Exhibit 10.23
EMPLOYMENT, CONFIDENTIALITY
AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (the
"Agreement") is made and entered into as of the 23rd day of February, 2004 (the
"Effective Date"), by and between:
COMBINATORX, INCORPORATED, a Delaware
Corporation duly organized under law and
having an usual place of business at 000
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000
(hereinafter referred to as the "COMPANY")
and
XXXXXX XXXXXXXXX of 000 Xxx Xxxxxx,
Xxxxxxxx, XX 00000 (hereinafter referred to
as the "EMPLOYEE")
The Company wishes to employ the Employee to serve as the Chief Financial
Officer and, in connection therewith, to provide specific financial expertise
and management direction for the Company and the Employee desires to be so
employed by the Company on the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, accepted and agreed to the Company, and the Employee hereby agree
as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as Chief
Financial Officer and the Employee accepts such employment, as of the Effective
Date, for the compensation and on the other terms and conditions set forth
below.
2. PERIOD OF EMPLOYMENT; DUTIES. The employment of the Employee shall
be from the Effective Date until the employment is terminated pursuant to
Section 4 below (the "Employment Period"). The Employee shall be employed as
Chief Financial Officer and shall have the duties, responsibilities and
authority normally and customarily associated with said office and position
including, but not limited to, presentations to investors, bankers, and
analysts; preparation of budgets, financial statements and projections;
management of outside accountants and others; preparation of reports;
interacting with lenders; providing general management direction and corporate
development of the Company and the overall supervision and monitoring of the
Company's finances.
As a member of the Senior Management Team, the Employee shall report to
and take direction from the President/CEO.
During the Employment Period, Employee shall devote all of his business
time, attention and loyalty to the Company; PROVIDED, HOWEVER, that the
foregoing shall not prevent the Employee from serving on the board of directors
or similar body of corporations or entities approved by the Board.
Notwithstanding anything contained herein, it is expressly agreed that the
Employee may serve on the advisory boards of AZURN, FusionCorp, New England Cord
Blood and Revolution Partners. The Employee warrants and represents that he is
under no contractual or other restrictions or obligations which will in any way
limit his activities on behalf of or employment by the Company; and the entering
into of this Agreement does not violate any agreement, contract or
confidentiality agreement that the Employee may have entered into or that is
binding upon the Employee. The Company acknowledges receipt of a copy of the
Employee's
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current non-competition agreement.
3. COMPENSATION
3.1 ANNUAL BASE SALARY. Subject to the provisions hereof, from
the Effective Date through December 31, 2004, the Company shall pay Employee,
not less frequently than monthly in arrears, a base salary at an annual rate of
Two Hundred Forty Five Thousand Dollars ($245,000.00) (the "BASE SALARY").
Thereafter, annually during the Employment Period, the Base Salary shall be
determined by the mutual agreement of the President/CEO and the Employee but, in
no event shall the Base Salary be less than the most recently negotiated and
accepted Base Salary. All payments of salary and other compensation to the
Employee shall be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws.
3.2 FRINGE BENEFITS. During the Employment Period, the Employee
shall be entitled to all rights and benefits for which he shall be eligible
under group insurance, participation in a 401(k) plan, free car parking and
other fringe benefits which may be, from time to time, provided to the Company's
executive employees generally.
Further, the Company shall reimburse the Employee for the out-of-pocket
expenses incurred by the Employee in the fulfillment of his duties and
responsibilities hereunder. Reimbursement shall be in accordance with the
Board's policies and procedures and in compliance with the requirements of the
Internal Revenue Code of 1986, as amended. Reimbursement of travel expenses will
be consistent with the Company's travel policies.
3.3 VACATION AND HOLIDAYS. During each year of the Employment
Period, the Employee shall be entitled to three (3) weeks of paid vacation
consistent with the Company's
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vacation policy then in effect. Further, the Employee will be entitled to twelve
(12) paid holidays per year as recognized by the Company.
