Celanese is critical in the discovery or
development of a particular Product, then Celanese shall be entitled to a forty
percent (40%) reduction in its royalty obligations with respect to such Product.
As used herein, "critical" means a particular Product could not have been
developed, made, used and sold without practicing the claimed invention.
10.3.2 Joint Patents.
(a) Inventions which are jointly made by Celanese
and Symyx shall be jointly owned by Celanese and Symyx. Celanese and its
Affiliates may practice any such patent internally, but may not sublicense such
patent to any person or entity. Celanese shall grant and hereby grants to Symyx
a co-exclusive, worldwide, royalty-free license under its interest in any such
patent. Subject to the restrictions contained in Section 2.7.2, Symyx may grant
sublicenses under any such patent to its Affiliates or in connection with
collaborative arrangements with third parties for the development and
commercialization of products, as opposed to the identification of active
compounds solely by such third party.
(b) If the parties agree that a particular CC
Technology patent jointly owned by Celanese and Symyx is critical in the
discovery or development of a particular Product, then Celanese shall be
entitled to a twenty percent (20%) reduction in its royalty obligations with
respect to such Product. As used herein, "critical" means a particular Product
could not have been developed, made, used and sold without practicing the
claimed invention.
10.3.3 Symyx Patents. Symyx shall retain all rights to Symyx
patents solely owned by it which claim one or more inventions relating to CC
Technology.
10.3.4 Ownership. The ownership of patents relating to CC
Technology which may have been jointly made shall be jointly determined by the
parties in accordance with U.S. patent law, any dispute as to ownership shall be
settled by arbitration.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
11.1 Celanese. Celanese represents and warrants on its own behalf and
on behalf of its Affiliates that: (i) it has the authority and right to enter
into this Agreement and to perform all of Celanese's obligations hereunder; and
(ii) this Agreement is a legal and valid obligation binding upon it and
enforceable in accordance with its terms.
-29-
<PAGE> 30
11.2 Symyx. Symyx represents and warrants that: (i) it has the
authority and right to extend the rights granted in this Agreement, (ii) this
Agreement is a legal and valid obligation binding upon it and enforceable in
accordance with its terms; (iii) it has the full right to enter into this
Agreement, and to fully perform its obligations hereunder; (iv) it has not
previously granted, and during the term of this Agreement will not knowingly
make any commitment or grant any rights which are inconsistent in any material
way with, the rights and licenses granted herein; and (v) to the best of its
knowledge as of the Effective Date, there are no existing or threatened actions,
suits or claims pending against it with respect to the Symyx Technology;
provided in each case, however, that the representations and warranties set
forth in (i) through (v) above shall not apply with respect to the CA1 between
Symyx and AR&T including, without limitation, with respect to obligations
undertaken, and rights and licenses granted, thereunder.
11.3 Disclaimer. Celanese and Symyx specifically disclaim any
guarantee that the Research Program will be successful, in whole or in part. The
failure of the parties to successfully develop Agreement Compounds or Products
will not constitute a breach of any representation or warranty or other
obligation under this Agreement. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, SYMYX AND CELANESE AND THEIR RESPECTIVE AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROGRAM TECHNOLOGY, SYMYX TECHNOLOGY,
CELANESE TECHNOLOGY, LIBRARIES, AGREEMENT COMPOUNDS, INFORMATION DISCLOSED
HEREUNDER OR AGREEMENT PRODUCTS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF ANY PROGRAM
TECHNOLOGY, SYMYX TECHNOLOGY OR CELANESE TECHNOLOGY, PATENTED OR UNPATENTED, OR
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
ARTICLE 12
INDEMNIFICATION
12.1 Celanese. Celanese agrees to indemnify, defend and hold Symyx
and its Affiliates and their directors, officers, employees, agents and their
respective successors, heirs and assigns (the "Symyx Indemnitees") harmless from
and against any losses, costs, claims, damages, liabilities or expense
(including reasonable attorneys' and professional fees and other expenses of
litigation) (collectively, "Liabilities") arising, directly or indirectly out of
or in connection with third party claims, suits, actions, demands or judgments,
including without limitation, personal injury, product liability, patent
infringement and trade secret misappropriation matters, suits, actions or
demands relating to (i) any Agreement Compounds or Products developed,
manufactured, used, sold or otherwise distributed by or on behalf of Celanese,
its Affiliates, Sublicensees or other designees (including, without limitation,
product
-30-
<PAGE> 31
liability and patent infringement claims), (ii) Celanese's performance of the
Research Program, (iii) any inconsistency or dispute regarding the allocation of
rights and licenses under this Agreement and/or the CA1 between Celanese and
AR&T (or the successors or assigns of either of them), and (iv) any breach by
Celanese of the representations and warranties made in this Agreement, except,
in each case, to the extent such Liabilities result from a material breach of
this Agreement by Symyx, or the gross negligence or intentional misconduct of
Symyx.
12.2 Symyx. Symyx agrees to indemnify, defend and hold Celanese, its
Affiliates and Sublicensees and their respective directors, officers, employees,
agents and their respective heirs and assigns (the "Celanese Indemnitees")
harmless from and against any losses, costs, claims, damages, liabilities or
expense (including reasonable attorneys' and professional fees and other
expenses of litigation) (collectively, "Liabilities") arising, directly or
indirectly out of or in connection with third party claims, suits, actions,
demands or judgments, including without limitation personal injury and product
liability matters, suits, actions, demands relating to (i) any Product
developed, manufactured, used, sold or otherwise distributed by or on behalf of
Symyx, its Affiliates, licensees (other than by Celanese or its Affiliates,
Sublicensees or other designees) or other designees (including, without
limitation, product liability and patent infringement claims), and (ii) any
breach by Symyx of its representations and warranties made in this Agreement,
except, in each case, to the extent such Liabilities result from a material
breach of this Agreement by Celanese, or the gross negligence or intentional
misconduct of Celanese.
12.3 Procedure. In the event that any Indemnitee (either a Celanese
Indemnitee or a Symyx Indemnitee) intends to claim indemnification under this
Article 12 it shall promptly notify the other party in writing of such alleged
Liability. The indemnifying party shall have the right to control the defense
thereof with counsel of its choice as long as such counsel is reasonably
acceptable to Indemnitee; provided, however, that any Indemnitee shall have the
right to retain its own counsel at its own expense, for any reason, including if
representation of any Indemnitee by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party reasonably represented by such
counsel in such proceeding. The affected Indemnitee shall cooperate with the
indemnifying party and its legal representatives in the investigation of any
action, claim or liability covered by this Article 12. The Indemnitee shall not,
except at its own cost, voluntarily make any payment to incur any expense with
respect to any claim or suit without the prior written consent of the
indemnifying party, which such party shall not be required to give.
ARTICLE 13
TERM AND TERMINATION
13.1 Term.
13.1.1 Research Program. The Research Program commenced under
the terms of the CA1 on or about February 1, 1997, and, unless earlier
terminated pursuant to the terms of this
-31-
<PAGE> 32
Article 13, shall continue until February 1, 2001, and for any extension of the
Research Program pursuant to this Section 13.1.1. Celanese shall have the right
to extend the Research Program (at the funding and FTE levels set forth in the
Agreement) until February 1, 2002, upon notice, as follows: Celanese may notify
Symyx in writing on or before May 1, 2001 whether or not Celanese desires to
extend the Research Program, and, in the event that Celanese does not give such
notice on or Before May 1, 2001, Celanese shall be deemed to have extended the
Research Program. The Research Program may be extended beyond February 1, 2002
upon the written consent of the parties. With six (6) months prior notice,
Celanese may cancel the Research Program with respect to any Active Field
following the end of the applicable Minimum Field Term of such Active Field. Any
such expiration, cancellation or termination of the Research Program by Celanese
as set forth in this Section 13.1.1 shall not operate as a cancellation or
termination of this Agreement.
13.1.2 Agreement. The term of this Agreement shall commence on
the Effective Date, and shall continue in full force and effect until Celanese
and its Affiliates and Sublicensees have no remaining royalty payment
obligations, unless terminated earlier as provided in this Article 13.
13.2 Termination for Breach. Either party to this Agreement may
terminate this Agreement as to any other party hereto in the event such other
party shall have materially breached or defaulted in the performance of any of
its material obligations hereunder, and such default shall have continued for
sixty (60) days after written notice thereof was provided to the breaching party
by the non-breaching party. Any termination shall become effective at the end of
such sixty (60) day period unless the breaching party (or any other party on its
behalf) has cured any such breach or default prior to the expiration of the
sixty (60) day period; provided, however, in the case of a failure to pay any
amount due hereunder, such default may be the basis of termination fifteen (15)
business days following the date that notice of such default was provided to the
breaching party. A good faith dispute as to the amount of or liability for
royalties or other amounts claimed due by the other party (excluding the
payments set forth in Section 5.1) shall not constitute a breach giving rise to
the right of termination set forth in this Section 13.2 if: (i) any
non-contested amount is paid promptly when due, (ii) all contested amounts are
placed in escrow during the pendency of the dispute, and (iii) full payment, if
any is due, plus reasonable expenses and legal fees expended for the purpose of
collecting such amounts, is made promptly upon resolution of the dispute. If
arbitration is required to resolve the dispute over whether the contested
amounts are due, the arbitrator shall also make a determination of whether the
disputed payments were withheld in good faith and whether the withholding of
payment was frivolous. If the arbitrator determines that the withholding of
payment was not in good faith or frivolous, or both, the party claiming the
payment shall have the right to terminate this Agreement for breach effective
immediately upon written notice to the other party.
13.3 Termination for Insolvency. If voluntary or involuntary
proceedings by or against a party are instituted in bankruptcy under any
insolvency law, or a receiver or custodian is appointed for such party, or
proceedings are instituted by or against such party for corporate
-32-
<PAGE> 33
reorganization, dissolution, liquidation or winding-up of such party, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or if such party makes an assignment for the
benefit of creditors, or substantially all of the assets of such party are
seized or attached and not released within sixty (60) days thereafter, the other
party may immediately terminate this Agreement effective upon notice of such
termination.
13.4 Effect of Breach or Termination.
13.4.1 Accrued Rights and Obligations. Termination of this
Agreement for any reason shall not release either party hereto from any
liability or obligation which, at the time of such termination, has already
accrued to the other party or which is attributable to a period prior to such
termination nor preclude either party from pursuing any rights and remedies it
may have hereunder or at law or in equity with respect to any breach of these
Agreement.
13.4.2 Return of Materials. Upon any termination of this
Agreement, Celanese and Symyx shall promptly return to the other all
Confidential Information including, without limitation, all Know-How received
from the other party (except one copy of which may be retained for archival
purposes and ensuring compliance with the provisions of Article 9).
13.4.3 Post-Termination Product Sales In the event of the
cancellation or termination of any license rights with respect to a Product
prior to the expiration of this Agreement, inventory of the Product may be sold
for up to six (6) months after date of termination, provided royalties are paid
thereon.
13.4.4 Licenses.
(a) The licenses and rights granted Celanese herein
shall terminate in the event of a termination by Symyx pursuant to Section 13.2
or 13.3, and the licenses granted to Symyx in Sections 4.5 and 10.3 shall
terminate in the event of a termination by Celanese pursuant to Sections 13.2 or
13.3.
(b) If Celanese's rights terminate with respect to a
particular Agreement compound and/or Product pursuant to the terms of Section
7.2.2, for failure to meet the diligence requirements of Section 7.1, and more
than one Product is being commercially developed or exploited by Celanese or its
Sublicensees hereunder, then Symyx shall be entitled to terminate this Agreement
only with respect to the applicable Agreement Compounds and Products.
13.5 Survival. Except as set forth above, Sections 2.2.3(b), 2.5,
2.6, 2.7, 4.5, 4.6, 4.9, 5.2, 13.4 and 13.5 of this Agreement, and Articles 6,
8, 9, 10, 11 and 14 shall survive the expiration or termination of this
Agreement for any reason.
-33-
<PAGE> 34
ARTICLE 14
MISCELLANEOUS
14.1 Governing Laws. This Agreement and any dispute arising from the
construction, performance or breach hereof shall be governed by and construed
and enforced in accordance with, the laws of the state of California, without
reference to conflicts of laws principles.
14.2 No Implied Licenses. Only the licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect. No other
license rights shall be created by implication, estoppel or otherwise.
14.3 Waiver. It is agreed that no waiver by either party hereto of
any breach or default of any of the covenants or agreements herein set forth
shall be deemed a waiver as to any subsequent and/or similar breach or default.
14.4 Assignment. This Agreement shall not be assignable by either
party to any third party hereto without the written consent of the other party
hereto, except either party may assign this Agreement, without such consent, to
an entity that acquires all or substantially all of the business or assets of
such party to which this Agreement pertains, whether by merger, reorganization,
acquisition, sale, or otherwise. This Agreement shall be binding upon and accrue
to the benefit any permitted assignee, and any such assignee shall agree to
perform the obligation of the assignor.
14.5 Independent Contractors. The relationship of the parties hereto
is that of independent contractors. The parties hereto are not deemed to be
agents, partners or joint ventures of the others for any purpose as a result of
this Agreement or the transactions contemplated thereby.
14.6 Compliance with Laws. In exercising their rights under this
Agreement, the parties shall fully comply in all material respects with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under this
Agreement including, without limitation, those applicable to the discovery,
development, manufacture, distribution, import and export and sale of Products
pursuant to this Agreement.
14.7 Patent Marking. Celanese agrees to mark and have its
Sublicensees mark all Agreement compounds sold pursuant to this Agreement in
accordance with the applicable statute or regulations relating to patent marking
in the country or countries of manufacture and sale thereof.
14.8 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be personally delivered or by registered
or certified mail, return receipt requested, postage prepaid, in each case to
the respective address specified below, or such other
-34-
<PAGE> 35
address as may be specified in writing to the other parties hereto and shall be
deemed to have been given upon receipt.
Symyx: Symyx Technologies, Inc.
420 Oakmead Parkway
Sunnyvale, California 94086
Attn: President
with a copy to: Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Michael S. Rabson
Celanese: Celanese Ltd.
1601 West LBJ Freeway
Dallas, Texas 75234
Attn: Chief Technology Officer
with a copy to: Celanese Ltd.
Corpus Christi Technical Center
1901 Clarkwood
Corpus Christi, Texas 78409
Attn: Patent Counsel
14.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect to
the fullest extent permitted by law without said provision, and the parties
shall amend the Agreement to the extent feasible to lawfully include the
substance of the excluded term to as fully as possible realize the intent of the
parties and their commercial bargain.
14.10 Force Majeure. Neither party shall lose any rights hereunder or
be liable to the other party for damages or losses (except for payment
obligations) on account of failure of performance by the defaulting party if the
failure is occasioned by war, strike, fire, Act of God, earthquake, flood,
lockout, embargo, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the reasonable
control and not caused by the negligence, intentional conduct or misconduct of
the non-performing party and such party has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in no event shall a
party be required to settle any labor dispute or disturbance.
14.11 Complete Agreement. This Agreement with its Exhibits,
constitutes the entire agreement, both written and oral, between the parties
with respect to the subject matter hereof,
-35-
<PAGE> 36
and all prior agreements respecting the subject matter hereof, either written or
oral, express or implied, shall be abrogated, canceled, and are null and void
and of no effect. No amendment or change hereof or addition hereto shall be
effective or binding on either of the parties hereto unless reduced to writing
and executed by the respective duly authorized representatives of Symyx and
Celanese.
14.12 Dispute Resolution. Any dispute under this Agreement which is
not settled by mutual consent shall be finally settled by binding arbitration,
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by three (3) neutral arbitrators appointed in accordance
with said rules, unless the parties agree to conduct such arbitration with a
single arbitrator. The arbitration shall be held in San Francisco, California,
and the arbitrators shall be independent experts with a background suitable for
the matters in dispute. The arbitrators shall determine what discovery will be
permitted, consistent with the goal of limiting the cost and time which the
parties must expend for discovery; provided the arbitrators shall permit such
discovery as they deem necessary to permit an equitable resolution of the
dispute. Any written evidence originally in a language other than English shall
be submitted in English translation accompanied by the original and a true copy
thereof. The costs of arbitration, including administrative and arbitrators'
fees, shall be shared equally by the parties. Each party shall bear its own
costs and attorneys' and witness fees. A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
thirty (30) days following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written opinion. Any
arbitration subject to this Section 14.12 shall be completed within one (1) year
from the filing of notice of a request for such arbitration. The award shall be
final and binding upon the parties hereto.
14.13 Export Control Regulations. The rights and obligations of the
parties under this Agreement, shall be subject in all respects to United States
laws and regulations as shall from time to time govern the license and delivery
of technology and products abroad, including the United States Foreign Assets
Control Regulations, Transaction Control Regulations and Export Control
Regulations, as amended, and any successor legislation issued by the Department
of Commerce, International Trade Administration, or Office of Export Licensing.
Without in any way limiting the provisions of this Agreement, Celanese agrees
that, unless prior authorization is obtained from the Office of Export
Licensing, it shall not export, re-export, or transship, directly or indirectly,
to any country, any of the technical data disclosed to Celanese by Symyx if such
export would violate the laws of the United States or the regulations of any
department or agency of the United States Government.
14.14 Headings. The captions to the several Sections hereof are not
part of this Agreement, but are included merely for convenience of reference and
shall not affect its meaning or interpretation.
-36-
<PAGE> 37
14.15 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same agreement.
14.16 Affiliates. Symyx understands that Celanese conducts its
business activities in cooperation with various Celanese Affiliates around the
world. In fulfilling the obligations of Celanese under this Agreement,
including, but not limited to, its obligations under Article 7, any activities
to be performed by Celanese may be performed by such Affiliates; provided, that
such performance shall not be deemed an assignment of this Agreement and
Celanese shall remain obligated to Symyx pursuant to the terms of this
Agreement. Further, to the extent that work performed pursuant to this Agreement
by a Celanese Affiliate results in the creation of intellectual property to
which Symyx would have certain rights had such intellectual property been
created by Celanese, Celanese shall insure that Symyx rights are not restricted
as a result of such work having been performed by such an Affiliate. In
addition, any rights or licenses granted to Celanese by Symyx pursuant to this
Agreement, including, but not limited to, the licenses granted in Article 4, may
be freely and unrestrictedly sublicensed by Celanese to Celanese Affiliates
subject to the terms of this Agreement.
-37-
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.
CELANESE LTD. SYMYX TECHNOLOGIES, INC.
DALLAS, TEXAS SUNNYVALE, CALIFORNIA
By: /s/ CHUCK HILTON By: /s/ ISY GOLDWASSER
-------------------------------- ------------------------------
Title: VP Title: President and CEO
-------------------------------- ------------------------------
Date: 7-28-98 Date: 8-31-98
-------------------------------- ------------------------------
CELANESE LTD. CELANESE LTD.
DALLAS, TEXAS DALLAS, TEXAS
By: /s/ HENRY E. KIEFFER By: /s/ RICK SHAW
-------------------------------- ------------------------------
Title: CTO Title: VP
-------------------------------- ------------------------------
Date: 7-21-98 Date: 7-28-98
-------------------------------- ------------------------------
Exhibit A: Definitions
Exhibit B: Procedure for Lead Compound Identification (2.4.1)
Exhibit C: Procedures regarding Inactive Projects (2.4.2)
Exhibit D: Inactive Fields (2.3.1)
Exhibit E: Preferred Fields (2.3.2)
-31-
<PAGE> 39
EXHIBIT A
DEFINITIONS
1.1 "Affiliate" shall mean any corporation or other business entity
which during the term of this Agreement controls, is controlled by or is under
common control with Symyx or Celanese or its parent entities, but only for so
long as such entity controls, is controlled by, or is under common control with
Symyx or Celanese. For this purpose, control means the possession of the power
to direct or cause the direction of the management and the policies of an entity
whether through ownership directly or indirectly of fifty percent (50%) or more
of the stock entitled to vote, and for nonstock organizations, the right to
receive over fifty percent (50%) of the profits by contract or otherwise, or if
not meeting the preceding requirement, any company owned or controlled by or
owning or controlling Symyx or Celanese at the maximum control or ownership
right permitted in the country where such company exists.
1.2 "Agreement Compound" shall mean any Lead Compound or Derivative
Compound, except that Agreement Compound shall not include any compound or
mixture or composition of matter which (i) is publicly known prior to the date
of identification in the Research Program to be useful for the applicable Active
Project, without breach of this Agreement, (ii) with respect to a Derivative
Compound identified during or after the term of the Research Program, is
publicly known prior to the date of identification of such Derivative Compound
is useful for the applicable Active Project, without breach of this Agreement,
or (iii) is independently developed by Celanese outside the Research Program,
without any reference to or use of any Symyx Technology or Program Technology.
Any dispute will be settled in accordance with Sections 4.9 and 14.12.
1.3 "Combinatorial Chemistry Technology" or "CC Technology" means
techniques, methodologies, synthetic routes or instrumentation as used for the
simultaneous, parallel or automated: (i) synthesis, (ii) processing, (iii)
analysis, or (iv) characterization of more than fifty (50) compounds, mixtures
or compositions of matter on a single monolithic substrate.
1.4 "Commodity Chemical" shall mean chemicals and materials which
are generally interchangeable products (i.e., products with generally accepted
specifications which are generally interchangeable in the marketplace for those
of other producers for most applications), which either (i) sell for less than
$1 per pound regardless of quantity manufactured, or (ii) if manufactured in a
total volume of at least 250 million pounds per year, sell for less than $3 per
pound. The dollar amounts set forth in this definition shall be increased
annually after July 1, 2000, to reflect changes in the Consumer Price Index, All
Consumers, as published by the U.S. Bureau of Labor Statistics using 1998 as the
base year.
1.5 "Confidential Information" shall mean (i) any proprietary or
confidential information or material in tangible form disclosed hereunder that
is marked as "Confidential" at the time it is delivered to the receiving party,
or (ii) proprietary or confidential information
<PAGE> 40
disclosed orally hereunder which is identified as confidential or proprietary
when disclosed and such disclosure of confidential information is confirmed in
writing within thirty (30) days by the disclosing party.
1.6 "Celanese Technology" shall mean any patent application or
patent owned or controlled by Celanese during the term of this Agreement which
relates to an invention conceived and reduced to practice outside the Research
Program by Celanese or its Sublicensees, and which claims (i) an Agreement
Compound or a Product, or (ii) a method or process for the synthesis of an
Agreement Compound or a Product, or (iii) a composition-of-matter containing an
Agreement Compound or a Product, or (iv) a method or process of use of an
Agreement Compound in or for the manufacture of a Product.
1.7 "Derivative Compound" shall mean any compound or mixture or
composition of matter which is derived from a Lead Compound or another
Derivative Compound synthesized by Symyx or Celanese or by a third party under
authority from Celanese or Symyx and is useful in the same Active Project (or
related Projects) as the Lead Compound from which it was derived. As used in
this Agreement, a compound, mixture or composition of matter shall be deemed to
have been "derived from" such other compound, mixture or composition of matter
if it is synthesized within ten (10) years of the date that the applicable Lead
Compound is identified by the applicable RFC, and:
(a) it is based on structure and performance data related to
such Lead Compound or Derivative Compound, and such compound, mixture or
composition of matter is within a genus of compounds, mixtures or compositions
of matter traceable to a Lead Compound which Symyx has reasonably described to
Celanese prior to the date of first commercialization of a Product incorporating
or made using the applicable Derivative Compound; or
(b) it is included within the scope of any claim of a patent
application or issued patent claiming one or more compounds, mixtures or
compositions of matter within (a) above or which claims one or more compounds,
mixtures or compositions of matter synthesized by Symyx or Celanese in the
conduct of an Active Project.
Notwithstanding the above, a compound, mixture or composition of matter
first derived from an Agreement Compound by a third party to which Celanese has
licensed an Agreement Compound for commercialization of a Product shall not be a
Derivative Compound, unless Celanese is compensated based on such Agreement
Compound or compound, mixture or composition derived from such Agreement
Compound, or compensated for the use of any of the preceding.
By way of illustration, Derivative Compounds under subpart (a) above do
not include:
(1) physical support means for a catalyst by virtue of the
fact the supported or unsupported catalyst itself is an Agreement Compound; or
<PAGE> 41
(2) process technology results developed outside the Program
Technology for purposes of separating or otherwise treating a Product.
1.8 "Field" shall mean a defined area of research within the
Research Program focused on the development of Agreement Compounds for the
production of one or more Products which meet an agreed Product Group
Definition. Fields include Active Fields and Inactive Fields.
1.8.1 "Active Field" means a Field for which there is at least
one on-going Active Project.
1.8.2 "Inactive Field" means a Field listed on Exhibit D or
Exhibit E hereto for which there is no on-going Active Project.
1.9 "Field Minimum Funding" shall mean the minimum level of annual
funding support from Celanese for a particular Active Field, as provided in
Section 5.1.1 or as may otherwise be established by the EC.
1.10 "Field Minimum Term" shall mean with respect to any Active
Field, the minimum time required to conduct a comprehensive evaluation of the
utility of combinatorial technologies within such Active Field, as established
by the EC.
1.11 "Lead Compound" shall mean a Library Compound which meets the
specific physical, chemical and/or catalytic properties established by the RFC
in the applicable Project Plan for identifying a Lead Compound. The procedure
for identifying a Lead Compound is set forth on Exhibit B hereto.
1.12 "Library Compound" shall mean any compound or mixture or
composition of matter which is or was contained in a library prepared by or on
behalf of Symyx.
