EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 26th, 2006, between INNOVATE
ONCOLOGY, INC., a Nevada corporation ("COMPANY"), and XXXXXXXXXXX XXXXXX, an
individual ("EXECUTIVE").
Company desires to employ Executive, and Executive desires to
be employed, as Chief Executive Officer ("CEO") of Company, in each case, on the
terms and subject to the conditions set forth in this Agreement.
Accordingly, each party hereto hereby agrees as follows:
1. TERM OF AGREEMENT
The term of this Agreement will commence on the date first set
forth above, or as soon thereafter as Executive commences services hereunder
(Executive's "START DATE") and will continue until the earlier of: (a) the date
on which it is terminated pursuant to Section 5; or (b) three years following
the date hereof (the "INITIAL TERM"). At the conclusion of the Initial Term, and
each successive term thereafter, this Agreement will be automatically renewed
for an additional one-year term, unless either party hereto gives written notice
to the other party of its intention to terminate this Agreement at least 90 days
prior to the automatic renewal date.
2. EMPLOYMENT
2.1 POSITION AND DUTIES. Executive will serve as Company's
CEO, reporting directly to Company's Board of Directors (the "BOARD"), and will
have the general powers, duties and responsibilities of management usually
vested in that office in a corporation and such additional powers and duties as
may be prescribed from time to time by the Board, which may include services for
one or more subsidiaries or affiliates of Company as well as hiring key
employees. Executive will be provided with a written description of his duties
as CEO, which will be incorporated into this Agreement with the understanding
that such description is not intended to be exclusive, and will receive
performance appraisals on or about each anniversary of this Agreement by the
compensation committee of the Board. In addition, the Board, which will be newly
constituted at the next annual meeting of the stockholders of the Company, will
nominate Executive, as CEO of Company and therefore part of management's slate,
to fill a seat on the Board and, in the meantime, will appoint Executive to fill
a vacancy on the Board.
2.2 OTHER SERVICES. Company acknowledges that Executive may do
charity work and conduct personal business as long as such activities do not
materially interfere with Executive's duties hereunder.
3. COMPENSATION
3.1 COMPENSATION. During the term of this Agreement, Company
will pay the amounts and provide the benefits described in this Section 3, and
Executive agrees to accept such amounts and benefits in full payment for
Executive's services under this Agreement.
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3.2 BASE SALARY. Company will pay to Executive a base salary
of $300,000 annually, payable in accordance with Company's standard payroll
practices, less applicable withholding. At Company's sole discretion,
Executive's base salary may be increased, but not decreased.
3.3 EQUITY INCENTIVE PLAN.
(a) Executive will be entitled to participate in any stock
option, stock bonus, phantom stock right, equity pool, cash bonus or other such
plans or arrangements, which may exist during the term of his employment,
provided that, except as otherwise provided herein, Executive's entitlement is
not inconsistent with the terms of any such plan or arrangement.
(b) As soon as practicable following attainment of certain
milestones as set forth on Schedule 1 hereto, subject to both Board and
shareholder approval, Executive, provided that he is still employed hereunder,
will be granted options to purchase such number of shares of Company's common
stock (expressed as a percentage of common shares (fully diluted) as are then
outstanding) as is set forth opposite each such milestone on Schedule 1 at a
price per share equal to the volume weighted price per share for the 30
consecutive trading days preceding the date of attainment of the related
milestone.
(c) To the extent permissible, such options will be incentive
stock options. The options will vest in three equal installments, on the first,
second and third anniversary of date of grant, and will be exercisable for five
years from date of grant (or, in case of earlier termination of Executive's
employment with Company, for three months following the effective date of
termination. Except as otherwise set forth herein, vesting of options will cease
upon the termination of Executive's employment with Company.
3.4 FRINGE BENEFITS.
(a) Company will provide to Executive, at Company's cost, all
perquisites to which other senior executives of Company are generally entitled
and such other perquisites which are suitable to the character of the
Executive's position with Company and adequate for the performance of his duties
hereunder in accordance with Company's policy.