3.4 BONUS PAYMENTS. In partial consideration of the Employee
entering into this Agreement, the Company shall provide the following:
A) PERFORMANCE BONUS. Upon the recommendation of the President/CEO
and based on the Company's financial and cash position and the Employee's
contribution to the Company's achievement of its annual goals, the Company may,
in its discretion, award an annual performance bonus, either in cash or stock
options, to the Employee. Any such bonus shall not be added to the Base Salary.
The Employee's target bonus is initially 30%.
B) STOCK OPTION AWARDS. In addition to the stock option grants
specified in Article 3.5, the Board may, on an annual basis in its discretion,
grant stock options to the Employee based on: (i) the Employee's performance and
(ii) the Company's progress and attainment of its business goals and objectives.
The granting of the stock options and the terms and conditions of the award
(e.g. the number of shares granted and the vesting schedule), shall be solely
within the discretion of the Board of Directors.
C) STOCK OPTIONS. The Employee is hereby granted an Incentive
Grant Option (the "Basic Option") to purchase up to Three Hundred Thousand
(300,000) Shares of the Company's Common Stock (the "Shares") at an exercise
price of Fifty (50 CENTS) cents per Share (the "Purchase Price"), in accordance
with the terms and conditions of the Company's Stock Option Plan (the "Plan")
and Incentive Stock Option Grant Agreement (the "Grant"). Subject to the
provisions of this Agreement and the Grant, it is understood and agreed that,
the vesting of the Shares shall occur as follows: Seventy Five Thousand (75,000)
shall vest on the first anniversary
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date following the Effective Date, and then Eighteen Thousand Seven Hundred
Fifty (18,750) Shares shall vest on each quarterly anniversary date thereafter,
and continuing thereafter until fully vested in accordance with the terms of
this Agreement.
3.6 SEVERANCE BENEFITS. Notwithstanding anything in this Agreement, it
is agreed and understood that, in the event of a "Change of Control" as
hereinafter defined, the Employee shall be entitled to the following: (i) The
Company shall pay the Employee an amount equal to twice his then Base Salary for
a period of twelve (12) months, to be paid in one lump sum at the time of the
closing of the Change of Control, and (ii) all stock options granted by the
Company to the Employee to the extent not previously vested shall accelerate and
be deemed fully vested. The severance benefit in clause 3.6(i) above will be
reduced to once times the Base Salary for a 12 month period if the aggregate
value of the sale proceeds (including any retained shares) valued at the
transaction price from a Change of Control received by the venture capital
investors is less than the amount they have invested plus 10%; this sentence
will expire on the closing of an IPO. For purposes of this Agreement, the term
"Change of Control" shall mean: (a) a sale, merger or consolidation after which
securities possessing more than fifty (50%) percent of the total combined voting
power of the Company's outstanding securities have been transferred to or
acquired by a person or persons different from the persons who held such
percentage of the total combined voting power immediately prior to such
transaction; (b) the sale, transfer or other disposition of all or substantially
all of the Company's assets to one or more persons (other than a wholly owned
subsidiary of the Company or a parent company whose stock ownership after the
transaction is the same as the Company's ownership before the transaction), or
(c) an acquisition, merger or similar transaction or a divestiture of a
substantial portion of the Company's business
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after which the Employee's role is not substantially the same as such role prior
to the transaction. In the event that a Change of Control of the Company occurs
and it is determined that any payment or benefit provided by the Company to or
for the benefit of the Employee, either under this Agreement or otherwise, will
be subject to the excise tax imposed by section 4999 of the Internal Revenue
Code or any successor provision ("section 4999"), the Company will, prior to the
date on which any amount of the excise tax must be paid or withheld, make an
additional lump-sum payment (the "gross-up payment") to the Employee. The
gross-up payment will be sufficient, after giving effect to all federal, state
and other taxes and charges (including interest and penalties, if any) with
respect to the gross-up payment, to make the Employee whole for all taxes
(including withholding taxes) and any associated interest and penalties, imposed
under or as a result of section 4999.
