EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of September 17, 2003 (the "Effective Date") by and between Araios, Inc., a
Delaware corporation ("Employer"), and Xxxx X. Xxxxxx, an individual
("Employee").
WHEREAS, Employer desires to engage Employee as its President, and
Employee is willing to be so engaged by Employer, on the terms set forth in this
Agreement.
NOW, THEREFORE, upon the above premises, and in consideration of the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows.
1. Engagement. Effective as of the Effective Date, Employer hereby
engages Employee as Employer's President and Employee hereby accepts such
employment.
2. Duties; Place of Employment. Employee shall perform such duties as
are customarily performed by the President of a company such as Employer as are
delegated to him from time to time by Employer's Chief Executive Officer or, in
the absence of a Chief Executive Officer, the Chief Executive Officer of CytRx
Corporation, the parent corporation of Employer ("CytRx"), and Employer's Board
of Directors, which shall include, without limitation, the duties described on
Schedule 1 to this Agreement. Employee shall perform such duties in a
professional business-like manner and to the best of his ability. Employee shall
report to Employer's Chief Executive Officer or, in the absence of a Chief
Executive Officer, to the Chief Executive Officer of CytRx. Employee understands
and agrees that his duties and authority hereunder will be modified in the event
Employer engages a Chief Executive Officer, so that Employee's duties and
authority are not inconsistent with those of such Chief Executive Officer.
Employee's services hereunder shall be rendered primarily at Employer's
principal executive offices in Worcester, Massachusetts, or its environs, and to
a lesser extent, at Parent's principal executive offices in Los Angeles,
California. Except for travel to and from Los Angeles, and otherwise, when and
as required in the performance of Employee's duties hereunder, Employer shall
have no right to require Employee to serve the Employer at any office or
location other than as set forth above.
3. Time and Efforts. Employee shall devote all of his business time,
efforts, attention and energies to Employer's business and the discharge of his
duties hereunder. Employee's services shall be exclusive to Employer during the
term of this Agreement. Notwithstanding the foregoing, Employee shall be
entitled to serve without compensation on the board of directors of not more
than three profit or non-profit entities which do not compete with the Company
or CytRx in the field of treatment, prevention or diagnosis of any disease
indication for which the Company or CytRx is seeking to develop or market
products (the "Field"), provided that such service does not entail a substantial
time commitment on Employee's part and subject to having first obtained the
consent of Employer, which consent shall not unreasonably be withheld.
4. Term. The term (the "Term") of Employee's employment hereunder shall
commence on the Effective Date and shall expire on the second anniversary
thereof, unless (a) either Employer or Employee notifies the other at least 30
days prior to the first anniversary of the date of this Agreement of its or his
intention that this Agreement expire on the first anniversary of the date of
this Agreement, which shall then be the expiration date or (b) sooner terminated
in accordance with Section 6. Neither party shall have any obligation to extend
or renew this Agreement.
5. Compensation. As the total consideration for Employee's services
rendered hereunder, Employer shall pay or provide Employee the following
compensation and benefits:
5.1. Salary. Employer shall pay Employee an annual salary of Two
Hundred Thousand Dollars ($200,000), in equal semi-monthly installments on the
15th day and the last day of each calendar month during the Term, with the first
such installment and final salary payment at the end of the Term to be adjusted
pro rata in the event the Term does not commence on the first day of a calendar
month.
5.2. Bonus Compensation. Employer shall pay Employee a bonus at
the completion of each year of the Term, provided that Employee remains in the
continuous employ of Employer through such respective dates. The amount of the
bonus will be determined by Employer's Chief Executive Officer or, in the
absence of a Chief Executive Officer, by the Chief Executive Officer of CytRx,
and approved by Employer's Board of Directors (based on the personal performance
of Employee and the overall performance of Employer for the applicable period),
with a target bonus for each year of $50,000 upon successful performance by
Employer and Employee of the milestones set forth on Schedule 2 to this
Agreement.