1.13 "Manufacturing Costs" shall mean (i) all direct and indirect
costs related to the manufacture by Celanese or its Affiliates of Products,
including costs for personnel, materials, quality control, regulatory
compliance, administrative expenses, subcontractors, fixed and variable
manufacturing overhead costs and business unit or division costs reasonably
allocable to the manufacture of Products, as determined and allocated in
accordance with generally accepted accounting principles, consistently applied,
excluding costs for excess manufacturing capacity not reasonably related to
projected demand for Products, or (ii) with respect to Products purchased from a
third party vendor, reasonable amounts actually paid to the vendor for such
Products in arm's length transactions.
1.14 "Net Income" shall mean the pro forma after tax income
(calculated using the normal and customary tax rate used by Celanese in its
internal calculations) attributable to
<PAGE> 42
royalties, license and other fees, and Net Sales with respect to a Product,
less: (a) Manufacturing Costs for such Product; and (b) reasonable expenses
incurred by Celanese in connection with the marketing, shipping or sale of the
Product, and general and administrative expenses relating thereto, all as
determined and allocated in accordance with generally accepted accounting
principles, consistently applied.
1.15 "Net Sales" shall mean the invoice price of any Product sold by
Celanese or its Affiliates to bona fide independent third parties, less, to the
extent included in such invoice price the total of: (1) ordinary and customary
trade discounts actually allowed; (2) credits, rebates and returns; (3) freight
and duties paid for and separately identified on the invoice or other
documentation maintained in the ordinary course of business, and (4) excise
taxes, other consumption taxes, customs duties and other compulsory payments to
governmental authorities actually paid and separately identified on the invoice
or of the documentation maintained in the ordinary course of business. Net Sales
shall also include the amount of fair market value of all other consideration
received by Celanese or its Affiliates in respect of Products, whether such
consideration is in cash, payment in kind, exchange or another form.
1.16 "Product" shall mean any product which (i) incorporates an
Agreement Compound, or (ii) utilizes an Agreement Compound in its manufacture,
or (iii) is made utilizing a patentable method or patentable process within the
Program Technology as to which Symyx has an interest. By way of illustration,
without limitation, examples of Products within the Celanese Group could include
acrylic acid made by the selective oxidation of propane, or acetic acid made by
the selective oxidation of ethane and/or ethylene.
1.17 "Product Group Definition" shall mean the definition established
at the commencement of research in an Active Field which defines the Product(s)
which are the focus of a particular Active Field. By way of example and without
limitation, such definition may include: Product structure, molecular weight,
backbone structure, comonomer, the raw materials used to make the Product, and
the catalyst used to synthesize such Product. The Product Group Definition for
the Celanese Group is as follows:
1.17.1 "Celanese Group" includes organic chemicals resulting
from either (1) selective oxidation of hydrocarbons (C1 - C18) through the
incorporation of oxygen using catalysis to make Commodity Chemicals or (ii)
oxidative dehydrogenation of hydrocarbons using catalysis to make Commodity
Chemicals. Also included in the Celanese Group are: (x) formaldehyde, (y)
acrylic acid and acrylic esters, and (z) acetic acid, vinyl acetate, acetic
acid esters, and acetic anhydride, in each case made through catalysis.
Notwithstanding the foregoing, the Celanese Group shall not include catalysts
used (a) for applications involving essentially complete oxidation of
hydrocarbons, (b) for environmental applications, (c) for making maleic
anhydride from butane, (d) for the reaction of benzene to phenol, or (e) for
applications in standard petroleum refining activities not directed toward
production of products specifically included within the Celanese Group as
defined in the two preceding sentences; nor shall the Celanese Group include
chemicals made through the processes in (a) through (e). In addition, Symyx
may, at any time, identify up to three reactions for selective oxidation of
aromatic hydrocarbons, and the catalysts used in such reactions, as well as the
chemicals resulting from such reactions, shall be excluded from the Celanese
Group. It is understood that additional reactions for selective oxidation of
aromatic hydrocarbons may be similarly excluded from the Celanese Group upon
agreement of the EC. As used herein, "hydrocarbons" means compounds containing
only hydrogen and carbon, and "aromatic hydrocarbons" means hydrocarbons
containing a benzene ring or a fused-ring structure.
1.18 "Program Minimum Funding" shall mean the minimum level of annual
funding support from Celanese for maintaining Program exclusivity, as provided
in Section 5.1.1(d) or as may otherwise be established by the EC.
1.19 "Program Technology" shall mean any Patent Right and Know-How
conceived, reduced to practice, or otherwise developed by Symyx or Celanese, or
jointly by the parties in connection with the conduct of the Research Program.
[PROGRAM TECHNOLOGY SHALL ALSO INCLUDE PATENT RIGHTS AND KNOW-HOW CONCEIVED,
REDUCED TO PRACTICE, OR OTHERWISE DEVELOPED BY SYMYX OR AR&T, OR JOINTLY BY
SYMYX AND AR&T, IN CONDUCTING OF THE AR&T RESEARCH PROGRAM PRIOR TO THE
EFFECTIVE DATE OF THIS AGREEMENT.] Program Technology shall not include any
Symyx Technology, Celanese Technology or CC Technology.
<PAGE> 43
1.19.1 "Know-How" shall mean all data, instructions, processes,
formulas and information, including, without limitation, chemical, physical and
analytical, safety, manufacturing and quality control data and information which
is necessary for the development, manufacture or use of Agreement Compounds or
Products. Know-How does not include any inventions included in the Patent
Rights.
1.19.2 "Patent Rights" shall mean (i) any patent or patent
application which claims an Agreement Compound or a Product, or method or
process for the synthesis of an Agreement Compound or Product, or a
composition-of-matter containing an Agreement Compound or product, or a method
or process for the use of an Agreement Compound in or for the manufacture of a
Product, and (ii) any divisions, continuations, continuations-in-part, reissues,
reexaminations, extensions or other governmental actions which extend any of the
subject matter of the patent applications or patents in (i) above, and any
substitutions, confirmations, registrations or revalidations of any of the
foregoing.
1.20 "Project" shall mean a research effort within a Field focused on
the discovery of Lead Compounds for the manufacture of Product(s) within a
specific Product Group Definition. Projects are categorized as follows:
1.20.1 "Active Project" means a Project for which Celanese is
paying Research Expenses pursuant to Section 5.1.
1.20.2 "Inactive Project" means a Project for which Celanese is
not paying any Research Expenses.
1.21 "Research Expense" shall have the meaning set forth in Section
5.1.1(d).
1.22 Research Program.
1.22.1 "Research Program" shall mean the research activities
conducted by Symyx under this Agreement for Celanese, or by Symyx and Celanese
on a collaborative basis under this Agreement, with the goal of discovering
Agreement Compounds. It is understood that the Research Program and Active
Projects shall include activities undertaken by Celanese with respect to initial
evaluation of a given compound, including without limitation activities subject
to Section 7.1.1, but shall not include any activities conducted by Celanese in
manufacturing scale-up or commercial manufacturing, or in evaluating or
developing a given Lead Compound after Celanese has sent the Validation Notice
described in Section 7.1.1 for such Lead Compound. [THE RESEARCH PROGRAM SHALL
ALSO INCLUDE THE AR&T RESEARCH PROGRAM.]
1.22.2 ["AR&T RESEARCH PROGRAM" SHALL MEAN RESEARCH ACTIVITIES
CONDUCTED PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT BY SYMYX FOR AR&T OR BY
SYMYX AND AR&T ON A COLLABORATIVE BASIS UNDER CA1 WITH RESPECT TO THE FIELD OF
THIS AGREEMENT.]
<PAGE> 44
1.23 "Specialty Chemical" shall mean chemicals and materials which
are not Commodity Chemicals.
1.24 "Sublicensee" shall mean, with respect to a particular Product,
a third party to whom Celanese has granted a license or sublicense to develop,
make, import, use, offer for sale or sell such Product. As used in this
Agreement, Sublicensee shall also include a third party to whom Celanese has
granted the right to distribute such Product, provided that such third party has
the primary responsibility for marketing and promotion at its expense of such
Product within the field or territory for which such distribution rights are
granted.
1.25 "Symyx Technology" shall mean all patents, copyrights, trade
secrets, knowhow, data, and other intellectual property of any kind owned or
controlled by Symyx during the term of this Agreement which relates to an
invention conceived and reduced to practice outside the Research Program by
Symyx, and which claims an Agreement Compound or a Product, or a method or
process for the synthesis an Agreement Compound or a Product, or a
composition-of-matter containing an Agreement Compound or a Product, or a method
or process of use of an Agreement Compound in or for the manufacture of a
Product.
<PAGE> 45
EXHIBIT B
PROCEDURE FOR
LEAD COMPOUND IDENTIFICATION
1. At such time as Symyx has identified a Library Compound which it
believes may meet the Lead Criteria for a particular Active Project it shall
provide the data and results supporting such conclusion to the applicable RFC.
2. Following the identification of any potential Lead Compound, at
Celanese's request, Symyx shall prepare and deliver to Celanese gram quantities
of such potential Lead Compound, which Celanese shall use in confirming whether
such potential Lead Compound meets the applicable lead criteria. Symyx will use
commercially reasonable efforts to provide quantities in such amounts as the RFC
may determine is reasonably required by Celanese for testing, and will notify
Celanese if it is not commercially reasonable to provide such quantities to
Celanese, in which case the parties agree to meet and discuss how to proceed
with respect to such Lead Compound.
3. The RFC for a particular Active Field shall review the results
provided by Celanese with respect to a potential Lead Compound, and if such
results indicate that the applicable lead criteria have been satisfied, the RFC
shall deem such Library Compound to be a potential Lead Compound for all
purposes of this Agreement.
4. In the event that the RFC requests further information or the
conduct of further studies to confirm whether a potential Lead Compound meets
the applicable lead criteria, Symyx and Celanese shall prepare any such
information and conduct any such studies.
<PAGE> 46
EXHIBIT C
PROCEDURES REGARDING ACTIVATION OF
INACTIVE PROJECTS
1. Inactive Projects. The RFC for each Active Field shall at the
request of either party consider any proposed Inactive Projects which a party
believes would be fruitful to pursue in connection with the Active Field, and at
least quarterly prepare an updated prioritized list of such Inactive Projects.
2. Activation of Inactive Projects. At any time while Celanese is
paying Research Expenses for a particular Active Field equal to or greater than
the Field Minimum Funding for such Active Field, the RFC for a particular Active
Field may agree to recommend to the EC that an Inactive Project within such
Active Field be activated to become an Active Project. In such event, the
parties shall exchange technical information relevant to the proposed Inactive
Project including the feasibility of such Inactive Project and the likelihood of
identifying a Lead Compound in connection therewith. Within ninety (90) days of
the initial notice, the EC shall determine whether to activate such Inactive
Project. If approved by the EC, the RFC shall (i) prepare a Project plan, (ii)
establish the Product Group Definition for such Active Project, and (iii)
establish the physical, chemical and/or catalytic criteria for identification of
a Lead Compound. Activation of an Inactive Project shall become effective upon
completion of all of the foregoing.
<PAGE> 47
EXHIBIT D
INACTIVE FIELDS
EXCLUSIVE LIST
1) Catalysts used to make methanol.
2) Chemistry and Technology used to synthesize Oxo-Aldehydes by the
hydroformylation of Olefins.
<PAGE> 48
EXHIBIT E
INACTIVE FIELDS
RIGHT OF NEGOTIATION LIST
1) Chemistry and Technology used to make Polyvinylacetate.
2) Catalysts and catalyst doped membranes for methanol fuel cells.
3) Chemistry and Technology used to make Polysulfides.
4) Chemistry and Technology used to make Terephthalic acid.
5) Chemistry used to make Polyacetals.
6) Heterogeneous hydrogenation catalysts (excluding supported organometalic
catalysts) for aldehydes, ketones, aromatic nitro compounds, nitriles,
fatty acids and alkyl substituted aromatics.
7) Catalysts for aldolization reactions of carbonyl compounds where at least
one partner in the reaction is a carbonyl compound with a chain length
(number of C-atoms) between C1 and C10.
8) Catalysts used for the Fischer Tropsch reaction.
<PAGE> 1
EXHIBIT 10.10
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
The Dow Chemical Company - Symyx Technologies
This COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement"),
effective as of January 1, 1999 (the "Effective Date"), is made by and between
Symyx Technologies, a California corporation having a principal place of
business at 3100 Central Expressway, Santa Clara, California 95051 ("Symyx"),
and The Dow Chemical Company, a Delaware corporation, having a principal place
of business at 2030 Willard H. Dow Center, Midland, Michigan 48674 ("TDCC").
BACKGROUND
A. Symyx owns and is developing novel, proprietary methods for the
combinatorial preparation and screening of novel materials and has
conducted certain materials discovery research focused on the discovery
and enhancement of catalysts and other materials; and
B. TDCC owns and is developing proprietary process technology related to
manufacture of various olefin polymers by means of gas phase, slurry,
solution and/or high pressure processes, which technology includes
catalyst systems, process steps, polymer resins and blends and
applications for polymer resins and blends; and
C. Symyx and TDCC desire to collaborate to research, develop and
commercialize certain catalysts useful for synthesis of olefin polymers
and polymers resulting from such synthesis on the terms and conditions
set forth below.
NOW, THEREFORE, for and in consideration of the covenants, conditions
and undertakings set forth herein, it is agreed by and between the parties as
follows:
ARTICLE 1
DEFINITIONS
1.1 "Added Value" shall have the meaning set forth in Section
5.2.1(i).
1.2 "Affiliate" shall mean any entity directly or indirectly
controlling, controlled by or under common control with, a party to this
Agreement. For purposes of this Agreement, the direct or indirect ownership of
fifty percent (50%) or more of the outstanding voting securities of an entity,
or the right to receive fifty percent (50%) or more of the profits or earnings
of an entity shall be deemed to constitute control. In addition, any entity
directly or indirectly owned or controlled by, or owning or controlling, TDCC or
Symyx at the maximum control or ownership right legally permitted in a country
where such entity exists, shall be deemed to constitute control provided that it
in fact results in actual control over the management, business and affairs of
such entity.
1.3 "Agreement Compound" shall mean any Lead Compound or Derivative
Compound.
1.4 "Combinatorial Chemistry Technology" shall mean Combinatorial
Chemistry Patent Rights and Combinatorial Chemistry Know-How.
1.4.1 "Combinatorial Chemistry Patent Rights" shall mean (i)
all U.S. patent applications claiming any inventions or discoveries related to
Combinatorial Chemistry, (ii) all divisions, substitutions, continuations,
continuation-in-part applications, and reissues, re-
-1-
<PAGE> 2
examinations and extensions of (i) above, (iii) foreign counterparts of any of
the preceding of (i) or (ii) above, and (iv) patents, utility models or similar
grants of rights issuing from any of the preceding of (i), (ii) or (iii) above .
1.4.2 "Combinatorial Chemistry Know-How" shall mean
inventions, information, data, or materials related to Combinatorial Chemistry,
excluding any inventions claimed in the Combinatorial Chemistry Patent Rights.
1.4.3 "Combinatorial Chemistry" shall mean techniques,
methodologies, processes, synthetic routes or instrumentation useful for the
simultaneous, parallel or rapid serial: (i) synthesis, (ii) processing, (iii)
analysis, or (iv) characterization of more than ten (10) compounds, compositions
or mixtures in quantities of less than ten (10) grams.
1.5 "Confidential Information" shall mean any information disclosed
by one party (or by an Affiliate of a party on behalf of that party) to the
other party or its representatives in connection with this Agreement which is in
written, graphic, machine readable or other tangible form and is marked
"Confidential" or "Proprietary" or in some other manner to indicate its
confidential nature. Confidential Information may also include information that
is disclosed orally or by observation, provided that such information is
designated as confidential at the time of disclosure and confirmed in writing as
confidential within thirty (30) days after such disclosure.
1.6 "Coordination Polymerization" shall mean a metal mediated
polymerization that proceeds by a polymerization reaction other than free
radical, controlled free radical, and carbocationic mechanisms. For the Vinyl
Chloride Field and Polar Comonomer within Exhibit A, Coordination Polymerization
mechanisms will be determined by examination of the effect of the metal on the
relative copolymerization rate constants: i.e., monomer selectivities. In
controlled free radical and free radical polymerizations the metal is not
involved in the propagation steps and therefore it does not affect the
microstructure, sequence distributions, or comonomer content in a
copolymerization. The presence and structure of the active metal complex in a
Coordination Polymerization must have a direct and significant effect on the
microstructure and comonomer content of the polymer because the metal is
involved in each propagation step during the polymerization. A test for
Coordination Polymerization would be to run two derivatives of the catalyst
family (e.g. one with bulky ligands, one less bulky) in a copolymerization;
changes in composition of the polymer will be indicative of Coordination
Polymerization. Tests comparing the composition and r1/r2 of polymers obtained
using conventional free radical initiators with those obtained using the
"catalyst" will also be performed.
1.7 "Designated Compound" shall have the meaning set forth in
Section 4.1.3.
1.8 "Designated Polymer" shall have the meaning set forth in Section
4.1.3.
1.9 "Derivative Compound" shall mean any compound or mixture or
composition of matter which is derived by or under authority of TDCC or its
Affiliates from a Library Compound. As used in this Agreement, a compound,
mixture or composition of matter shall be deemed to have been "derived from" a
Library Compound if it (i) results from a chemical synthesis program based on a
Library Compound or (ii) results from the use of Program Technology relating to
one or more Library Compounds, or (iii) is within the scope of patent claims of
any patent or patent application where the inventive feature relates to one or
more Library Compounds or compounds, mixtures or compositions of matter
described in (i) or (ii) above. Derivative Compound shall also include a
compound, mixture or composition of matter that is derived, as described in (i)
through (iii) above, from another Derivative Compound. Notwithstanding the
foregoing, a compound, mixture or composition of matter other than a Library
Compound that is first identified as an Olefin Polymer or as a catalyst useful
in the synthesis of an Olefin Polymer more than five (5) years after the end of
the Research Program shall not be deemed a Derivative Compound. It is understood
that compounds
-2-
<PAGE> 3
developed independently by TDCC without the use of Library Compounds,
Confidential Information of Symyx, or Program Technology, shall not be deemed to
be a Derivative Compound.
1.10 "Direct Modification" shall have the meaning set forth in
Section 4.1.3.
1.11 "Discovery Tools" shall have the meaning set forth in Section
2.8.
1.12 "EPDM" shall have the meaning set forth in Section 2.5.
1.13 "Executive Committee" shall have the meaning set forth in
Section 3.6.
1.14 "Field" means the discovery, development and use of catalysts to
make Olefin Polymers through Coordination Polymerization in a defined reaction
agreed upon by the parties. The Fields are set forth in Exhibit A.
1.15 "FTE" shall mean a full-time employee or independent contractor
utilized for the conduct of the Research Program or, in the case of less than
full-time dedication, a full-time equivalent person-year, based on a total of
forty-six and 1/4 (46.25) weeks or one thousand eight hundred fifty (1,850)
hours per year, of work on or directly related to the Research Program.
1.16 "Independent TDCC Research" shall have the meaning set forth in
Section 2.3.3.
1.17 "Joint Invention" shall have the meaning set forth in Section
7.1.
1.18 "Lead Compound" shall mean a Library Compound which meets the
specific physical, chemical and/or catalytic properties established either in
the Research Plan or by the Research Committee for identifying a Lead Compound.
The procedure for identifying a Lead Compound is set forth on Exhibit B hereto.
It is understood and agreed that any Library Compound that is transferred from
Symyx to TDCC and subsequently commercialized by or under authority of TDCC or
its Affiliates shall be deemed a Lead Compound.
1.19 "Library Compound" shall mean any compound or mixture or
composition of matter screened or prepared by or on behalf of Symyx in the
course of the Research Program in order to determine its usefulness as an Olefin
Polymer or as a catalyst for making an Olefin Polymer in connection with a
Field. However, any compound, mixture or composition of matter provided to Symyx
by TDCC (or by an Affiliate of TDCC on behalf of TDCC) for screening as a
catalyst, an activator, a scavenging agent or a support provided under another
agreement shall not be deemed to be a Library Compound.
1.20 "Manufacturing Costs" shall mean (i) all direct and indirect
costs related to the manufacture by TDCC or its Affiliates of Products,
including costs for personnel, materials, quality control, regulatory
compliance, administrative expenses, subcontractors, fixed and variable
manufacturing overhead costs and business unit or division costs reasonably
allocable to the manufacture of Products, as determined and allocated in
accordance with generally accepted
-3-
<PAGE> 4
accounting principles, consistently applied, excluding costs for excess
manufacturing capacity not reasonably related to projected demand for Products,
or (ii) with respect to Products purchased from a Third Party vendor, reasonable
amounts actually paid to the vendor for such Products in arm's length
transactions.
1.21 "Net Income" shall mean the pro forma amounts attributable to
royalties, license and other fees projected to be received, and projected Net
Sales with respect to a Product, less the projected: (a) Manufacturing Costs for
such Product; and (b) reasonable expenses incurred by TDCC or its Affiliates in
connection with the marketing, shipping or sale of the Product, and general and
administrative expenses relating thereto, all as determined and allocated in
accordance with generally accepted accounting principles, consistently applied.
1.22 "Net Sales" shall mean the invoice price billed by TDCC or its
Affiliates to Third Parties for the sale of Products, after deduction of (1)
cash, trade and/or quantity discounts actually allowed; (2) amounts repaid or
credited by reason of rejections or returns of goods, recalls, chargebacks,
defects, rebates (including government mandated rebates); (3) freight, postage,
and duties paid for and separately identified on the invoice or other
documentation maintained in the ordinary course of business, and (4) excises,
sales taxes, value added taxes, and duties actually paid and separately
identified on the invoice or other documentation maintained in the ordinary
course of business. Net Sales shall also include the amount of fair market value
of all other consideration received by TDCC or its Affiliates in respect of sale
of Products, whether such consideration is in cash, payment in kind, exchange or
another form. In the case of a transfer of Products between TDCC and one of its
Affiliates or between two Affiliates of TDCC for any purpose other than
research, development or sampling, Net Sales shall where feasible be determined
as provided in Section 5.2.1(vii).
1.23 "Olefin Polymers" shall mean any polymer within the scope of
Exhibit A.
1.24 "Outside Technology" shall have the meaning set forth in Section
2.3.3.
1.25 "Product" shall mean any product that (i) contains an Agreement
Compound, and/or (ii) contains a reaction product or other chemical derivative
of an Agreement Compound, (iii) utilizes in its manufacture any method or
process within the Program Technology developed by Symyx or developed jointly by
Symyx and TDCC, or (iv) utilizes an Agreement Compound in its manufacture, e.g.,
as a catalyst.
1.26 "Program Experiment" shall have the meaning set forth in Section
2.1.1(b).
1.27 "Program Technology" shall mean Program Patents and Program
Know-How.
1.27.1 "Program Know-How" shall mean inventions, information,
data, or materials developed by Symyx or TDCC or jointly by Symyx and TDCC in
each case in the course of the Research Program that are useful for the
manufacture, use or sale of Agreement Compounds or Products; provided, however,
that Program Know-How shall not include any Combinatorial
-4-
<PAGE> 5
Chemistry Technology, Outside Technology, any invention claimed in the Program
Patents or results of Independent TDCC Research.
1.27.2 "Program Patents" shall mean (i) all U.S. patent
applications claiming any inventions or discoveries conceived and reduced to
practice in the course of the Research Program by Symyx or TDCC or jointly by
Symyx and TDCC, or conceived by Symyx before the Research Program and reduced to
practice in the Research Program, which claim an Agreement Compound or a
Product, or method or process for the manufacture of an Agreement Compound or
Product, or a composition-of-matter containing an Agreement Compound or Product,
or a method or process for the use of an Agreement Compound in or for the
manufacture of a Product, in each case that are necessary or materially useful
for the manufacture, use or sale of Agreement Compounds or Products in the
Field, (ii) all divisions, substitutions, continuations, continuation-in-part
applications, and reissues, re-examinations and extensions of (i) above, (iii)
foreign counterparts of any of the preceding of (i) or (ii) above, and (iv)
patents, utility models or similar grants of rights issuing on any of the
preceding of (i), (ii) or (iii) above. It is understood and agreed that Program
Patents shall not include any Combinatorial Chemistry Technology or results of
Independent TDCC Research.
1.28 "Research Committee" shall have the meaning set forth in Section
3.1.
1.29 "Research Plan" shall have the meaning set forth in Section 2.1.
1.30 "Research Program" shall mean the program of research conducted
by Symyx and/or TDCC on a collaborative basis under this Agreement for the
purpose of identifying and optimizing Agreement Compounds for use as catalysts
in the Field. It is understood that the Research Program does not include
screening of compounds, mixtures or compositions of matter provided to Symyx by
TDCC (or by an Affiliate of TDCC on behalf of TDCC) for screening as a catalyst,
an activator, a scavenging agent or a support, which research is to be conducted
under terms of a separate agreement.
1.31 "Research Program Term" shall have the meaning described in
Section 2.2.
-5-
<PAGE> 6
1.32 "Sublicensee" shall mean, with respect to a particular Product,
a Third Party to whom TDCC or its Affiliate has granted a license or sublicense
to make, use and sell such Product.
1.33 "Symyx Patents" shall mean all U.S. patent applications filed on
or before or claiming priority on or before the date five (5) years after the
end of the Research Program claiming any inventions or discoveries owned or
controlled by Symyx (or by any wholly-owned subsidiary of Symyx) which claim an
Agreement Compound or a Product, or method or process for the manufacture of an
Agreement Compound or Product, or a composition-of-matter containing an
Agreement Compound or Product, or a method or process for the use of an
Agreement Compound in or for the manufacture of a Product, in each case that are
necessary or materially useful for the manufacture, use or sale of Agreement
Compounds, or Products in the Field (excluding EPDM), (ii) all divisions,
substitutions, continuations, continuation-in-part applications, and reissues,
re-examinations and extensions of (i) above, (iii) foreign counterparts of any
of the preceding of (i) or (ii) above, and (iv) patents, utility models or
similar grants of rights issuing on any of the preceding of (i), (ii) or (iii)
above. Notwithstanding the foregoing, it is understood and agreed that "Symyx
Patents" shall not include patent applications or patents claiming inventions
made by Symyx or its wholly-owned subsidiary (solely or jointly) in
collaboration with, or as part of a research program funded by, a Third Party if
such collaboration or research program is not directed to the screening,
discovery, or optimization of catalysts and catalyst systems (including but not
limited to catalyst supports, activators and scavenging agents) in the Field for
the purpose of making Olefin Polymers or the discovery or development of Olefin
Polymers using such catalysts and catalyst systems in the Field.