Determinations under this Section 3 will be made by the Company's
independent auditors unless the Employee has reasonable objections to the use of
that firm, in which case the determinations will be made by a comparable firm
chosen by the Employee after consultation with the Company (the firm making the
determinations to be referred to as the "Firm"). The determinations of the Firm
will be binding upon the Company and the Employee except as the determinations
are established in resolution (including by settlement) of a controversy with
the Internal Revenue Service to have been incorrect. All fees and expenses of
the Firm will be paid by the Company.
If the Internal Revenue Service asserts a claim that, if successful,
would require the Company to make a gross-up payment or an additional gross-up
payment, the Company and the Employee will cooperate fully in resolving the
controversy with the Internal Revenue Service.
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The Company will make or advance such gross-up payments as are necessary to
prevent the Employee from having to bear the cost of payments made to the
Internal Revenue Service in the course of, or as a result of, the controversy.
The Firm will determine the amount of such gross-up payments or advances and
will determine after resolution of the controversy whether any advances must be
returned by the Employee to the Company. The Company will bear all expenses of
the controversy and will gross the Employee up for any additional taxes that may
be imposed upon the Employee as a result of its payment of such expenses.
4. EARLY TERMINATION OF PERIOD OF EMPLOYMENT.
4.1 EMPLOYEE'S EARLIER TERMINATION. The Employee may terminate
his employment hereunder by giving the Company written notice thereof not later
than sixty (60) days prior to the date fixed for such termination in such
notice. Further, the Employee's employment with the Company shall automatically
terminate on his death or disability (as defined below). The Employee may also
terminate his employment under this Agreement for Good Reason. Good Reason means
(i) a material breach of any of the material provisions of this Agreement by the
Company, including but not limited to a reduction in the Employee's compensation
or in the Employee's position, duties, responsibilities or authority; or (ii) a
relocation of the Employee's place of employment to a point beyond a 35-mile
radius of the Company's current office.
4.2 COMPANY'S EARLIER TERMINATION. The Company shall have the
right to terminate Employee's employment hereunder: (i) without cause, (i.e. for
any reason or no reason whatsoever), upon sixty (60) days prior written notice
to the Employee and (ii) FOR CAUSE, immediately upon, or at any time after,
giving written notice of such termination. In the event
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that the Employee's employment is terminated pursuant to section 4.2(i), without
cause or if the Employee terminates the Agreement for a Good Reason, then the
Employee shall receive his Base Salary and the cost of the fringe benefits for
12 months following the date of termination; such sum will be payable in one
lump sum within 30 days of the termination. The 12 month period following
termination of Employee's employment is referred to as the Severance Year. In
the event that Employee is employed during one or more of the last three months
of the Severance Year in a comparable full-time position with at least equal
compensation to that he was receiving from the Company, he will refund to the
Company the severance pay for that portion of the three month period that he is
so employed. In the event of the death or disability of the Employee, the
Employee's Base Salary, fringe benefits and vesting of stock options shall cease
as of the 180th day after the Employee's death or disability. In the event that
the Employee is terminated without cause or the Employee terminates for Good
Reason then, the vesting of stock options granted pursuant to Article 3.5 of
this Agreement shall be as follows: With respect to all unvested options, the
Employee shall be entitled to vest twenty five (25%) percent of the then
unvested options for each year of employment with the Company. For example, if
there is a termination without cause at the end of the second year of
employment, then fifty (50%) percent of the options would be unvested and
automatically an additional twenty five (25%) percent of the initial amount
shall be vested (50% of the remaining 50%), and thereafter no further or
additional Shares shall vest. If the Employee terminates his employment without
Good Reason pursuant to the first sentence of Section 4.1 hereof the Base
Salary, fringe benefits and vesting of stock options shall cease as of the date
of such termination of employment.