5.3. Stock Options. CytRx shall grant Employee as of the Effective
Date a nonqualified stock option (the "Option") to purchase approximately
140,000 shares of CytRx's common stock under CytRx's 2000 Long-Term Incentive
Plan (the "Plan") and upon CytRx shareholder approval of an increase in the size
of the Plan (which is anticipated to occur during the fourth quarter of 2003),
an additional nonqualified stock option under the Plan (the "Additional Option")
to purchase a number of shares of CytRx common stock equal to the difference
between 400,000 shares and the number of shares covered by the Option. Subject
to Section 6, the shares covered by the Option and the Additional Option shall
vest and become exercisable as to 1/3rd of the shares covered thereby on each of
the first, second and third annual anniversaries of the Effective Date,
respectively, provided, in each case, that Employee remains in the continuous
employ of Employer through such date. The exercise price of the Option shall be
equal to the closing price of CytRx's common stock on the Effective Date as
reported by Nasdaq, and the exercise price of the Additional Option shall be
equal to the closing price of CytRx's common stock on the date of its grant as
reported by Nasdaq, but not less than the exercise price of the Option. In the
event the exercise price of the Additional Option is higher than the exercise
price of the Option, CytRx will, if permitted by the Plan, issue an additional
nonqualified stock option, stock appreciation right or other compensatory
security, or some combination of the foregoing, under the Plan, that
2
to the maximum extent feasible, puts Employee in the same economic and tax
position as if the Additional Option had the same exercise price as the Option.
The Option and Additional Option each shall have a term of ten years from the
Effective Date and such other terms as shall be determined by CytRx's Board of
Directors (or the Compensation Committee of CytRx's Board of Directors) in its
sole discretion and set forth in the stock option agreements evidencing the
Option and Additional Option.
5.4. Expense Reimbursement. Employer shall reimburse Employee for
reasonable and necessary business expenses incurred by Employee (excluding any
car allowance or commuting expenses) in connection with the performance of
Employee's duties in accordance with Employer's usual practices and policies in
effect from time to time.
5.5. Vacation. Employee shall be entitled to three (3) weeks
vacation during the Term, without loss of salary or bonus hereunder, plus
holidays, sick leave and personal days as determined in accordance with
Employer's usual practices and policies in effect from time to time during the
Term.
5.6. Insurance Benefits. Employee shall be eligible to participate
in any medical, dental, life and disability insurance and other benefits made
available by Employer to all of its senior executive employees under its group
plans or otherwise in effect during the Term. However, until such time as
Employer provides a group plan life insurance coverage for Employee, Employer
shall reimburse Employee for up to $150 per month for any term life insurance
policy maintained by Employee. Employee acknowledges and agrees that, although
Employer plans to obtain such insurance and maintain such other benefits, no
such plans are currently in effect, and that any such plans put into effect may
be modified or terminated by Employer at any time in its discretion.
5.7. Tax Withholding. Employer shall have the right to deduct from
the compensation and benefits due to Employee hereunder any and all sums
required for social security and withholding taxes and for any other federal,
state, or local tax or charge which may be in effect or hereafter enacted or
required as a charge on the compensation or benefits of Employee.
6. Expiration and Termination. This Agreement may be terminated as set
forth in this Section 6.
6.1. Termination by Employer for Cause. Employer may terminate
Employee's employment hereunder for "Cause" upon notice to Employee. "Cause" for
this purpose shall mean any of the following:
(a) Employee's breach of any material term of this Agreement;
provided that the first occasion of any particular breach shall not constitute
such Cause unless Employee shall have previously received written notice from
Employer stating the nature of such breach and affording Employee at least ten
days to correct such breach;
(b) Employee's conviction of, or plea of guilty or nolo contendere
to, any misdemeanor, felony or other crime of moral turpitude;
3
(c) Employee's act of fraud or dishonesty injurious to Employer or
its reputation;
(d) Employee's continual failure or refusal to perform his
material duties as required under this Agreement after written notice from
Employer stating the nature of such failure or refusal and affording Employee at
least ten days to correct the same;
(e) Employee's act or omission that, in the reasonable
determination of Employer's Board of Directors, indicates alcohol or drug abuse
by Employee; or
(f) Employee's act or personal conduct that, in the judgment of
Employer's Board of Directors, gives rise to a material risk of liability of
Employee or Employer under federal or applicable state law for discrimination,
or sexual or other forms of harassment, or other similar liabilities to
subordinate employees.
