EXHIBIT 10.5
TRIANGLE PHARMACEUTICALS, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of this 5th day of August, 2002,
between Triangle Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY"),
and Xxxxxx X. Xxxxx (the "EXECUTIVE").
R E C I T A L S:
WHEREAS, the Company believes that the future growth, profitability
and success of the Company's business will be enhanced by its employment of the
Executive; and
WHEREAS, the Company desires to employ the Executive and the Executive
has indicated his willingness to be so employed, on the terms and conditions set
forth herein.
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth. Subject to the terms
and conditions contained herein, the Executive shall serve as Chairman and Chief
Executive Officer of the Company and, in such capacity, shall report directly to
the Board of Directors of the Company (the "BOARD") and shall have such duties
and responsibilities as are typically performed by a chairman and chief
executive officer of a corporation similar to the Company, together with such
additional duties and responsibilities, commensurate with the Executive's
position as Chairman and Chief Executive Officer of the Company, as may
reasonably be assigned to the Executive from time to time by the Board. The
principal location of the Executive's employment shall be at the Company's
principal executive offices located in Durham, North Carolina, although the
Executive understands and agrees that he may be required to travel from time to
time for business reasons.
Section 2. TERM. The term of the Executive's employment hereunder
shall commence on August 5, 2002 (the "COMMENCEMENT DATE") and shall continue
until terminated in accordance with Section 6 hereof (the "EMPLOYMENT TERM").
Section 3. COMPENSATION. During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:
(a) SALARY. The Company shall pay to the Executive a salary (the
"SALARY") of $425,000 per annum. The Salary will be reviewed annually and may be
increased at the discretion of the Board. The Salary shall be payable in
accordance with the payroll practices of the Company as the same shall exist
from time to time. In no event shall the Salary be decreased during the
Employment Term.
(b) BONUS PLAN; SIGNING BONUS.
(i) The Executive shall be eligible for an annual incentive bonus
award from the Company in respect of each fiscal year during the Term of
Employment (the "ANNUAL BONUS"). The Executive's target Annual Bonus for each
such year shall be an amount equal to 50% of his Salary for such year. The Board
and the Executive will use their reasonable best efforts to agree on annual
objectives for such bonus, not later than 60 days from the beginning of each
year (or, in the case of 2002, no later than 60 days from the date hereof).
Annual objectives may be refined during the year to reflect changing priorities
and circumstances, by mutual agreement of the Executive and the Board. At the
discretion of the Board, the Executive's Annual Bonus amount for each such year
may be less than or greater than the target amount, depending upon the degree of
attainment of annual objectives. The amount of Annual Bonus shall be
communicated to the Executive within the first 90 days of each such year. The
Executive's Annual Bonus for 2002 shall be prorated based on the number of days
worked in that year. The Executive shall receive the Annual Bonus in respect of
any year at the same time as bonuses are paid to other executive officers of the
Company, but in no event later than ninety (90) days following the end of the
fiscal year for which the Annual Bonus is payable.
(ii) Within fifteen (15) days of the Commencement Date, the Company
shall pay the Executive a signing bonus of $50,000.
(c) OPTIONS. On the Commencement Date, the Company shall grant the
Executive an option (the "Option") to purchase 2,300,000 shares of common stock
of the Company, at an exercise price per share equal to the closing selling
price per share of the common stock on the Commencement Date, as such price is
reported on Nasdaq National Market. Subject to continued employment, the option
shall vest and be exercisable as to one-sixtieth (1/60th) of the underlying
shares on each monthly anniversary of the Commencement Date and shall be subject
to the terms and conditions of the notice of grant and stock option agreement,
attached hereto as Exhibits A and B, respectively (together, the "Option
Agreement"). The Executive will also be eligible to receive annual option grants
based on performance and grants for achievement of significant milestones as
determined by the Board.
(d) BENEFITS. The Executive shall be entitled to participate in
the health, life insurance, pension and other benefit plans and programs
provided to senior executives of the Company on terms no less favorable than
those available to such executives. The Executive shall also be entitled to six
weeks vacation and the same number of holidays, sick days and other benefits as
are generally allowed to senior executives of the Company in accordance with the
Company policy in effect from time to time.
(e) RELOCATION EXPENSES. The Company shall reimburse Executive for
reasonable and customary expenses incurred in connection with his relocation to
the Durham, North Carolina area; provided that the total amount payable to
Executive, including a gross-up for taxes incurred by him in connection with
such reimbursement, shall not exceed $300,000.