1.34 "Third Party" shall mean any party other than Symyx and its
Affiliates, TDCC and its Affiliates, and their permitted assignees.
ARTICLE 2
RESEARCH PROGRAM
2.1 Research Program. Subject to the terms and conditions set forth
herein, Symyx and TDCC shall conduct the research activities in the Fields in a
collaborative effort in accordance with an agreed upon written plan describing
the research activities to be conducted by each party (the "Research Plan"). The
initial Research Plan has been agreed upon by the parties in writing prior to
the Effective Date.
2.1.1 Responsibility - Symyx. During the term of the Research
Program, Symyx shall use efforts that are reasonable in the circumstances and
consistent with professional standards applicable to research in the Field as
well as relevant standards applied by Symyx in conducting research outside the
Research Program, to conduct research activities in accordance with the Research
Plan to identify, discover or synthesize catalysts for making Olefin Polymers in
the Fields by preparing and screening Library Compounds as set forth in the
Research Plan.
-6-
<PAGE> 7
(a) Compounds Already Identified. Symyx shall make available
for evaluation in the Research Program any compound, mixture or composition of
matter which was screened or prepared by or on behalf of Symyx prior to the
Effective Date or during the Research Program Term and is both (i) owned or
controlled by Symyx to the extent that no obligations to any Third Party will be
violated by use of the compound, mixture or composition in the Research Program
and (ii) believed by Symyx to be potentially useful as a Lead Compound or a
precursor of a Lead Compound.
(b) FTEs and Experiments. During each calendar year quarter
of the Research Program Term, Symyx shall, in its discretion taking into
consideration what is required to achieve the objectives of the Research Plan,
either (i) utilize nine (9) FTEs to conduct the Research Program or (ii) conduct
at least seven thousand five hundred (7,500) separate Program Experiments in the
Research Program. Each FTE utilized by Symyx shall be qualified for the
activities assigned to him or her under the Research Program. The FTEs will
include FTEs for Chemistry, Engineering, Database and Software. The initial FTEs
for Chemistry will be selected from the list set forth in Exhibit E, and may
include fractions of the time of one or more of the listed persons, provided
that individuals with special skills or expertise identified as "Key Personnel"
in Exhibit E shall be available for minimum fractions of their work time during
each calendar year quarter of the Research Program Term as may be reasonably
required consistent with the Research Plan. It is understood and agreed that in
the event one or more "Key Personnel" are not available due to circumstances
beyond the reasonable control of Symyx, Symyx shall use commercially reasonable
efforts to maintain the overall level of skills and expertise by replacing one
or more of the "Key Personnel" listed on Exhibit E. The Key Personnel identified
in Exhibit E may also be amended by mutual agreement of Symyx and TDCC and TDCC
shall not unreasonably withhold approval of changes in Key Personnel in Exhibit
E. As used herein, a "Program Experiment" shall include (A) an attempt to
synthesize a compound, mixture or composition of matter for use as a potential
catalyst, and (B) an attempt to carryout a polymerization reaction related to
the Field using such compound, mixture or composition of matter, and (C)
measurement of a property of either the potential catalyst or resulting polymer,
if any (e.g., activity of potential catalyst or physical/chemical properties of
polymer). It is understood and agreed that if different potential catalysts are
used in different experiments, or if two or more experiments are run using the
same potential catalyst in an attempted polymerization reaction that is run with
different monomers or different reaction parameters, or if measurement is made
of different properties, then such experiments shall be deemed to be separate
Program Experiments. The Program Experiments conducted by Symyx during the
Research Program will be selected consistent with the objectives set forth in
the Research Plan. Duplication of Program Experiments during the Research
Program will be avoided unless required as a control or for other valid research
purposes consistent with the objectives set forth in the Research Plan.
(c) Other Responsibilities. Symyx shall use reasonable
efforts to ensure that the most efficient and effective Combinatorial Chemistry
Technology reasonably available to Symyx are made available for conducting the
Research Program. At TDCC's request, Symyx will use commercially reasonable
efforts to provide samples of up to ten (10) grams of any Lead Compound;
however, if such sample cannot be provided at a commercially reasonable cost,
Symyx will so notify
-7-
<PAGE> 8
TDCC and the parties shall meet to discuss how to proceed. Notwithstanding any
other provision of this Agreement, Symyx shall not, without its consent, be
required to perform research activities other than in accordance with the
Research Plan, or utilize more than nine (9) FTEs (or, if applicable, perform
more than 7,500 Program Experiments) in any given calendar year quarter during
the Research Program Term.
2.1.2 Responsibility - TDCC. During the Research Program Term,
TDCC shall (i) conduct research activities in accordance with the Research Plan
to identify, discover or synthesize catalysts for making Olefin Polymers in the
Fields, and (ii) to provide Symyx technical information and technical support
reasonably necessary to conduct of the Research Program in accordance with the
Research Plan. TDCC's efforts in conduct of the Research Program shall be
reasonable in the circumstances and consistent with professional standards
applicable to research in the Field as well as relevant standards applied by
TDCC in conducting research outside the Research Program. Notwithstanding any
other provision of this Agreement, TDCC shall not, without its consent, be
required to disclose proprietary information to Symyx which is not essential to
conduct of the Research Program or to provide equipment or materials.
2.2 Research Program Term. The Research Program Term shall commence
on the Effective Date and, unless earlier terminated, continue thereafter for a
period of three (3) years, or such other period as the parties may mutually
agree in writing.
2.3 Exclusivity and Independent Research.
2.3.1 In the Field. During the Research Program Term, Symyx
shall not conduct any research activities outside the Research Program, on its
own behalf or on behalf of any Third Party, directed to the screening,
discovery, and optimization of catalysts and catalyst systems, including but not
limited to catalyst supports, activators and scavenging agents, for the purpose
of making Olefin Polymers within the scope of the Field. In addition, during the
Research Program Term, Symyx shall not knowingly provide Library Compounds to a
Third Party for use in screening, discovery, and optimization of catalysts and
catalyst systems (including but not limited to catalyst supports, activators and
scavenging agents) for the purpose of making Olefin Polymers.
2.3.2 Other Polyolefin Research by Symyx. It is understood
that Symyx will conduct research activities outside the Research Program ("Other
Polyolefin Research") during the Research Program Term for itself and/or Third
Parties for the purpose of identifying catalysts for making polyolefins other
than in the Field. In the event some Symyx employees work on both the Research
Program and the Other Polyolefin Research, Symyx shall use good faith
commercially reasonable efforts to avoid potential conflicts or overlaps between
the Research Program and Other Polyolefin Research and misappropriation of any
Confidential Information. It is understood that the Library Compounds are
regularly used by Symyx and that Symyx can use and screen the Library Compounds
for any use on its own behalf or for Third Parties, including without limitation
for Other Polyolefin Research, except to the extent that Symyx has granted to
TDCC exclusive rights to screen and optimize the Library Compounds in the Field
as set forth in Section 2.3.1. In the event that Symyx becomes aware of
information, data, materials or inventions which Symyx believes may
-8-
<PAGE> 9
advance the Research Program, in the course of conducting research outside of
the Research Program at its own expense or in collaboration with a Third Party,
Symyx will make available these information, data, materials and inventions for
use in the Research Program to the extent it is free to do so without violating
obligations to any Third Party; provided, however, it is understood that this
provision shall not impose, or be construed to impose, any obligation on Symyx
to identify or make itself aware of any such information, data, materials and
inventions.
2.3.3 Independent TDCC Research. It is understood that this
Agreement shall not prohibit TDCC from conducting research activities outside of
and independent from the Research Program ("Independent TDCC Research") during
the Research Program Term for itself and/or with Third Parties for the purpose
of identifying catalysts for making polymers including but not limited to Olefin
Polymers, developing new polymers including but not limited to Olefin Polymers
and developing, evaluating or utilizing Combinatorial Chemistry Technology. In
the event some TDCC employees work on both the Research Program and the
Independent TDCC Research, TDCC shall use good faith commercially reasonable
efforts to avoid potential conflicts or overlaps between the Research Program
and Independent TDCC Research and misappropriation of any Confidential
Information of Symyx. In the event that TDCC in the course of conducting
research outside of and independent from the Research Program discovers
information, data, materials or inventions ("Outside Technology") which TDCC
believes may advance the Research Program, TDCC may make such Outside Technology
available for use in the Research Program the extent it is free to do so without
violating obligations to any Third Party, and it is understood that such Outside
Technology shall not be deemed to be Program Technology; provided, however, that
information, data, materials or inventions made in the Research Program shall be
deemed to be Program Technology whether or not such information, data, materials
or inventions were made using Outside Technology.
2.4 Changes to Fields. The initial Fields activated in the Research
Plan shall be two or more Fields designated in the Research Plan. During the
Research Program Term, TDCC and Symyx may agree to conduct research in one or
more additional Fields, or to amend Exhibit A to create a new Field. In the
event that TDCC and Symyx agree to a new Field, this will be documented by
appropriate written modifications to the Research Plan, including criteria for
identifying a Lead Compound in such Field, and appropriate modifications in
writing to the staffing plan of the Research Program activities in connection
with such Field. TDCC and Symyx may also agree to discontinue activity in one or
more Fields by written modifications to the Research Plan. Appropriate
modifications or adjustments to staffing of the Research Program will be agreed
to reflect any changes in activity of the Fields. The Research Committee
described in Section 3.1 shall in general provide direction for any changes in
Fields and make formal recommendations to the Executive Committee. Symyx shall
not unreasonably refuse to agree to changes proposed by TDCC to change activity
in the Fields. TDCC shall not unreasonably refuse to agree to adjustments in
staffing of the Research Program proposed by Symyx as a consequence of any
changes in the activity of the Fields.
-9-
<PAGE> 10
2.5 EPDM. For a period of two (2) years commencing on the Effective
Date, Symyx will not conduct research on its own behalf or on behalf of any
Third Party for the purpose of discovering or developing catalysts to make
ethylene propylene diene monomer polymers ("EPDM"), except as provided in this
Section 2.5. If Symyx wishes to work on catalysts for the purpose of making
EPDM, either on its own behalf or on behalf of a Third Party, Symyx will notify
TDCC in writing. If TDCC wishes to either fully fund the work by Symyx in this
EPDM program, if there is no Third Party, or share the cost of the program, if
there is a Third Party, TDCC may so notify Symyx in writing and the parties will
negotiate terms for such EPDM program. If TDCC does not wish to participate in
the EPDM program, and TDCC does not give Symyx written consent to conduct such
program on its own behalf or on behalf of a Third Party, then Symyx shall not
conduct or initiate the EPDM program prior to two years after the Effective
Date. TDCC understands that Symyx may have similar obligations to a Third Party
in connection with the Other Polyolefin Research as described in Section 2.3.2
with respect to EPDM. Notwithstanding the foregoing, in the event that a Third
Party provides to Symyx compounds and/or potential catalysts for making EPDM,
Symyx may work with such Third Party at any time to conduct research activities
directed solely towards the optimization of such compounds and/or potential
catalysts for making EPDM.
2.6 Research Records. Symyx and TDCC shall maintain records of the
Research Program (or cause such records to be maintained) in sufficient detail
and in good scientific manner as will properly reflect the work done and results
achieved in the performance of the Research Program (including information
sufficient to establish dates of conception and reduction to practice of
inventions). Access to such records shall be granted as provided in Sections
5.1.3 and 7.2.
2.7 Development and Commercialization of Agreement Compounds and
Products. TDCC and its Affiliates shall be responsible for all expenses incurred
for the development and commercialization of Agreement Compounds and Products by
TDCC and its Affiliates under the terms of this Agreement.
2.8 Discovery Tools. It is understood that Symyx has been at its own
expense developing and intends to continue to develop a 48-channel parallel
polymerization reactor and related analysis tools (including ambient and high
temperature molecular weight determination modules, a high throughput thermal
analysis module, library synthesis tools and certain related software) for uses
including but not limited to synthesizing, screening or identifying Coordination
Polymerization catalysts and/or supported Coordination Polymerization catalysts
utilizing Combinatorial Chemistry (collectively, the "Discovery Tools"), and
that Symyx intends to offer some or all of these Discovery Tools to TDCC and/or
TDCC Affiliates and possibly to Third Parties, either through sale of equipment
and supplies and/or licenses to intellectual property or some other means
selected at Symyx's discretion. Symyx agrees to provide TDCC a proposal (the
"Tools Proposal") setting forth a summary of terms which in Symyx's opinion are
essential and on which Symyx is willing to license and/or sell such Discovery
Tools to TDCC on or before April 1, 1999, and Symyx and TDCC agree to negotiate
in good faith to enter into a written agreement for such license and/or sale of
Discovery Tools for a period of sixty (60) days following delivery of the Tools
Proposal, it being understood that such written agreement shall set forth
mutually agreed terms and conditions on which Symyx will license and/or sell
Discovery Tools on a non-exclusive basis as reasonably required for internal
research use by TDCC and/or TDCC's Affiliates. In order to provide TDCC an
opportunity to be one of Symyx's first customers to exploit the Discovery Tools
for Coordination Polymerization applications, Symyx will not ship or deliver the
Discovery Tools to any of the companies listed in Exhibit C earlier than one
year after the date Symyx notifies TDCC
-10-
<PAGE> 11
such Discovery Tools are available for shipment to TDCC, provided that TDCC or
TDCC's Affiliates enter into a written agreement with Symyx to purchase and/or
license Discovery Tools on or before sixty (60) days after Symyx has delivered
the Tools Proposal to TDCC, and such agreement is not breached by TDCC. Symyx
shall also not knowingly deliver Discovery Tools to a Third Party which Symyx
has reason to know at the time of contracting to deliver same would be used for
the benefit of any of the companies on Exhibit C during the period, if any, that
Symyx is obligated not to license or sell Discovery Tools to such companies. It
is understood and agreed that the terms for sale of Discovery Tools by Symyx to
TDCC are to be mutually agreed in writing and this Agreement does not itself
obligate Symyx to sell or TDCC to purchase such Discovery Tools, or obligate
either Symyx or TDCC to accept or agree to terms and conditions of any such sale
and/or license. In the event that Symyx and TDCC do not conclude a written
agreement regarding purchase or license of Discovery Tools within sixty (60)
days of delivery of the Tools Proposal, TDCC and Symyx may mutually agree to
terms of such an agreement at a later date but Symyx shall be free to ship or
deliver Discovery Tools to any party.
2.9 Third Party Claims. In the event that TDCC or Symyx receives a
written notice from any Third Party alleging patent infringement,
misappropriation of trade secrets, or other violation of intellectual property
rights, based on research activities in the Research Program (i) such party
shall promptly notify the other, and (ii) Symyx shall have the right, in its
discretion, to cease to conduct any research activities that are the subject of
such claim without liability to TDCC; provided, however, that if TDCC acquires a
license to permit the conduct of such activities by Symyx in the Research
Program, and/or if TDCC and Symyx mutually agree in writing upon terms of
indemnification by TDCC for Symyx's conduct of such activities, then Symyx will
resume or continue, as appropriate, such activities in accordance with the
Research Plan and the terms and conditions of this Agreement. In the event Symyx
decides to cease to conduct any research activities pursuant to this Section
2.9, Symyx and TDCC shall endeavor to change or modify the Fields as provided in
Section 2.4 in a manner which maintains the value of the Research Program to
TDCC; provided, however, that if such cessation of research activities by Symyx
will have a material adverse impact on the Research Program which in the
reasonable opinion of TDCC will not be adequately remedied by a change or
modification of Fields, then TDCC shall have the right to terminate the Research
Program on thirty (30) days written notice to Symyx specifying termination
pursuant to this Section 2.9 and identifying the ceased research activities
giving rise to the termination.
ARTICLE 3
MANAGEMENT
3.1 Establishment of Research Committee. Symyx and TDCC shall
establish a committee (the "Research Committee") to (i) monitor technical
progress in the Research Program and report progress to the Executive Committee,
(ii) modify the Research Plan as needed within the scope of the Fields, (iii)
establish criteria to define Lead Compounds within each Field, and (iv)
-11-
<PAGE> 12
recommend to the Executive Committee changes in the Fields in accordance with
Section 2.4, and (v) ensure open communications between the parties.
3.2 Membership of Research Committee. The Research Committee shall
be comprised of three (3) representatives designated by each of Symyx and TDCC,
or such other equal number of representatives as the parties may from time to
time agree in writing, with each party's representatives selected by that party.
Either party may replace one or more of their respective Research Committee
members at any time, upon written notice to the other party. The chairperson of
the Research Committee shall be selected by TDCC. The secretary of the Research
Committee shall be selected by Symyx.
3.3 Technical Team and Program Coordinator. Symyx and TDCC shall
each designate two or more representatives to serve on a Technical Team which
will: (i) provide day to day oversight and coordination of activities under the
Research Program, and (ii) initiate and respond to communications between the
parties related to conduct of the Research Program. Each party shall designate a
single program coordinator to lead its representatives on the Technical Team and
to resolve or facilitate resolution of issues arising under the provisions of
this Agreement. The Technical Team shall report progress and refer unresolved
disputes to the Research Committee. Each party may change its designated program
coordinator or representatives on the Technical Team at any time upon written
notice to the other.
3.4 Meetings. During the Research Program Term, the Research
Committee shall meet at regular intervals at least four times per year at
locations and times agreed by the parties. Special meetings of the Research
Committee may be called by either party on ten (10) days written notice to the
other party. All meetings shall alternate between offices of TDCC and Symyx
unless members of the Research Committee otherwise agree. Upon consent of the
parties, other representatives of Symyx or TDCC may attend Research Committee
meetings as nonvoting observers. Research Committee members may participate in
any such meeting in person, by telephone, or by televideo conference. Symyx
shall prepare minutes of each Research Committee meeting, which minutes shall be
subject to review and approval by TDCC. The reviewed and approved minutes shall
be signed by Research Committee representatives of each party.
3.5 Decision Making. A quorum of the Research Committee shall be
present at any meeting where at least one member of each party participates in
all decisions. Decisions of the Research Committee shall be made by unanimous
approval. In the event the Research Committee is unable to decide an issue, it
may be referred by either party to the Executive Committee for resolution.
3.6 Executive Committee. Symyx and TDCC shall establish a committee
comprised of one representative each from Symyx and TDCC (the "Executive
Committee"). Each party's representative on the Executive Committee shall be
selected by that party, and either party may replace its Executive Committee
representative at any time, upon written notice to the other party. The initial
members of the Executive Committee shall be Ed Gambrell for TDCC and Steve
Goldby for
-12-
<PAGE> 13
Symyx. The Executive Committee shall meet at least twice per year at locations
and times agreed by the parties, and members of the Executive Committee may
participate in any such meeting in person, by telephone, or by televideo
conference. Special meetings of the Executive Committee may be called by either
party on fifteen (15) days written notice to the other party. Upon consent of
the parties, other representatives of Symyx or TDCC may attend Executive
Committee meetings as nonvoting observers. Symyx shall prepare minutes of each
Executive Committee meeting, which minutes shall be subject to approval by TDCC
and after approval will be signed by Executive Committee representatives of each
party. The Executive Committee shall (i) oversee the direction of the overall
relationship between TDCC and Symyx, (ii) resolve any disputes not resolved by
the Research Committee, (iii) set the direction of the Research Program within
the bounds set forth in this Agreement and the Research Plan, and (iv) decide
upon changes in Fields. In the event that the Executive Committee cannot reach
unanimous agreement on matters related to the conduct of the Research Program
other than: (a) the interpretation of obligations of confidentiality under this
Agreement, (b) the amount of any payments due hereunder, (c) intellectual
property ownership, (d) additions to or changes in the scope of the Fields, (e)
staffing of research projects, (f) expenditures by Symyx in conducting the
Research Program, and (g) rights granted under Article 4, TDCC shall have the
right to cast the deciding vote. Unresolved disputes related to (a), (b), (c),
(d), (e), (f), or (g) shall be subject to binding arbitration by either party as
set forth in Section 13.16, in the absence of a unanimous decision by the two
members of the Executive Committee.
ARTICLE 4
LICENSES
4.1 License to TDCC.
4.1.1 License in the Fields. Subject to the terms and
conditions of this Agreement, Symyx agrees to grant, and hereby grants, to TDCC,
and TDCC hereby accepts an exclusive (even as to Symyx), worldwide,
royalty-bearing license under Symyx's interest in the Program Technology to
make, have made, import and use Agreement Compounds to develop, make, have made,
use, sell, offer for sale, and import Products within the scope of the
corresponding Fields. For purposes of clarification, it is understood that for
so long as TDCC retains this license, TDCC shall have the non-exclusive right to
use Library Compounds and Confidential Information received from Symyx in the
course of the Research Program, as well as Program Technology, to develop
Agreement Compounds both during and after the Research Program Term and to make,
have made, import and use such Agreement Compounds to develop, make, have made,
use, sell, offer for sale, and import Products within the Scope of the Fields.
However, it is understood and agreed that no license is granted to TDCC under
Symyx Patents or other patents owned or controlled by Symyx which are not
Program Patents, except as provided in Section 4.1.3.
4.1.2 EPDM. Within six months after the end of the Research
Program Term, TDCC may identify and notify Symyx of up to five Lead Compounds
which TDCC may use in a chemical synthesis program or modify using Program
Technology to produce Agreement
-13-
<PAGE> 14
Compounds for EPDM. For so long as TDCC retains a license under Section 4.1.1 to
use any Lead Compound to manufacture, use and sell Products within any Fields,
and on the terms and conditions set forth in this Agreement, Symyx agrees that
TDCC shall also have a non-exclusive, worldwide, royalty-bearing, license under
Symyx's interest in the Program Technology to use any Lead Compound or
Derivative Compounds based on the up to five Lead Compounds notified to develop,
make, have made, use, sell, offer for sale, and import EPDM as a Product under
this Agreement. TDCC understands and acknowledges that Symyx may grant similar
rights regarding EPDM to a Third Party in connection with the Other Polyolefin
Research described in Section 2.3.2, and that one or more Lead Compounds or
Derivative Compounds to which TDCC obtains a license in the Field may be
licensed to the Third Party for use outside of the Field, and that both TDCC and
such Third Party may acquire licenses from Symyx to use one or more of the same
Lead Compound(s) or Derivative Compound(s) to make EPDM.
4.1.3 Limited Immunity with Respect to Symyx Patents. Within
three (3) months after the end of the Research Program Term, TDCC may identify
and notify Symyx of (a) up to ten (10) discrete chemical entities that were
identified as Lead Compounds in the Research Program or result from a chemical
synthesis program based on a Library Compound or from use of Program technology
relating to a Library Compound (each such compound being a "Designated
Compound"), and (b) one Olefin Polymer, which may comprise either any one of the
first five Fields in Exhibit A or a specific copolymer of ethylene and/or
a-olefin with a single specified comonomer selected by TDCC from the sixth Field
("Polar Comonomer Fields") in Exhibit A, such Olefin Polymer being (the
"Designated Polymer"). It is understood and agreed that no more than three of
the ten Designated Compounds are to be selected for use in the Polar Comonomer
Fields. In furtherance of the license granted to TDCC in Section 4.1.1, Symyx
agrees that, to the extent necessary for TDCC to practice the license granted in
Section 4.1.1 and for so long as TDCC is not in default of any payment due to
Symyx hereunder, Symyx shall not bring any claim or action against TDCC or its
Affiliates or Sublicensees or purchasers or users of Products from TDCC or its
Affiliates or Sublicensees, based on or asserting that:
(i) the manufacture, use, sale, offer for sale or import of
the Designated Polymer that is made using an Agreement Compound and for which
TDCC, its Affiliates or Sublicensee pays a royalty to Symyx hereunder violates
or infringes any Symyx Patent, or
(ii) the manufacture, use, sale, offer for sale or import of
a Product (other than the Designated Polymer covered in (i) above) that contains
or is made using a Designated Compound (or a "Direct Modification" thereof, as
defined in Exhibit D) and for which TDCC, its Affiliates or Sublicensee pays a
royalty to Symyx hereunder violates or infringes any Symyx Patent based on or
claiming priority from a U.S. patent application filed on or before or claiming
priority on or before the date two (2) years after the end of the Research
Program (or a division, substitution continuation, continuation in part,
reissue, re-examination, or extension thereof, or a foreign counterpart of any
of the preceding, or any patents, utility models, or similar grant of rights
issuing on any of the preceding).
-14-
<PAGE> 15
It is understood and agreed that the limited immunity granted under this Section
4.1.3 shall not extend to any unit of Product, unless Symyx has actually
received payment of royalty for such unit of Product so manufactured, used, sold
or imported in a territory where one or more Symyx Patent(s) are in force.