Upon termination of Employee's employment by Employer for Cause, all
compensation and benefits to Employee hereunder shall cease and Employee shall
be entitled only to payment, not later than three days after the date of
termination, of any accrued but unpaid salary and unused vacation as provided in
Sections 5.1 and 5.5 as of the date of such termination.
6.2. Termination by Employer without Cause. Employer may also
terminate Employee's employment without Cause upon notice to Employee. Upon
termination of Employee's employment by Employer without Cause, all compensation
and benefits to Employee hereunder shall cease and Employee shall be entitled to
(a) payment of (1) any accrued but unpaid salary and unused vacation as provided
in Sections 5.1 and 5.5 as of the date of such termination, which shall be due
and payable upon the effective date of such termination, and (2) an amount,
which shall be due and payable within ten days following the effective date of
such termination, equal to the salary that would otherwise be payable as
provided in Section 5.1 for the period (the "Severance Period") commencing on
the date of termination of Employee's employment and ending on the six-month
anniversary of such date, and (b) continued participation, at Employer's cost
and expense, during the Severance Period in any Employer-sponsored group benefit
plans in which Employee was participating as of the date of termination.
Notwithstanding anything to the contrary set forth in Section 5.3, in the event
Employee's employment is terminated by Employer without Cause, the Option and
Additional Option shall thereupon vest and become immediately exercisable as to
1/6th of the shares covered thereby which have not already vested in accordance
with the respective terms of the Option and the Additional Option. If, for
example, Employer were to terminate Employee's employment without Cause at any
time prior to the first annual anniversary of the date of this Agreement, the
Option would thereupon become vested and immediately exercisable as to 23,333
shares of CytRx common stock covered thereby (assuming the Option is for 140,000
shares originally) and the Additional Option would thereupon become vested and
immediately exercisable as to 43,334 shares of CytRx common stock covered
therby. In the event Employer substantially modifies Employee's responsibilities
4
or reduces Employee's compensation in breach of this Agreement, or otherwise
breaches this Agreement, Employee may, unless such breach is cured by Employer
within ten days after written notice from Employee, terminate this Agreement,
which shall be deemed to be a termination without Cause. In this regard,
however, Employee acknowledges and agrees that, in the event Employer hires a
Chief Executive Officer, Employee's obligations hereunder will be changed as
contemplated in Section 2 and that such change shall not be deemed to be a
breach of this Agreement.
6.3. Death or Disability. Employee's employment will terminate
automatically in the event of Employee's death or upon notice from Employer in
event of his permanent disability. Employee's "permanent disability" shall mean
his inability to fully perform his duties hereunder for any period of at least
75 consecutive days or for a total of 90 days, whether or not consecutive. Upon
termination of Employee's employment as aforesaid, all compensation and benefits
to Employee hereunder shall cease and Employer shall pay to the Employee's heirs
or personal representatives, not later than ten days after the date of
termination, any accrued but unpaid salary and unused vacation as provided in
Sections 5.1 and 5.5 as of the date of such termination.
7. Inventions. Employee shall promptly disclose to Employer, and hereby
assigns and agrees to assign to Employer (or as otherwise directed by Employer),
his full right, title and interest to all Inventions (as defined below).