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Section 4. EXCLUSIVITY. During the Employment Term, the Executive
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board in
accordance with the terms of this Agreement, shall use his best efforts to
promote and serve the interests of the Company and shall not, without the prior
written approval of the Board, engage in any other business activity, whether or
not such activity shall be engaged in for pecuniary profit, except that the
Executive may (i) participate in the activities of professional trade
organizations related to the business of the Company and (ii) engage in personal
investing activities, provided that activities set forth in these clauses (i)
and (ii), either singly or in the aggregate, do not interfere in any material
respect with the services to be provided by the Executive hereunder.
Section 5. REIMBURSEMENT FOR EXPENSES. The Executive is authorized
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items, in accordance with the Company's expense reimbursement policy, as the
same may be modified by the Board from time to time. The Company shall reimburse
the Executive for all such proper expenses upon presentation by the Executive of
itemized accounts of such expenditures in accordance with the financial policy
of the Company, as in effect from time to time.
Section 6. TERMINATION.
(a) DEATH. The Executive's employment shall automatically
terminate upon his death.
(b) DISABILITY. If the Executive is unable to perform the duties
required of him under this Agreement because of any physical or mental
disability or infirmity that prevents the performance of the Executive's duties
for a period of (i) ninety (90) consecutive calendar days or (ii) one hundred
twenty (120) non-consecutive business days during any twelve (12) month period,
the Company may terminate Executive's employment immediately upon written
notice. Any question as to the existence, extent or potentiality of the
Executive's disability upon which the Executive and the Company cannot agree
shall be determined by a qualified, independent physician selected by the
Company and approved by the Executive (which approval shall not be unreasonably
withheld). The determination of any such physician shall be final and
conclusive.
(c) CAUSE. The Company may terminate the Executive's employment at
any time, with or without Cause. Termination of the Executive's employment
hereunder shall be effective upon delivery of such notice of termination, except
that, in the event of termination pursuant to this Section 6(c) for Cause, the
Company shall deliver to the Executive written notice setting forth the basis
for such termination, which notice shall specifically set forth the nature of
action constituting Cause. If such actions are curable, the Executive shall have
a period of thirty (30) calendar days to cure such actions and shall have the
right, during such period, to be heard before the Board at a place and time to
be designated by the Board and subject to Executive's approval, which approval
shall not be unreasonably withheld. If Executive does not attempt to cure such
actions or fails to cure such actions to the satisfaction of the Board,
Executive's employment shall be deemed terminated for Cause on the thirtieth
(30) day following the date specified in the original notice of termination. The
Company, in its reasonable discretion, shall
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have the right to relieve Executive of all duties and responsibilities during
such period and deny him access to Company premises, and any such actions taken
by the Company shall not constitute "Good Reason" (as hereinafter defined) under
this Agreement. For purposes of this Agreement, "CAUSE" shall mean (i) the
Executive's willful failure (except where due to a disability), gross neglect or
refusal to perform his duties hereunder; (ii) any willful or intentional act of
the Executive that has the effect of injuring the reputation or business of the
Company or its affiliates in any material respect; (iii) public or consistent
drunkenness by the Executive or his illegal use of narcotics which is, or could
reasonably be expected to become, materially injurious to the reputation or
business of the Company or which impairs, or could reasonably be expected to
impair, the performance of the Executive's duties hereunder; (iv) conviction of,
or plea of guilty or NOLO CONTENDERE to, the commission of a felony by the
Executive; (v) the commission by the Executive of an act of fraud, embezzlement
or dishonesty against the Company; or (vi) the Executive's breach of (A) any of
the covenants contained in Section 7 hereof, (B) any provisions of the
Confidentiality Agreement (as defined in Section 7 hereof) or (C) the
representations set forth in Section 10 hereof.
(d) GOOD REASON. The Executive may terminate his employment for
Good Reason, but only if the Company receives written notice from the Executive
describing in detail the specific nature of the action constituting Good Reason,
and such action is not corrected by the Company within thirty (30) days of
receipt of such notice (the "CURE PERIOD"). Such notice must be given to the
Company within ninety (90) days of the action allegedly constituting Good
Reason. For this purpose, "GOOD REASON" shall mean without the Executive's
consent, (i) a change in the Executive's title, or a material diminution in his
duties, responsibilities, Salary or target Annual Bonus, (ii) a change whereby
Executive no longer reports directly to the Board, (iii) a relocation of the
Company's principal executive offices to a location more than thirty (30) miles
from Durham, North Carolina, or (iv) the failure of the Company to obtain the
assumption in writing of its obligation to perform under the employment
agreement by any successor to all or substantially all of the assets of the
Company; PROVIDED, HOWEVER, that Good Reason shall not include a termination of
the Executive's employment hereunder pursuant to Section 6(b) or (c) hereof. The
date of termination of the Executive's employment under this Section 6(d) shall
be the effective date of any resignation specified in writing by the Executive,
which may not be less than thirty (30) days after receipt by the Company of
written notice of such resignation; PROVIDED, HOWEVER, that such resignation
shall not be effective and the action constituting Good Reason shall be deemed
to have been cured if such action is corrected by the Company during the Cure
Period.