(b) Upon satisfaction of applicable eligibility requirements,
Executive will be provided with group medical and dental insurance through
Company's plans, as well as any other fringe benefit plan(s) as Company may
offer from time to time to its personnel. Executive's spouse and any dependent
children of Executive will also be covered under the Company's medical and
dental plans at Company's cost and will be provided with disability insurance
and life insurance coverage as well. In addition, Executive will be eligible to
participate in Company's 401K plan. (Executive acknowledges, however, with
reference to the foregoing, that no such benefit plans currently exist and that
Company intends to implement them no earlier than the date which follows by two
months completion of a "PIPE financing" within the meaning of Schedule 1
hereto.) To the extent legally permissible, Company will not treat amounts paid
in respect of such benefits as income to Executive.
3.5 PAID TIME OFF. Executive will accrue, on a daily basis, a
total of three workweeks of paid time off ("PTO") per year following the date of
this Agreement. This PTO will be in addition to normal Company holidays, which
will be determined at the discretion of Company from time to time. Any accrued
but unused PTO (up to such limits as Company may establish) will be paid to
Executive, on a pro rata basis, at the time that his employment is terminated.
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3.6 DEDUCTIONS FROM COMPENSATION. Company will deduct and
withhold from all compensation payable to Executive all amounts required to be
deducted or withheld pursuant to any present or future law, ordinance,
regulation, order, writ, judgment, or decree requiring such deduction and
withholding.
4 REIMBURSEMENT OF CERTAIN EXPENSES
4.1 TRAVEL AND OTHER EXPENSES. Company will pay to or
reimburse Executive for reasonable and necessary business, travel, promotional,
professional continuing education and licensing costs (to the extent required),
professional society membership fees, seminars and similar expenditures incurred
by Executive for which Executive submits appropriate receipts and indicates the
amount, date, location and business character in a timely manner.
4.2 LIABILITY INSURANCE. Company will add Executive to the
coverage of Company's officers and directors' insurance and other liability
insurance policies, consistent with usual and reasonable business practices, to
cover Executive against insurable events related to his employment with Company.
4.3 INDEMNIFICATION. Promptly upon written request from
Executive, Company will indemnify, defend (with counsel of its choice) and hold
harmless Executive, to the fullest extent under applicable law, for all defense
costs, judgments, fines, settlements, losses, costs or expenses (including
attorney's fees), arising out of Executive's activities as an agent, employee,
officer or director of Company, or in any other capacity on behalf of or at the
request of Company. Notwithstanding the foregoing, Company may not enter into
any settlement, of any kind, of any claim, which requires Executive to admit
liability or responsibility or to have any order or judgment entered against
Executive without Executive's consent, which will not unreasonably be withheld
or delayed.
5 TERMINATION
5.1 TERMINATION WITH GOOD CAUSE; RESIGNATION WITHOUT GOOD
REASON. Company may terminate Executive's employment at any time, with or
without notice or Good Cause (as defined below). If Company terminates
Executive's employment with Good Cause, or if Executive resigns without Good
Reason (as defined below), Company will pay Executive his salary prorated
through the date of termination, at the rate in effect at the time notice of
termination is given, together with any benefits accrued through the date of
termination. Company will have no further obligations to Executive under this
Agreement or any other agreement, and all unvested options will terminate.
5.2 TERMINATION WITHOUT GOOD CAUSE; RESIGNATION WITH GOOD
REASON. Company will have the right to terminate Executive's employment under
this Agreement without Good Cause at any time, and Executive will have the right
to terminate his employment with notice and Good Reason at any time. If Company
terminates Executive's employment without Good Cause, or Executive resigns for
Good Reason:
(a) Company will pay Executive his salary prorated
through the date of termination, at the rate in effect at the time
notice of termination is given, together with any benefits accrued
through the date of termination;
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(b) Company will pay Executive in a lump sum an
amount equal to one year's salary (at the rate in effect at the time
of termination);
(c) all of Executive's unvested stock options will
vest immediately, and remain exercisable for a period of two years
thereafter; and
(d) in addition to any rights under COBRA, medical
and dental benefits under the Company's plan will continue for a
period of one year from the date of termination, provided that
coverage will terminate sooner if Executive becomes covered under
another employer's medical plan.
To be eligible for the compensation provided for in clauses (b), (c) and (d)
above, Executive must execute a full and complete a mutual release of any and
all claims in the standard form then used by Company (a "RELEASE"). Company will
have no further obligations to Executive under this Agreement or any other
agreement.
