1
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 15th day of
June, 1998, by and between Demeter BioTechnologies Ltd., a Colorado corporation
("Corporation"), and Xx. Xxxxx X. Xxxxxx ("Employee").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this agreement and intending to be legally bound, the Parties
to this agreement agree as follows:
BACKGROUND
A. The Corporation is engaged in the business of research and development of
lytic peptides and related substances ("Corporation's Peptide Technology")
for agricultural, nutritional, medical and other possible commercial
applications (the "Corporation's Business").
B. The Employee is an employee, shareholder, director and officer of the
Corporation, and is a party to that certain Technology Transfer Agreement
dated July 1992 by and between Employee and the Corporation (the "Technology
Transfer Agreement").
C. The Corporation and the Employee desire to set forth in writing the terms
under which the Employee will continue his employment relationship with the
Corporation.
SECTION 1. EMPLOYMENT. The Corporation agrees to employ the Employee and the
Employee agrees to accept the employment in accordance with the terms and
conditions described in this Agreement.
SECTION 2. DUTIES. The Employee shall serve as Vice President of Technology
Development, Chief Scientific Officer of the Corporation and, in addition to
accepting such employment, agrees to perform such duties as may be set from time
to time by the President of the Corporation, subject however, to directions from
the Board of Directors of the Corporation,
-1-
2
such duties to include (i) the generation and development of new molecular
compounds and substances related to the business of the Corporation,
documentation thereof and direct participation and assistance in the preparation
and pursuit of patent rights thereon, (ii) development of potential applications
utilizing such molecular compounds and substances as may be developed by the
Corporation or in conjunction with its authorized collaborators, (iii)
participation and assistance with the research efforts of the Corporation's
licensees, collaborators and research partners and (iv) such other duties and
services assigned to him from time to time by the Board of Directors of the
Corporation or its designee. The Employee shall make available to the
Corporation his best efforts, knowledge, and experience. The Employee shall use
his full time, best efforts, skills and abilities to faithfully and diligently
perform and manage the research functions of the Corporation as directed by the
President of the Corporation and its Board of Directors.
SECTION 3. EXTENT OF SERVICES.
3.1 Except to the extent otherwise provided in this Agreement, the Employee
shall devote his full time, attention, and energies to the performance of his
duties and shall not be engaged in any other business activity, whether or not
pursued for gain, profit or other pecuniary advantage. The Employee shall at all
times faithfully and to the best of his ability perform his duties under this
Agreement. The duties shall be rendered at the Corporation's offices in
Pittsburgh, Pennsylvania, or at such other place or places and at such times as
the needs of the Corporation may from time-to-time require.
3.2 The Corporation enthusiastically supports the Employee's interest in
creating a charitable foundation ("the Foundation") to xxxxxx certain research
for the benefit of underdeveloped and developing nations of the world and agrees
that, notwithstanding any other provision in this Agreement, the Employee may
spend up to two business days a month in furtherance of the Foundation and its
research activities. The Employee and the Corporation agree to attempt in good
faith to coordinate the incidence of such days and minimize any conflicts and
disruption resulting from such activities.
-2-
3
3.3 In order to facilitate the establishment and operation of the Foundation,
the Corporation agrees to retain competent tax and legal advisors to advise the
Corporation and the Employee as to procedures required for the creation and
management of the Foundation. This advice shall include the requirements to
obtain and maintain a favorable tax exempt status ruling from the Internal
Revenue Service. This advice shall be sought as soon as is practicable, in light
of the Corporation's contemplated move of its offices to Pittsburgh,
Pennsylvania. Furthermore, the Corporation agrees to negotiate in good faith
with the Employee, subject to the rights of any third parties, the terms of a
license agreement pursuant to which the Foundation would be granted a
non-exclusive license to use certain of Corporation's Peptide Technology (the
"Licensed Technology") for certain to be agreed-upon applications within the
countries listed on Exhibit A attached to this Agreement. The Foundation may
seek funding and/or grants to further its research efforts related to the
Licensed Technology from third parties so long as no associated
commercialization rights are given to such third parties and such third parties
have agreed to appropriate non-disclosure or use restrictions with respect to
the Licensed Technology.