4.2 Sublicenses. Subject to the terms and conditions of this
Agreement, TDCC shall have the right to grant sublicenses under the rights
granted in Section 4.1 above to Affiliates of TDCC; provided that the terms of
each such sublicense shall be consistent with the terms of this Agreement. It is
understood that any such sublicense shall be subject and subordinate to the
terms and conditions of this Agreement, and that TDCC shall remain responsible
for all applicable financial and other obligations under this Agreement for each
such Affiliate sublicensed, including without limitation milestone and royalty
payments due to Symyx hereunder with respect to development and sales of
Products. Subject to the terms and conditions of this Agreement, TDCC or an
Affiliate of TDCC shall also have the right to grant sublicenses under the
rights granted in Sections 4.1.1, 4.1.2 and 4.1.3 above to one or more Third
Parties; provided that any revenue received from such a Sublicensee for such
grant shall be shared in accordance with Section 5.2(iv). TDCC shall provide to
Symyx at least the following information with respect to each Sublicensee or
Affiliate sublicensed: (i) the identity of each Sublicensee or Affiliate
sublicensed, (ii) a summary of the rights granted as to both subject matter and
territory; and (iii) a summary of the Confidential Information of Symyx and
Program Technology furnished to each Sublicensee or Affiliate. No sublicense
granted by TDCC or an Affiliate to a Third Party may be further assigned or
further transferred by any Sublicensee without the prior written consent of
Symyx, which consent shall not be unreasonably withheld; provided, any such a
sublicense may be further assigned by a Sublicensee without the consent of Symyx
in connection with a transfer of substantially all the business of such
Sublicensee to which such sublicense relates.
4.3 Third Party Rights. It is understood that Symyx is in the
business of conducting materials discovery, research and development with Third
Parties, and that Symyx will continue to grant Third Parties rights to acquire
licenses related to compounds and materials derived from such research. It is
possible that a Third Party may acquire rights from Symyx with respect to one or
more compounds or materials that are solely owned by Symyx or jointly owned by
Symyx and a Third Party and which were made and designed independently of
Symyx's activities in the Research Program. Accordingly, Symyx's grant of rights
to TDCC under Section 4.1 does not include (i) rights that are covered by a
patent application with respect to such a compound or material that was made and
designed independently of activities in the Research Program and is solely owned
by Symyx or a Third Party or jointly owned by Symyx and a Third Party, where
such patent application was filed by a Third Party (either alone or jointly with
Symyx) prior to the filing by TDCC (either alone or jointly with Symyx) of a
patent application with respect to such a compound or material, or (ii) rights
which are subject to a license, option, or other rights that Symyx has granted
to a Third Party prior to the Effective Date. It is understood and agreed that,
even if Symyx complies with its obligations under this Agreement, research for
Third Parties in the course of Symyx's other business activities may result in
patent applications and patents owned by Third Parties, or owned jointly by
Symyx and such Third Parties, which could conflict with patent applications and
patents owned by
-15-
<PAGE> 16
TDCC, or jointly owned by TDCC and Symyx, under this Agreement. Symyx shall use
its good faith commercially reasonable efforts to avoid such conflicts. In the
event that conflicts arise between rights granted to TDCC in the Field and
rights granted by Symyx outside the Field, Symyx agrees to use commercially
reasonable efforts to promote a resolution of the conflict between TDCC and the
Third Party via a cross-license or other arrangement acceptable to the parties
involved. It is understood that, except to the extent that TDCC is damaged as a
proximate result of a material breach by Symyx of Sections 2.3, 4.1.1, or 10.2
of this Agreement, then Symyx shall have no liability under this Agreement with
respect to any such conflict.
4.4 Joint Inventions Outside of the Fields. TDCC, TDCC's Affiliates,
Symyx, and Symyx's Affiliates shall each have the right to use Joint Inventions
for internal research purposes outside of the scope of the Fields; provided,
however, that Symyx shall have the sole right to grant and authorize licenses
and sublicenses under such Joint Inventions to Third Parties outside of the
scope of the Fields. It is further understood and agreed that Symyx shall have
the right to grant Third Parties licenses under Joint Inventions outside of the
scope of the Field that are exclusive even as to TDCC and Symyx; provided, that
if Symyx grants such a license that is exclusive even as to TDCC and Symyx,
Symyx shall promptly notify TDCC in writing and shall pay to TDCC thirty-three
percent (33%) of up-front license fees and royalties payments received by Symyx
from such Third Party in respect of such exclusive license under such Joint
Inventions. Notwithstanding the foregoing, it is understood and agreed that
Symyx may grant exclusive licenses under such Joint Inventions outside of the
Fields to certain Third Parties in connection with the Other Polyolefin Research
described in Section 2.3.2, and that Symyx shall not be required to pay any
amounts to TDCC hereunder in connection with such licenses. It is understood and
agreed that Confidential Information received by Symyx from TDCC shall be
subject to all applicable provisions of Article 9 of this Agreement.
4.5 Retained Rights.
4.5.1 Sole Inventions Outside the Fields. Subject to the
license to Combinatorial Chemistry Technology in Section 4.6, TDCC and Symyx
shall each retain all rights outside the scope of the Fields in and to
inventions and discoveries invented or made solely by such party in the course
of the Research Program.
4.5.2 Symyx Research. Notwithstanding the licenses and rights
granted by Symyx in this Article 4, Symyx shall retain the right to make, have
made, and use any Library Compounds or Agreement Compounds, and use or practice
any processes or methods developed by or on behalf of Symyx in the course of
performing the Research Program, for its own internal research to develop,
improve and validate its tools and Combinatorial Chemistry Technology.
4.6 Combinatorial Chemistry. TDCC agrees to grant, and hereby
grants, to Symyx an irrevocable, royalty-free non-exclusive license, with the
right to grant and authorize sublicenses, under TDCC's interest in Combinatorial
Chemistry Technology made or invented solely by TDCC in the course of the
Research Program, to conduct activities using Combinatorial Chemistry. TDCC,
TDCC's Affiliates, Symyx and Symyx's Affiliates shall each have the right to use
Combinatorial
-16-
<PAGE> 17
Chemistry Technology made or invented jointly by TDCC and Symyx in the course of
the Research Program for internal research purposes; provided, however, that
Symyx shall have the sole right to grant and authorize licenses and sublicenses
to Third Parties under such Combinatorial Chemistry Technology. It is understood
that this Section 4.6 shall not apply to any inventions conceived and reduced to
practice by TDCC independent of the Research Program and without use of, or
reference to, Combinatorial Chemistry Technology owned by Symyx, other than the
use of and reference to the Discovery Tools, if any, licensed or sold to TDCC as
set forth in Section 2.8. Nothing herein shall be construed to obligate TDCC to
grant to Symyx the right to use or sublicense background rights in technology of
TDCC which existed prior to the Effective Date or results of Independent TDCC
Research.
4.7 Limited Use Outside of Field. Except as the parties may
otherwise expressly agree in writing, TDCC shall not use or sell, or authorize
the use or sale of, Program Technology developed solely or jointly by Symyx, or
any Agreement Compound or Library Compound, except (i) in relation to the
manufacture, use or sale of Products within the corresponding Field or Fields in
accordance with the license granted by Symyx in Sections 4.1.1 or (ii) in
relation to the manufacture, use or sale of EPDM in accordance with Section
4.1.2. It is understood that this Section 4.7 does not preclude TDCC from the
use or sale or authorizing the use or sale of compounds developed independently
by TDCC without the use of Library Compounds, Confidential Information of Symyx,
or Program Technology.
ARTICLE 5
PAYMENTS
5.1 Research Funding.
5.1.1 Amounts. TDCC shall pay Symyx the following amounts as a
part of the consideration for conducting the research activities in the Research
Program: (i) four million five hundred thousand dollars ($4,500,000) for the
first full year of the Research Program, (ii) four million nine hundred fifty
thousand dollars ($4,950,000) in the second full year of the Research Program,
and (iii) five million four hundred thousand dollars ($5,400,000) in the third
full year of the Research Program.
5.1.2 Quarterly Payments. The amounts set forth in Section
5.1.1 shall be paid in advance in four equal installments during each year of
the Research Program. The initial payment shall be made on or before the 1st day
of the month following the Effective Date. Subsequent payments shall be made at
three month intervals thereafter on or before the first day of the applicable
month for the duration of the Research Program term. It is understood and agreed
that all such payments are nonrefundable and noncreditable, except as provided
in Article 12.
5.1.3 Research Program Records. Symyx shall keep complete,
true and accurate books of account and records sufficient to determine the
number of Symyx FTE's utilized, the number of experiments performed by Symyx in
each quarter during the Research Program Term in connection with the performance
of the Research. Such books and records shall be kept at the
-17-
<PAGE> 18
principal place of business of Symyx for at least three (3) years following the
end of the calendar year quarter to which they pertain. Such records will be
open for inspection during normal business hours upon ten (10) days prior notice
during such three (3) year period, by an independent auditor of TDCC, for the
purpose of verifying the number of Symyx FTE's used in the Research Program
during the Research Program Term, and the number of Program Experiments. Such
inspections may be made no more than once each calendar year, at reasonable
times mutually agreed by Symyx and TDCC. It is understood and agreed that TDCC's
auditor will be obliged to execute a reasonable confidentiality agreement prior
to commencing any such inspection.
5.2 Royalties.
5.2.1 General Principles. TDCC shall pay to Symyx (i) a
royalty on Net Sales of Products by TDCC and its Affiliates at a royalty rate
determined in accordance with this Section 5.2.1, and (ii) a share of any
payments from Sublicensees as set forth in Section 5.2.1(iv). Illustrative
calculations for determining a royalty rate pursuant to Section 5.2.1(i) and
sharing of revenue from Sublicensees pursuant to Section 5.2(iv) shall be
mutually agreed by Symyx and TDCC by July 1, 1999.
(i) Determining Royalty Rate for Net Sales of
Product. A royalty rate shall be determined for each class of Products. Where
two or more Products to be sold commercially by TDCC are similar in terms of
type and markets, for example different grades of polyethylene resins for films,
all such Products shall be included in a class of Products and a single royalty
rate determined for same. At least three (3) months prior to the first
commercial sale of the first Product in a class, Symyx and TDCC shall meet to
determine a fixed royalty rate that will be payable to Symyx with respect to Net
Sales of the applicable class of Products. TDCC and Symyx shall each use
commercially reasonable efforts to determine the applicable royalty rate for
each class of Products prior to the initial sale of significant commercial
quantities of such Products. In the event that the applicable royalty rate of a
Product has not been determined at the time the initial payments of royalties
are due, a provisional royalty rate of two and one-half percent (2.5%) will be
used as the basis for royalty payments for such Product until the applicable
royalty rate is determined. When the applicable royalty rate is determined, TDCC
shall within thirty (30) days remit to Symyx any amounts underpaid because the
provisional royalty rate was lower than the determined royalty rate, plus
interest to be calculated as provided in Section 6.2 from the time the royalty
payments would have been due to the time the payment is made, and TDCC shall be
entitled to take as a credit against future royalty payments to Symyx for such
Products any amounts overpaid because the provisional royalty rate was higher
than the determined royalty rate, plus interest to be calculated as provided in
Section 6.2 from the time such provisional payments were made until the time
such credit is taken. The royalty rate for each class of Products shall be
determined by TDCC and Symyx as set forth in this Section 5.2.1 with the goal of
providing Symyx twenty-five percent (25%) of the Added Value realized by TDCC
and its Affiliates from commercialization of: Agreement Compounds and Products
attributable to Program Technology licensed by Symyx to TDCC and the use of
Combinatorial Chemistry Technology of Symyx. In the case of manufacture or sale
of Products by TDCC or TDCC Affiliates, "Added Value" shall mean the difference
for a business unit between: (i) Net Income derived from
-18-
<PAGE> 19
the use or sale of a Product to the extent it is attributable to use of
Agreement Compounds or Program Technology, and (ii) the Net Income without the
use or sale of Product but including other goods which it is expected would have
been sold by the business unit if the Product were not available, in each case
determined in accordance with Generally Accepted Accounting Principles (GAAP),
on a consistent basis. By way of example and without limitation, in determining
the overall Added Value received by TDCC, where a Product is a substitute for an
existing product sold by TDCC, the parties shall consider changes in sales
volume resulting from Product, Product pricing and Product development,
production and commercial costs (e.g., due to changes in raw materials costs,
capital costs, processing costs, yield, market development costs, research
costs, royalties payable to Third Parties and claims of third parties), in each
case, attributable to the use or sale of the Products or their manufacture. In
addition, it is understood that if a Product uses technology developed by TDCC
or its Affiliates outside of the Research Program or acquired from a Third
Party, e.g., a second catalyst in a dual catalyst system to manufacture a
Product where the first catalyst is an Agreement Compound, Added Value shall,
where appropriate, take into account the contributions of the Agreement
Compounds and Program Technology relative to the other technology in determining
the Net Income derived from use or sale of the Product as a result of the
Agreement Compounds and Program Technology. Once the projected Added Value
related to the particular Product has been determined, the parties will then
decide on the royalty rate to be paid by TDCC on Net Sales of such Product so as
to provide Symyx twenty-five percent (25%) of the Added Value projected to be
realized by TDCC or its Affiliates over the period during which royalty payments
are to be paid. However, in no event shall the royalty rate so determined by the
parties be less than one-half of one percent (0.5%) or greater than five percent
(5%) of the Net Sales of a Product.
(ii) TDCC Internal Documentation. The royalty rate
used to calculate the royalty payments due Symyx with respect to a particular
Product or class of Products shall be agreed by the parties at the time TDCC
decides to build or modify its commercial production facilities to utilize the
Program Technology or to use any Agreement Compound for production of such
Products in its production facilities, and in no event later than six months
after the date of commercialization of such Product. It is understood and agreed
that limited sales for purposes of market development do not constitute
commercialization of a Product. The royalty rate will be determined based on the
expectation of the Added Value to be realized by TDCC and TDCC Affiliates from
such Products, as demonstrated in TDCC's internal forecasts for ten (10) years
or longer of Product sales, pricing, cost and profitability used by TDCC at the
time of determining whether or not to build or modify production facilities to
utilize the Program Technology, or whether or not to utilize Agreement
Compounds, or other relevant sources of information if such forecasts do not
exist. Such forecasts shall start with the first year of commercial sales of the
class of Products, and prior to their consideration, such forecasts and other
relevant information shall have been approved by the chief executive officer of
TDCC or the leader of the business unit of TDCC or a TDCC Affiliate involved. It
is understood and agreed that if TDCC notifies Symyx that TDCC desires enhanced
secrecy with respect to certain specified internal forecasts of TDCC or TDCC's
Affiliates for Product sales, pricing, cost or profitability to be provided to
Symyx hereunder, Symyx shall designate one (1) executive of Symyx, approved by
TDCC (which approval shall not be unreasonably withheld), to review such
information, which executive shall agree not to disclose the actual data or
forecast to
-19-
<PAGE> 20
other employees of Symyx, and TDCC shall also disclose such data or forecasts to
an independent consultant selected by Symyx and approved by TDCC (which approval
shall not be unreasonably withheld) for verification on Symyx's behalf of the
royalty determination for the applicable Products. The designated Symyx
executive and independent consultant shall each be required to agree to and
abide by reasonable and appropriate obligations of confidentiality with respect
to any Confidential Information received, and internal forecasts of TDCC for
Product sales, pricing, cost and profitability will be subject to reasonable and
appropriate protections to prevent disclosure of same to other persons at Symyx
and to Third Parties.
(iii) Arbitration. In the event the parties do not
reach agreement on the royalty rate to be paid by TDCC to Symyx with respect to
any particular class of Products within ninety (90) days from the parties' first
meeting regarding such Product pursuant to Section 5.2.1(i), above, the
determination of a royalty rate may be submitted to binding arbitration by
either party pursuant to Section 13.16, except that the arbitration will be
conducted by one neutral arbitrator with expertise in the chemical industry
which both TDCC and Symyx approve. The arbitrator in an arbitration pursuant to
this Section 5.2.1(iii) shall be instructed that the sharing of Added Value as
set forth in this Section 5.2.1 shall be the basis of the arbitrator's decision,
which decision regarding the royalty shall be limited to setting an appropriate
royalty rate for the Product. The arbitrator must agree to abide by appropriate
obligations of confidentiality with respect to any Confidential Information
received and internal forecasts of TDCC for Product sales, pricing, cost and
profitability will be subject to protections to prevent disclosure of same to
Symyx.
(iv) Sharing of Sublicense Revenues. In addition to
the royalty paid to Symyx on Net Sales of Products by TDCC and its Affiliates,
TDCC shall share payments received from Sublicensees with Symyx as follows: TDCC
shall pay to Symyx twenty five percent (25%) of any royalties and license fees
received from a Sublicensee net of costs (including costs for negotiation and
administration of the license) with respect to the grant of a license to make,
have made, use, sell, offer for sale, and import Products or EPDM using
Agreement Compounds or Program Technology licensed to TDCC by Symyx. The payment
received by TDCC for grant of such a sublicense is to be negotiated at
arm's-length. In the event that the license to the Third Party pertaining to
Products is granted as part of a license of other rights, for example a license
to use TDCC solution polymerization technology, or in exchange for non-monetary
consideration, such as a cross-license, the fair market value of the technology
sublicensed related to the Agreement Compounds and Program Technology licensed
to TDCC from Symyx shall be determined and used as the basis for calculating the
twenty five percent (25%) of such revenue due Symyx.
(v) Development Activity Expenses. It is further
understood and agreed that when determining Added Value, development expenses
with respect to a particular Product will be depreciated on a straight-line
basis over the same period of time as the forecasts in Section 5.2.1(ii) to
determine Added Value, and will be limited to the amount of development expenses
expected to be incurred by TDCC and its Affiliates.
-20-
<PAGE> 21
(vi) Unexpected Results. In the event that after a
royalty rate is set for a class of Products, subsequent developments, such as
failure to obtain patent protection, much lower or higher market prices for a
Product than projected, much lower or higher volumes of sales of Products than
forecast, third party patent infringement claims or royalties payable to a Third
Party on a Product, result in a material impact of greater than twenty percent
(20%) on the projected Added Value on which the royalty rate was based, the
Parties shall in good faith negotiate an adjustment to the royalty rate, within
the range specified in the last sentence of Section 5.2.1(i), for such class of
Products upon request of either party.
(vii) Single Royalty Due. Where a Product is sold by
TDCC or its Affiliates to Third Parties and the Product is also converted by
TDCC or its Affiliates into another Product by processing, blending or
fabricating and the resulting converted Product sold, Net Sales shall be
determined on the Product initially made and only a royalty payment for such
initial Product shall be due. In the case of a transfer of Products between TDCC
and one of its Affiliates or between two Affiliates of TDCC for any purpose
other than research, development or sampling, Net Sales shall where feasible be
determined based on the invoiced sales price for substantially identical
Products upon sale to a Third Party customer in the territory or geographic
region where the Product is delivered, less the deductions allowed for such
sales. In the event that Products are transferred between an Affiliate of TDCC
and either TDCC or another Affiliate of TDCC and there have been no comparable
sales of such Products to a Third Party on which to determine a basis of
determining the value of such sale, the invoice price received from invoicing,
shipment or transfer of title in the Product to a person or entity other than
TDCC or its Affiliate, less allowed deductions, shall be used in determining Net
Sales. In the event a Product is sold by TDCC or an Affiliate in combination
with other goods and services, Net Sales of the Product shall also be determined
by reference to the average selling price of the Product without other goods and
services sold to Third Parties during the same time period.
(viii) Patents. Whether or not patent protection will
be obtained for Products or a process for making or using Products will have a
significant impact on the Added Value realized by TDCC. In addition, failure to
abate infringement of a Program Patent and/or obligations to pay a Third Party a
royalty for rights to practice under its patents or to settle patent
infringement disputes may have an impact on Added Value. Accordingly, the extent
of patent protection for Products and risks and costs of infringement of Third
Party patents will be taken into consideration in determining the Value Added.
5.2.2 Royalty Term. TDCC's obligation to pay royalties to
Symyx shall continue for each class of Products until the later of (i) twelve
(12) years after the first commercial sale of any Product in such class of
Products on which royalties are payable by TDCC to Symyx, or (ii) the expiration
of the last to expire issued patent covering such Product based on the Program
Technology which is owned and/or controlled by TDCC or Symyx. Notwithstanding
any other provision of this Agreement, all royalty obligations of TDCC or its
sublicensee for all Products shall cease twenty (20) years from the date of the
first commercial sale of the first Product on which royalties are payable by
TDCC to Symyx.
-21-
<PAGE> 22
5.3 Payments in Lieu of Royalties. Royalties due on Net Sales of
Products or classes of Products may be burdensome to calculate and report. TDCC
and Symyx in such cases will seek to negotiate an alternative basis for
calculation of consideration payable in lieu of running royalties on such
classes of Products, which both parties deem will result in a payment to Symyx
of an amount commensurate with the royalties otherwise payable under Section
5.2.
5.4 Technology Access Fee. In addition to the other payments to
Symyx provided herein, TDCC shall pay to Symyx a one-time Technology Access Fee
of [******] by February 12, 1999. It is understood and agreed that the
Technology Access Fee is noncreditable and shall be non-refundable, except as
provided in Article 12.
5.5 Third Party Royalties. Symyx shall not be responsible for
payments due to Third Parties for the manufacture, sale, or use of Products by
TDCC or its Affiliates or Sublicensees.
5.6 Convenience of the Parties. The parties acknowledge that Symyx
may not own or control patent applications or patents covering the manufacture,
sale or use of a particular Product; however, that parties agree that
substantial value is expected to be contributed by Symyx in accelerated
identification, time to market, enhanced probability of success, and the
potential for multiple leads and, for the convenience of the parties, TDCC
agrees to pay royalties as specified herein during the applicable royalty
period, regardless of whether a Product is covered by a patent application or
patent owned or controlled by Symyx.
5.7 Separate Agreement. Although not a part of the Research Program,
it is understood and agreed that the amounts paid pursuant to Sections 5.1 and
5.4 shall include the consideration due Symyx from TDCC for evaluations to be
conducted by TDCC for screening as a catalyst, an activator, a scavenging agent
or a support under a separate agreement to be negotiated in good faith;
provided, it is further understood and agreed that Symyx will not be obligated
to provide more than six (6) months time of one (1) FTE or the equivalent, for
example, (3) FTEs for two (2) months, under the terms of such separate
agreement, and Symyx will be obligated under such separate agreement only for so
long as TDCC is not in default under any payment due Symyx under this Agreement.
ARTICLE 6
PAYMENTS; BOOKS AND RECORDS
6.1 Royalty Reports and Payments. After the first commercial sale of
a Product on which royalties are payable by TDCC or its Affiliates hereunder,
TDCC shall make quarterly written reports to Symyx within ninety (90) days after
the end of each calendar year quarter, stating in each such report, separately
for TDCC and each Affiliate, the number, description, and aggregate Net Sales,
of each Product or class of Products sold during the calendar year quarter upon
which a royalty is payable under Section 5.2. Concurrently with the making of
such reports, TDCC shall pay to Symyx all royalties due in respect of such Net
Sales at the rate determined in accordance with Section 5.2.
-22-
<PAGE> 23
6.2 Payment Method. All payments due under this Agreement shall be
made by bank wire transfer in immediately available funds to a bank account
designated by Symyx. All payments hereunder shall be made in U.S. dollars. Any
payments that are not paid on the date such payments are due under this
Agreement or any refunds for overpayments or underpayments of actual royalties
pursuant to Section 5.2.1(i) shall bear interest at the lesser of (i) the prime
rate (as reported by the Bank of America, San Francisco, California, on the date
such payment is due) plus an additional two percent (2%) or (ii) the maximum
rate permitted by law, in each case calculated on the number of days such
payment is delinquent. Nothing in this Section 6.2 shall prejudice any other
rights or remedies available to either party hereunder or at law or equity.
6.3 Place of Royalty Payment and Currency Conversions. Royalties
shall be deemed payable by the entity making the Net Sales of the Product from
the country in which earned in local currency and subject to foreign exchange
regulations then prevailing. Royalty payments to Symyx shall be made in United
States dollars to the extent that free conversion to United States dollars is
permitted. Any such conversion to U.S. dollars from the currency in the country
where such Net Sales occurs shall be made using the exchange rate for conversion
of the foreign currency into U.S. Dollars employed by TDCC in the normal course
of its business for other commercial transactions on the last business day of
the calendar year quarter to which such payment pertains. If, due to
restrictions or prohibitions imposed by national or international authority,
payments cannot be made as aforesaid, the parties shall consult with a view to
finding a prompt and acceptable solution. If such royalties due Symyx in any
country cannot be remitted to Symyx within six (6) months after the end of the
calendar year quarter during which they are earned, then TDCC or its Affiliate
shall upon request of Symyx deposit the full amount of such unpaid royalties in
a bank account in such country in the name of Symyx.
6.4 Records; Inspection. TDCC and its Affiliates shall keep
complete, true and accurate books of account and records for the purpose of
determining the royalty amounts (and revenues received from Sublicensees) which
are payable to Symyx under this Agreement. Such books and records shall be kept
at the principal place of business of such party, as the case may be, for at
least three (3) years following the end of the calendar year quarter to which
they pertain. Such records will be open for inspection during such three (3)
year period by a public accounting firm to whom TDCC has no reasonable
objection, solely for the purpose of verifying royalty reports provided pursuant
to Section 6.1. Such inspections may be made no more than once each calendar
year, at reasonable times and on reasonable notice. Inspections conducted under
this Section 6.4 shall be at the expense of Symyx, unless a variation or error
producing an increase in the payment due exceeding the greater of ten thousand
U.S. dollars ($10,000) or ten percent (10%) of the amount stated for any period
covered by the inspection is established in the course of any such inspection,
whereupon all reasonable costs relating to the inspection for such period and
any unpaid amounts that are discovered will be paid promptly by TDCC or the
Affiliate together with interest thereon from the date such payments were due at
the lesser of (i) the prime rate (as reported by the Bank of America, San
Francisco, California), plus an additional two percent (2%) or (ii) the maximum
rate permitted by law. The public accounting firm employees shall sign a
reasonable confidentiality agreement as a condition precedent to their
inspection, and shall report to Symyx only that
-23-
<PAGE> 24
information which would be contained in a properly prepared royalty report by
TDCC. Symyx agrees to hold in strict confidence all information received
concerning royalty payments and reports, and all information learned in the
course of any audit or inspection, except to the extent necessary for Symyx to
reveal such information in order to enforce its rights under this Agreement or
if disclosure is required by law.