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If the Company terminates the Employee pursuant to (ii) above (i.e. FOR
CAUSE), then Employee's Base Salary, fringe benefits and vesting of stock
options shall cease and terminate as of the date of termination of the
Employee's employment. As used herein "FOR CAUSE" shall mean: (a) the conviction
of Employee of any felony; (b) the willful or gross neglect or dereliction by
the Employee of his duties and responsibilities as set forth in Article 2
hereof, which neglect or dereliction of duties and responsibilities continues 30
daysafter written notice given to the Employee by the Board; (c) material breach
by the Employee of this Agreement in any material respect, which remains uncured
following 30 days' written notice from the Company (d) engaging in material
fraudulent conduct toward the Company. A determination that there is FOR CAUSE
termination of the Employee's employment shall be made by the Board in good
faith, and only after notice to Employee and providing Employee an opportunity
to be heard, and such determination shall require that the Board find that there
has occurred an event of the kind described in (a), (b), (c), or (d) above.
For purposes of this Agreement, the term "disability" shall mean the
physical or mental illness or disability of Employee such that, in the good
faith and reasonable judgment of a reputable physician mutually selected by
Employee and the Board, he shall be materially unable to perform his duties of
employment, with reasonable accommodation, and such inability may reasonably be
expected to be permanent or to continue for a period of at least one hundred
twenty (120) business days during any period of twelve (12) consecutive months.
5. NON-COMPETITION.
5.1 NON-COMPETITION PERIOD. Employee shall not, directly or
indirectly
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(including, without limitation, either alone or as a partner, officer, director,
employee, joint venturer or stockholder of, or as a consultant or other
independent contractor to or agent or representative for, any company, business,
individual or other entity), engage in any business activity which constitutes
substantial direct competition with the Company's Business, as hereinafter
defined, at any time during the Employment Period and for a period of one (1)
year after the termination for any reason of the Employment Period (the
"POST-EMPLOYMENT PERIOD") (collectively, the Employment Period and the
Post-Employment Period are herein referred to as the "NON-COMPETITION PERIOD");
PROVIDED, HOWEVER, that nothing in this Agreement shall prevent or restrict the
Employee from owning, directly or indirectly, not more than five percent (5%) of
the securities of any publicly traded company for the sole purpose of a passive
investment. For purposes of this Agreement, the Company's Business shall be
defined as: discovering, developing and commercializing combination therapeutics
and combination technologies for the life sciences.
5.2 RESTRICTED BUSINESS ACTIVITIES: During the Non-Competition Period,
Employee will not, directly or indirectly (excluding actions through responses
to general advertisements and headhunters which, in either case, are not
specifically targeted to Company employees)
(a) solicit or request any other employee of or
consultant to the Company to join the employ
of, or begin consulting for, any individual
or entity that researches, develops, markets
or sells products that compete with
Company's Business;
(b) solicit or request any individual or entity
that researches, develops, markets or sells
products that compete with the Company's
Business, to employ or retain as a
consultant any employee or consultant of the
Company;
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(c) divert, directly or indirectly, to any
competitor of the Company in the Company's
Business, any customer of the Company; or
(d) induce or attempt to induce any supplier or
vendor of the Company to terminate or breach
any written or oral agreement or
understanding with the Company.
6. PROPRIETARY RIGHTS.
6.1 DEFINITIONS. For the purposes of this Section 6, the terms
set forth below shall have the following meanings:
6.1.1 CONCEPTS AND IDEAS. Concepts and Ideas mean those
concepts and ideas which become known to the Employee at any time during the
Employee's employment by the Company which relate to the Company's present, past
or prospective activities, services and products, all of which shall remain the
sole and exclusive property of the Company. The Employee shall have no
publication rights to any Concepts and Ideas and/or Confidential Information,
and all of the same shall belong exclusively to the Company.
6.1.2 CONFIDENTIAL INFORMATION. Confidential Information is
that secret proprietary information of whatever kind or nature disclosed to
Employee or known by Employee (whether or not invented, discovered or developed
by Employee), at any time during Employee's establishment of or employment by
the Company as a consequence of or through such establishment or employment.