3.4. The Employee's work for or with the Foundation shall not be deemed to
violate Section 7 or Section 9 of this Agreement.
SECTION 4. TERM. Unless earlier terminated, the initial term of this Agreement
shall begin on June 1st, 1998 ("Effective Date"), and shall continue for a five
(5) year period (the "Initial Term"). After the Initial Term, this Agreement
will automatically renew on such terms and conditions as are in effect at the
time of renewal or as may be agreed between the Parties unless either the
Employee or the Corporation elects not to renew this Agreement and notifies the
other party in writing at least ninety (90) days prior to the expiration date
hereof.
SECTION 5. COMPENSATION.
5.1 Base Compensation. The Employee will receive a base salary of One Hundred
Twenty Thousand Dollars ($120,000.00) per year, payable in accordance with the
Corporation's standard payroll procedures and Federal, State, and local
employment tax regulations. The Employee's
-3-
4
Base Compensation will be reviewed at least annually by the Corporation's
Compensation Committee of the Board of Directors and increases, if any, will be
made at the sole discretion of the Board of Directors.
5.2 Bonuses and Profit Sharing. The Employee shall be eligible for
performance-based bonuses, but there is no assurance that bonuses will be paid.
Bonuses will be paid, if at all, in the sole discretion of the Corporation's
Board of Directors. The Employee shall be eligible for participation in any
Stock Option Plans established from time to time by the Corporation.
5.3 Patent Registration Bonuses. As an incentive to further its research and the
development of patent worthy compounds, processes and/or methodology, the
Corporation agrees that during the term of this Agreement and any renewals or
extensions thereof the Employee will receive for each invention made (solely or
jointly) by him which results in issuance of one or more United States or
Foreign patents with potential commercial application a Patent Registration
Bonus. For patents applied for after June 1, 1998 and issuing on or after June
30, 1999, the amount of such Patent Registration Bonus shall be not less than
[Twenty-Five Thousand Dollars ($25,000.00)] and not greater than Fifty Thousand
Dollars ($50,000.00), such amount to be determined by the Board of Directors of
the Corporation (or its committee designee) in its sole discretion. For patents
applied for after June 1, 1998 and issuing before June 30, 1999, the amount of
such Patent Registration Bonus shall be not less than Five Thousand Dollars
($5,000.00) and not greater than Fifty Thousand Dollars ($50,000.00), such
amount to be determined by the Board of Directors of the Corporation (or its
committee designee) in its sole discretion. The parties recognize that there may
be a question regarding the number of inventions in any family of patents, and
the parties agree to negotiate this matter in good faith. The Employee's right
to a Patent Registration Bonus shall only be applicable (i) to patents that have
been assigned to the Corporation and (ii) if the Employee shall not have, prior
to the date of issuance of the patent, voluntarily resigned from his employment
with the Corporation.
5.4 Benefits. For 1998, the Employee shall receive 10 working days vacation, any
or all of which may be carried over into the subsequent year. For all other
years, the Employee shall
-4-
5
receive 20 working days vacation a year, 10 days of which may be carried over
into the subsequent year. For purposes hereunder, "working days" refers to
Monday through Friday, exclusive of weekends and holidays observed by the
Corporation as determined by the Board of Directors. In addition the Employee
shall receive comparable sick leave, group medical insurance and other fringe
benefits as are made available to other full-time employees of the Corporation
as may be from time to time established by the Board of Directors of the
Corporation.
5.5 Life Insurance. The Corporation shall maintain a life insurance policy with
death benefits of One Million Dollars ($1,000,000.00) for the benefit of
Employee's wife and children. The Corporation, in its sole discretion, may
acquire multi-year fixed premium or annual premium term insurance in order to
meet this obligation to the Employee. In the event a multi-year fixed premium
policy is utilized, the Corporation is obligated only for such premiums as may
become due and payable during the term of this Agreement, and the Employee shall
have the absolute right to continue coverage under the policy at his own expense
upon the termination of the Employee's employment with the Corporation. The
Employee acknowledges the income tax effect of and the Corporation's reporting
requirements on the excess life insurance benefits over Fifty Thousand Dollars
($50,000.00) and accepts full responsibility for payment of the income tax
liability thereon.