5.3 GOOD CAUSE. For purposes of this Agreement, a termination
will be for "GOOD CAUSE" if Executive should:
(a) commit an act of fraud, moral turpitude or
embezzlement in connection with his duties;
(b) violate a material provision of Company's
written Codes of Ethics as adopted by the Board, or any applicable
state or federal law or regulation;
(c) violate a material provision of the
Confidentiality Agreement executed by Executive and referenced in
Section 7 hereof;
(d) fail or refuse to comply with a relevant and
material obligation assumable and chargeable to an executive of his
corporate rank and responsibilities under the Xxxxxxxx-Xxxxx Act and
the regulations of the Securities and Exchange Commission promulgated
thereunder; or
(e) be convicted of, or enter a plea of guilty or no
contest to, a felony or a misdemeanor involving fraud or moral
turpitude under state or federal law.
5.4 GOOD REASON. For purposes of this Agreement, a resignation
will be with "GOOD REASON" following:
(a) assignment to Executive of duties materially
inconsistent with Executive's status as CEO of an emerging company,
removal of Executive as CEO, material adverse change in the reporting
relationship set forth in Section 2.1 hereof or a substantial
reduction in the nature or status of Executive's responsibilities as
CEO; or
(b) material breach of this Agreement by Company,
including, but not limited to, Company's failure to timely pay to
Executive any amount due under Section 3.2 hereof which continues
after written notice and reasonable opportunity to cure.
5.5 EFFECTS OF CHANGE IN CONTROL. Immediately upon a Change in
Control all of Executive's unvested options will vest immediately, and remain
exercisable for a period of three years thereafter. Further if Executive is
terminated without Good Cause or resigns for Good Reason during the first six
months following a Change in Control, Executive will be entitled to receive a
lump sum in an amount equal to his salary (at the rate in effect at the time of
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termination) for (x) one year, or (y) the remainder of the Initial or then
current renewal term of this Agreement (if six months or more but less than one
year), whichever is less. In addition, medical and dental benefits under the
Company's plan will continue for a period of one year from the date of
termination, provided that coverage will terminate sooner if Executive becomes
covered under another employer's plan. To be eligible for the compensation
provided for in this Section, Executive must execute a Release. Company will
have no further obligations to Executive under this Agreement.
5.6 CHANGE IN CONTROL. For purposes of this Agreement, a
"CHANGE IN CONTROL" means:
(a) the acquisition of Company by another entity by
means of a transaction or series of related transactions (including,
but not limited to, any reorganization, merger, stock purchase or
consolidation); or
(b) the sale, transfer or other disposition of all
or substantially all of Company's assets to an unaffiliated third
party.
Notwithstanding the foregoing, a transaction will not constitute a Change in
Control:
(i) if the sole purpose of the transaction is to
change the state of the Company's incorporation or to create or
eliminate a holding company that will be owned in substantially the
same proportions by the same beneficial owners as before the
transaction;
(ii) if Company's stockholders as constituted
immediately prior to the transaction will, immediately after the
transaction (by virtue of securities issued as consideration for
Company's capital stock or assets or otherwise), hold more than 50% of
the combined voting power of the surviving or acquiring entity's
outstanding securities;
(iii) if in an underwritten public offering of
Company's common stock, Company's stockholders as constituted
immediately prior to the offering will, immediately after the
offering, continue to hold more than 50% of the combined voting power
of Company's outstanding voting securities;
(iv) if in a private placement of preferred or
common stock, or the issuance of debt instruments convertible into
preferred or common stock, such securities are sold and issued for
fair market value as determined by the Board, provided the acquiring
person does not as a result of the transaction own more than 50% of
the outstanding capital stock of Company, have the right to vote more
than 50% of the outstanding voting stock of Company, or have the right
to elect a majority of the Board; or
(v) if Executive is a member of a group that
acquires control of Company in an event that would otherwise be a
Change in Control.
5.7 DEATH OR DISABILITY. To the extent consistent with
applicable law, Executive's salary will terminate on his death or Disability.
"DISABILITY" means any health condition, physical or mental, or other cause
beyond Executive's control, that prevents him from performing his duties, even
after reasonable accommodation is made by Company, for a period of 90
consecutive days within any 365-day period. In the event of termination due to
death or Disability, Company will pay Executive (or his legal representative)
his salary prorated through the date of termination, at the rate in effect at
the time of termination and continue to provide insurance and other fringe
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benefits to Executive and Executive's spouse and dependent children for a period
of one year from Executive's termination date, and 100% of the options set to
vest in the year that death or disability occurs will vest and Executive (or his
legal representative) will have until the end of the option term to exercise all
options. Company will have no further obligations to Executive (or his legal
representative) under this Agreement, except for any other vested rights under
employee benefit plans and programs and the right to receive reimbursement for
business expenses.
