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EMPLOYMENT AGREEMENT
AGREEMENT, dated this 5th day of January, 1998 between Nastech
Pharmaceutical Company Inc., a Delaware corporation (the "Company") with
offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive was formerly employed as Executive Vice
President for the Company and as of October 7, 1997 assumed the additional
responsibilities as set forth herein; and
WHEREAS, the Company and the Executive wish to formalize the
Executive's assumption of the title of President of the Company and enter into
an employment and compensation arrangement on the following terms and
conditions.
1. Employment. Subject to the terms and conditions of this Agreement,
the Company agrees to employ the Executive as its President during the
Employment Period (as defined in Section 7) and to perform such acts and duties
and furnish such services to the Company and its affiliates and related parties
as the Company's Board of Directors shall from time to time direct. The
Executive shall have responsibility for the strategic planning, business
development and business operations of the Company, subject to the authority
and control of the Chief Executive Officer and the Board of Directors of the
Company. The Executive hereby accepts such employment and agrees to devote his
full time and best efforts to the duties provided herein, provided, that the
Executive may engage in other business activities which (i) involve no conflict
of interest with the interests of the Company (subject to approval by the Board
of Directors, which approval shall not be unreasonably withheld) and (ii) do
not materially interfere with the performance by the Executive of his duties
under this Agreement.
2. Compensation. For services rendered to the Company during the term
of this Agreement, the Company shall compensate the Executive with an initial
salary, payable in bi-weekly installments, of $215,000 per annum.
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3. Incentive Compensation. The Executive shall also be entitled to
annual incentive compensation of up to fifty (50)% of the applicable base
salary if the Company's business objectives as set forth in the Company's
annual business plan are achieved. Such business objectives shall be heavily
weighted to include the performance of the Company's Common Stock on the Nasdaq
National Market as well as material business development and financial
accomplishments. The nature and extent of such incentive compensation shall be
determined by the Compensation Committee of the Company's Board of Directors no
later than ninety (90) days following the end of the Company's fiscal year.
4. Stock Options. As further compensation, subject to shareholder
approval of a new stock option plan, Executive shall be issued 40,000 incentive
stock options (subject to allowable limitations set forth in the Internal
Revenue Code of 1986, as amended, hereinafter "stock options") upon the
commencement of his employment in this capacity which date was October 7, 1997.
The stock options shall be issued at the fair market value of the Employer's
common stock as of the date of this Agreement and shall then be vested over a
three year period as follows: 50% for the first full year of service and 25%
per full year of service thereafter (and shall not be vested for interim
periods on a pro-rata basis, except as otherwise provided in the applicable
Stock Option Agreement) all of the foregoing to be in accordance with the
provisions of Employer's Stock Option Plan, as may be amended from time to
time, which is incorporated by reference herein.
If the Executive's employment is terminated (i) because of his death
or disability pursuant to Section 8 of this Agreement, (ii) by the Company for
any reason other than for Cause or (iii) by the Executive for Good Reason:
(x) the portion of the stock option which was exercisable
at termination shall remain exercisable for a period of 1 year after such date;
and
(y) with respect to that portion, if any, of the stock
option which was not yet exercisable at termination, such portion shall
immediately become exercisable and shall remain exercisable until the end of
such 1-year period. The stock option shall be memorialized in a separate
written stock option agreement reasonably satisfactory to the Company and the
Executive.
In the event that the Common Stock to be issued upon the exercise of
said options has not been registered under the Securities Act of 1933 (the
"Act"), it must be held by the Executive indefinitely, and may not be sold or
disposed of unless (i) a registration statement covering those
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shares becomes effective under the Act, or (ii) if an exemption from
registration becomes available. The Company is not under any obligation to
register the shares under the Act. The Company shall use its best efforts to
timely file all reports, statements and other documents as may be required
under the Securities and Exchange Act of 1934 to keep available the exemption
under Rule 144 of the Act or other comparable rules or regulations of the
Securities and Exchange Commission.
5. Benefits. During the Employment Period, the Company shall
provide or cause to be provided to the Executive such employee benefits as are
provided to other executive officers of the Company, including family medical
and dental, disability and life insurance, and participation in pension and
retirement plans, incentive compensation plans, stock option plans and other
benefit plans. During the Employment Period, the Company may provide or cause
to be provided to the Executive such additional benefits as the Company may
deem appropriate from time to time.
6. Vacation. The Executive shall be entitled to annual vacations in
accordance with the Company's vacation policies in effect from time to time for
executive officers of the Company.
7. Term; Employment Period. The "Employment Period" shall commence
on the date of this Agreement and shall terminate 2 years and 9 months
thereafter, unless extended by written agreement between the parties or unless
earlier terminated pursuant to Section 8. If the Executive shall remain in the
full-time employ of the Company beyond the Employment Period without any
written agreement between the parties, this Agreement shall be deemed to
continue on a month to month basis and either party shall have the right to
terminate this Agreement at the end of any ensuing calendar month on written
notice of at least 30 days.