5.6 Expenses. The Corporation shall reimburse the Employee for all reasonable
out-of-pocket expenses incurred by the Employee in fulfilling his duties under
this Agreement. The Employee shall provide the Corporation with written evidence
of such expenses as required for compliance with the Internal Revenue Code (as
amended), and the Employee shall fully comply with the Corporation's policies
regarding pre-authorization of expenditures as may be defined from time to time
by its Board of Directors. The Employee agrees to reimburse the Corporation
immediately for any expense reimbursement to the Employee that is disallowed by
the Internal Revenue Service, which reimbursement may not be waived by the
Corporation.
-5-
6
5.7 Relocation and Temporary Living Expenses. The Corporation shall pay all
expenses reasonably incurred by the Employee in relocating his family to
Pittsburgh, Pennsylvania, including normal closing costs, normal and customary
real estate commissions on the sale of his house, moving expenses, the cost of
three (3) trips to Pittsburgh for his wife and other family members residing at
home to look for housing, plus Ten Thousand Dollars ($10,000.00) to cover
incidental moving expenses. In addition, for a period of up to twelve (12)
months, the Corporation shall reimburse the Employee for his properly reported
temporary housing expenses and travel expenses provided that such expenses shall
not exceed [Two Thousand Dollars ($2000) per month].
SECTION 6. TERMINATION.
6.1 For Cause. The Corporation may terminate the Employee's employment at any
time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
gross neglect or intentional disregard of Employee's duties under this Agreement
or any other material violation by the Employee of this Agreement which is not
cured with thirty (30) days after written warning from the Corporation; (c)
conviction of or entrance of a plea of guilty or nolo contendere to a felony;
(d) conviction of any crime involving moral turpitude; (e) gross insubordination
or repeated insubordination after written warning from the Corporation; (f)
unauthorized disclosure by the Employee of the confidences of the Corporation;
or (g) material and continuing failure by the Employee to perform the duties
described in Section 2 above in a quality and professional manner for forty five
(45) days after written warning from the Corporation. Upon termination for
cause, the Corporation's sole and exclusive obligation will be to pay the
Employee his compensation for a period of one (1) month after the date of
termination and the amount of any unused vacation or sick leave benefits earned
through the date of termination.
6.2 Upon Death. In the event of the Employee's death during the term of the this
Agreement, the Corporation's sole and exclusive obligation will be to pay to the
Employee's spouse, if living,
-6-
7
or to his estate, if his spouse is not then living, the Employee's compensation
for a period of two (2) months after the date of death and the amount of any
unused vacation or sick leave benefits earned through the date of death.
6.3 Upon Disability. The Corporation may terminate the Employee's employment
upon the Employee's total disability. The Employee shall be deemed to be totally
disabled if he/she is unable to perform his duties under this Agreement by
reason of mental or physical illness or accident. Upon termination by reason of
the Employee's disability, the Corporation's sole and exclusive obligation will
be to continue to pay the Employee his compensation for a period of six (6)
months after the date of disability, plus the amount of any vacation and sick
leave benefits earned through the date of termination disability.
6.4 Without Cause. During the Term of this Agreement and only by action of its
Board of Directors, the Corporation may terminate the Employee's employment
without cause upon sixty (60) days written notice and with a continuation of
payment to the Employee of his salary after termination for (i) twelve (12)
months salary if the Employee has previously relocated his family to Pittsburgh,
Pennsylvania or (ii) six (6) months if the Employee has not yet relocated his
family to Pittsburgh, Pennsylvania, plus the amount of any unused vacation or
sick leave benefits earned through the date of termination.
6.5 By the Employee. The Employee may terminate this Agreement at any time upon
sixty (60) days written notice to the Corporation.
6.6 Termination by the Board of Directors. Any determination to terminate the
Employee's employment under this Section 6 shall be made only by the Board of
Directors of the Corporation.
