Exhibit 10.3
NON-COMPETITION AGREEMENT
This Non-Competition
Agreement (the “ Agreement
” ) is made and entered into as of this 23 rd day of
February, 2008 (the “ Agreement Date
” ), by and between Cypress Bioscience, Inc. ,
a Delaware corporation ( “ Parent
” ), Proprius, Inc. (doing
business in California as “Proprius Pharmaceuticals,
Inc.”) , a
Delaware corporation (the “ Company
” ), and Michael J. Walsh (
“ Employee ” ).
Recitals
A. Employee is a key
employee and stockholder and/or optionholder of the Company. Parent
and the Company have entered into an Agreement and Plan of Merger
(the “ Merger Agreement ” )
of even date herewith, providing for the acquisition by Parent of
the Company pursuant to a merger of Propel Acquisition Sub, Inc., a
Delaware corporation and wholly-owned subsidiary of Parent (
“ Merger Sub ” ) with and
into the Company (the “Merger” ) with the
Company surviving the Merger as a wholly owned subsidiary of the
Parent. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Merger Agreement.
As part of the Merger, Employee will dispose of all of
Employee’s Company Common Stock and Company Series A
Stock, in exchange for such Employee’s portion of the Merger
Consideration determined pursuant to the Merger Agreement.
Immediately following the Merger, the business of the Company will
be conducted by Parent. Employee will receive substantial benefits
as a result of the Merger and the exchange of his Company Common
Stock and Company Series A Stock and, in consideration
thereof, Employee has agreed not to compete in the manner and to
the extent herein set forth. Employee is entering into this
Agreement as an inducement to Parent and Merger Sub to consummate
the Merger, with all of the attendant financial benefits to
Employee as an employee and stockholder of the Company.
B. Parent has
requested, as a condition precedent to executing the Merger
Agreement and consummating the transactions contemplated by the
Merger Agreement, that Employee execute and deliver this Agreement,
and Employee desires to enter into this Agreement.
C. Parent and the
Company each are engaged in the research and development of
products, therapies, and services to diagnose and treat
rheumatological conditions or diseases and autoimmune disorders,
including but not limited to fibromyalgia syndrome, and each has
conducted and are conducting their respective businesses on a
worldwide basis.
D. The Company and
Employee are executing an Employment Agreement of even date
herewith (the “Employment Agreement” ) in
connection with Employee’s employment by the Parent following
the Merger. Pursuant to the Employment Agreement, Employee will
become a key employee of the Parent, meaning that Employee will
obtain extensive and valuable knowledge and trade secret and other
confidential information concerning the business of the
Parent.
1.
Agreement
Now, Therefore, in
consideration of the mutual covenants herein contemplated and
intending to be legally bound hereby, and in order to induce the
Parent to consummate the transactions contemplated by the Merger
Agreement, the parties hereto agree as follows:
1. Acknowledgements by
Employee . Employee acknowledges that by virtue of
Employee’s position with the Company Employee has developed
considerable expertise in the business operations of the Company
and has had extensive access to trade secrets and other
Confidential Information of the Company. Employee further
acknowledges that as a result of Employee’s continuing
post-merger employment by the Parent, he will develop extensive
knowledge of the Parent’s business operations including trade
secret and other Confidential Information. Employee recognizes that
Parent would be irreparably damaged, and its substantial investment
in the Company materially impaired, if Employee were to enter into
an activity competing with the business of the Company (or any
subsidiary, Affiliate, successor or acquiror of the Company) in
violation of the terms of this Agreement or if Employee were to
disclose or make unauthorized use of any Confidential Information
concerning the business of the Company or the Parent (or any
subsidiary, successor or acquiror of the Company). Accordingly,
Employee expressly acknowledges that he is voluntarily entering
into this Agreement and that the terms and conditions of this
Agreement are fair and reasonable to Employee in all
respects.
2. Restricted Period .
This Agreement shall expire on the earlier of (the
“Termination Date” ): the second
anniversary of the effective date of the termination of
Employee’s employment with the Parent or the date on which
Parent ceases to engage in all respects in all aspects of the
Restricted Business. The period of time that elapses from the
consummation of the Merger (the “Effective
Date” ) until the Termination Date shall be referred
to herein as the “Restricted Period .
”
3. Non-Competition.
During the Restricted Period and within the Restricted Territory,
Employee shall not, directly or indirectly, without the prior
written consent of Parent, own, manage, operate, join, control,
finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, or consultant
of any Entity engaged in any activity that relates to the research,
development, promotion, marketing, licensing or distribution of
products, therapies, or services which are related to the diagnosis
and/or treatment of rheumatological conditions or diseases and
autoimmune disorders, including, but not limited to fibromyalgia
syndrome (the “Restricted Business” ).
Notwithstanding the above, Employee shall not be deemed to be in
contravention of the foregoing if Employee participates as a
passive investor holding up to 1% of the equity securities of an
Entity engaged in the Restricted Business, which securities are
publicly traded.
4. Non-Interference .
Employee further agrees that during the Restricted Period, Employee
will not, without the prior written consent of Parent,
(i) interfere with the business of the Company or Parent, by
soliciting, attempting to solicit, induce or attempt to induce any
employee or consultant of the Company or Parent to terminate
his/her employment as such in order to become an employee,
consultant or independent contractor to or for any competitor of
the Company or Parent or to or for any Entity with which Employee
is associated in any way;
2.
(provided that, in the absence of a violation of this
Section 4, this restriction shall not be construed as a
prohibition against hiring); or (ii) induce or attempt to
induce any customers, suppliers, distributors, resellers, or
independent contractors of the Company or Parent to terminate their
relationships with, or to take any action that would be
disadvantageous to the business of, the Company or Parent.
5. Confidential
Information. Employee agrees that he or she shall hold all
Confidential Information in strict confidence and shall not at any
time (whether during or after the Restricted Period):
(a) reveal, report, publish, disclose or transfer any
Confidential Information to any Person (other than the Parent or
the Company), except in the performance of Employee’s
obligations under the Employment Agreement; (b) use any
Confidential Information for any purpose, except in the performance
of his obligations under the Employment Agreement; or (c) use
any Confidential Information for the benefit of any Person other
than the Parent or the Company.
6. Representations and
Warranties. Employee represents and warrants, to and for the
benefit of the Indemnitees, that: (a) Employee has full power
and capacity to execute and deliver, and to perform all of
Employee’s obligations under, this Agreement; and
(b) neither the execution and delivery of this Agreement nor
the performance of this Agreement will result directly or
indirectly in a violation or breach of (i) any agreement or
obligation by which Employee or any of Employee’s Affiliates
or subsidiaries is or may be bound, or (ii) any law, rule or
regulation. Employee’s representations and warranties shall
survive the expiration of the Restricted Period for an unlimited
period of time.
7. Independence of
Obligations . The covenants of Employee set forth in this
Agreement shall be construed as independent of any other agreement
or arrangemen
|