8. Termination.
(a) Executive's employment with the Company shall be "at will".
Either the Company or the Executive may terminate this Agreement and
Executive's employment at any time, with or without Cause or Good Reason (as
such terms are defined below), in its or his sole discretion, upon thirty (30)
days' prior written notice of termination.
(b) Without limiting the foregoing Section 8(a), (i) the Executive
may terminate his employment with the Company at any time for Good Reason, or
(ii) the Company may terminate
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his employment at any time for Cause. "Good Reason" shall mean death,
Disability (as defined below) or a termination of employment as a result of a
substantial diminution in the Executive's responsibilities, or base salary
below $215,000 or a demotion in title or status. "Cause" shall mean (i) the
Executive's willful, repeated or neglectful failure to perform his duties
hereunder or to comply with any reasonable or proper direction given by or on
behalf of the Company's Chief Executive Officer or Board of Directors following
ten (10) days written notice to such effect; (ii) the Executive being guilty of
serious misconduct on the Company's premises or elsewhere, whether during the
performance of his duties or not, which may cause damage to the reputation of
the Company or render it difficult for the Executive to satisfactorily continue
to perform his duties; (iii) the Executive being found guilty in a criminal
court of any offense of a nature likely to affect the reputation of the Company
or to prejudice its interests if the Executive were to continue to be employed
by the Company; (iv) the Executive's commission of any act of fraud, theft or
dishonesty, or any intentional tort against the Company; or (v) the Executive's
violation of any of the material terms, covenants, representations or
warranties contained in this Agreement.
(c) "Disability" shall mean that the Executive, in the good faith
determination of the Board of Directors of the Company, is unable to render
services of the character contemplated hereby and that such inability (i) may
be expected to be permanent, or (ii) may be expected to continue for a period
of at least six (6) consecutive months (or for shorter periods totaling more
than six (6) months during any period of twelve consecutive months).
Termination resulting from Disability may only be effected after at least
thirty (30) days written notice by the Company of its intention to terminate
the Executive's employment.
(d) "Termination Date" shall mean (i) if this Agreement is
terminated on account of death, the date of death; (ii) if this Agreement is
terminated for Disability, the date established by the Company pursuant to
Section 8(c) hereof; (iii) if this Agreement is terminated by the Company, the
date on which a notice of termination is given to the Executive; (iv) if the
Agreement is terminated by the Executive, the date the Executive ceases work;
or (v) if this Agreement expires by its terms, the last day of the term of this
Agreement.
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9. Severance.
(a) If (i) the Company terminates the employment of the Executive
against his will and without Cause, or (ii) the Executive terminates his
employment for Good Reason (excluding death or Disability), the Executive shall
be entitled to receive salary, target incentive compensation and vacation
accrued through the Termination Date plus the lesser of (x) six (6) months base
salary or (y) the balance of the Executive's compensation hereunder to the end
of the term of this Agreement computed using the latest applicable salary rate.
The Company shall make such termination payment within 30 days of such
termination. Notwithstanding the foregoing, the Company shall not be required
to pay any severance pay for any period following the Termination Date if the
Executive violates the provisions of Section 15, Section 16 or Section 17 of
this Agreement. In such event, the Company shall provide written notice to the
Executive detailing such violation.
(b) If, the Executive's employment is terminated due to death or
Disability, then the Executive, his estate or legal representatives, as the
case may be, shall be entitled to receive earned incentive compensation and
accrued vacation through the Termination Date as well as six months' severance
pay.
(c) If (i) the Executive voluntarily terminates his employment
other than for Good Reason, or (ii) the Executive is terminated by the Company
for Cause, then the Executive shall be entitled to receive salary and accrued
vacation through the Termination Date only.
(d) In addition to the provisions of Section 9(a), 9(b) and 9(c)
hereof, to the extent COBRA shall be applicable to the Company or as provided
by law, the Executive shall be entitled to continuation of group health plan
benefits for the required time period following the Termination Date if the
Executive makes the appropriate conversion and payments.
(e) The Executive acknowledges that, upon termination of his
employment, he is entitled to no other compensation, severance or other
benefits other than those specifically set forth in this Agreement or any
applicable Stock Option Agreement.
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10. Expenses. The Company shall pay or reimburse the Executive for
all expenses normally reimbursed by Company, reasonably incurred by him in
furtherance of his duties hereunder and authorized and approved by the Company
in compliance with such rules relating thereto as the Company may, from time to
time, adopt and as may be required in order to permit such payments as proper
deductions to Company under the Internal Revenue Code of 1986, as amended, and
the rule and regulations adopted pursuant thereto now or hereafter in effect.