Employee agrees to cooperate fully with Employer, its attorneys and agents, in
the preparation and filing of all papers and other documents as may be required
to perfect Employer's rights in and to any of such Inventions, including, but
not limited to, execution of any and all applications for domestic and foreign
patents, copyrights or other proprietary rights and the performance of such
other acts (including, among others, the execution and delivery of instruments
of further assurance or confirmation) requested by Employer to assign the
Inventions to Employer and to permit Employer to file, obtain and enforce any
patents, copyrights or other proprietary rights in the Inventions, all at
Employer's expense. Employee hereby designates Employer as his agent, and grants
to Employer a power of attorney with full power of substitution, which power of
attorney shall be deemed coupled with an interest, for the purpose of effecting
any such assignment hereunder from Employee to Employer. "Inventions" shall
mean, for purposes of this Section 7, ideas, discoveries, creations, manuscripts
and properties, innovations, improvements, know-how, inventions, trade secrets,
apparatus, developments, techniques, methods, biological processes, cell lines,
laboratory notebooks and formulas (whether or not patentable or copyrightable or
constituting trade secrets) conceived, made or discovered by Employee (whether
alone or with others) during the Term and/or as a result of confidential
information (as referred to in Section 8 hereof) received from Employer (as
defined therein). Employee agrees to not use or incorporate any third party
proprietary information into any Inventions or to disclose such information to
Employer. Upon termination of this Agreement with Employer, Employee shall
provide to Employer in writing a full, signed statement of all Inventions in
which Employee participated prior to termination of this Agreement.
5
8. Confidentiality; Non-Compete. While this Agreement is in effect and
for a period of five years thereafter, Employee shall hold and keep secret and
confidential all "trade secrets" (within the meaning of applicable law) and
other confidential or proprietary information of Employer and shall use such
information only in the course of performing Employee's duties hereunder;
provided, however, that with respect to trade secrets, Employee shall hold and
keep secret and confidential such trade secrets for so long as they remain trade
secrets under applicable law. Employee shall maintain in trust all such trade
secrets or other confidential or proprietary information, as Employer's
property, including, but not limited to, all documents concerning Employer's
business, including Employee's work papers, telephone directories, customer
information and notes, and any and all copies thereof in Employee's possession
or under Employee's control. Upon the expiration or earlier termination of
Employee's employment with Employer, or upon request by Employer, Employee shall
deliver to Employer all such documents belonging to Employer, including any and
all copies in Employee's possession or under Employee's control. For purposes of
Sections 7, 8 and 9, the term "Employer" shall also include CytRx and its
affiliates. During the Term and for a one-year period thereafter (unless
Employer terminates this Agreement without Cause), Employee shall not be
employed with or serve as a consultant to or be a 5% or greater shareholder of
any entity that is competing, directly or indirectly, with Employer in the
Field, and Employee shall not solicit any employee of Employer for employment
with any other entity.
9. Equitable Remedies; Injunctive Relief. Employee hereby acknowledges
and agrees that monetary damages are inadequate to fully compensate Employer for
the damages that would result from a breach or threatened breach of this
Agreement and, accordingly, that Employer shall be entitled to equitable
remedies, including, without limitation, specific performance, temporary
restraining orders, and preliminary injunctions and permanent injunctions, to
enforce such Section without the necessity of proving actual damages in
connection therewith. This provision shall not, however, diminish Employer's
right to claim and recover damages or enforce any other of its legal or
equitable rights or defenses.
10. Indemnification; Insurance. Employer and Employee acknowledge that,
as the President of the Employer, Employee shall be a corporate officer of
Employer and, as such, Employee shall be entitled to indemnification to the full
extent provided by Employer to its officers, directors and agents under the
Employer's Certificate of Incorporation and Bylaws as in effect as of the date
of this Agreement. Subject to his insurability thereunder, effective the
Effective Date, Parent shall add Employee as an additional insured under its
current policy of directors and officers liability insurance and shall continue
to insure Employee thereunder, or under any replacement policies in effect from
time to time, during the Term.
11. Severable Provisions. The provisions of this Agreement are
severable and if any one or more provisions is determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.
