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EXHIBIT 10.20
EMPLOYMENT AGREEMENT
AGREEMENT, dated this 1st day of November, 1998 between Nastech
Pharmaceutical Company, Inc. a Delaware corporation (the "Company") with offices
at 00 Xxxxxx Xxxxx, Xxxxxxxxx, XX and Xx. Xxxxxx X. Xxxx (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive wish to 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 Executive Vice President of
Research and Development 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
management of research and development projects from the conception of the
project to final product approval by FDA, subject to the authority and control
of the Chief Executive Officer and Board of Directors of the Company. The
Executive shall also be responsible for the management of analytics and quality
control within research and development. The Executive shall not be responsible
for the administration and functional supervision of Clinical, Regulatory,
Quality Assurance, Compliance and Production. The Executive hereby accepts such
employment and agrees to devote his full time and best efforts to the duties
provided herein.
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 weekly installments, of $200,000 per annum.
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 in the form of aggressive milestone
achievements as set forth in the
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Company's annual business plan are achieved. 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, Executive shall be issued
48,000 incentive stock options (subject to allowable limitations set forth in
the Internal Revenue Code of 1986, as amended, hereinafter "stock options) upon
the execution of this Agreement. The stock options shall be issued at the fair
market value of the Employer's common stock as of the date if this Agreement and
shall then be vested as follows: 15,000 shares to vest as of January 1, 1999 and
11,000 shares to vest each year for the three calendar years thereafter (and
shall not be vested for interim periods on a pro-rate 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 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,
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statements and other documents as may be required under the Securities and
Exchange Act of 1934 to keep 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 3 years and 2 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.
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(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 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 $200,000 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
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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.
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.
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(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.
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 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
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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.
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 one year 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 ten percent (10%)
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 of 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 one year period following termination, to
refrain from directly or indirectly soliciting Company's vendors, collaborative
partners or employees.
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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 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. In consideration of the foregoing and as additional incentive
compensation Executive shall be paid $10,000 upon each patent filing (not
including provisional applications) in which he is the lead inventor and $35,000
upon the issuance of any patent in which he is the lead inventor.
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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 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.
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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 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
(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 for a period
of one year after such date.
(b) For purposes of this Agreement, the term "Change of Control"
shall mean:
(i) The acquisition, other than from the Company, by an
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
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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 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, 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
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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) sale or other disposition of all or substantially all of the
assets of the Company other than to 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.
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
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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.
23. 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.
24. 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
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
25. 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.
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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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XXXXXXX X. XXXXX, Ph.D., Chief Executive Officer
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XXXXXX X. XXXX, Ph.D.
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