Such secret proprietary information shall include (unless such information is
generally known in the industry through no action or fault of Employee),
information relating to the design, trade secrets, manufacture, application,
know-how, research and development relating to the Company's products,
materials, operating and other cost data, price lists and data relating to
pricing of the Company's products to the extent secret and
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proprietary. Such secret proprietary information shall specifically include,
without limitation, all information contained in the Company's manuals,
memoranda, plans, drawings and designs, specifications, supply sources, customer
lists and records legended or otherwise identified by the Company or the Board
as Confidential Information to the extent secret and proprietary.
6.2 NON-DISCLOSURE TO THIRD PARTIES. Except as required by
Employee's duties in the course of his employment by the Company, Employee shall
not, at any time during or following the Employment Period, directly or
indirectly, use, publish, disseminate or otherwise disclose any Confidential
Information, Concepts or Ideas relating to the present, past or prospective
business of the Company to any third party without the prior written consent of
the Board which consent may be denied in each instance and all of the same,
together with publication rights, shall belong exclusively to the Company.
6.3 DOCUMENTS, ETC. All documents, procedural, manuals, guides,
specifications, plans, drawings, designs and similar materials, lists of
present, past or prospective customers, customer proposals, invitations to
submit proposals, price lists and data relating to the pricing of the Company's
products and services, records, notebooks and similar repositories of or
containing Confidential Information (including all copies thereof) that come
into the Employee's possession or control by reason of Employee's establishment
of or employment by the Company, whether prepared by Employee or others: (a) are
the property of the Company, (b) will not be used by Employee in any way adverse
to the Company (c) will not be removed from the Company's premises (except as
Employee's duties require) and (d) at the termination (for whatever reason) of
Employee's employment by the Company, will be left with, or forthwith returned
by Employee to the Company.
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6.4 ASSIGNMENT OF INVENTIONS. The Employee hereby agrees that
he will promptly make full written disclosure to the Company, and will hold in
trust for the sole right and benefit of the Company, and agrees to assign to the
Company or its designee all of his right, title and interest in and to any and
all of the inventions, original works of authorships, developments, concepts,
improvements or trade secrets, whether or not patentable or registerable under
patent, copyright or similar laws, that the Employee may, solely or jointly,
make, develop, conceive or reduce to practice, or cause to be made, developed,
conceived or reduced to practice, during the Employment Period that relates to
the Company's Business (collectively, referred to as the "Inventions"). Employee
further agrees that all original works of authorship that are made by the
Employee (solely or jointly with others), within the scope of employment and
during the Employment Period that are protectable by copyright are "works made
for hire", as that term is defined in the United States Copyright Act.
Employee hereby agrees to assist the Company or its designee at the
Company's expense, in every way to secure the Company's rights in the Inventions
and any copyrights, patents, or other intellectual property rights relating
thereto in any and all countries, including, disclosing to the Company all
pertinent information data with respect thereto, and executing all applications,
specifications, oaths, assignments and all other instruments that the Company
shall deem necessary in order to apply for and obtain such rights and in order
to secure and convey to the Company and its successors and assigns, the sole and
exclusive rights, title and interests in and to such Inventions, and any
copyrights, patents or other intellectual property rights relating thereto. The
Employee agrees that his obligations to execute or cause to be executed, when it
is in his
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power to do so, any such instruments or papers will continue after the
termination of this Agreement. If the Employee is unwilling or refuses, for any
reason, to execute and deliver all such documents needed to complete such
applications in the United States of America or foreign patents or any copyright
registrations covering inventions or original works of authorship assigned to
the Company as above, then the Employee hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as the
Employee's agent and attorney-in- fact, coupled with an interest, to act for an
in the Employee's behalf and stead to execute and file any such applications, at
the Company's expense, and to do all other lawfully permitted acts to further
the prosecution in issuance of letters patent or copyright registration thereon
with the same legal force and effect as if executed by the Employee.