6.5 Tax Matters. All royalty amounts and other payments required to
be paid to a party pursuant to this Agreement may be paid with deduction for
withholding for or on account of any taxes (other than taxes imposed on or
measured by net income) or similar governmental charge imposed by applicable law
("Withholding Taxes"). Any Withholding Taxes will be paid to the proper tax
authorities and receipts for such payment or other proof of payment will be made
available by the paying party to the other party. The parties will exercise
diligent efforts to ensure that any withholding taxes imposed are reduced as far
as possible under provisions of any treaties applicable.
ARTICLE 7
INTELLECTUAL PROPERTY
7.1 Ownership. TDCC shall own any inventions or discoveries
conceived and reduced to practice and other intellectual property otherwise
developed solely by personnel of TDCC or TDCC's Affiliates in the course of the
Research Program and shall also own inventions and discoveries fully conceived
(with sufficient specificity that it can be reduced to practice without efforts
beyond those efforts that one skilled on the art would reasonably employ) by
personnel of TDCC or TDCC's Affiliates and reduced to practice in the course of
the Research program by Symyx and TDCC consistent with such conception, which
pertain to Olefin Polymers, compositions containing Olefin Polymers or uses for
Olefin Polymers (collectively, "TDCC Inventions"). Symyx shall own any
inventions or discoveries conceived and reduced to practice and other
intellectual property otherwise developed solely by Symyx personnel in the
course of the Research Program ("Symyx Inventions"). Except as provided above,
TDCC and Symyx shall jointly own any inventions or discoveries conceived and/or
reduced to practice in the course of the Research Program where personnel of
Symyx and of TDCC have each made inventive contributions to such inventions
which would result in them being determined to be joint inventors in accordance
with United States patent law ("Joint Inventions"). Program Know-How which is
jointly developed but is not deemed to be patentable will be jointly owned.
7.2 Notice of Inventions and Access to Records of the Research
Program. Symyx and TDCC shall report to the Research Committee all inventions
relating to Lead Compounds, Derivative Compounds, or Program Technology made in
the course of performing the Research Program. During the Research Program Term
and for three (3) years thereafter, each of TDCC and Symyx shall make available
to the other party upon request research records pertaining to such inventions
as may be reasonably required to exercise any rights of a party arising pursuant
to this Agreement. Such records and the information disclosed therein shall be
deemed Confidential Information of the party providing such records for
inspection subject to the obligations and
-24-
<PAGE> 25
conditions in Article 9. Upon request and tender of payment for the actual cost
in providing copies, Symyx and/or TDCC, as appropriate, shall provide to the
requesting party legible copies of such records as are reasonably required.
7.3 Jointly Owned IP. Except as otherwise expressly provided in this
Agreement, both TDCC and Symyx may use, sublicense, commercialize, or otherwise
exploit all jointly-owned Program Technology without the consent of, or
obligation to account to, the other party.
7.4 Patent Prosecution.
7.4.1 Solely-Owned Patents. Each party will be responsible, in
its discretion and at its sole expense, for preparing, filing, prosecuting and
maintaining patent applications and patents relating to the inventions conceived
or reduced to practice in the course of the Research Program that are owned
solely by that party as described in Section 7.1, and conducting any
interferences, re-examinations, reissues, oppositions or requests for patent
term extension or governmental equivalents thereto.
7.4.2 Jointly-Owned Patents.
(a) Combinatorial Chemistry. Symyx shall have the sole
right, in its discretion and at its sole expense, to prepare, file, prosecute
and maintain patent applications and patents relating to Joint Inventions owned
by TDCC and Symyx which claim Combinatorial Chemistry Technology and to conduct
any interferences, re-examinations, reissues, oppositions or requests for patent
term extension or governmental equivalents thereto.
(b) Jointly-Owned Patents Related to Specific Fields. Except
as provided in Section 7.4.2 (a), TDCC shall have the first right, in its
discretion and at its sole expense, to prepare, file, prosecute and maintain, in
consultation with Symyx, patent applications and patents relating to Joint
Inventions within the Program Technology in the first, second and fourth Fields
in Exhibit A which (i) relate to the use of Agreement Compounds to make Products
in one or more of such Fields, or (ii) relate to Products in (or used in) one or
more such Fields or (iii) relate to processes for making Products in one or more
such Fields, in each case that are jointly-owned by TDCC and Symyx, and to
conduct any interferences, re-examinations, reissues, oppositions or requests
for patent term extension or governmental equivalents thereto. In the event that
TDCC does not file, prosecute or maintain, or conduct such other activities
described above, with respect to any such patent or patent application which
claims the composition or method of use of any Agreement Compound in the Field,
Symyx will have the right, in its discretion, to assume such activities at its
own expense. It is understood and agreed that in the event a Joint Invention as
it will be filed in a patent application or claimed in a patent encompasses
Program Technology in one or more of the third, fifth or sixth fields in Exhibit
A in addition to the first, second or fourth Fields of Exhibit A, then Section
7.4.2(c) shall apply.
(c) Jointly-Owned Patents Outside of the Specified Fields.
Except as provided in Section 7.4.2 (a) and (b), Symyx shall have the first
right, in its discretion and at its sole expense,
-25-
<PAGE> 26
to prepare, file, prosecute and maintain, in consultation with TDCC, patent
applications and patents relating to Joint Inventions within the Program
Technology that are jointly-owned by TDCC and Symyx, and to conduct any
interferences, re-examinations, reissues, oppositions or requests for patent
term extension or governmental equivalents thereto. In the event that Symyx does
not file, prosecute or maintain, or conduct such other activities described
above, with respect to any such patent or patent application, TDCC will have the
right, in its discretion, to assume such activities at its own expense.
7.5 Cooperation in Patent Filing. During the Research Program Term
and for three years thereafter, TDCC and Symyx shall use reasonable efforts to
keep each other informed as to the status of patent matters described in this
Article 7, including without limitation, by providing the other the opportunity
to review and comment on patent application drafts providing the basis for
Program Patents claiming inventions made in the course of the Research Program a
reasonable time in advance of applicable filing dates, and providing the other
party with copies of any substantive documents that such party receives from
applicable patent offices regarding applications for any Program Patent, and/or
applications claiming any Joint Inventions, promptly after receipt, including
notice of all official actions, interferences, reissues, re-examinations,
oppositions, potential litigation, or requests for patent term extensions. TDCC
and Symyx shall each reasonably cooperate with and assist the other at its own
expense in connection with such activities, at the other party's request. The
Research Committee, either directly or through a patent committee designated by
the Research Committee, will (i) facilitate communication between the parties
regarding patents and patent applications arising from inventions made in the
course of the Research Program, and (ii) discuss and provide advice on patent
strategy related to such patent applications. It is understood and agreed that
provisional patent applications may be filed by a party without review and
comment in order to obtain the earliest possible filing date, but each party
will use commercially reasonable efforts to seek review and comment from the
other party prior to filing such provisional patent applications. 7.6
Enforcement.
7.6.1 Notice. Each party shall promptly notify the other party
in writing if it becomes aware of any actual or threatened commercially material
infringement of the Program Patents by a Third Party.
7.6.2 Inside the Fields. TDCC shall have the initial right,
but not the obligation, to take appropriate legal action to enforce any Program
Patents against any infringement within the Fields by any Third Party, at its
sole cost and expense. If, within six (6) months following receipt of notice
from Symyx of any such infringement of a jointly-owned, issued patent, TDCC does
not take such action to halt such infringement or notify Symyx of action it
proposes to take to abate patent infringement in a commercially reasonable
period, Symyx shall, in its sole discretion, have the right, but not the
obligation to take such action at its sole expense.
7.6.3 Other Infringement. In the event of an actual or
threatened infringement by a Third Party of a Program Patent that is solely
owned by TDCC, TDCC shall have the sole right, but
-26-
<PAGE> 27
not the obligation, to take appropriate legal action to enforce such Program
Patent against infringements by Third Parties, as TDCC determines and at its
expense. Except as otherwise provided in Section 7.6.2, in the event of an
actual or threatened infringement by a Third Party of a Program Patent that is
solely owned by Symyx, or jointly by TDCC and Symyx, Symyx shall have the sole
right, but not the obligation, to take appropriate legal action to enforce such
Program Patent against infringement by Third Parties, as Symyx determines in its
discretion and at its expense. It is understood that Symyx may authorize one or
more Third Parties to enforce patents against infringements outside of the
Fields.
7.6.4 Cooperation; Costs and Recoveries; Settlements. Each
party agrees to use commercially reasonable efforts to render such assistance in
the enforcement activities described in Sections 7.6.2 and 7.6.3 as the
enforcing party may reasonably request. Costs of maintaining any such action and
damages recovered therefrom shall be paid by and belong to the party bringing
the action; provided, however, that any recovery by TDCC under Section 7.6.2 in
excess of TDCC's actual cost and expenses shall be divided seventy-five percent
(75%) to TDCC and twenty-five (25%) to Symyx. If TDCC consents to a sublicense
to any Third Party, which consent it shall not be required to give, who, but for
the sublicense, would be infringing a claim of an issued patent in the Program
Technology, TDCC shall be entitled to receive all running royalties payable by
such Third Party but such revenue received in excess of TDCC's actual costs and
expenses for enforcement shall be included as a part of revenues received from
Sublicensees as set forth in Section 5.2.1(iv). Neither Symyx nor TDCC shall
settle without the consent of the other party a dispute with a Third Party
regarding infringement of a Program Patent except to the extent that such rights
could have been granted as a permitted license or sublicense without the consent
of the other party.
7.7 Third Party Claims of Infringement. If the manufacture, use or
sale of any Product pursuant to this Agreement because of the practice of the
Program Technology results in any claim, suit or proceeding alleging patent
infringement against Symyx or TDCC (or its Affiliates or Sublicensees), such
party shall promptly notify the other party hereto in writing setting forth the
facts of such claims in reasonable detail. Each party agrees to use commercially
reasonable efforts to render assistance to the other party in defending such
claims of infringement as the defendant may reasonably request. The defendant
shall have the exclusive right and obligation to defend and control the defense
of any such claim, suit or proceeding, at its own expense, using counsel of its
own choice; provided, however, it shall not enter into any settlement which
admits or concedes that any Program Patent is invalid or unenforceable, without
the prior written consent of the other party, which shall not be unreasonably
withheld. The defendant shall keep the other party hereto reasonably informed of
all material developments in connection with any such claim, suit or proceeding.
ARTICLE 8
COMMERCIALIZATION
-27-
<PAGE> 28
8.1 Due Diligence. TDCC shall use commercially reasonable efforts to
develop and commercialize Agreement Compounds and Products which in TDCC's sound
business judgment can be profitably implemented. It is understood and agreed
that such "commercially reasonable efforts" shall mean efforts generally
equivalent to the efforts TDCC uses with regard to its other similar products
(lower case) of comparable value, risk and patent protection to develop and
commercialize Products. Specific diligence parameters will include TDCC
utilizing its knowledge of chemical and polymer markets to identify suitable
concepts for Products and market opportunities.
8.2 Acquisition of Rights by Symyx. In the event that TDCC
determines it will not commercialize on its own or by license to Third Parties
or Affiliates of TDCC one or more discrete, specified chemical entities that
were identified as Lead Compounds to manufacture one or more specified Olefin
Polymers with respect to one or more Fields, TDCC shall notify Symyx. Symyx
shall for a period of three (3) months from the date of such notification have
the option, on written notice to TDCC, to obtain an exclusive, worldwide right
under TDCC's interest in Program Technology and at TDCC's discretion,
improvements or modifications made by TDCC to such Program Technology for such
Lead Compounds to be used to manufacture, use and sell the specified Olefin
Polymers, on reasonable terms to be agreed by the parties, with consideration to
be paid TDCC which is commensurate with fair market value of these rights taking
into account the investment made by TDCC in the development of the Lead
Compounds and the use of the same for the manufacture of Olefin Polymers. In the
event that Symyx exercises its option, and TDCC and Symyx do not reach agreement
on fair market value for such rights, Symyx shall have the right to have the
fair market value of such rights determined by arbitration pursuant to Section
13.16 upon notice given to TDCC within ninety (90) days after the date the three
(3) month option period expires.
8.3 Reports. During the term of this Agreement, TDCC shall provide
Symyx with written annual reports within thirty (30) days of the end of each
calendar year providing a summary of the status of the research and development
activities conducted with respect to Products and Agreement Compounds. In
addition, five (5) times during the term of this Agreement, Symyx may request
special reports which provide a summary of the status of the research and
development activities conducted with respect to Products and Agreement
Compounds. TDCC will provide these special reports within thirty (30) days of
notification. The reports as described in this Section 8.3 shall contain
sufficient information to allow Symyx to monitor TDCC's compliance with this
Agreement. All reports and information provided under this Section 8.3 shall be
deemed Confidential Information of TDCC.
ARTICLE 9
CONFIDENTIALITY
9.1 Confidentiality. Except as otherwise expressly provided herein,
the parties agree that, until the later of fifteen (15) years from the Effective
Date of the Agreement and (ii) ten (10) years from the end of the Research
Program, the receiving party shall not, except as expressly provided in this
Article 9, disclose to any Third Party or use for any purpose, any Confidential
-28-
<PAGE> 29
Information furnished to it by the disclosing party pursuant to this Agreement,
except in each case to the extent that it can be established by the receiving
party by competent proof that such information:
(a) was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise
part of the public domain after it disclosure and other than through any act or
omission of the receiving party in breach of this agreement;
(d) was independently developed by the receiving party
without use of, or reference to, the other party's confidential information, as
demonstrated by documented evidence; or
(e) was disclosed to the receiving party, other than under
an obligation of confidentiality, by a Third Party authorized and entitled to
disclose such information to others.
9.2 Permitted Use and Disclosures. Each party hereto may (i) use
Confidential Information disclosed to it by the other party in conducting the
Research Program and (ii) use or disclose Confidential Information disclosed to
it by the other party to the extent such use and disclosure is reasonably
necessary in (A) exercising the rights and licenses granted hereunder, (B)
prosecuting or defending litigation, (C) complying with applicable laws,
governmental regulations or court orders or submitting mandatory information to
tax or other governmental authorities, (D) filing and prosecuting patent
applications, subject to consultation with the disclosing party as to the
content of such patent applications prior to filing, or (E) making a permitted
sublicense or otherwise exercising license rights expressly granted pursuant to
this Agreement. TDCC and Symyx shall not (and agree that their Affiliates shall
not) disclose Confidential Information received from the other party under this
Agreement as permitted by 9.2(ii)(A) or (E), except pursuant to an agreement of
confidentiality with terms reasonably equivalent to those applicable to the
party to this Agreement that received the information from the other. If a party
to this Agreement is required to make any disclosure pursuant to 9.2(ii)(B), (C)
or (D) of Confidential Information received, it will give reasonable advance
notice to the other party to this Agreement and will use reasonable efforts to
secure confidential treatment of such information (whether through protective
order or otherwise), except to the extent inappropriate in the case of patent
applications.
9.3 Nondisclosure of Terms. Each of the parties hereto agrees not to
disclose the terms of this Agreement to any Third Party without the prior
written consent of the other party hereto, which consent shall not be
unreasonably withheld, except to such party's attorneys, advisors, investors and
others on a need to know basis under circumstances that reasonably ensure the
confidentiality thereof either: (i) in connection with a public offering of
Symyx stock, (ii) in connection with negotiation of a sublicense, manufacture or
sale of a Product or an Agreement Compound, or (iii) to the extent required by
law. Notwithstanding the foregoing, the parties shall agree upon a press release
to
-29-
<PAGE> 30
announce the execution of this Agreement, and Symyx and TDCC may each thereafter
disclose to Third Parties the information contained in such press release
without the need for further approval by the other. In addition, TDCC and Symyx
may each make public statements regarding the general progress of the Research
Program.
9.4 Publication of Results. Any manuscript or other public
disclosure by Symyx or TDCC describing the scientific results of the Research
Program to be published within the Research Program Term, or within one (1) year
after the end of the Research Program, shall be provided to the other party for
review at least ninety (90) days prior to its submission, except that patent
applications which may be published shall be subject only to the review
described in Section 7.5. Further, to avoid the loss of patent rights as a
result of premature public disclosure of patentable information, the reviewing
party may, within thirty (30) days of receiving such a proposed disclosure,
notify the publishing party in writing that the reviewing party desires to file
a patent application on any invention disclosed in such scientific results, in
which case the publishing party shall withhold publication or disclosure of such
scientific results until the earlier of (i) the time the patent application is
filed thereon, (ii) the time the parties both determine, after consultation,
that no patentable invention exists, or (iii) ninety (90) days after the
publishing party received notice of the reviewing party's desire to file such
patent application. Further, if such scientific results contain Confidential
Information of the reviewing party that is subject to the use and nondisclosure
restrictions under this Article 9, the publishing party agrees to remove such
Confidential Information from the proposed publication or disclosure.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 TDCC's Representations. TDCC represents and warrants that: (i)
it has the right and authority to enter into this Agreement and to fully perform
its obligations hereunder; (ii) this Agreement is a legal and valid obligation
binding upon it and enforceable in accordance with its terms, and (iii) it has
not previously granted, and during the term of this Agreement will not knowingly
make any commitment or grant any rights which conflict in any material way with
the rights and obligations set forth herein.
10.2 Symyx's Representations. Symyx represents and warrants that: (i)
it has the right and authority to enter into this Agreement, and to fully
perform its obligations hereunder; (ii) this Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms; (iii)
it has not previously granted, and during the term of this Agreement will not
knowingly make any commitment or grant any rights which conflict in any material
way with the rights and obligations set forth herein; (iv) it has the right to
extend the rights granted by it in this Agreement; and (v) to the best of its
knowledge as of the Effective Date, there are no existing or threatened actions,
suits or claims pending against it with respect to the Confidential Information,
Combinatorial Chemistry Technology or Library Compounds to be used in the
Research Program.
-30-
<PAGE> 31
10.3 Disclaimer. TDCC and Symyx specifically disclaim any
representation, warranty or guarantee that the Research Program will be
successful, in whole or in part. It is understood that the failure of the
parties to successfully synthesize, discover, identify or optimize Agreement
Compounds in the course of the Research Program shall not constitute a breach of
any representation or warranty or other obligation under this Agreement;
provided, however, it is understood and agreed that the foregoing shall not be
construed so as to relieve either party from its obligation under this Agreement
to perform research activities in the Research Program. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, SYMYX AND TDCC MAKE NO REPRESENTATIONS
AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE PROGRAM TECHNOLOGY, INFORMATION DISCLOSED HEREUNDER, LIBRARY
COMPOUNDS, AGREEMENT COMPOUNDS, OR PRODUCTS, AND HEREBY EXPRESSLY DISCLAIM ANY
WARRANTIES OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR VALIDITY
OF ANY PROGRAM TECHNOLOGY, PATENTED OR UNPATENTED, OR NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
ARTICLE 11
INDEMNIFICATION
11.1 TDCC. TDCC agrees to indemnify, defend and hold harmless Symyx
and its Affiliates and their respective directors, officers, employees, agents
and their respective successors, heirs and assigns (the "Symyx Indemnitees")
from and against any losses, costs, reasonable expense from lost time of Symyx
employees, claims, damages, liabilities or expense (including reasonable
attorneys' and professional fees and other expenses of litigation)
(collectively, "Liabilities") arising, directly or indirectly out of or in
connection with Third Party claims, suits, actions, demands or judgments,
including without limitation, personal injury, product liability, patent
infringement and trade secret misappropriation matters, suits, actions or
demands relating to (i) any Agreement Compounds or Products which are developed,
manufactured, used, sold or otherwise distributed by or on behalf of TDCC, its
Affiliates, Sublicensees or other designees (other than Symyx, its Affiliates
and licensees), (ii) TDCC's activities in performing the Research Program, (iii)
Symyx's research activities in performing the Research Program arising in
circumstances where TDCC has directed these activities pursuant to Section 3.6,
and (iv) any breach by TDCC of the representations and warranties made in this
Agreement, except, in each case, to the extent such Liabilities result from the
negligence or intentional misconduct of the Symyx Indemnitees. Except as
expressly set forth herein regarding reasonable expenses from lost time of Symyx
employees, indemnification hereunder does not include any consequential damages
or lost profits which may be suffered by the Symyx Indemnitees.
11.2 Symyx. Symyx agrees to indemnify, defend and hold harmless TDCC,
its Affiliates and Sublicensees and their respective directors, officers,
employees, agents and their respective heirs and assigns (the "TDCC
Indemnitees") from and against any losses, costs, claims, damages, liabilities
or expense (including reasonable attorneys' and professional fees and other
expenses of
-31-
<PAGE> 32
litigation) (collectively, "Liabilities") arising, directly or indirectly out of
or in connection with Third Party claims, suits, actions, demands or judgments,
including without limitation, personal injury, product liability, patent
infringement and trade secret misappropriation matters, suits, actions, or
demands relating to (i) any Library Compound or product (lower case) developed,
manufactured, used, sold or otherwise distributed by or on behalf of Symyx, its
Affiliates, licensees or other designees (other than TDCC, its Affiliates and
Sublicensees), (ii) any breach by Symyx of its representations and warranties
made in this Agreement, and (iii) Symyx's activities in performing the Research
Program other than those where TDCC directed such activities pursuant to Section
3.6 (except with respect to claims of infringement of the intellectual property
rights of Third Parties, in which event Symyx shall not be obligated to
indemnify TDCC); and except, in each case, to the extent such Liabilities result
from the negligence or intentional misconduct of the TDCC Indemnitees.
Indemnification hereunder does not include any consequential damages or lost
profits which may be suffered by the TDCC Indemnitees.
11.3 Procedure. In the event that any "Indemnitee" (either a TDCC
Indemnitee as described in Section 11.2 or a Symyx Indemnitee as described in
Section 11.1) intends to claim indemnification under this Article 11 it shall
promptly notify the other party in writing of such alleged Liability. The
indemnifying party shall have the right to control the defense thereof with
counsel of its choice that is reasonably acceptable to Indemnitee; provided,
however, that any Indemnitee shall have the right to retain its own counsel at
its own expense for any reason. The affected Indemnitee shall give reasonable
cooperation to the indemnifying party and its legal representatives in the
investigation of any action, claim or liability covered by this Article 11. The
indemnification under this Article 11 shall not apply to amounts paid by an
Indemnitee in settlement of any Liabilities if such settlement is effected
without the consent of the indemnifying party, which consent shall not be
withheld unreasonably. The failure of the Indemnitee to deliver notice to the
indemnifying party within a reasonable time after commencement of a claim or
action, if prejudicial to the ability to defend such claim or action, shall
relieve the indemnifying party of any liability under this Article 11 to the
extent of such prejudice. The indemnifying party will not be liable to pay legal
costs and attorney's fees incurred by the Indemnitee in establishing its claim
for indemnification.
ARTICLE 12
TERM AND TERMINATION
12.1 Term of Agreement. The term of this Agreement shall commence on
the Effective Date, and shall continue in full force and effect on a
country-by-country, Agreement Compound-by-Agreement Compound and Product by
Product basis, until TDCC and its Affiliates have no remaining royalty payment
obligations for such Agreement Compound or Product in such country, unless
terminated earlier as provided in this Article 12. Following the expiration of
this Agreement pursuant to this Section 12.1, but not the earlier termination of
this Agreement pursuant to Section 12.2 or 12.3, with respect to an Agreement
Compound or Product in a country, TDCC shall have a
-32-
<PAGE> 33
nonexclusive license under Symyx's interest in the Program Technology to make,
have made, use, sell, offer to sell and import such Agreement Compound or
Product in such country.
12.2 Breach.
12.2.1 Termination of Agreement. Either party to this Agreement
may terminate this Agreement in the event the other party shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such default shall have continued for thirty (30) days after
written notice thereof was provided to the breaching party by the non-breaching
party. Any termination shall become effective at the end of such thirty (30) day
period unless the breaching party (or any other party on its behalf) has cured
any such material breach or default prior to the expiration of the thirty (30)
day period. In the event that TDCC has materially breached this Agreement solely
with respect to an Agreement Compound or Product within a specific Field, then
Symyx shall only be entitled to terminate this Agreement with respect to such
Field as a result of such breach. Any dispute as to whether or not a material
breach or default has occurred or has been timely cured shall be subject to
dispute resolution in accordance with Section 13.16.
12.2.2 Termination of Research Program for Breach. In the event
that Symyx shall have materially breached or defaulted in the performance of any
of its material obligations hereunder during the Research Program Term, and such
default shall have continued for thirty (30) days after written notice thereof
was provided to Symyx by TDCC, TDCC may elect to terminate the Research Program
and not the Agreement, upon written notice to Symyx clearly stating TDCC's
election. Any termination of the Research Program and not the Agreement shall
become effective at the end of such thirty (30) day period unless Symyx (or any
other party on its behalf) has cured any such breach or default prior to the
expiration of the thirty (30) day period or TDCC elects not to terminate the
Research Program. In the event that TDCC properly terminates the Research
Program and not the Agreement, TDCC shall have no further obligation to make the
payments otherwise due Symyx under Section 5.1 after the effective date of such
termination of the Research Program. In the event that Symyx has materially
breached or defaulted during the Research Program Term and TDCC has provided to
Symyx notice of such material breach or default, and of TDCC's intent to
terminate the Research Program if such material breach or default is not cured
within the applicable 30-day cure period, TDCC may, upon prior notice to Symyx,
suspend payments that would otherwise be due to Symyx under Section 5.1 during
such 30-day cure period; provided, however, that (i) TDCC shall only be entitled
to suspend payments as described herein one (1) time during the Research Program
Term; (ii) in the event the Research Program is terminated, TDCC shall have no
rights or license in or to Program Technology developed by Symyx during the
period for which such payments were suspended; and (iii) in the event that Symyx
cures such breach or default (or TDCC waives such breach or default) and the
Research Program is not terminated, TDCC shall pay to Symyx the full amount that
would have been due under Section 5.1 plus interest to be calculated as provided
in Section 6.2 within fifteen (15) business days of the earlier of (i) the date
such cure is notified to TDCC, (ii) the date of a waiver by TDCC, or (iii) the
end of the thirty (30) day cure period.