5.8 RETURN OF Company PROPERTY. Within ten days after the
effective date of termination of Executive's employment with Company, Executive
will return to Company all products, books, records, forms, specifications,
formulae, data processes, designs, papers and writings relating to the business
of Company, including, but not limited to, proprietary or licensed computer
programs, customer lists and customer data, and copies or duplicates thereof in
Executive's possession or under Executive's control. Executive will not retain
any copies or duplicates of such property and all licenses granted to him by
Company to use computer programs or software will be revoked on the termination
date.
6 DUTY OF LOYALTY
During the term of this Agreement, Executive will not,
without the prior written consent of Company, engage in any activity directly
competitive with the business or welfare of Company, whether alone, as a
partner, or as an officer, director, employee, consultant, or holder of more
than one percent of the capital stock of any other corporation.
7. CONFIDENTIAL INFORMATION
7.1 TRADE SECRETS OF Company. Executive, during the term of
this Agreement, will develop, have access to and become acquainted with various
trade secrets which are owned by Company and which are regularly used in the
operation of its business. Executive will not disclose such trade secrets,
directly or indirectly, or use them in any way, either during the term of this
Agreement or at any time thereafter, except as required in the course of his
employment by Company. All files, contracts, manuals, reports, letters, forms,
documents, notes, notebooks, lists, records, documents, customer lists, vendor
lists, purchase information, designs, computer programs and similar items and
information relating to the businesses of such entities, whether prepared by
Executive or otherwise and whether now existing or prepared at a future time,
coming into his possession will remain the exclusive property Company.
7.2 CONFIDENTIAL DATA OF CUSTOMERS OF Company. Executive, in
the course of his duties, will have access to and become acquainted with
financial, accounting, statistical and personal data of customers of Company and
of its and their affiliates. All such data is confidential and will not be
disclosed, directly or indirectly, or used by Executive in any way, either
during the term of this Agreement (except as required in the course of
Executive's employment by Company) or at any time thereafter.
7.3 INTELLECTUAL PROPERTIES. Executive will sign the Company's
Employee Innovation, Proprietary Information and Confidentiality Agreement (the
"CONFIDENTIALITY AGREEMENT") prior to or on his start date.
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7.4 INJUNCTIVE RELIEF. Executive acknowledges that the
services to be rendered under this Agreement and the items described in this
Section 7 are of a special, unique and extraordinary character, that it would be
difficult or impossible to replace such services or to compensate Company in
money damages for a breach of this Agreement. Accordingly, Executive agrees and
consents that if he violates any of the provisions of this Agreement, Company,
in addition to any other rights and remedies available under this Agreement or
otherwise, will be entitled to temporary and permanent injunctive relief.
7.5 CONTINUING EFFECT. The provisions of this Section 7 will
remain in effect after the effective date of termination of Executive's
employment with Company.
8 OTHER PROVISIONS
8.1 CURE PERIOD. In the event that Executive or Company
breaches this Agreement, the breaching party will have 15 business days within
which to cure such breach, after receiving written notice from the other party
specifying in reasonable detail the basis for the claimed breach. No breach of
the Agreement will be actionable if the breaching party is able to cure the
breach within the aforementioned cure period.
8.2 COMPLIANCE WITH OTHER AGREEMENTS. Executive represents and
warrants to Company that, to his knowledge and belief, the execution, delivery
and performance of this Agreement will not conflict with or result in the
violation or breach of any term or provision of any order, judgment, injunction,
contract, agreement, commitment or other arrangement to which Executive is a
party or by which he is bound.
8.3 COUNSEL. The parties acknowledge and represent that, prior
to the execution of this Agreement, they have had an opportunity to consult with
their respective counsel concerning the terms and conditions set forth herein.
Additionally, Executive represents that he has had an opportunity to receive
independent legal advice concerning the taxability of any consideration received
under this Agreement. Executive has not relied upon any advice from Company or
its attorneys with respect to the taxability of any consideration received under
this Agreement.