11. Facilities and Services. The Company shall furnish the Executive
with office space, secretarial, support staff and such other facilities and
services as shall be reasonably necessary for the performance of his duties
under this Agreement.
12. Mitigation Not Required. In the event this Agreement is
terminated, the Executive shall not be required to mitigate amounts payable
pursuant hereto by seeking other employment or otherwise. The Executive's
acceptance of any such other employment shall not diminish or impair the
amounts payable to the Executive pursuant hereto.
13. Place of Performance. The Executive shall perform his duties
primarily in Hauppauge, New York or locations within a reasonable proximity
thereof, except for reasonable travel as the performance of the Executive's
duties may require.
14. Insurance and Indemnity. During the Employment Period, if
available at reasonable costs, the Company shall maintain, at its expense,
officers and directors fiduciary liability insurance covering the Executive and
all other executive officers and directors in an amount of no less than
$1,000,000. The Company shall also indemnify the Executive, to the fullest
extent permitted by law, from any liability asserted against or incurred by the
Executive by reason of the fact that the Executive is or was an officer or
director of the Company or any affiliate or related party or is or was serving
in any capacity at the request of the Company for any other corporation,
partnership, joint venture, trust, employment benefit plan or other enterprise.
This indemnity shall survive termination of this Agreement.
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15. Noncompetition.
A. The Executive agrees that, except in accordance with his
duties under this Agreement on behalf of the Company, he will not during the
term of this Agreement:
Participate in, be employed in any capacity by, serve as director,
consultant, agent or representative for, or have any interest, directly or
indirectly, in any enterprise which is engaged in the business of formulating,
developing, distributing, selling or otherwise trading in pharmaceutical
products which are competitive to any products manufactured, sold or otherwise
traded in by the Company or any of its subsidiaries during the term of the
Executive's employment with the Company, or which are competitive to any
products being actively developed, with the bona fide intent to market same, by
the Company or any of its subsidiaries during the term of the Executive's
employment with the Company;
In addition, the Executive agrees that for a period of two years after
the end of the term of this Agreement (unless this Agreement is terminated due
to a breach of the terms hereof by the Company in failing to pay to the
Executive all sums due him under the terms hereof, in which event the following
shall be inapplicable), the Executive shall observe the covenants set forth in
this Section 15 and shall not own, either directly or indirectly or through or
in conjunction with one or more members of his or his spouse's family or
through any trust or other contractual arrangement, a greater than five percent
(5%) interest in, or otherwise control either directly or indirectly, any
partnership, corporation, or other entity which engages in the field of nasal
drug delivery or other pharmaceutical products which are competitive to any
products or services being developed, distributed, sold, or otherwise traded in
by the Company or any its subsidiaries, during the term of this Agreement, or
being actively developed by the Company or any of its subsidiaries during the
term of this Agreement with the Company with a bona fide intent to market same.
Executive further agrees, for such two year period following termination, to
refrain from directly or indirectly soliciting Company's vendors, collaborative
partners or employees.
B. The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 15 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy
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available at law, also may enforce the terms of this Section 15 by injunction
or specific performance, and may obtain any other appropriate remedy available
in equity.
16. Assignment of Patents. Executive shall disclose fully to the
Company any and all discoveries he shall make and any and all ideas, concepts
or inventions which he shall conceive or make during his period of employment,
or during the period of six months after his employment shall terminate, which
are in whole or in part the result of his work with the Company. Such
disclosure is to be made promptly after each discovery or conception, and the
discovery, idea, concept or invention will become and remain the property of
the Company, whether or not patent applications are filed thereon. Upon
request and at the expense of the Company, the Executive shall make application
through the patent solicitors of the Company for letters patent of the United
States and any and all other countries at the discretion of the Company on such
discoveries, ideas and inventions, and to assign all such applications to the
Company, or at its order, forthwith, without additional payment by the Company
during his period of employment and for reasonable compensation for time
actually spent by the Executive at such work at the request of the Company
after the termination of the employment. He is to give the Company, its
attorneys and solicitors, all reasonable assistance in preparing and
prosecuting such applications and, on request of the Company, to execute all
papers and do all things that may be reasonably necessary to protect the right
of the Company and vest in it or its assigns the discoveries, ideas or
inventions, applications and letters patent herein contemplated. Said
cooperation shall also include all actions reasonably necessary to aid the
Company in the defense of its rights in the event of litigation.