-33-
<PAGE> 34
12.2.3 Other Remedies for Breach. It is understood that in the event that a
party has breached or defaulted in performance of any of its obligations
hereunder and such breach or default shall have continued for thirty (30) days
after written notice thereof was provided to the breaching party by the
non-breaching party, the non-breaching party may elect to seek such specific
performance and/or monetary damages or rescission as the non-breaching party may
be entitled at law or equity, if any, pursuant to Section 13.16.
12.3 Termination for Insolvency. If voluntary or involuntary
proceedings by or against a party are instituted in bankruptcy under any
insolvency law, or a receiver or custodian is appointed for such party, or
proceedings are instituted by or against such party for corporate
reorganization, dissolution, liquidation or winding-up of such party, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or if such party makes an assignment for the
benefit of creditors, or substantially all of the assets of such party are
seized or attached and not released within sixty (60) days thereafter, the other
party may immediately terminate this Agreement effective upon notice of such
termination or in the event Symyx is involved in insolvency proceedings during
the Research Program Term, TDCC may elect to terminate the Research Program and
not the Agreement upon notice to Symyx.
12.4 Symyx Change of Control. In the event that greater than fifty
percent (50%) of the outstanding shares of Symyx's voting stock is acquired,
directly or through its subsidiaries, by a company listed in Exhibit C during
the Research Program Term, TDCC shall have the right to terminate the Research
Program and not the Agreement immediately upon written notice to Symyx.
12.5 Effect of Termination.
12.5.1 Accrued Rights and Obligations. Termination of this
Agreement for any reason shall not release either party hereto from any
liability or obligation which, at the time of such termination, has already
accrued to the other party or which is attributable to a period prior to such
termination nor preclude either party from pursuing any rights and remedies it
may have hereunder or at law or in equity with respect to any breach of this
Agreement.
12.5.2 Return of Confidential Information. Upon any termination
of this Agreement prior to fifteen (15) years from the Effective Date or
rescission of the Agreement pursuant to Section 12.2.4, TDCC and Symyx shall
promptly return to the other all Confidential Information received from the
other party (except one copy of which may be retained for archival purposes and
ensuring compliance with the provisions of Article 9).
12.5.3 Termination of the Research Program. In the event the
Research Program (and not the Agreement) is properly terminated by TDCC as
provided in Sections 2.9, 12.2.2, 12.3 or 12.4, earlier than three (3) years
after the Effective Date, TDCC shall have no further obligation to make the
payments otherwise due to Symyx under Section 5.1 following the effective date
of such termination. On request from TDCC, Symyx shall engage in an orderly
transfer to TDCC of information and data from the Program Technology developed
before the effective date of such termination. It is understood and agreed that
Symyx shall have the right, in its discretion, to
-34-
<PAGE> 35
continue research activities in the Field, either on its own or with a Third
Party, following any such termination.
12.5.4 Refund of Certain Payments. In the event that the
Research Program is properly terminated pursuant to Section 2.9, 12.2.2, 12.3 or
12.4, Symyx will refund to TDCC: (i) one thirty-sixth (1/36) of the Technology
Access Fee for each full month between the effective date of such termination
and the third anniversary of the Effective Date, and (ii) a pro rata amount of
Research Funding paid in advance by TDCC pursuant to Section 5.1 for periods
after the effective date of termination of the Research Program. In the event
that this Agreement is properly terminated by TDCC pursuant to Section 12.2.1 or
12.3, Symyx will refund to TDCC: (i) one thirty-sixth (1/36) of the Technology
Access Fee for each full month between the date thirty (30) days before the
effective date of such termination and the third anniversary of the Effective
Date, and (ii) a pro rata amount of Research Funding paid in advance by TDCC
pursuant to Section 5.1 for periods after the date thirty (30) days before the
effective date of such termination of the Agreement.
12.5.5 Licenses.
(i) Termination of Agreement by TDCC. In the event of any
termination of the Agreement by TDCC pursuant to Section 12.2.1 or 12.3, the
licenses granted by Symyx in Section 4.1 shall terminate. It is understood that
if Symyx has granted any permitted sublicense or license to a Third Party under
Section 4.4 prior to the effective date of such termination, then such
sublicense or license shall not be effected and shall continue in accordance
with its terms with revenues to be shared as if this Agreement remained in
effect.
(ii) Termination of Research Program But Not Agreement. In
the event TDCC terminates the Research Program and not the Agreement as set
forth in Section 2.9, 12.2.2, 12.3 or 12.4, then the licenses in Section 4.1,
sublicenses in Section 4.2 and rights in Joint Inventions under Section 4.4
shall remain in effect with respect to all Program Technology made, or conceived
and reduced to practice before the effective date of such termination; provided,
however, that (i) such licenses and rights shall not include any interest or
right in or to Program Technology (or other intellectual property made, or
conceived or reduced to practice by Symyx) after the effective date of such
termination, and (ii) Section 4.1.3 shall terminate on the effective date of
such termination.
(iii) Termination by Symyx. In the event of termination by
Symyx under Sections 12.2 or 12.3, the license set forth in Section 4.1 shall
terminate; provided, however, that if the breach relates solely to an Agreement
Compound or Product in a specific Field, then Symyx shall only terminate the
licenses to TDCC with respect to the Agreement Compounds and Products in such
Field, and the remaining licenses granted to TDCC and to Symyx hereunder shall
remain in effect, subject to all the terms and conditions of this Agreement. If
a party to this Agreement has granted any permitted sublicense or license to a
Third Party prior to the effective date of such termination, then such
sublicense or license shall not be effected and shall continue in accordance
with its terms with revenues to be shared as if this Agreement remained in
effect.
-35-
<PAGE> 36
12.6 Survival. Sections 2.7, 4.3, 4.4, 4.5, 4.6, 5.5, 7.1, 12.5,
12.6, 13.1, 13.2, 13.5, 13.6, 13.10, 13.11, 13.16, and 13.17, and Articles 9 and
11 of this Agreement shall survive the expiration or termination of this
Agreement for any reason. Section 7.3 shall also survive the expiration or
termination of this Agreement, except if this Agreement is properly terminated
by TDCC pursuant to Section 2.9, 12.2.1 or 12.3, then any rights of TDCC and
Symyx to use sublicense, commercialize, or otherwise exploit jointly-owned
Program Technology must be agreed by the parties in writing. Section 4.7 shall
survive any termination or expiration of this Agreement, but if this Agreement
is properly terminated by TDCC pursuant to Section 2.9, 12.2.1, or 12.3, TDCC
for a period of three (3) months from the date of termination have an option
upon written notice to Symyx to obtain a non-exclusive, royalty-bearing license
to use Program Technology in the Field on reasonable terms to be agreed by the
parties with consideration to be paid to Symyx which is commensurate with the
fair market value of these rights taking into account the investment made by
TDCC in the Research Program and the Technology Access Fee retained by Symyx. In
the event TDCC exercises such option and TDCC and Symyx do not reach agreement
on fair market value, TDCC shall have the right to have fair market value of
such rights determined by arbitration pursuant to Section 13.16 upon notice
given to Symyx within ninety (90) days of the end of the option period.
ARTICLE 13
MISCELLANEOUS
13.1 Governing Laws. This Agreement and any dispute arising from the
construction, performance or breach hereof shall be governed by and construed
and enforced in accordance with, the laws of the state of Delaware, without
reference to conflicts of laws principles.
13.2 No Implied Licenses. Only the licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect. No other
license rights shall be created by implication, estoppel or otherwise.
13.3 Waiver. It is agreed that no waiver by either party hereto of
any breach or default of any of the covenants or agreements herein set forth
shall be deemed a waiver as to any subsequent and/or similar breach or default.
13.4 Assignment. This Agreement shall not be assignable by either
party to any Third Party without the written consent of the other party hereto,
except either party may assign this Agreement, without such consent, to an
Affiliate or to an entity that acquires all or substantially all of the business
or assets of the assigning party relating to the subject matter of this
Agreement, whether by merger, reorganization, acquisition, sale, or otherwise,
subject to Section 12.4. This Agreement shall be binding upon and accrue to the
benefit any permitted assignee, and any such assignee shall agree to perform the
obligation of the assignor. C:\NRPORTBL\PALib2\pgc\1293081.2
13.5 Independent contractors. The relationship of the parties hereto
is that of independent contractors. The parties hereto are not deemed to be
agents, partners or joint ventures of the others for any purpose as a result of
this Agreement or the transactions contemplated thereby.
-36-
<PAGE> 37
13.6 Representation by Legal Counsel. Each party hereto represents
that it has been represented by legal counsel in connection with this Agreement
and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement, the
parties agree that no presumption shall exist or be implied against the party
which initially drafted such terms and provisions.
13.7 Solicitation of Employees. TDCC and Symyx both agree that they
will not, during the Research Program Term, actively recruit or solicit
employment of any scientific or technical personnel of the other party involved
in the Research Program or development of catalysts for synthesis of
polyolefins. It is understood that the foregoing restriction shall not apply to,
or be breached by: (i) advertising open positions, participating in job fairs,
and conducting comparable activities to recruit skilled or unskilled help from
the general public, or responding to individuals contacted through such methods,
(ii) responding to unsolicited inquiries about employment opportunities or
possibilities from job placement agencies or other agents acting for
unidentified principals, or (iii) responding to unsolicited inquiries about
employment opportunities from any individual.
13.8 TDCC Affiliates. It is understood and agreed that TDCC may at
its sole discretion fulfill some or all of its obligations by or through its
Affiliates, and that TDCC may grant sublicenses under the Program Technology to
its Affiliates subject to the terms and conditions of this Agreement. TDCC
hereby warrants and guarantees the performance by its Affiliates of, and shall
remain jointly and severally liable for, all applicable obligations of its
Affiliates under this Agreement, including without limitation, the payment of
applicable royalties.
13.9 Compliance with Laws. In exercising their rights under this
license, the parties shall fully comply in all material respects with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under this
license including, without limitation, those applicable to the discovery,
development, manufacture, distribution, import, use, export and sale of Products
or Agreement Compounds pursuant to this Agreement.
13.10 Export Control Regulations. The rights and obligations of the
parties under this Agreement, shall be subject in all respects to United States
laws and regulations as shall from time to time govern the license and delivery
of technology and products abroad, including the United States Foreign Assets
Control Regulations, Transaction Control Regulations and Export Control
Regulations, as amended, and any successor legislation issued by the Department
of Commerce, International Trade Administration, or Office of Export Licensing.
Without in any way limiting the provisions of this Agreement, each party hereto
agrees that, unless prior authorization is obtained from the Office of Export
Licensing, it shall not export, reexport, or transship, directly or indirectly,
to any country, any of the technical data disclosed to it by the other party if
such export would violate the laws of the United States or the regulations of
any department or agency of the United States Government. This provision shall
survive termination of this Agreement.
-37-
<PAGE> 38
13.11 Headings. The captions to the several Sections hereof are not
part of this Agreement, but are included merely for convenience of reference and
shall not affect its meaning or interpretation.
13.12 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be hand delivered, or sent by express
delivery service with confirmation of receipt, or sent by registered or
certified mail, return receipt requested, postage prepaid, or by facsimile
transmission (with written confirmation copy by registered first-class mail), in
each case to the respective address or facsimile number indicated below.
Symyx: Symyx Technologies
3100 Central Expressway
Santa Clara, CA 95051
Attn: President & COO
Fax: (408) 764-2004
TDCC: The Dow Chemical Company
Patent Department, 1790 Building
Midland, MI 48674
Attn: General Patent Counsel
Fax: (517) 636-7592
Any such notice shall be deemed to have been given when received. Either party
may change its address or facsimile number by giving the other party written
notice, delivered in accordance with this Section.
13.13 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect to
the fullest extent permitted by law without said provision, and the parties
shall amend the Agreement to the extent feasible to lawfully include the
substance of the excluded term to as fully as possible realize the intent of the
parties and their commercial bargain.
13.14 Force Majeure. Neither party shall lose any rights hereunder or
be liable to the other party for damages or losses (except for payment
obligations) on account of failure of performance by the defaulting party if the
failure is occasioned by war, strike, fire, Act of God, earthquake, flood,
lockout, embargo, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the reasonable
control and not caused by the negligence, intentional conduct or misconduct of
the non-performing party and such party has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in no event shall a
party be required to settle any labor dispute or disturbance.
13.15 Complete Agreement. This Agreement with its Exhibits,
constitutes the entire agreement, both written and oral, between the parties
with respect to the subject matter hereof, and
-38-
<PAGE> 39
all prior agreements respecting the subject matter hereof, either written or
oral, express or implied, shall be abrogated, canceled, and are null and void
and of no effect, except that the Research Plan shall have effect and
information exchanged by the parties pursuant to the Secrecy Agreement between
the parties dated September 22, 1998 shall be deemed to be Confidential
Information under this Agreement. No amendment or change hereof or addition
hereto shall be effective or binding on either of the parties hereto unless
reduced to writing and executed by the respective duly authorized
representatives of Symyx and TDCC.
13.16 Dispute Resolution. Any dispute under this Agreement which is
not settled by mutual consent shall be finally settled by binding arbitration,
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by three (3) neutral arbitrators appointed in accordance
with said rules, unless the parties agree to conduct such arbitration with a
single arbitrator. The arbitration shall be held in Wilmington, Delaware, and
the arbitrators shall be independent experts with a background suitable for the
matters in dispute. The arbitrators shall determine what discovery will be
permitted, consistent with the goal of limiting the cost and time which the
parties must expend for discovery; provided the arbitrators shall permit such
discovery as they deem necessary to permit an equitable resolution of the
dispute. Any written evidence originally in a language other than English shall
be submitted in English translation accompanied by the original and a true copy
thereof. The costs of arbitration, including administrative and arbitrators'
fees, shall be shared equally by the parties. Each party shall bear its own
costs and attorneys' and witness' fees. A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
thirty (30) days following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written opinion. Any
arbitration subject to this Section 13.16 shall be completed within one (1) year
from the filing of notice of a request for such arbitration. The award shall be
final and binding upon the parties hereto. Judgment upon any decision rendered
by the arbitrators may be entered by any court having jurisdiction.
13.17 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same agreement.
-39-
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.
THE DOW CHEMICAL COMPANY SYMYX TECHNOLOGIES
By: /s/ A. J. CARBONE By: /s/ ISY GOLDWASSER
------------------------------- ---------------------------------
A. J. Carbone
Title: Executive Vice President Title: President and COO
---------------------------- ------------------------------
Date: 2 February 1999 Date: 5 February 1999
----------------------------- -------------------------------
<PAGE> 41
LIST OF EXHIBITS
Exhibit A: Scope of Field
Exhibit B: Procedure for Lead Compound Identification
Exhibit C: Company List
Exhibit D: Direct Chemical Modification
Exhibit E: List for Initial Chemistry FTEs
<PAGE> 42
EXHIBIT A
SCOPE OF FIELD
THE FIELDS SHALL BE DEFINED AS (HEADINGS ARE FOR CONVENIENCE IN REFERENCE AND
ARE NOT INTENDED TO LIMIT THE DESCRIPTION):
(1) Polyethylene 1 Field - The discovery, development and use of catalysts for
the Coordination Polymerization of ethylene and/or a-olefins to make
homopolymers or copolymers (density <0.915 according to ASTM D792);
(2) Polyethylene 2 Field - The discovery, development and use of catalysts for
the Coordination Polymerization of ethylene and/or a-olefins to
homopolymers or copolymers (density >=0.915 according to ASTM D792);
(3) Ethylene/Styrene Field - The discovery, development and use of catalysts
for the Coordination Polymerization of ethylene and/or a-olefins with
styrene or substituted vinyl aromatic analogs;
(4) Polypropylene Field - The discovery, development and use of catalysts for
the Coordination Polymerization of propylene to make polypropylene;
(5) Vinyl Chloride Field - The discovery, development and use of catalysts for
the Coordination Polymerization of vinyl chloride to form homopolymers or
copolymers with ethylene and/or a-olefins; and
(6) Polar Comonomer Fields - The discovery, development and use of catalysts
for the Coordination Polymerization of ethylene and/or a-olefins with the
following comonomers: a) vinyl acetate, b) any acrylate, any c)
methacrylate, d) acrylic acid, e) methacrylic acid, f) maleic anhydride,
or g) acrylamide, in each case to form copolymers comprised of either less
than 10 mole % of the comonomer or greater than 90 mole % of the comonomer
with number average molecular weight > 5,000;
1) For clarity, the monomers mentioned in the above Fields have the following
chemical structures:
[DIAGRAM] [DIAGRAM] [DIAGRAM] [DIAGRAM]
a-Olefins Acrylamide Acrylates Acrylic Acid
[DIAGRAM] [DIAGRAM] [DIAGRAM] [DIAGRAM]
Maleic Anhydride Methacrylates Methacryllic Acid Substituted Vinyl
Aromatic Analogs
[DIAGRAM] [DIAGRAM]
Vinyl Acetate Vinyl Chloride
R(1) = linear, branched, or cyclic saturated hydrocarbon moiety. For substituted
vinyl aromatic analogs, R(1) may also be a hydrogen moiety; and Ar =
unsubstituted aromatic hydrocarbyl moiety or an aromatic moiety substituted
with hydrocarbyl or halogen substituents.
-35-
<PAGE> 43
EXHIBIT B
PROCEDURE FOR LEAD COMPOUND IDENTIFICATION
1. At such time as Symyx has identified a Library Compound which it
believes may meet the established criteria for a Lead Compound in a particular
activated Field it shall provide the data and results supporting such conclusion
to the Research Committee. Examples of target criteria for Lead Compounds are
set forth in the Lead Compound Criteria Section of the Research Plan.
2. Following the identification of any potential Lead Compound, at
TDCC's request, Symyx shall prepare and deliver to TDCC reasonable gram
quantities of such potential Lead Compound, which TDCC shall use in confirming
whether such potential Lead Compound meets the applicable lead criteria. Symyx
will use commercially reasonable efforts to provide quantities in such amounts
as the Research Committee may determine is reasonably required by TDCC for
testing, and will notify TDCC if it is not commercially reasonable to provide
such quantities to TDCC, in which case the parties agree to meet and discuss how
to proceed with respect to such Lead Compound.
3. The Research Committee shall review the results provided by TDCC with
respect to a potential Lead Compound, and if the Research Committee determines
that such results indicate that the applicable lead criteria have been
satisfied, then such Library Compound shall be deemed to be a Lead Compound for
all purposes of this Agreement.
4. In the event that the Research Committee requests further information
or the conduct of further studies to confirm whether a potential Lead Compound
meets the applicable lead criteria, Symyx and TDCC shall use commercially
reasonable efforts to prepare any such information and conduct such studies.
<PAGE> 44
EXHIBIT C
COMPANY LIST
Borealis Group
BP/Amoco p.l.c.
BP Chemicals Limited
Dex-Plastomers V.O.F.
DSM
DuPont Dow Elastomers L.L.C.
Elenac GmbH
Equistar Chemicals L.P.
Exxon Chemical
Mitsui Petrochemicals
Montell Polyolefins
Nova Corporation
Royal Dutch/Shell
Philips Petroleum Company
Union Carbide Corporation
Univation Technologies
<PAGE> 45
EXHIBIT D
DIRECT CHEMICAL MODIFICATION
A discrete chemical entity means a specific organometallic compound where the
metal as well as all substituents and functional groups of the coordinating
ligands are specified. As an example, the following compound would exemplify a
discrete chemical entity TDCC could select as a Designated Compound as used
under Section 4.1.3. This particular palladium (II) compound is supported by the
neutral ancillary ligand as shown:
[COMPOUND FORMULA]
Where Ph = phenyl group; Me = methyl group; Cy = cyclohexyl group.
If this compound were to be selected by TDCC as a Designated Compound, then a
Direct Modification of this compound would be represented by the following
general formula:
[COMPOUND FORMULA]
Where X and X' represent monoanionic ligands
Within this general formula R(1)-R(6), X and X' represent the groups that may
be modified. R(1)-R(6) may be modified with any group provided that said group
does not bind to the metal to change the ligand class from a (2,0) ligand as
defined in the Research Plan.
-38-
<PAGE> 46
EXHIBIT E
LIST FOR INITIAL CHEMISTRY FTES
Howard Turner*
Rodney Howden
Jeff Norris
Miroslav Petro
Anne LaPointe*
Vince Murphy*
Mike Krohn
Ursala Tracht
Cheryl Lund*
Tom Boussie*
Keith Hall*
"Key Personnel" are marked with "*"
-39-
<PAGE> 1
EXHIBIT 10.11
LICENSE AGREEMENT
THIS License Agreement ("Agreement") is made as of 6/22/95 (the
"Effective Date") by and between the Lawrence Berkeley Laboratory ("LBL"), on
behalf of The Regents of the University of California ("The Regents"), an agency
of the State of California, located in Berkeley, California, and Symyx
Technologies, Inc., a corporation duly organized and existing under the laws of
California, whose address is 4005 Miranda Ave., Suite 180, Palo Alto, California
94304 ("Licensee").
RECITALS
WHEREAS, certain inventions, generally characterized as "the
Combinatorial Synthesis of Novel Materials" hereinafter collectively referred to
as "the Invention," were made in the course of research at LBL by Dr. Peter G.
Schultz and Dr. Xiaodong Xiang, jointly with Mr. Isy Goldwasser of Symyx
Technologies, Inc., and are covered by the Patent Rights as defined below;
WHEREAS, Drs. Schultz and Xiang have assigned their rights in the
Invention and the Patent Rights to The Regents and Mr. Goldwasser has assigned
his rights to Licensee, and as a result the Patent Rights are owned jointly by
The Regents and Licensee;
WHEREAS, the development of the Invention was sponsored in part by the
United States Department of Energy ("U.S. DOE") and as a consequence this
license is subject to certain obligations to the federal government as set forth
in Public Law 96-517, as amended;
WHEREAS, the Licensee is a "small business firm" as defined at Section 2
of Public Law 85-536 (15 U.S.C. 632);
WHEREAS, The Regents desire that the Invention be developed and utilized
to the fullest extent so that the benefits can be enjoyed by the general public;
WHEREAS, the Licensee desires to obtain certain rights from The Regents
for the commercial development, use, and exploitation of the Invention, and The
Regents are willing to grant such rights.
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning
indicated:
1.1 "Affiliate" shall mean any corporation or other entity that is
directly or indirectly controlling, controlled by or under common control with
Licensee. For the purpose of this definition, "control" shall mean the direct or
indirect ownership of more than fifty percent (50%) of the capital stock of the
subject entity entitled to vote in the election of directors (or, in the case of
an entity that is not a corporation, interests entitled to vote in the election
of the corresponding managing authority).
<PAGE> 2
1.2 "Licensed Subject Matter" shall mean inventions, discoveries,
information and other subject matter within the Patent Rights or Technology.
1.3 "Licensed Products" shall mean (i) any product whose sale would
infringe a Valid Claim within the Patent Rights in the country for which the
product is made or sold; or (ii) a composition of matter that is first invented
by Licensee, or by a Sublicensee pursuant to a sublicense granted hereunder,
using a method covered at the time of such use by a Valid Claim within the
Patent Rights in the country in which such use occurred.
1.4 "Net Sales" shall mean the gross sales price actually received by
Licensee upon its sales of Licensed Products to a third party, less (a) normal
and customary rebates, and cash and trade discounts actually given, (b) amounts
allowed or credited due to returns (not to exceed the original billing or
invoice amount), and (c) to the extent billed separately on the invoice and paid
by the buyer: (i) sales, use and/or other excise taxes or duties actually paid,
(ii) the cost of any packages and packing, (iii) insurance costs and outbound
transportation charges prepaid or allowed, and (iv) import and/or export duties
actually paid. In the event that Licensee sells or otherwise transfers a
Licensed Product to an Affiliate for resale, the amount received by Licensee
from such Affiliate shall not be included in Net Sales, but Net Sales shall
include amounts received by such Affiliate on resale of such Licensed Product,
calculated on the same basis as Net Sales by Licensee. In addition, in the event
that Licensee exchanges Licensed Products for goods or services in a commercial
barter transaction with a third party, Net Sales shall include the fair market
value of such Licensed Products. For such purposes, fair market value shall be
determined by: (a) the selling price at which products of similar kind and
quality, sold in similar quantities, are then currently being offered for sale
by Symyx; (b) when such products are not then currently being offered for sale
by Symyx, the average selling price at which products of similar kind and
quality, sold in similar quantities, are then currently being offered for sale
by other like manufacturers; (c) when such products are not currently being
offered for sale by Symyx or other like manufacturers, Symyx' cost of
manufacture, determined by generally accepted accounting principles, plus Symyx'
standard mark-up on similar products.