8.4 NON-DELEGABLE DUTIES. This Agreement is a contract for
Executive's personal services. The duties of Executive under this Agreement are
personal and may not be delegated or transferred in any manner whatsoever, and
will not be subject to involuntary alienation, assignment or transfer by
Executive during his life.
8.5 GOVERNING LAW. The validity, construction and performance
of this Agreement will be governed by the internal laws of the State of
California. The federal and state courts located in Los Angeles, California,
will have exclusive jurisdiction over any action to compel performance in
accordance with this Agreement, the Confidentiality Agreement or the Dispute
Resolution Agreement (as defined below) or to enforce any award in any
arbitration.
8.6 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement will not affect the other provisions, and
this Agreement will be construed in all respects as if any invalid or
unenforceable provision were omitted.
8.7 BINDING EFFECT. The provisions of this Agreement will bind
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
8.8 NOTICE. Any notices or communications required or
permitted by this Agreement will be deemed sufficiently given if in writing and
when delivered personally or two business days after deposit with the United
States Postal Service as registered or certified mail, postage prepaid and
addressed as follows:
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(a) if to Company, to the principal office of
Company in the State of California, marked "Attention: Chairman of the
Board"; or
(b) if to Executive, to the most recent address for
Executive appearing in Company's records.
8.9 DISPUTE RESOLUTION. Executive will enter into with Company
a Dispute Resolution Agreement (the "DISPUTE RESOLUTION AGREEMENT") prior to or
on his start date. Any disputes, controversies or claims arising out of or
relating to this Agreement will be resolved by mediation or, failing which,
binding arbitration before a retired judge at JAMS in Santa Monica, California,
in accordance with JAMS's rules and procedures and the Dispute Resolution
Agreement.
8.10 ATTORNEYS' FEES. The prevailing party in any suit or
other proceeding brought to enforce, interpret or apply any provisions of this
Agreement will, except as otherwise provided in the Dispute Resolution
Agreement, be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including attorneys' fees.
8.11 HEADINGS. The headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
8.12 AMENDMENT AND WAIVER. This Agreement may be amended,
modified or supplemented only by a writing executed by each of the parties
hereto. Either party may in writing waive any provision of this Agreement to the
extent such provision is for the benefit of the waiving party. No waiver by
either party of a breach of any provision of this Agreement will be construed as
a waiver of any subsequent or different breach, and no forbearance by a party to
seek a remedy for noncompliance or breach by the other party will be construed
as a waiver of any right or remedy with respect to such noncompliance or breach.
8.13 ENTIRE AGREEMENT. This Agreement, including Schedule I
hereto, the Confidentiality Agreement, the Dispute Resolution Agreement and all
stock option agreements entered into with Executive during his employment with
Company, are the only agreements and understandings between the parties hereto
pertaining to the subject matter hereof, and supersede all prior agreements,
summaries of agreements, descriptions of compensation packages, discussions,
negotiations, understandings, representations or warranties, whether verbal or
written, between the parties pertaining to such subject matter.
8.14 AUTHORITY. Company represents and warrants that the
individual executing this Agreement on its behalf has been duly authorized so to
do and that this Agreement is a valid and enforceable agreement of Company.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INNOVATE ONCOLOGY, INC.
/s/ Xxxxxxxxxxx Xxxxxx /s/ Xxxxxxx Xxxxx, M.D.
---------------------------- ----------------------------
Xxxxxxxxxxx Xxxxxx Xxxxxxx Xxxxx, M.D.
Chairman of the Board
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SCHEDULE 1
GRANTING OF STOCK OPTIONS
Percentage of Outstanding
Milestone to be Granted
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Execution by both parties thereto of Agreement 1%
Completion of a PIPE (private investment in public equity)
offering of at least $7 million 1.5%
Company's share price closes, on average, for 30 consecutive
trading days at $3.00 or higher 1%
First to occur of: (x) Company's share price closing, on average, for
30 consecutive trading days at $5.00 or higher; or (y) second
anniversary of start date; PROVIDED that there has occurred by then: 2.5%
o Announcement of German Phase II trial results for RP101;
o Successful application for US IND for RP101
o Initiation of US/European Phase II trial for RP101;
o Completion of FDA meeting to discuss potential endpoints of the first
randomized study for RP101;
o Presentation to at least four investor conferences each year; AND
o Hiring of key personnel according to Board agreed plan
In addition to clause (x) above, Company's share price closes, on
average, for 30 consecutive trading days at $5.00 or higher 1%