SECTION 7. COVENANT NOT TO COMPETE.
7.1 Covenant. During the term of this Agreement and for one year thereafter the
Employee will not directly or indirectly:
-7-
8
7.1.1 enter into or attempt to enter into the "Restricted Business" (as
defined below);
7.1.2 induce or attempt to persuade any employee, agent, manager,
consultant, director, or other participant in the Corporation's Business to
terminate such employment or other relationship in order to enter into any
relationship with the Employee, any business organization in which the Employee
is a participant in any capacity whatsoever, or any other business organization
in competition with the Corporation's Business; or
7.2 Indirect Activity. The term "indirectly," as used in Section 7.1 above,
includes acting as a paid or unpaid director, officer, agent, representative,
employee of, or consultant to any enterprise, or acting as a proprietor of an
enterprise, or holding any direct or indirect participation in any enterprise as
an owner.
7.3 Restricted Business. The term "Restricted Business" means any business which
is engaged in selling products and rendering services which directly compete
with any product or service of the Corporation, or any prduct or service under
development by the Corporation or related to the Corporation's. Nevertheless,
the Employee may own less than five percent of the outstanding equity securities
of a corporation that is engaged in the Restricted Business if the equity
securities of such corporation are listed for trading on a national stock
exchange or are registered under the Securities Exchange Act of 1934.
SECTION 8. SEVERABILITY. The covenants set forth in Section 7 above shall be
construed as a series of separate covenants, one for each county in each of the
states of the United States to which such restriction applies. If, in any
judicial proceeding, a court of competent jurisdiction shall refuse to enforce
any of the separate covenants deemed included in this Agreement, or shall find
that the term or geographic scope of one or more of the separate covenants is
unreasonably broad, the Parties shall use their best good faith efforts to
attempt to agree on a valid provision which shall be a reasonable substitute for
the invalid provision. The reasonableness of the substitute provision shall be
considered in light of the purpose of the covenants and the reasonable
protectable interests of the Corporation and the Employee. The substitute
provision
-8-
9
shall be incorporated into this Agreement. If the Parties are unable to agree on
a substitute provision, then the invalid or unreasonably broad provision shall
be deemed deleted or modified to the minimum extent necessary to permit
enforcement.
SECTION 9. CONFIDENTIALITY. The Employee acknowledges that he will develop and
be exposed to information that is or will be confidential and proprietary to the
Corporation.
9.1 Information. The information includes but is not limited to research
techniques, funding sources, trade secrets and other patent worthy information,
marketing plans, pricing data, product plans, contracts, customer lists, mailing
lists, goodwill, miscellaneous confidential information, or other intangible
intellectual or otherwise propriety property used or useful in connection with
the Corporation's Business whether in written, photographic, digital, or in any
other form of storage or retention as may be used by the Corporation.
9.2 Authorized Use. All such information shall be deemed confidential to the
extent not publicly known. The Employee agrees to make use of such information
only in the performance of his duties under this Agreement, to maintain such
information in confidence and to disclose the information only in connection
with fully authorized activities pursuant to this agreement or lawful order of a
court, exchange or other governmental authority of competent jurisdiction, and
agrees that he shall not use such information for his own personal benefit or
for the benefit of third Parties in any fashion.
SECTION 10. REMEDIES. The Employee acknowledges that monetary damages would be
inadequate to compensate the Corporation for any breach by the Employee of the
covenants set forth in Sections 7 and 9 above. The Employee acknowledges that
the claim for the payment of any damages for breach of the provisions contained
shall not preclude the Corporation from seeking injunctive relief or other forms
of relief as may be obtained in a court of law or equity, but that the
Corporation, in lieu of or in addition to the remedy of damages, may seek
injunctive relief prohibiting the Employee from breaching provisions in Sections
7 and 9 of this Agreement.