1.5 "Patent Rights" shall mean any and all rights in and to: the patents
and patent applications listed in Exhibit A; any foreign counterparts of such
patents or applications; any divisions, substitutions, re-examinations, and
continuations thereof; any patents issuing on any of the foregoing; and all
reissues, renewals and extensions thereof. Continuations-in-part of any of the
foregoing applications and patents issuing on such continuations-in-part,
patents of addition, and all reissues, renewals and extensions of such patents
and patents of addition, shall also be within the Patent Rights, to the extent
the same claim subject matter that was disclosed in an application listed in
Exhibit A or any foreign counterparts thereof. To the extent The Regents own
jointly with Licensee any of the foregoing patent rights, it is understood that
the Patent Rights include only The Regents' rights as a joint owner of such
patents and patent applications.
1.6 "Sublicensee" shall mean a third party to whom Licensee has granted
the right to make (or have made) and sell Licensed Products, or to whom Licensee
has granted the right to practice any method that would infringe a Valid Claim
within the Patent Rights, in each case with
-2-
<PAGE> 3
respect to Licensed Products made by such third party (or by another entity
pursuant to such third party's "have made" rights).
1.7 "Technology" shall mean any and all rights owned by The Regents and
administered by LBL under the Regent's intellectual property policy, in any
technical information, know-how, process, procedure, composition, device,
method, formula, protocol, technique, software, design, drawing or data, which
were conceived or reduced to practice by Dr. Peter G. Schultz or Dr. Xiaodong
Xiang or other LBL personnel arising out of or in connection with work in Dr.
Schultz's and/or Dr. Xiang's laboratories or under either of their direction,
prior to the Effective Date, which are not covered by Patent Rights, but which
are reasonably necessary to practice inventions covered by the Patent Rights.
1.8 "Valid Claim" shall mean either (a) a claim of an issued and
unexpired patent, which has not been held unenforceable, unpatentable or invalid
by a court or other governmental agency of competent jurisdiction, and which has
not been admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or (b) a claim in a pending patent application, provided that if such
pending claim has not issued as a claim of an issued patent within five (5)
years after the date from which such claim takes priority, such pending claim
shall not be a Valid Claim for purposes of this Agreement unless and until,
subsequent to such five (5) year period, such pending claim is issued as a claim
of an issued and unexpired patent as set forth in (a) above. In the event that a
claim of an issued and unexpired patent is held by a court or other governmental
agency of competent jurisdiction to be unenforceable, unpatentable or invalid,
and such holding is reversed on appeal by a higher court or agency of competent
jurisdiction, such claim shall be reinstated thereafter as a Valid Claim
hereunder.
1.9 "Highly Inflationary Currency" shall mean the currency of any
economy with a cumulative inflation rate of 100% or more over the most recent
three calendar years, as measured by consumer price indices published by the
International Monetary Fund (International Financial Statistics), Washington,
D.C.
II. LICENSE
2.1 Grant.
(a) The Regents and LBL hereby grant to Licensee an exclusive,
worldwide right and license, including the right to grant and authorize
sublicenses, under the Patent Rights to make, use, sell, import, export and
otherwise distribute Licensed Products, practice any method, process or
procedure, and otherwise exploit the Patent Rights; and to have any of the
foregoing performed on its behalf by a third party.
(b) The Regents and LBL hereby also grant to Licensee a
nonexclusive, worldwide right and license, including the right to grant and
authorize sublicenses, with respect to the Technology, to make, use, sell,
import, export and otherwise distribute Licensed Products, practice any method,
process or procedure, and to otherwise exploit such Technology; and to have
-3-
<PAGE> 4
any of the foregoing performed on its behalf by a third party. It is understood,
however, that no license is granted under this Section 2.1(b) with respect to
any patent or patent application that is not within the Patent Rights.
(c) The licenses granted to Licensee under this Section 2.1 are
subject to any rights of the United States Government, as provided to Section
8.2 below. In addition, it is understood that any sublicense granted by Licensee
in accordance with this Section 2.1 shall be subordinate to this Agreement.
License shall provide to LBL copies of any such sublicenses, as provided under
Section 5.2 below.
2.2 Reservation. Notwithstanding Section 2.1, The Regents expressly
reserve the right to use the Licensed Subject Matter for educational and
academic, noncommercial research purposes.
2.3 Future Inventions. Licensee will have an option to acquire a license
to certain inventions, as follows:
(a) LBL will promptly provide Licensee with a written Invention
Disclosure Report with respect to any Option Invention conceived or reduced to
practice, alone or jointly with others, by Dr. Schultz, Dr. Xiang or by other
LBL personnel, which in each case arises out of or in connection with work in
the laboratory, or under the direction, of Dr. Schultz or Dr. Xiang, and that
are owned by The Regents or LBL, to the extent such Option Invention is
conceived or first reduced to practice at LBL. As used herein, an "Option
Invention" shall mean any invention or discovery that comprises any method or
apparatus the practice, manufacture, sale or use of which would infringe a Valid
Claim within the Patent Rights, or any novel material discovered using a method
covered by a Valid Claim within the Patent Rights.
(b) Licensee shall have the option to acquire an exclusive,
worldwide license for all purposes, including the right to grant and authorize
sublicenses, with respect to each such Option Invention (including all worldwide
patent rights therein) on reasonable and customary terms. To exercise such
option with respect to any particular Option Invention, Licensee shall notify
LBL within six (6) months after receiving an Invention Disclosure Report and a
written request from LBL, referencing this Section 2.3, as to whether Licensee
wishes to acquire a license to such Option Invention (the "Option Period").
However, for an Invention Disclosure Report to operate to commence the Option
Period, such Invention Disclosure Report must describe an Option Invention that
has been reduced to practice and is sufficiently developed to evaluate, in
conjunction with discussions with the inventors, the scope and patentability of
such Option Invention. In any event, upon request by Licensee, LBL agrees to
provide to Licensee promptly a copy of any patent applications prepared or filed
by or on behalf of LBL or The Regents with respect to the Option Invention.
(c) Licensee may extend the time period for exercising its
option once with respect to each particular Option Invention for an additional
six (6) months by so notifying LBL prior to the expiration of the initial Option
Period for such Option Invention and paying LBL an option fee of $20,000. It is
understood that, for purposes of determining the amount due to LBL upon an
extension of the Option Period, the Option Invention shall be deemed to include
all subject matter that would normally be covered in a single U.S. patent
application in accordance with reasonable and customary U.S. patent prosecution
practice (i.e. only one extension fee shall be due with respect to all such
subject matter, even if technically a patent application may include more than
one invention or a series of related inventions is divided into separate
applications).
III. LICENSE ISSUE FEE
3.1 Stock. In partial consideration of the rights and license granted to
Licensee under this Agreement, Licensee agrees to issue to The Regents, One
Hundred and Twenty Thousand (120,000) shares of Symyx Common Stock, pursuant to
the Stock Issuance Agreement attached hereto as Exhibit B. Licensee represents
and warrants that such Stock Issuance Agreement is substantially the same in
form to stock issuance agreements under which Licensee sold its currently issued
and outstanding stock, except that such other agreements contain provisions
under which the shares issued thereunder are subject to repurchase by Licensee
in certain events.
3.2 Initial Fee. In further consideration of the rights and license
granted to Licensee under this Agreement, Licensee shall pay to The Regents upon
execution of this Agreement a license issue fee of Forty-Five Thousand Dollars
($45,000), less the Twenty Thousand Dollar ($20,000) fee previously paid to LBL
pursuant to that certain Option Agreement dated January 26, 1995 between LBL and
Symyx.
3.3 Maintenance Fees. Licensee shall also pay to The Regents License
Maintenance Fees on the anniversaries of the Effective Date of this Agreement in
accordance with the following schedule:
Date Amount
----------------- --------
First Anniversary $15,000
-4-
<PAGE> 5
Second Anniversary $20,000
Third Anniversary $30,000
Fourth Anniversary $40,000
Fifth Anniversary $50,000
3.4 Amounts Non-refundable. The amounts paid to The Regents under 3.2
and 3.3 above are not refundable or creditable against future royalties.
IV. ROYALTIES
4.1 Royalties. In further consideration of the rights and license
granted to Licensee under this Agreement, Licensee agrees to pay to The Regents
the following amounts:
(a) Licensee agrees to pay The Regents running royalties equal
to one percent (1%) of Net Sales of Licensed Products sold by Licensee; and
(b) Licensee agrees to pay The Regents five percent (5%) of any
running royalties that Licensee receives from its Sublicensees upon such
Sublicensee's sales of Licensed Products ("Sublicense Royalties"). As used
herein, Sublicense Royalties shall not include amounts paid to Licensee as
development funds, equity investments, scientific or development benchmark
payments, payments for research expenditures, payment for goods or any other
amount that does not become payable as a running royalty upon a Sublicensee's
sale of a Licensed Product; provided that if Licensee (i) grants to
non-Affiliate third party a license, under patent rights owned or controlled by
Licensee, to make and sell a Licensed Product for Sublicense Royalties that are
both less than one percent (1%) of the Sublicensee's net sales of Licensed
Products and below the normal range of royalties for products of that type in
the particular industry, and (ii) receives in consideration of such license a
cash issuance fee upon the grant of such license, such license issuance fee
shall be included within Sublicense Royalties for purposes of this Section
4.1(b), to the extent the same is not attributable to reimbursement of expenses,
equity, benchmark payments, payments for research expenditures, payments for
goods or the like. It is understood that the preceding sentence (beginning with
"provided that") shall not apply, however, in the event that the license so
granted by Licensee is contingent upon future events, such as a failure by
Licensee to supply Licensed Products, or otherwise not immediately exercisable.
It is further understood and agreed that Sublicense Royalties received by
Licensee shall be determined net of withholding taxes; provided, however, to the
extent that Licensee recoups any such withholding tax, as a result of actually
reducing its United States income tax liability as a result of a credit for such
withholding tax, the amount so recouped shall be included in Sublicense
Royalties for the quarter in which such amounts were so recouped.
(c) Royalties shall continue under paragraphs (a) and (b) of this
Section 4.1 with respect to each Licensed Product, on a country-by-country
basis, for so long as a Valid Claim within the Patent Rights exists in such
country covering the sale of such Licensed Product or the method used to invent
such Licensed Product. However, if the sale of a Licensed Product would not
infringe a Valid Claim within the Patent Rights, and would not infringe any
other Valid Claim owned or controlled by Licensee, in the country for which such
Licensed Product is sold, then no royalty shall be due under Section 4.1(a)
above with respect to such sales.
4.2 Minimum Royalties. Beginning with calendar year 2001, if the amounts
owed to The Regents under Section 4.1 above for such calendar year, or any
subsequent calendar year, are less than Fifty Thousand Dollars ($50,000), then
with the third payment under Section 5.1 below for such calendar year (i.e. the
payment due by November 30 of that year) shall include an amount that will bring
the total amounts paid to The Regents for such year up to Fifty Thousand Dollars
($50,000). Any amounts paid to The Regents under this Section 4.2 may be carried
forward and offset against amounts due under Section 4.1 in subsequent periods
(it being understood, however, that the amounts so carried forward will not be
counted in determining whether Licensee has satisfied the minimum payment
required under this Section 4.2 for any such subsequent period).
-5-
<PAGE> 6
4.3 Allocation.
(a) In the event that a Licensed Product is sold in combination
with a product, service or component that would not alone be a Licensed Product,
then Net Sales from such combination sales, and Sublicense Royalties received by
Licensee with respect to such sales, for purposes of calculating the amounts due
under Section 4.1 shall be as reasonably allocated by Licensee between such
Licensed Product and such other product, components, and/or services based upon
their relative value.
(b) In the event that a Licensed Product or the Patent Rights are
licensed or sublicensed to a Sublicensee in combination with other patents or
subject matter not within the Licensed Subject Matter and/or not consisting of a
Licensed Product, then Sublicense Royalties and any license issuance fees
resulting from such license for purposes of determining the amounts due under
Section 4.1(b) shall be as reasonably allocated by Licensee between the Licensed
Subject Matter and/or Licensed Product, and such other patents and/or subject
matter, based upon their relative value.
(c) For the purposes of determining relative value, the value of
components of a sale or product shall be determined by: (a) the selling price at
which components of the sale or product, of similar kind and quality, sold in
similar quantities, are then currently being offered for sale by the party
making the combination sale or selling the combination product; (b) when such
products are not then currently being offered for sale by such party, the
average selling price at which products of similar kind and quality, sold in
similar quantities, are then currently being offered for sale by other like
manufacturers; and (c) when such products are not currently being offered for
sale by the selling party or other like manufacturers, the cost of manufacture
for the party making the sale or, determined by generally accepted accounting
principles, plus such party's standard mark-up for such similar products.
4.4 Third Party Payments. In the event that Licensee is required to pay
to a third party amounts in respect of a patent or patent application the claims
of which would be infringed by the practice of an invention within the Patent
Rights, or the manufacture, sale or use of a Licensed Product, then fifty
percent (50%) of such amounts may be offset against amounts owed to The Regents
under this Agreement.
4.5 Annual Amount. Notwithstanding anything to the contrary, at such
time as the total amounts paid and payable by Licensee to The Regents hereunder
with respect to any calendar year exceeds One Million Dollars ($1,000,000), any
further amounts due hereunder with respect to such calendar year prior to any
other adjustments hereunder shall be reduced by fifty percent (50%).
4.6 Non-Royalty Sales. In the event that more than one Valid Claim
within the Patent Rights is applicable to any Licensed Product, it is understood
that only one royalty shall be due under Section 4.1 above, and in no event
shall more than one payment be due under Section 4.1 with respect to any
particular Licensed Product unit.
-6-
<PAGE> 7
V. PAYMENTS AND RECORDS
5.1 Royalty Reports. In each calendar year during the term of this
Agreement beginning after the first sale of a Licensed Product or receipt by
Licensee of Sublicensee Royalties, within sixty (60) days after March 31, June
30, September 30 and December 31, Licensee shall deliver to The Regents a true
and accurate report, giving such particulars of the business conducted by
Licensee during the preceding three (3) calendar months under this Agreement as
are pertinent to an account for payments hereunder. Such report shall include,
with respect to such calendar quarter, at least (a) the total of Net Sales; (b)
the total amount of Sublicense Royalties received by Licensee; and (c) the
calculation of amounts due The Regents pursuant to Article IV. Simultaneously
with the delivery of each such report, Licensee shall pay to The Regents the
total amount, if any, due to The Regents for the period of such report. If no
amounts are due, Licensee shall so report, and if amounts are due for such
quarter, the payment shall accompany such report. For purposes of calculating
Net Sales hereunder, a Licensed Product shall be considered sold when invoiced,
or if not invoiced, when delivered to the third party. But when the last patent
owned or controlled by Licensee covering a Licensed Product expires, or when
this Agreement terminates, any shipment made on or before the day of that
expiration or termination that has not been invoiced shall be considered sold
(and therefore subject to the royalties specified herein); provided that The
Regents shall credit amounts that Licensee so pays with respect to Licensed
Products that the customer does not accept.
5.2 Sublicenses. Licensee shall provide to LBL redacted copies of
sublicenses granted by Licensee hereunder. Such redacted sublicense agreements
may exclude only such information as is not reasonably necessary for LBL to
determine the Sublicense Royalties payable to Licensee pursuant to such
agreements.
5.3 Payments. Licensee shall make checks payable to "The Regents of the
University of California (LBL/L-95-1167)." All amounts payable hereunder by
Licensee shall be payable in United States Dollars. If any currency conversion
shall be required in connection with the payment of royalties hereunder, such
conversion shall be made by using the exchange rates used by Licensee in
calculating Licensee's own revenues for financial reporting purposes in
accordance with generally accepted accounting principles; provided, however, if
a Licensed Product is sold for a Highly Inflationary Currency, Licensee shall
convert the sales subject to royalties into equivalent U.S. dollars using the
closing exchange rates in effect on the date of invoicing (or if no invoicing,
of delivery) as published by The Wall Street Journal. If legal restrictions
prevent the prompt remittance of any payments by Licensee with respect to any
country where a Licensed Product is sold, Licensee may make such payments by
depositing the amount thereof in local currency to The Regents, or if not
permitted to deposit such amounts in U.S. dollars under the laws of that
country, then in the local currency, to The Regents' account in a bank or other
depository in that country. Except as otherwise provided in Section 4.1,
Licensee shall not reduce amounts payable to The Regents by any taxes, fees or
other charges imposed on the remittance of royalty income, including but not
limited to, bank transfer charges. If Licensee does not make payments when due,
Licensee shall pay to LBL reasonable administrative fees and interest charges
LBL generally collects from third parties on overdue accounts.
-7-
<PAGE> 8
5.4 Records. Licensee shall keep complete and accurate records of Net
Sales of Licensed Products by Licensee, and Sublicense Royalties received by
Licensee from any Sublicensee, in sufficient detail to enable the amounts
payable hereunder to be determined. Upon The Regents' written request, but not
more frequently than once per calendar year, Licensee shall permit
representatives or agents of The Regents to examine such records during
Licensee's regular business hours for the purpose of and to the extent necessary
to verify any report required under this Agreement with respect to Net Sales
made by Licensee and Sublicense Royalties received from Sublicensees not more
than five (5) years prior to the date of The Regents' request. In the event that
the amounts due to The Regents are determined to have been underpaid, Licensee
shall pay to The Regents any amount due and unpaid, together with interest on
such amount at the prime rate in effect at Bank of America NT&SA, San Francisco,
California, or at the maximum rate permitted by law, whichever is lower. The
Regents shall bear the fees and expenses of The Regents' representatives
performing the examination of the books and records. But if the representatives
establish an underpayment of royalties of more than 7.5% of the total
royalties due for the period audited, then Licensee shall bear the reasonable
out of pocket fees and expenses paid by The Regents to such representatives.
VI. PATENTS AND INVENTIONS
6.1 Applications. Applying for, seeking prompt issuance of, and
maintaining during the term of this Agreement, the Patent Rights, shall be
undertaken by The Regents. The Regents shall promptly notify Licensee if The
Regents elect not to pursue any application for Patent Rights, or pay any fee
required to maintain a patent within the Patent Rights, in any country and in
any event shall so notify Licensee at least sixty (60) days before the
application or payment is due. In such event, Licensee shall have the right to
file and prosecute such application, and/or maintain such patent, in that
country. The Regents and LBL agree to use the law firm of Townsend & Townsend,
Khourie & Crew or such other firm as the parties agree, for the prosection of
the Patent Rights.
6.2 Expenses. Licensee shall reimburse The Regents for reasonable
out-of-pocket fees and expenses incurred by The Regents or LBL after the
Effective Date in prosecuting applications and maintaining patents within the
Patent Rights. In the event that Licensee fails to reimburse The Regents for
such costs with respect to a patent or application in any country listed on
Exhibit C hereto, the subject patent application or patent (as the case may be)
shall cease to be within the Patent Rights in such country for purposes of this
Agreement; in the event that Licensee fails to reimburse The Regents for such
costs with respect to such a patent or application in any country other than
those listed on Exhibit C hereto, the license granted to Licensee under such
application or patent (as the case may be) shall become nonexclusive in such
country. Licensee shall not be entitled to exercise its rights under Section 6.1
with respect to any countries in which Licensee has lost its rights pursuant to
this Section 6.2. Licensee may deduct against amounts owing under Section 4.1
above, one-half of the amounts reimbursed to The Regents under this Section 6.2
for prosecuting and maintaining U.S. patents within the Patents Rights.
-8-
<PAGE> 9
6.3 Consultation. The Regents agree to consult with Licensee with
respect to the Patent Rights in a timely manner concerning (i) scope and content
of patent applications within the Patent Rights prior to filing such patent
applications, and (ii) content of and proposed responses to official actions of
the United States Patent and Trademark Office and foreign patent offices during
prosecution of such patent applications, and to include in such application and
responses reasonable changes requested by Licensee, to the extent not
inconsistent with the interests of The Regents. For purposes of this Section
6.3, "timely" shall mean sufficiently in advance of any deadline imposed upon
written response so as to allow Licensee to meaningfully review such written
response and also provide comments to The Regents in advance of such decision or
deadline to allow comments of Licensee to be considered and incorporated into
The Regents' decision or written response. If License has not commented before
the deadline for filing a response with the relevant government patent offices,
The Regents may always take action to prevent the loss of patent rights.
VII. INFRINGEMENT
7.1 Notice of Infringement. If Symyx learns of the substantial
infringement of any of LBL's Patent Rights, Symyx shall so inform LBL in writing
and shall provide LBL with reasonable evidence of the infringement. During the
period and in a jurisdiction where Symyx has exclusive rights under this
Agreement, neither party may notify a third party of the infringement of any of
LBL's Patent Rights without first obtaining written consent of the other party,
which consent shall not be unreasonably denied. Both parties shall use good
faith efforts in cooperation with each other to terminate such infringement
without litigation.
7.2 Legal Action. Symyx may request that LBL take legal action against
the infringement of LBL's Patent Rights. Symyx shall make that request in
writing and include reasonable evidence of the infringement and damages to
Symyx. If the infringing activity has not been abated within ninety (90) days of
that request, LBL may elect to: (a) commence suit on its own account; or (b)
refuse to participate in the suit. LBL shall give written notice of its election
to Symyx by the end of the one hundredth (100th) day after receiving notice of
the request from Symyx. Symyx may thereafter bring suit for patent infringement
only if LBL elects not to commence suit within such ninety (90) day period and
if the infringement occurred during the period and in a jurisdiction where Symyx
has exclusive rights under this Agreement. If, however, one party elects to
bring suit in accordance with this paragraph, the other party may thereafter
join such suit at its own expense. All recoveries in such suit (whether
initiated by Licensee or its designee, or brought as a counterclaim in a suit
commenced by a third party) will inure to the benefit of Licensee or its
designee, less a one time payment to The Regents equal to five percent (5%) of
the amount recovered by Licensee, net of all legal and other out of pocket
expenses incurred by either party in commencing and conducting a legal action
under this Section 7.2 (for which the party incurring such expenses shall be
reimbursed), to the extent that the amount recovered represents damages awarded
for infringement of the Patent Rights. Such legal action as is undertaken
pursuant to this Article 7 must be at the expense of the party by whom such suit
is brought.
-9-
<PAGE> 10
7.3 Withholding Royalties. In the event that Licensee commences an
action to enforce the Patent Rights, Licensee shall have the right during the
pendency of the action to withhold up to, but no more than fifty percent (50%)
of the amounts payable to The Regents hereunder to offset Licensee's out of
pocket legal expenses incurred in connection with such action or proceeding. Any
portion of such withheld amounts that is not so applied shall be promptly paid
to The Regents after such action or proceeding is resolved or abandoned. Any
amounts recovered from third parties by Licensee with respect to the Patent
Rights in such action or proceeding shall be applied to reimburse any
outstanding legal expenses of the action or proceeding incurred by Licensee or
The Regents, and to reimburse The Regents for any amount withheld under this
Section 7.3 with respect to such action or proceeding in proportion to the total
of the expense incurred by Licensee and The Regents. Any amounts remaining shall
be disbursed as provided in 7.2 above.
7.4 Cooperation. Each party shall cooperate with the other in litigation
proceedings instituted under this Agreement (including without limitation by
joining as a nominal party) but, except for attorney's fees, at the expense of
the party by whom suit is brought. The party bringing the suit will control that
litigation, except that the other party may elect to be represented at its own
expense by counsel of its choice. Upon the request and at the expense of the
requesting party, the other party shall make available at reasonable times and
under appropriate conditions all relevant personnel, records, papers,
information, samples, specimens and other similar materials in its possession.
7.5 Rights As Joint Owner. Notwithstanding any of the foregoing, nothing
in this Article VII shall prevent Symyx from enforcing, without restriction, its
rights under the Patent Rights to the same as extent that it would be entitled
to enforce such rights as a joint owner of a patent within the Patent Rights in
the absence of this Agreement.
7.6 Defense. If Licensee or a Sublicensee, distributor or other customer
is sued by a third party charging infringement of patent rights that dominate a
claim of the Patent Rights, or that cover Technology, with respect to the
manufacture, use, distribution or sale of a Licensed Product or practice of the
Patent Rights, Licensee will promptly notify The Regents. As between the parties
to this Agreement, Licensee will be entitled to control the defense in any such
action(s) and withhold one-half of the amounts otherwise payable to The Regents
hereunder and use the withheld amounts to reimburse the defense costs,
attorneys' fees and liability incurred in such infringement suit(s).
Notwithstanding, Licensee agrees to withhold only that portion of such royalties
as may reasonably be necessary to reimburse amounts in accordance with this
Section 7.3. If Licensee is required to pay a royalty or other amount to a third
party as a result of a final judgment or settlement, the amounts payable to The
Regents hereunder will be reduced as provided in Section 4.4 above, provided
that LBL consents in writing to the settlement or other disposition (other than
final judgment) of the claim or suit, which consent shall not be unreasonably
withheld or delayed.
VIII. REPRESENTATIONS AND WARRANTIES
8.1 Warranties. Except for the rights, if any, of the Government of the
United States of America, as set forth in Section 8.2 below, The Regents and LBL
represent and warrant that: (a)
-10-
<PAGE> 11
Subject to Licensee's rights as a joint owner, The Regents are the owner of the
entire right, title, and interest in and to the Patent Rights, (b) The Regents
have the right and authority to enter into this Agreement and grant the rights
and licenses hereunder, (c) Neither The Regents nor LBL have previously granted,
and neither will grant in the future, any rights in the Patent Rights or the
Option Inventions that are inconsistent with the rights and licenses granted to
Licensee herein, (d) to the best knowledge of LBL, as of the Effective Date, but
without research into the matter, practice of inventions within the Patent
Rights does not infringe any patent rights, trade secrets or other proprietary
rights of any third party, and (e) to the best present knowledge of LBL but
without research into the matter, neither The Regents nor LBL own any rights in
any other patent or patent application, the claims of which would dominate the
claims of a patent or patent application within the Patent Rights or that claim
subject matter within the Technology or its use.
8.2 Governmental Rights. The parties understand that the Licensed
Subject Matter may have been developed under a funding agreement with the U.S.