(e) RESIGNATION. The Executive shall have the right to terminate
his employment other than for Good Reason upon sixty (60) days' prior written
notice to the Company.
(f) PAYMENTS.
(i) In the event that the Executive's employment terminates for
any reason, the Company shall pay to the Executive all accrued but unpaid Salary
through the date of termination of the Executive's employment and any unpaid or
unreimbursed expenses incurred in accordance with Section 5 hereof (the "ACCRUED
OBLIGATIONS").
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(ii) In the event the Executive's employment is terminated by the
Company without Cause (other than pursuant to Section 6(b) hereof), or by the
Executive with Good Reason, in addition to the Accrued Obligations, the
Executive shall (A) continue to receive the Salary (less any applicable
withholding or similar taxes) at the rate in effect hereunder on the date of
such termination periodically, in accordance with the Company's prevailing
payroll practices, and shall continue to receive medical and dental benefits at
no additional cost to the Executive, in each case for a period of eighteen (18)
months following the date of such termination, and (B) receive a prorated Annual
Bonus for the year of termination, based on the number of days worked during
such year, calculated on the basis of 100% achievement of the target Annual
Bonus, such payment to be made at the time the Annual Bonus would otherwise have
been paid for such year. The Executive's right to receive severance, continued
medical and dental benefits and prorated bonus pursuant to this Section 6(f)(ii)
shall be expressly conditioned upon the Executive's compliance with the
provisions of Section 7 hereof and his execution of a general release in favor
of the Company and its affiliates and related parties in such form as is
reasonably required by the Company, and the expiration of any waiting periods
contained in such release.
(iii) In the event of any termination of employment, the Executive
shall be under no obligation to mitigate amounts payable under this Section 6(f)
by seeking other employment or otherwise and, except as provided in Section 7(d)
hereof, there shall be no offset against amounts due to the Executive hereunder
on account of subsequent employment or otherwise; PROVIDED, HOWEVER, that
medical and dental benefits shall cease if Executive secures full-time
employment during the 18-month period following his termination.
(iv) Upon any termination of employment, the Executive's rights
with respect to the Option shall be governed by the terms of the Option
Agreement.
(g) SURVIVAL OF OPERATIVE SECTIONS. Upon any termination of the
Executive's employment, the provisions of Section 6(f) and Section 7 through
Section 17 of this Agreement shall survive to the extent necessary to give
effect to the provisions thereof.
Section 7. SECRECY AND NON-COMPETITION.
(a) NO COMPETING EMPLOYMENT. The Executive acknowledges that the
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and, by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that during the Employment Term and for the period ending on the first
anniversary of the termination of the Executive's employment hereunder, the
Executive shall not, anywhere in the world, participate or engage, directly or
indirectly, for himself or on behalf of or in conjunction with any person,
partnership, corporation or other entity, whether as an employee, agent,
officer, director, shareholder, partner, joint venturer, investor or otherwise,
in any business activities related to the anti-viral segment of the
pharmaceutical industry, or any other major segment of such industry in which
the Company or any of its subsidiaries was engaged, or had decided to
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become engaged in a material way, during the Employment Term, as evidenced by
written Company documentation.
(b) NO INTERFERENCE. During the Employment Term and for the period
ending on the second anniversary of the termination of the Executive's
employment hereunder, the Executive shall not, whether for his own account or
for the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), directly or indirectly solicit,
endeavor to entice away from the Company or its subsidiaries, or otherwise
directly interfere with the relationship of the Company or its subsidiaries with
any person who, to the knowledge of the Executive, is, or was within the then
most recent twelve-month period, employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a clinical, medical, scientific or
business advisor to, the Company, or any of its subsidiaries; provided that the
Executive may engage clinical, medical, scientific or business advisors who had
or have a business relationship with the Company for work unrelated to the
pharmaceutical segments described in Section 7(a). The placement of any general
classified or "help wanted" advertisements and/or general solicitations to the
public at large shall not constitute a violation of this Section 7(b) unless the
Executive's name is contained in such advertisements or solicitations.
(c) CONFIDENTIAL INFORMATION. As a condition of the Executive's
employment hereunder, the Executive will execute, prior to the Commencement
Date, the Company's standard Confidentiality and Invention Assignment Agreement
(the "CONFIDENTIALITY AGREEMENT"). During the Term of Employment and following
any termination of the Executive's employment, the Executive agrees to comply
with the terms and conditions of the Confidentiality Agreement.
(d) Upon a material breach by Executive of any provisions of this
Section 7, Executive shall (i) be liable to the Company for an amount equal to
the aggregate of all gains realized by Executive, within the 24-month period
immediately preceding such breach, from the exercise of any options (including
the Option) or vesting of any other equity awards, and (ii) forfeit his right to
receive any termination payments described in Section 6(f)(ii) which have not
been paid prior to the date of such breach.