6
12. Successors and Assigns. This Agreement shall inure to the benefit
of and shall be binding upon Employer, its successors and assigns and Employee
and his heirs and representatives. Neither party may assign this Agreement
without the prior written consent of the other party; provided, however, that
this Agreement may be assigned by Employer to Parent or any affiliate of Parent
in connection with any merger or acquisition of Employer by Parent or such
affiliate.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof, and the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this Agreement that are not set forth otherwise herein. This Agreement
supersedes any and all prior or contemporaneous agreements, written or oral,
between Employee and Employer relating to the subject matter hereof. Any such
prior or contemporaneous agreements are hereby terminated and of no further
effect, and Employee, by the execution hereof, agrees that any compensation
provided for under any such agreements is specifically superseded and replaced
by the provisions of this Agreement.
14. Amendment. No modification of this Agreement shall be valid unless
made in writing and signed by the parties hereto and unless such writing is made
by an executive officer of Employer (other than Employee). The parties hereto
agree that in no event shall an oral modification of this Agreement be
enforceable or valid.
15. Governing Law. This Agreement is and shall be governed and
construed in accordance with the laws of the State of California without giving
effect to California's choice-of-law rules.
16. Notice. All notices and other communications under this Agreement
shall be in writing and mailed, telecopied or delivered by hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party
at the following address (or to such other address as such party may have
specified by notice given to the other party pursuant to this provision):
If to Employer:
Araios, Inc.
c/o CytRx Corporation
00000 Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: CytRx Chief Executive Officer
If to Employee:
Xxxx X. Xxxxxx, Ph.D.
000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
7
17. Arbitration. The parties agree if any controversy or claim shall
arise out of this Agreement or the breach hereof (other than claims (a) for
equitable relief, including specific performance, injunctive relief or temporary
restraining orders or (b) enforcing this Section 17 or an arbitration award
granted in accordance herewith), and either party shall request that the matter
be settled by arbitration the matter shall be settled exclusively by final and
binding arbitration before JAMS (or its successor pursuant to the United States
Arbitration Act, 9 U.S.C. Section 1 et seq.) in accordance with the provisions
of JAMS' Streamlined Arbitration Rules and Procedures in effect at such time, by
a single arbitrator, if the parties shall agree upon one, or by one
arbitrator-appointee by each party and a third arbitrator appointed by the other
arbitrators. In case of any failure of a party to make an appointment referred
to above within two weeks after written notice of controversy, such appointment
shall be made by JAMS. All arbitration proceedings shall be held in the City of
Los Angeles, and each party agrees to comply in all respects with any award made
in such proceeding and to the entry of a judgment in any jurisdiction upon any
award rendered in such proceeding. All costs and expenses of arbitration
(including costs of preparation therefore and reasonable attorneys' fees
incurred in connection therewith) of the party prevailing in such arbitration
shall be borne by the losing party to such arbitration or otherwise as directed
by the arbitrator or arbitrators.
18. Survival. Sections 7 through 17 shall survive the expiration or
termination of this Agreement.
19. 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.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first above written.
"EMPLOYER"
Araios, Inc.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman of the Board
"EMPLOYEE"
/s/ Xxxx X. Xxxxxx
--------------------------------------
Xxxx X. Xxxxxx, Ph.D.
8
SCHEDULE 1
Description of Duties
Corporate
o Monitor and support the timely delivery of Araios' near and
long range strategic goals, business plan and budget as
approved by the Board of Directors
o Facilitate the sponsored research agreement between CytRx and
the laboratory of Xx. Xxxxxxx X. Czech
o Provide staffing, laboratory facilities and equipment
necessary to execute the business plan, including the Czech
SRA
o Implement and oversee an intellectual property strategy to
protect any developed or improved technology, including future
patent claims, proprietary know-how, trade secrets, etc.