7. EQUITABLE RELIEF. Employee agrees that any breach of Sections 5 and 6
above by Employee would cause irreparable damage to the Company and that, in the
event of such breach, the Company shall have, in addition to any and all
remedies of law, the right to an injunction, specific performance or other
equitable relief to prevent the violation or threatened violation of Employee's
obligations hereunder.
8. WAIVER. Any waiver by either party of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach of the same or any other provision hereof by such other
party. All waivers shall be in writing.
9. SEVERABILITY; REFORMATION. In case any one or more of the provisions
or parts of a provision contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not
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affect any other provision or part of a provision of this Agreement; and this
Agreement shall, to the fullest extent lawful, be reformed and construed as if
such invalid or illegal or unenforceable provision, or part of a provision, had
never been contained herein, and such provision or part reformed so that it
would be valid, legal and enforceable to the maximum extent possible. Without
limiting the foregoing, if any provision (or part of provision) contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, activity or subject, it shall be construed by limiting and reducing
it, so as to be enforceable to the fullest extent compatible with then existing
and applicable law.
10. ASSIGNMENT. The Company shall have the right to assign its rights
and obligations under this Agreement to a party which assumes the Company's
obligations hereunder. This Agreement is personal to the Employee and
accordingly, the Employer shall not have the right to assign his rights or
obligations under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11. HEADINGS. Headings and sub-headings are for convenience only and
shall not be deemed to be a part of this Agreement.
12. AMENDMENTS. This Agreement may be amended or modified, in whole or
in part, only by an instrument in writing signed by all parties hereto. Any
amendment, consent, decision, waiver or other action to be made, taken or given
by the Company with respect to the Agreement shall be made, taken or given on
behalf of the Company only by authority of the Board or President or CEO.
13. NOTICES. Any notices or other communications required hereunder
shall be in
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writing and shall be deemed given when delivered in person or when mailed, by
certified or registered first-class mail, postage prepaid, return receipt
requested, or by faxed transmission where the date and time of the transmission
are clearly stated, addressed, if to the Company, at 000 Xxxxxx Xxxxxx, Xxxxxx,
XX 00000, with a copy to Xxxxx X. Xxxx, Esquire, Xxxxx and Xxxxxx LLP, 00 Xxxxx
Xxxxx, Xxxxxx, XX 00000 or, if to the Employee, at 000 Xxx Xxxxxx, Xxxxxxxx, XX
00000 or to such other addresses of which a party shall have notified the others
in accordance with the provisions of this Section 13.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which shall
be deemed a single agreement.
15. SURVIVAL. The provisions of this Agreement shall survive the
termination of the Employee's employment hereunder in accordance with their
terms.
16. ARBITRATION. In the event of any dispute or disagreement arising
out of or related to this Agreement, the dispute or disagreement shall be first
negotiated by the parties, in good faith for a period of 30 days, and the
parties shall use their best efforts to reach a resolution. In the event that
the parties are, for whatever reason, unable to reach a resolution within 30
days, then, in that event, either party may refer the matter to the American
Arbitration Association for resolution in accordance with the then applicable
rules and regulations of the American Arbitration Association. The arbitration
shall be held in Boston, Massachusetts before a single arbitrator and the
decision of the arbitrator shall be final and binding upon the parties and the
award may be entered in any court of competent jurisdiction. The cost of the
arbitration filing fee and the arbitrator's fee shall be divided equally between
the parties and otherwise, each party
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shall be responsible for its own costs and expenses, including attorneys' fees
and disbursements.
17. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the Commonwealth of
Massachusetts applicable to contracts executed and wholly performed within such
jurisdiction. In enforcing such governing laws, any court of competent
jurisdiction shall afford all relief which a Massachusetts court would afford
under the circumstances.
EXECUTED as an instrument, under seal, as of the date first above
written.
COMBINATORX, INCORPORATED
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, President/CEO
Hereunto Duly Authorized
EMPLOYEE:
/s/ Xxxxxx Xxxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxxx
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