EMPLOYMENT AGREEMENT
Agreement, dated April 4, 1996, effective as of April 15, 1996, by and
between Discovery Pharmaceuticals, Inc., a Delaware corporation having a
place of business at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the
"Corporation"), and Xxxxx X. Xxx, M.D., an individual residing at 000 Xxxx 00xx
Xxxxxx Xxx. 00X, Xxx Xxxx, X.X. 00000 ("CEO").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the CEO as President,
Chief Executive Officer and Director, and the CEO desires to be employed
by the Corporation as President, Chief Executive Officer and Director,
all pursuant to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and convenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) The Corporation engages and employs the CEO, and the CEO hereby
accepts engagement and employment, as Chief Executive Officer, President
and Director of the Corporation, to direct, supervise and have responsibility
for the daily operations of the Corporation, including, but not limited
to: (i) directing and supervising the business and research and development
efforts of the Corporation; (ii) managing the other executives and personnel
of the Corporation; (iii) evaluating, negotiating, structuring and
implementing business transactions with the Corporation's customers
and suppliers; (iv) to attend meetings of the Board of Directors of the
Corporation; and to perform such other services and duties as the Board
of Directors of the Corporation shall determine.
(b) The CEO shall perform his duties hereunder from the Corporation's
executive offices, provided, however, that the CEO acknowledges and agrees
that the performance by the CEO of his duties hereunder may require significant
domestic and international travel by the CEO.
(c) The CEO shall devote substantially all of his professional
time to the faithful and high quality performance of his duties and
responsibilities under this Agreement.
2. TERM
The CEO's employment hereunder shall be for a term of three
years commencing on April 15, 1996 and continuing through the third
anniversary of such date.
3. COMPENSATION
(a) As compensation for the performance of his duties on behalf
of the Corporation, the CEO shall be compensated as follows:
(i) Upon the next meeting of the Corporation's Board of Directors,
the CEO shall be entitled to purchase Eight Percent (8%) of the
common stock of the Corporation outstanding on the effective date
of this Agreement for $0.001 per share (the "Founders Stock");
(ii) The Founders Stock shall be subject to a repurchase option in
favor of the Corporation at $0.001 per share (the "Repurchase
Option"). The Repurchase Option shall expire only in advance
in twelve equal installments each April 15, July 15, October
15, and January 15, 1996, 1997, and 1998 (the "Vesting Dates"),
provided that the CEO has not terminated this Agreement other
than with "Cause" (as defined in Paragraph 7(a)(ii) hereof)
and that the Corporation has not terminated this Agreement
with "Cause" (as defined in Paragraph 7(a)(iii)). In the event
of a merger or acquisition of the corporation in which a party
previously unaffiliated with the corporation acquires at least
fifty percent (50%) of the voting stock of the corporation,
then following six (6) months after such merger or acquisition,
the repurchase option shall immediately expire with respect
to any of the CEO's Founders' stock still subject to repurchase;
(iii) The Corporation shall pay the CEO an annual base salary ("Base
Salary") of $145,000 per annum during the first year of this
Agreement and $165,000 per annum during the second year and third
year of this Agreement subject to increase for the second and third
years of this Agreement according to the federally published cost of
living adjustment, payable in accordance with the usual payroll
period of the Corporation;
(iv) The CEO shall also be entitled to receive a one time minimum annual
bonus of $20,000, payable on April 15, 1997, and additional annual
bonuses in the sole discretion of the Board of Directors of the
Corporation.
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The Corporation shall withhold all applicable federal, state and local taxes,
social security and workers' compensation contributions and such other amounts
as may be required by law or agreed upon by the parties with respect
to the compensation payable to the CEO pursuant to section 3(a) hereof.
(b) The Corporation shall reimburse the CEO for all normal, usual
and necessary expenses incurred by the CEO in furtherance of the business and
affairs of the Corporation, including reasonable travel and entertainment,
against receipt by the Corporation of appropriate vouchers or other proof
of the CEO's expenditures and otherwise in accordance with such Expense
Reimbursement Policy as may from time to time be adopted by the Board
of Directors of the Corporation.
(c) The CEO shall be, during the term of this Agreement, entitled
to vacations of not less than four (4) weeks per annum.
(d) The Corporation shall make available to the CEO and his dependents,
such medical, disability, life insurance and such other health benefits
as it makes available to its senior officers and directors, which shall
include at minimum, HMO coverage pursuant to New York Life/Sanus or
other mutually agreeable healthcare provider.
(e) The appointment of an initial Chairman of the Corporation
shall be mutually agreeable to the CEO. The Corporation shall adopt
a stock option plan for the benefit of employees, directors, and consultants
comprising fifteen percent (15%) of the corporation's initial outstanding
shares.