related to Araios' overall business strategy
o Implement and oversee a regulatory strategy that promotes the
greatest chance of Araios achieving regulatory approval for
its products
o Promote Araios and its research activities to thought leaders
in the scientific and medical communities
o Interface with CytRx management concerning the strategic
direction and operations of Araios
o Create and communicate a vision for the organization that
reflects the company's values and responds to the needs of
various "stakeholders" (i.e., employees, customers, CytRx)
Financial
o Prepare and review monthly, quarterly and annual actual vs.
budgeted operating results and present copies to CytRx
o Monitor cash flow, expenses and allocation of resources
o Anticipate resource needs, set priorities, and allocate
financial and human resources as appropriate
o Create an annual budget that is approved by the Board of
Directors
o Approve vendor invoices for payment by CytRx
o Maintain local imprest bank account in the amount of $5,000
and provide detailed substantiation for CytRx reimbursement
Human Resources
o Recruit and retain the most qualified, talented personnel -
"A" Team
o Ensure that employees are aware of mission, objectives,
individual responsibilities, and competencies critical to
successful job performance
o Set and communicate high standards of performance, evaluate
performance objectives, and provide timely, candid feedback
o Establish and maintain an environment where new ideas and
solutions to problems are solicited, evaluated, and
implemented
x Xxxxxx internal company image as an innovative, highly
competent biopharmaceutical company developing opportunities
for the personal and professional growth of its employees
o Compliance with federal and state employment laws applicable
to Araios employees
Personal
o Exercises sound judgment in decision-making and takes
intelligent business risks
o Inspires trust by demonstrating high ethical standards and
personal integrity
o Makes effective and persuasive presentations, both oral and
written, formal and informal
8
o Identifies the right issues to be communicated, the
appropriate audience, vehicle, and time
o Skilled in negotiation and conflict resolution
SCHEDULE 2
Bonus Milestones
Xxxxxx Employment Milestones and Key Deliverables
Through year end 2004
General Milestones
o Obtain approval of business plan, long range strategic plan
and annual budget by Board of Directors
o Recruitment of scientific staff: 3 chemists, 2 screeners, 2
protein expression scientists and additional staff in 2004
within the budget set forth in the business plan
o Maintain consistent internal communication with the Board of
Directors
o Establish controls and procedures in accordance with the
Xxxxxxxx-Xxxxx Act
o Submission of 1 grant to support Araios research (SBIR, ATP,
DARPA, NIH, etc.) by mid 2004
o Generate a substantial number of newsworthy events, in
addition to the formation of Araios, that warrant press
release activity positively influencing the value of CytRx
o Establish meaningful relationships with pharmaceutical and
biotech companies for potential partnering, strategic
alliances and/or licensing transactions
o A minimum of one scientific publication and one presentation
at a scientific or financial conference to further awareness
of CytRx as permitted by appropriate intellectual property and
trade secret protection
o Assist in aligning Araios' strategy with CytRx's overall
corporate strategy
o Maintain a positive and proactive relationship with the
University of Massachusetts (UMass), its executives and Office
of Technology Management
o Work with Dr. Czech and/or the UMass to assign, allocate or
generate NIH monies from new or existing programs in type II
Diabetes and Obesity
o Keep apprised of new developments in the field of type II
Diabetes and Obesity for possible mergers, acquisitions or
strategic alliances
o Maintain continued membership of Xxxx, Xxxxxx and Xxxxxxxxxx
on Scientific Advisory Board
Scientific Milestones
o First Target Pathway Screen Initiated by Q1 `04
o 3 drug targets/pathways screened in the area of type II
Diabetes/Obesity
o Initiate Hit to Lead chemistry program on at least 1 novel
type II Diabetes/Obesity target
o 1 structure-based chemical library generated around targets in
the area of fatty acid metabolism
o 1 pharmacophore-based compound library generated focused on
type II Diabetes/Obesity drug target
o Select at least 1 new novel target from Xxxxxxx Czech's SRA
for screening in Araios.