-9-
10
SECTION 11 NOTICES. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or upon receipted delivery
via courier, insured parcel delivery service, Federal Express, registered or
certified U.S. mail, all postage prepaid and addressed to the Party at the
address stated in this Agreement or such other address as either Party may
designate by written notice to the other. Notice by facsimile shall be effective
as of the date and time transmitted provided the sending Party maintains written
evidence that the transmission was initiated and completed during normal
business hours, was successfully received by the addressee, and was in a legible
format.
SECTION 12 NO RELEASE. The terms of Sections 7 and 9 shall survive the
termination or expiration of this Agreement and the termination of this
Agreement or the expiration of the term of this Agreement shall not release
either Party from any obligations under Sections 7 and 9 or remedies pursuant to
Section 10.
SECTION13 WAIVER. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
SECTION 14 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
SECTION 15 DISPUTE RESOLUTION.
15.1 Mandatory Mediation. Except for any controversy or claim relating to a
threatened or actual unauthorized use or disclosure of proprietary information,
the parties shall attempt in good faith to resolve by mediation any dispute
arising out of or relating to this Agreement. Either party may initiate a
mediation proceeding by a request in writing to the other party. Thereupon, both
parties will be obligated to engage in a mediation. The proceeding will be
conducted in
-10-
11
accordance with the then current Model Procedure for Mediation of Business
Disputes of the Center for Public Resources ("CPR"), with the following
exceptions:
(i) If the parties have not agreed within 30 days of the request for
mediation on the selection of a mediator willing to serve, the
Center for Public Resources, upon request of either party, shall
appoint a member of the CPR Panels of Neutrals as the mediator;
and
(ii) efforts to reach a settlement will continue until the conclusion
of the proceeding, which is deemed to occur when: (a) a written
settlement is reached, or (b) the mediator concludes and informs
the parties in writing that further efforts would not be useful,
or (c) the parties agree in writing that in impasse has been
reached.
Neither party may withdraw before the conclusion of the proceeding. The
parties regard the obligation to mediate an essential provision of this
Agreement and one that is legally binding on them. In case of a violation of
such obligation by either party, the other party may bring an action to seek
enforcement of the obligation in any court of law having jurisdiction.
15.2 Arbitration. Except for any controversy or claim relating to a threatened
or actual unauthorized use or disclosure of proprietary information, any and all
claims, disputes or controversies arising under, out of, or in connection with
this Agreement, which have not been
-11-
12
resolved by mandatory mediation between the parties, shall be resolved by final
and binding arbitration under the rules of the American Arbitration Association
then obtaining; provided, however, that any request for arbitration is filed
within 90 days after the mediation procedures of Section 15.1 have been
concluded. The matter shall be settled by a panel of three (3) to be designated
by the parties who possess business experience, provided however if the matter
involves the Corporation's Peptide Technology, such panel shall be comprised of
individuals who are also knowledgable as to technology issues. The judgment of
the panel may be entered in any court having jurisdiction of the matter. Any
decision of the panel shall be final and binding, and except in cases of fraud
or gross misconduct of the arbitrator, the decision rendered shall not be
appealable. The prevailing party in the arbitration shall be entitled to recover
attorney's fees, all reasonable out-of-pocket costs and disbursements, as well
as any and all charges which may be made for the arbitration's cost and the fees
of the panel. The arbitrators shall have no power to add to, subtract from or
modify any of the terms or conditions of this Agreement.
SECTION 16 AGREEMENT BINDING. This Agreement shall be binding upon the
respective heirs, executors, administrators, successors and assigns of the
Parties hereto.
SECTION 17 COUNTERPARTS. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the Parties
hereto even though all the Parties are not signatories to the original or the
same counterpart.
-12-
13
SECTION 18 EXISTING AGREEMENTS. Nothing in this Agreement is intended to modify
or otherwise affect the obligations of the Parties to this Agreement under the
terms of the Technology Transfer Agreement between the Corporation and the
Employee.
IN WITNESS WHEREOF, the Parties to this Agreement have executed this Agreement
as of the date first written above.
ATTEST: DEMETER BIOTECHNOLOGIES LTD.
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
---------------------- -------------------------
Title: President President
WITNESSED BY: EMPLOYEE
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxx
---------------------- -------------------------
-13-