Section 8. INJUNCTIVE RELIEF. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there would be no adequate remedy at law, that it would not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, in addition to the damages described in Section 7(d)
hereof, the Company shall be entitled to obtain a temporary restraining order
and/or a preliminary or permanent injunction, without the necessity of proving
irreparable harm or injury as a result of such breach or threatened breach of
Section 7 hereof, restraining the Executive from engaging in activities
prohibited by Section 7 hereof and providing other relief as may be required
specifically to enforce any of the covenants in Section 7 hereof.
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Section 9. EXTENSION OF RESTRICTED PERIOD. In addition to the
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of any
of the covenants contained in Section 7 hereof.
Section 10. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE. The
Executive represents and warrants to the Company as follows:
(a) This Agreement, upon execution and delivery by the Executive,
will be duly executed and delivered by the Executive and (assuming due execution
and delivery hereof by the Company) will be the valid and binding obligation of
the Executive enforceable against the Executive in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby nor the performance of this
Agreement in accordance with its terms and conditions by the Executive will (i)
require the approval or consent of any governmental body or of any other person
or (ii) conflict with or result in any breach or violation of, or constitute (or
with notice or lapse of time or both would constitute) a default under, any
agreement, instrument, judgment, decree, order, statute, rule, permit or
governmental regulation applicable to the Executive. Without limiting the
generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no-hire or similar agreement that restricts
in any way the Executive's ability to engage in any business or to solicit or
hire the employees of any person. In the performance of his duties under this
Agreement, Executive shall not use any confidential or proprietary information
which he may have obtained in connection with his employment with any prior
employer.
The representations and warranties of the Executive contained in this
Section 10 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Section 11. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; PROVIDED, HOWEVER, that neither party shall assign or delegate any of
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this
Agreement shall confer upon any person or entity not a party to this Agreement,
or the legal representatives of such person or entity, any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement.
Section 12. WAIVER AND AMENDMENTS. Any waiver, alteration,
amendment or modification of any of the terms of this Agreement shall be valid
only if made in writing and signed by the parties hereto; PROVIDED, HOWEVER,
that any such waiver, alteration, amendment or
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modification is consented to on the Company's behalf by the Board. No waiver by
either of the parties hereto of its rights hereunder shall be deemed to
constitute a waiver with respect to any subsequent occurrences or transactions
hereunder unless such waiver specifically states that it is to be construed as a
continuing waiver.
Section 13. SEVERABILITY; GOVERNING LAW; DISPUTE RESOLUTION.
(a) The Executive acknowledges and agrees that the covenants set
forth in Section 7 hereof are reasonable and valid in geographical and temporal
scope and in all other respects. If any of such covenants or such other
provisions of this Agreement are found to be invalid or unenforceable by a final
determination of a court of competent jurisdiction (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
(b) Except for any disputes arising out of a breach or alleged
breach by the Executive of any provisions of Section 7 of this Agreement or of
the Confidentiality Agreement, as to which the Company shall be entitled to seek
a restraining order and/or an injunction in any court of competent jurisdiction,
all disputes arising under this Agreement shall be resolved by arbitration under
the Commercial Arbitration Rules of the American Arbitration Association. The
costs of any such arbitration shall initially be borne equally by the Company
and the Executive, and each side shall initially bear its own legal and other
related costs; PROVIDED, HOWEVER, that the prevailing party in any such dispute
shall be entitled to reimbursement from the losing party of all such
arbitration, legal and other related costs incurred in connection therewith.
Section 14. NOTICES.
(a) All communications under this Agreement shall be in writing
and shall be delivered by hand or mailed by overnight courier or by registered
or certified mail, postage prepaid:
(i) if to the Executive, at his home address for payroll purposes,
or at such other address as the Executive may have furnished the Company in
writing, with copy to Xxxxxx Xxxxxxx, Esq., Xxxxxxx & Company, P.C., 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(ii) if to the Company, at its principal executive offices in
Durham, North Carolina, marked for the attention of the Board, or at such other
address as it may have furnished in writing to the Executive.
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
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Section 15. SECTION HEADINGS. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, or affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 16. ENTIRE AGREEMENT. This Agreement, together with the
Exhibits attached hereto, constitutes the entire understanding and agreement of
the parties hereto regarding the employment of the Executive. This Agreement
supersedes all prior negotiations, discussions, correspondence, communications,
understandings and agreements between the parties relating to the subject matter
of this Agreement.
Section 17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same instrument.
[Signatures appear on next page.]
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[Signature page to Employment Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Chairman, Executive Search Committee
of the Board of Directors
/s/ Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx
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