17. Trade Secrets.
A. In the course of the term of this Agreement, it is anticipated
that the Executive shall have access to secret or confidential technical and
commercial information, records, data, specifications, systems, methods,
formulations, plans, policies, inventions, material and other knowledge
("Confidential Material") owned by the Company and its subsidiaries. The
Executive recognizes and acknowledges that included within the Confidential
Material are the Company's confidential commercial information, technology,
research and development information, methods of nasal drug formulation and
manufacture, and related materials, all as they may exist from time to time,
and that they are valuable special and unique aspects of the Company's
business. All such Confidential material shall be and remain the property of
the Company. Except as required by his
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duties to the Company, the Executive shall not, directly or indirectly, either
during the term of his employment or at any time thereafter, disclose or
disseminate to anyone or make use of, for any purpose whatsoever, any
Confidential Material. Upon termination of his employment, the Executive shall
promptly deliver to the Company all Confidential Material (including all copies
thereof, whether prepared by the Executive or others) which are in the
possession or under the control of the Executive. The Executive shall not be
deemed to have breached this Section 17 if the Executive shall be specifically
compelled by lawful order of any judicial, legislative, or administrative
authority or body to disclose any confidential material or else face civil or
criminal penalty or sanction.
B. The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 17 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 17 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.
18. Payment and Other Provisions After Change of Control
(a) In the event Executive's employment with the Company is
terminated within one year following the occurrence of a Change of Control
(other than as a consequence of death or disability) either (x) by the Company
for any reason other than for Cause, or (y) by Executive for Good Reason, then
Executive shall be entitled to receive from the Company, in lieu of the
severance payment otherwise payable pursuant to Section 9(a), the following:
(i) Base Salary: The balance of the Executive's
compensation hereunder from the Termination Date to the end of the term of this
Agreement computed using the latest applicable salary rate, shall be paid on
the Termination Date;
(ii) Target Incentive Compensation: The amount of the
Executive's target incentive compensation under the applicable Executive Bonus
Plan for the fiscal year in which the date of termination occurs, shall be
paid on the Termination Date; and
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(iii) Other Benefits: Notwithstanding the vesting period
provided for in the Company's Stock Option Plan and any related stock option
agreements between the Company and the Executive for stock options ("options")
granted Executive by the Company all of options shall be fully vested and
exercisable upon a Change of Control and termination of employment.
(b) For purposes of this Agreement, the term "Change of Control"
shall mean:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Rule 13d-3
promulgated under the Exchange Act or any successor provision) (any of
the foregoing described in this Paragraph 18.b.i hereafter a "Person")
of 50% or more of either (a) the then outstanding shares of Capital
Stock of the Company (the"Outstanding Capital Stock") or (b) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Voting Securities"), provided, however, that any acquisition by (x)
the Company or any of its subsidiaries, or any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (y) any Person that is eligible, pursuant to Rule
13d-1(b) under the Exchange Act, to file a statement on Schedule 13G
with respect to its beneficial ownership of Voting Securities, whether
or not such Person shall have filed a statement on Schedule 13G,
unless such Person shall have filed a statement on Schedule 13D with
respect to beneficial ownership of 50% or more of the Voting
Securities or (z) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition,
of the Outstanding Capital Stock and Voting Securities, as the case
may be, shall not constitute a Change of Control; or
(ii) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that
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any individual becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A, or any successor
section, promulgated under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from the Business Combination; or
(iv) (a) a complete liquidation or dissolution of the Company
or (b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the
same proportion as their ownership of the Outstanding Capital Stock
and Voting Securities, as the case may be, immediately prior to such
sale or disposition.
19. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail, return receipt requested to his residence in the case of the
Executive, or to its principal office in the case of the Company, or to such
other addresses as they may respectively designate in writing.
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20. Entire Agreement; Waiver. This Agreement contains the entire
understanding of the parties and may not be changed orally but only by an
agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Waiver of or failure to
exercise any rights provided by this Agreement in any respect shall not be
deemed a waiver of any further or future rights.
21. Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of the Company
by reorganization, merger or consolidation, or any assignee of all or
substantially all of the Company's business or properties. The Executive's
rights hereunder are personal to and shall not be transferable nor assignable
by the Executive.
22. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
23. Governing Law; Arbitration. This Agreement shall be construed in
accordance with and governed for all purposes by the laws and public policy of
the State of New York applicable to contracts executed and to be wholly
performed within such state. Any dispute or controversy arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the American Arbitration Association and judgment upon the award
may be entered in any court having jurisdiction thereover. The arbitration
shall be held in Suffolk County, New York or in such other place as the parties
hereto may agree.
24. Further Assurances. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any time and from time to time, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and/or
assurances as may be necessary or proper to carry out the provisions or intent
of this Agreement.
25. Severability. The parties agree that if any one or more of the
terms, provisions, covenants or restrictions of this Agreement shall be
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
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restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
26. Counterparts. This Agreement maybe executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
IN WITNESS WHEREOF, NASTECH PHARMACEUTICAL COMPANY INC. has caused
this instrument to be signed by a duly authorized officer and the Executive has
hereunto set his hand the day and year first above written.
NASTECH PHARMACEUTICAL COMPANY INC.
By
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