DOE and, if so, that the U.S. DOE may have certain rights relative thereto under
35 U.S.C. Sections 201-207 and regulations thereunder, including without
limitation (i) Department of Energy nonexclusive, nontransferable, irrevocable,
paid-up, worldwide licenses to practice or have practiced, for or on behalf of
the U.S. Government, the Licensed Subject Matter; (ii) certain march-in rights
in accordance with 48 CFR 27.304-1(g), and (iii) the provisions of 35 U.S.C.
204, which requires exclusive licensees to manufacture substantially in the
United States products embodying Licensed Products that such licensee produces
for sale in the United States. The Regents and LBL represent and warrant that
they (i) have complied and agree to continue to comply during the term of this
Agreement with all laws and regulations applicable to such U.S. DOE funding
agreement and (ii) have done and will continue to do all acts necessary or
convenient for the protection of The Regent's rights to retain ownership of all
inventions within the Licensed Subject Matter, including disclosing subject
inventions to the U.S. DOE and electing to retain title in subject inventions.
8.3 Disclaimer. NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES
OTHER THAN THOSE EXPRESSLY STATED IN THIS AGREEMENT, AND SPECIFICALLY, LBL AND
THE REGENTS MAKE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING PROVISIONS OF THIS
SECTION 8.3, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS:
(a) a warranty or representation by The Regents or LBL as to the
validity or scope of any Patent Rights; or
(b) a warranty or representation that anything made, used, sold
or otherwise disposed of under any license granted in this Agreement is or will
be free from infringement of patents of third parties, except as provided under
8.1(d) above; or
(c) an obligation to bring or prosecute actions or suits against
third parties for patent infringement; or
(d) conferring by implication, estoppel or otherwise any license
or rights under any patents of The Regents other than the Patent Rights as
defined herein, regardless of whether such patents are dominant or subordinate
to the Patent Rights; or
-11-
<PAGE> 12
(e) an obligation to furnish any know-how not provided in the
Patent Rights or the Technology.
IX. INDEMNIFICATION AND INSURANCE
9.1 Indemnification. Licensee shall hold harmless and indemnify The
Regents, LBL, sponsors of the research that led to the Licensed Subject Matter,
and their officers, employees, and agents, from and against amounts paid to
third parties as a result of any claims, demands, or causes of action
whatsoever, including without limitation those arising on account of any injury
or death of persons or damage to property caused by, or arising out of, or
resulting from, the exercise or practice of the rights and license granted under
this Agreement by Licensee or its officers, employees, agents or
representatives; provided that (a) Licensee receives prompt notice of any such
claim, demand or cause of action, (b) Licensee shall not be obligated to
indemnify any party in connection with any settlement for any claim, demand or
cause of action unless Licensee consents in writing to such settlement, which
consent shall not be unreasonably withheld or delayed, and (c) upon request of
Licensee, the exclusive right to control the defense thereof.
9.2 Clinical Trials. Before Licensee or any Sublicensee initiates
clinical trials of a Licensed Product(s) in humans, Licensee shall obtain such
insurance (or alternative indemnification) as is reasonable and customary to
insure against the risks of such trials.
9.3 Insurance. From and after the first commercial sale or transfer of a
Licensed Product pursuant to the license granted hereunder, and in any event
prior to the initiation of any human clinical trials by Licensee of a Licensed
Product, Licensee at its sole cost and expense, shall obtain, keep in force and
maintain insurance as follows, or an equivalent program of self insurance:
Comprehensive or Commercial Form General Liability Insurance with limits
as follows:
(a) Each Occurrence: $1,000,000
(b) Products/Completed Operations Aggregate: $5,000,000
(c) Personal and Advertising Injury: $1,000,000
(d) General Aggregate (commercial form only): $5,000,000
It should be expressly understood, however, that the coverages and limits
referred to above shall not in any way limit the liability of Licensee. Upon
request, Licensee shall furnish LBL with certificates of insurance evidencing
compliance with all requirements. Such certificates shall:
(1) Provide for thirty (30) days advance written notice to The
Regents of any modification.
(2) Indicate that The Regents, LBL, the U.S. DOE and their
officers, employees, and agents, have been endorsed as an additional Insured
under the coverages referred to above.
-12-
<PAGE> 13
(3) Include a provision that the coverages will be primary and
will not participate with nor will be excess over any valid and collectable
insurance or program of self-insurance carried or maintained by The Regents.
X. USE OF NAMES AND NONDISCLOSURE OF AGREEMENT
10.1 Use of Names. In accordance with California Education Code Section
92000; nothing contained in this Agreement may be construed as conferring any
right to use in advertising, publicity or other promotional activities any name,
trade name, trademark, or other designation of LBL or The Regents (including any
contraction, abbreviation or simulation of any of the foregoing). Unless
otherwise required by law, Licensee may not use the name "Lawrence Berkeley
Laboratory," "LBL," "The Regents of the University of California" or the name of
any University of California campus in a manner that suggests an endorsement by
them.
10.2 Nondisclosure. Neither party may disclose the terms of this
Agreement to a third party without express written permission of the other
party, except where required under either the California Public Records Act or
other applicable law. Notwithstanding the foregoing, (i) the parties may
disclose the existence of this Agreement and the extent of the grant in Article
2; (ii) Licensee may disclose the terms of this Agreement to bona fide
prospective investors and professional advisors to Licensee, and to other
parties with whom Licensee has or is evaluating a business relationship, under
reasonable conditions of confidentiality; and (iii) LBL may disclose the terms
of this Agreement to the U.S. DOE.
XI. CONFIDENTIAL INFORMATION
11.1 General. The parties may, from time to time, in connection with
this Agreement, disclose to each other Confidential Information. "Confidential
Information" shall mean any information disclosed in writing by a party to this
Agreement to any of the other parties to this Agreement, and marked by the
disclosing party with the legend "CONFIDENTIAL" or other similar legend
sufficient to identify such information as confidential proprietary information
of the disclosing party. Neither party shall use any Confidential Information of
the other party except as expressly authorized under this Agreement, and each
party will use best efforts to prevent the disclosure of the other party's
Confidential Information to third parties; provided that Licensee may disclose
Confidential Information of LBL and The Regents, with similar protections in
place, to the extent reasonably necessary to exploit the rights and license
granted to Licensee hereunder (including the rights to grant and authorize
sublicenses); and provided further that the recipient party's obligations under
this Article XI shall not apply to Confidential Information that:
(a) is disclosed orally; provided, however, that the recipient
party's obligations under this Article XI shall apply to information disclosed
orally if such information is confirmed in writing as "CONFIDENTIAL" by the
disclosing party within thirty (30) days after disclosure thereof;
-13-
<PAGE> 14
(b) is in the recipient party's possession at the time of
disclosure thereof;
(c) is or later becomes part of the public domain through no
fault of the recipient party;
(d) is received from a third party having no obligations of
confidentiality to the disclosing party;
(e) is developed independently by the recipient party without
reliance upon or use of the disclosing party's Confidential Information; or
(f) is required by law or regulation to be disclosed; provided,
however, that the party subject to such disclosure requirement has provided
written notice to the other party promptly to enable such other party to seek a
protective order or otherwise prevent disclosure of such Confidential
Information.
11.2 Disclosure to DOE. In the event that LBL determines that disclosure
of Confidential Information to the U.S. DOE is reasonably necessary or required
by law, LBL may disclose such Confidential Information of Licensee to the U.S.
D.O.E., provided that it shall not disclose Confidential Information to the U.S.
DOE unless either the U.S. DOE has executed a confidentiality agreement with LBL
containing terms and conditions substantially similar to this Article XI, or,
has put into place other usual and customary procedures that are utilized by the
U.S. DOE to protect such Confidential Information.
11.3 Period. The obligations of the parties pursuant to this Article XI
with respect to Confidential Information of the other party shall continue in
full force and effect for a period or five (5) years after the disclosure of
that Confidential Information to a party hereunder; provided that if either
party requests an additional five (5) year period for maintaining the
confidentiality of any specified Confidential Information disclosed prior to the
expiration of such initial five (5) year period, the obligations under this
Article XI shall continue with respect to such Confidential Information for an
additional five (5) years. Notwithstanding any other provisions of this
Agreement, Licensee shall not be obligated to disclose to LBL or The Regents
information for which Licensee reasonably needs protection for more than ten
(10) years.
XII. DUE DILIGENCE
12.1 Obligation to Exploit. Licensee shall use commercially reasonable
efforts to bring one or more Licensed Products to market and to meet the market
demand therefor. Beginning November 30, 1995 and semi-annually thereafter,
Licensee shall deliver to The Regents a progress report covering Licensee's
activities related to the development and testing of Licensed Products and the
obtaining of any applicable governmental approvals necessary for marketing
Licensed Products. Licensee shall make these progress reports until the first
commercial sale of a Licensed Product occurs anywhere in the world. Progress
reports submitted by Licensee pursuant to this Section 12.1 shall include, but
not be limited to, the following topics: (a) summary of work completed, (b)
-14-
<PAGE> 15
summary of work in progress, (c) current schedule of anticipated milestones, and
(d) market plans for introduction of Licensed Products, and (e) number of
full-time equivalent (FTEs) employees or agents working on the development of
Licensed Products.
12.2 Development Funding. In satisfaction of its obligations under
Section 12.1 above, Licensee agrees to expend (itself or through Sublicensees or
others) an aggregate of not less than One Million Dollars ($1,000,000) toward
the development of Licensed Products and/or inventions within the Patent Rights
during the first three (3) years of this Agreement, and for the next three (3)
years, the Licensee shall at least spend One Million Dollars ($1,000,000) per
year for such purposes. Compliance with this Section 12.2 shall satisfy, with
the exception of the obligation to provide progress reports, all obligations of
Licensee under this Article XII for the full term of this Agreement.
12.3 Remedy. In the event that Licensee fails to fulfill its obligations
under Section 12.1 or 12.2 above, The Regents shall have a right to terminate
this Agreement or reduce this exclusive limited license to a nonexclusive
license for such lack of diligence. In order to terminate this Agreement or
reduce this exclusive limited license to a nonexclusive license, The Regents
must provide written notice to Licensee of the Licensee's deficiency in
fulfilling the performance requirements of this Article XII. The Regents may
then terminate this Agreement or reduce this exclusive limited license to a
nonexclusive license only if Licensee fails to provide written evidence, within
sixty (60) days after receiving written notice from The Regents of The Regents'
intention to so terminate this Agreement or reduce the exclusive limited license
to a nonexclusive license, that Licensee is fulfilling such obligations;
provided if Licensee disputes an assertion by The Regents of such failure,
termination of this Agreement or reduction of the exclusive limited license
shall not occur unless and until it has been determined in an arbitration
proceeding under Section 14.3 below that Licensee has not satisfied such
obligations, and Licensee has failed to undertake such efforts within sixty (60)
days thereafter. Licensee's compliance with Section 12.2 above shall be deemed
conclusive evidence that Licensee has commercialized or is using commercially
reasonable efforts to commercialize a Licensed Product and to meet the market
demand therefor worldwide, and that Licensee has satisfied all of its
obligations under this Article XII. This Section 12.3 sets forth The Regents'
sole remedy for a failure by Licensee to meet Licensee's obligations, other than
the obligation to provide progress reports, under this Article XII.
12.4 Non-Exclusive License. If LBL or The Regents grant a non-exclusive
license to any other party upon royalty rates more favorable than those of this
Agreement after reducing this license to a non-exclusive license, then Licensee
shall also be entitled to the benefit of the more favorable rates, provided that
Licensee agrees in writing to accept all financial terms of that license
(mutatis mutandis) in whole and not in part in order to enjoy the benefit of the
more favorable rates.
XIII. TERM AND TERMINATION
13.1 Term. The term of this Agreement shall commence on the Effective
Date and continue in full force and effect until expiration, revocation,
invalidation or abandonment of the last patent or application within the Patent
Rights, unless terminated earlier pursuant to this Article XIII.
-15-
<PAGE> 16
Upon the expiration, but not an earlier termination of this Agreement, the
license granted to Licensee under 2.1 above shall continue on a non-exclusive
basis.
13.2 Termination By Notice. This Agreement will terminate:
(a) Upon The Regents' written notice to Licensee after sixty (60)
days written notice to Licensee if Licensee breaches or defaults on any material
obligation under this Agreement; provided that such sixty (60) day notice
specifies the nature of the breach; and provided further that Licensee may avoid
such termination if before the end of such sixty (60) day period Licensee cures
such breach or default. However. other than for breaches or defaults under
Article III or Section 4.2, if Licensee disputes an asserted breach in writing
within such sixty (60) day period, The Regents shall not have the right to
terminate this Agreement unless and until it has been determined in an
arbitration proceeding under Section 14.3 below that this Agreement was
materially breached, and Licensee fails to cure such breach within sixty (60)
days after such determination. This Section 13.2(a) shall not, however, suspend
any obligation of Licensee to compensate The Regents for any undisputed amount,
as provided for under any term of this Agreement, during the pendency of any
determination of breach; or
(b) in its entirety, or as to any particular patent application
or patent within the Patent Rights, upon Licensee's sixty (60) days written
notice to The Regents. From and after the effective date of a termination under
this Section 13.2(b) with respect to a particular patent application or patent,
such patent application and patent in the particular country shall cease to be
within the Patent Rights for all purposes of this Agreement. Upon a termination
of this Agreement in its entirety under this Section 13.2(b), all rights and
obligations of the parties shall terminate, except as provided in this Article
XIII.
13.3 Sale of Stock On Hand. In the event that this Agreement is
terminated for any reason, Licensee, Sublicensees and customers of either
Licensee or a Sublicensee may, within six months after the effective date of
such termination, sell or otherwise dispose of all Licensed Products that
Licensee, Sublicensees and customers of either Licensee or a Sublicensee may
have on hand on the effective date of such termination, subject to Licensee's
payment of amounts due to The Regents pursuant to Article IV of this Agreement,
provided that Licensee or its Sublicensee provides to The Regents within sixty
(60) of the effective date of such termination, an inventory of Licensed
Products on hand on the effective date of such termination. Upon termination of
this Agreement for any reason, any sublicense or other rights granted by
Licensee pursuant to this Agreement and in compliance with the terms and
conditions hereof, shall survive upon request by the party to whom such
sublicense or rights were granted, provided that upon request by LBL such third
party promptly agrees in writing to be bound by the applicable terms of this
Agreement.
13.4 Survival. Articles I, V, VIII, IX, X, XI, XIII, and XIV shall
survive the expiration and any termination of this Agreement. Except as
otherwise provided in this Article XIII, all rights and obligations of the
parties under this Agreement shall terminate upon the expiration or termination
of this Agreement.
-16-
<PAGE> 17
13.5 Rights as Joint Owners. In the event this Agreement is terminated
for any reason with respect to any Patent Rights of which The Regents (including
LBL) and Licensee are joint owners, it is understood that neither The Regents
nor Licensee shall have any obligation to account to the other for profits, or
to obtain the consent of the other, with respect to any license or other
exploitation of such Patent Rights by reason of such joint ownership. Any rights
to an accounting from, and any requirement to obtain the consent of, the other
joint ownership under the laws of any jurisdiction are hereby waived.
XIV. GENERAL
14.1 Assignment. This Agreement may not be assigned by Licensee without
the prior written consent of The Regents, except to a party that succeeds to all
or substantially all of Licensee's business or assets relating to this Agreement
whether by sale, merger, operation of law or otherwise; provided that such
assignee or transferee promptly agrees in writing to be bound by the terms and
conditions of this Agreement.
14.2 Patent Marking. Licensee agrees to mark permanently and legibly all
products and documentation manufactured, used or sold by Licensee under this
Agreement with such patent notice as may be permitted or required under Title
35, United States Code.
14.3 Arbitration. At the request of either party, the parties shall
settle any controversy or claim arising out of or relating to this Agreement,
excluding any dispute relating to patent validity or infringement, by
arbitration conducted in San Francisco, California under the then current
Licensing Agreement Arbitration Rules of the American Arbitration Association.
Judgment upon the arbitral award is binding on the parties. Either party may
enter that judgment in any court having jurisdiction.
14.4 References to LRL and The Regents. It is understood that this
Agreement is entered into by and between Licensee and The Regents, and that The
Regents are acting through LBL. Accordingly, notwithstanding that an obligation
of Licensee hereunder is expressly stated as being to either LBL or The Regents,
the satisfaction or performance by Licensee of any such obligations to either
LBL or The Regents shall be deemed to satisfy all obligations of Licensee to
both LBL and The Regents; i.e. The Regents and LBL shall be deemed to be one and
the same party for purposes of this Agreement.
14.5 Complete Agreement. This Agreement and the exhibits attached
hereto, constitute the entire understanding and only agreement between the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, representations, agreements, and understandings, written or
oral, that the parties may have reached with respect to the subject matter
hereof. No agreements altering or supplementing the terms hereof may be made
except by means of a written document signed by the duly authorized
representatives of each of the parties hereto.
14.6 No Implied Obligations. Licensee's sole obligation to bring
pLicensed Products to market and meet the market demand thereof is as set forth
in Article XII. Nothing in this Agreement
-17-
<PAGE> 18
shall be deemed to require Licensee to otherwise exploit the Licensed Subject
Matter for commercial purposes, or prevent Licensee from commercializing
products similar to or competitive with a Licensed Product.
14.7 Force Majeure. In the event either party hereto is prevented from
or delayed in the performance of any of its obligations hereunder by reason of
acts of God, war, strikes, riots, storms, fires, or any other cause whatsoever
beyond the reasonable control of the party, the party so prevented or delayed
shall be excused from the performance of any such obligation to the extent and
during the period of such prevention or delay.
14.8 Notices. Any payment, notice or other communication this Agreement
requires or permits either party to give must be in writing to the appropriate
address given below, or to such other address as one party designates by written
notice to the other party. The parties deem payment, notice or other
communication to have been properly given and to be effective (a) on the date of
delivery if delivered in person; (b) on the fourth day after mailing if mailed
by first-class mail, postage paid; (c) on the second day after delivery to an
overnight courier service such as Federal Express, if sent by such a service; or
(d) upon confirmed transmission by facsimile. The parties' addresses are as
follows:
For Payments to LBL or The Regents: For all other notices to LBL or The Regents:
Lawrence Berkeley Laboratory Lawrence Berkeley Laboratory
Accounting/Financial Management Technology Transfer Department
P.O. Box 528 Mailstop 90-1070
Berkeley, California 94701 One Cyclotron Road
Attention: Licensing Accountant Berkeley, California 94720
Fax: (510) 486-7113 Attention: Licensing Manager
Telephone: (510) 486-7113 Fax: (510) 486-6457
Telephone: (510) 486-6467
To SYMYX:
SYMYX Technologies
2600 El Camino Real, Suite 505
Palo Alto, California 94304
Attention: Isy Goldwasser
Fax: (415) 424-0832
Telephone: (415) 812-8715
-18-
<PAGE> 19
14.9 Compliance with Law. Licensee shall comply with all applicable
federal, state and local laws and regulations in connection with its activities
pursuant to this Agreement. If the law of any nation requires that any
governmental agency either approve or register this Agreement or any associated
transaction, Licensee shall assume all legal obligation to do so. Licensee shall
notify LBL if it becomes aware that this Agreement is subject to a U.S. or
foreign government reporting or approval requirement. Licensee shall make all
necessary filings and pay all costs, including fees, penalties, and all other
costs associated with such reporting or approval process. Licensee shall observe
all applicable United States and foreign laws and regulations with respect to
the transfer of Licensed Products and related technical data, including, without
limitation, the International Traffic in Arms Regulation (ITAR) and the Export
Administration Regulations.
14.10 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of California;
provided, however, that all questions with respect to validity of any patents or
patent applications within the Patent Rights shall be determined in accordance
with the laws of the respective country in which such patents or patent
applications shall have been granted or filed, as applicable.
14.11 No Waiver. A waiver, express or implied, by either LBL, The
Regents or Licensee of any right under this Agreement or of any failure to
perform or breach hereof by the other party hereto shall not constitute or be
deemed to be a waiver of any other right hereunder or of any other failure to
perform or breach hereof by such other party, whether of a similar or dissimilar
nature thereto.
14.12 Headings. Headings included herein are for convenience only, do
not form a part of this Agreement and shall not be used in any way to construe
or interpret this Agreement.
14.13 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES, HOWEVER CAUSED AND UNDER
ANY THEORY OF LIABILITY, REGARDLESS OF WHETHER THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
14.14 Severability. If any provision of this Agreement shall be found by
a court of competent jurisdiction to be void, invalid or unenforceable, the same
shall be reformed to comply with applicable law or stricken if not so
reformable, so as not to affect the validity or enforceability of the remainder
of this Agreement, provided that the reformation complies with the intent of the
parties.
14.15 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement.
-19-
<PAGE> 20
THE REGENTS OF THE UNIVERSITY SYMYX CORPORATION
OF CALIFORNIA ("The Regents") ("Licensee")
through THE LAWRENCE BERKELEY
LABORATORY ("LBL")
By: /s/ R.M. FLEISCHMAN By: /s/ ISY GOLDWASSER
---------------------------------- --------------------------------
Name: R.M. Fleischman Name: Isy Goldwasser
-------------------------------- ------------------------------
Title: Associate Laboratory Director Title: Chief Financial Officer
------------------------------- -----------------------------
-20-
<PAGE> 21
EXHIBIT A
U.S. patent application, serial number 08/327,513, entitled The Combinatorial
Synthesis Of Novel Materials, by Peter Schultz, Xiaodong Xiang, and Isy
Goldwasser.
U.S. patent application, serial number 08/438043, filed May 8, 1995, entitled
The Combinatorial Synthesis of Novel Materials, by Peter Schultz, Xiaodong
Xiang, and Isy Goldwasser.
<PAGE> 22
EXHIBIT B
<PAGE> 23
SYMYX TECHNOLOGIES
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this ____th day of ______, 1995, between Symyx
Technologies, a California corporation (the "Company") and The Regents of the
University of California (the "Purchaser").
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 120,000 shares of the
Company's Common Stock (the "Shares") in consideration for the licenses granted
under that certain License Agreement of an even date herewith between the
Company and the Purchaser (the "License Agreement"). The Shares are valued at
$.001 per share for an aggregate valuation of $120.00.
2. Closing. The closing for the issuance of the Shares shall be held at
the offices of Wilson Sonsini Goodrich & Rosati on _________, 1995, or at such
other time and place as the Company and Purchaser may agree upon (the
"Closing"). Upon receipt by the Company of an executed License Agreement, the
Company shall issue and deliver to the Purchaser a duly executed certificate
evidencing the Shares in the name of the Purchaser.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to Purchaser as
follows:
a. Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement and sell the Shares and to carry out the provisions of
this Agreement.
b. Capitalization, Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 10,000,000 shares
of Common Stock, 2,110,000 shares of which are issued and outstanding. All
issued and outstanding shares of the Company's Common Stock (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable and (iii)
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. There are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), proxy
or shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. When issued in compliance
with the provisions of this Agreement, the shares will be validly issued, fully
paid and nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
<PAGE> 24
4. Investment Representations.
a. In connection with the purchase of the Shares, the Purchaser
represents to the Company the following:
(i) Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
securities. Purchaser is purchasing these securities for investment for its own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933 (the
"Securities Act").
(ii) Purchaser understands that the securities have
not been registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
the Purchaser understands that, in view of the Securities and Exchange
Commission ("Commission"), the statutory basis for such exemption may not be
present if Purchaser's representations meant that its present intention was to
hold these securities for a minimum capital gains period under the tax statutes,
for a deferred sale, for a market rise, for a sale if the market does not rise,
or for a year or any other fixed period in the future.
(iii) Purchaser further acknowledges and understands
that the securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser further acknowledges and understands that the Company is
under no obligation to register the securities. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(iv) Purchaser is aware of the adoption of Rule 144 by
the Commission, promulgated under the Securities Act, which permits limited
public resale of securities acquired in a non-public offering subject to the
satisfaction of certain conditions.
(v) Purchaser further acknowledges that in the event
all of the requirements of Rule 144 are not met, compliance with Regulation A or
some other registration exemption will be required; and that although Rule 144
is not exclusive, the staff of the Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and other than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers who participate
in the transactions do so at their own risk.
b. The Purchaser agrees, in connection with the Company's initial
public offering of the Company's securities, (i) not to sell, make short sales
of, loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock of the Company held by the Purchaser (other than those
shares included in the registration) without the prior written consent of
-2-
<PAGE> 25
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration and (ii) further agrees to execute any
agreement reflecting (i) above as may be requested by the underwriters at the
time of the public offering.
5. Legends. The share certificate evidencing the Shares issued hereunder
shall be endorsed with the following legends:
a. "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933".
b. Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
6. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
7. General Provisions.
a. This Agreement shall be governed by the internal laws of the
State of California. This Agreement represents the entire agreement between the
parties with respect to the purchase of Common Stock by the Purchaser, may only
be modified or amended in writing signed by both parties and satisfies all of
the Company's obligations to the Purchaser with regard to the issuance or sale
of securities.
b. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
c. The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company.
d. Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that
-3-
<PAGE> 26
party thereafter from enforcing each and every other provision of this
Agreement. The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal remedies
available to it under the circumstances.
e. The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
f. SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES
TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
COMPANY: PURCHASER:
SYMYX TECHNOLOGIES, THE REGENTS OF THE UNIVERSITY
a California corporation OF CALIFORNIA
By:________________________________ _____________________________
Title:_____________________________ _____________________________
4005 Miranda Ave., Suite 180 _____________________________
Palo Alto, CA 94304 _____________________________
(address)
-4-
<PAGE> 27
EXHIBIT C
United States
Japan
United Kingdom
Germany
France
The Netherlands