4. REPRESENTATIONS AND WARRANTIES BY THE CEO AND CORPORATION
The CEO hereby represents and warrants to the Corporation as follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the CEO of his duties and other obligations hereunder violate or
will violate any statute, law, determination or award, or conflict with or
constitute a default under (whether immediately, upon the giving of notice or
lapse of time or both) any prior employment agreement, contract, or other
instrument to which the CEO is a party or by which he is bound.
(b) The CEO has the full right, power and legal capacity to enter
and delivery this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
the CEO enforceable against him in accordance with its terms. No approvals or
consents of any persons or entities are required for the CEO to execute and
deliver this Agreement or perform his duties and other obligations hereunder.
The Corporation hereby represents and warrants to the CEO as follows:
(a) The Corporation is duly organized, validly existing and in good standing
under the laws of the State of Delaware, with all requisite corporate power and
authority to own its properties and conduct its business in the manner presently
contemplated.
(b) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(c) The execution, delivery and performance by the Corporation of this
Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether immediately, upon the giving of notice
or lapse of time or both) the certificate of incorporation or by-laws of the
Corporation, or any agreement or instrument to which the Corporation is a party
or by which the Corporation of any of its properties may be bound of affected.
5. NON-COMPETITION
(a) The CEO understands and recognizes that his services to the Corporation
are special and unique and agrees that, during the term of this Agreement and,
unless such termination is by the CEO pursuant to 7(a)(iii) below, for a period
of one (1) year from the date of termination of his employment hereunder, he
shall not in any manner, directly or indirectly, on behalf of himself of any
person, firm, partnership, joint venture, corporation or other business entity
("Person"), enter into or engage in any business competitive with the
Corporation's business, proposed business or research activities, either as
an individual for his own account, or as a partner, joint venturer, executive,
agent, consultant, salesperson, officer, director or shareholder of a Person
operating or intending to operate in the areas of cystic fibrosis therapy,
Tyloxapol or respiratory surfactants, or any additional area of business listed
in Schedule A attached hereto (as shall be amended from time to time by the
parties to take into account additional areas of business in which the
Corporation may become engaged), within the geographic area of the Corporation's
business.
(b) During the term of this Agreement and for one (1) year thereafter, CEO
shall not, directly or indirectly, without the prior written consent of the
Corporation:
(i) solicit or induce any employee of the Corporation
or any affiliate to leave the employ of the Corporation or any affiliate
or hire for any purpose any employee of the Corporation or any affiliate
or any employee who has left the employment of the Corporation or any
affiliate within six months of the termination of said employee's
employment with the Corporation; or
(ii) solicit or accept employment or be retained by any party who, at
any time during the term of this Agreement, was a customer or supplier of
the Corporation any affiliate where his position will be related to the
business of the Corporation; or
(iii) solicit or accept the business of any customer or supplier of the
Corporation or any affiliate with respect to products similar to those
supplied by the Corporation.
(c) In the event that the CEO breaches any provisions of this Section 5 or
there is a threatened breach, then, in addition to any other rights which the
Corporation may have, the Corporation shall be entitled, without the posting of
a bond or other security, to injunctive relief to enforce the restrictions
contained herein. In the event that an actual proceeding is brought in equity
to enforce the provisions of this Section 5, the CEO shall not urge as a defense
that there is an adequate remedy at law nor shall the Corporation be prevented
from seeking any other remedies which may be available.
6. CONFIDENTIAL INFORMATION
The CEO agrees that during the course of his employment or at any time after
termination, he will not disclose or make accessible to any other person, the
Corporation's products, services and technology, both current and under
development, promotion and marketing programs, lists, trade secrets and other
confidential and proprietary business information of the Corporation or any of
its clients. The CEO agrees: (i) not to use any such information for himself
or others; and (ii) not to take any such material or reproductions thereof
from the Corporation's facilities at any time during his employment by the
Corporation, except as required in the CEO's duties to the Corporation. The
CEO agrees immediately to return all such material and reproductions thereof
in his possession to the Corporation upon request and in any event upon
termination of employment.
(b) Except with prior written authorization by the Corporation, the CEO
agrees not to disclose or publish any of the confidential, technical or
business information or material of the Corporation, its clients or any other
party to whom the Corporation owes an obligation or confidence, at any time
during or after his employment with the Corporation.
(c) CEO hereby assigns to the Corporation all right, title and interest
he may have or acquire in all inventions (including patent rights) developed
by the CEO during the term of this Agreement ("Inventions") and agrees that
all Inventions shall be the sole property of the Corporation and its assigns,
and the Corporation and its assigns shall be the sole owner of all patents,
copyrights and other rights in connection therewith. CEO further agrees to
assist the Corporation in every proper way (but at the Corporation's expense)
to obtain and from time to time enforce patents, copyrights or other rights
on said Inventions in any and all countries.
7. TERMINATION
(a) This CEO's employment hereunder shall begin on April 15, 1996
and shall continue for the period set forth in Section 2 hereof unless sooner
terminated upon the first to occur of the following events:
(i) The death of the CEO;
(ii) Termination by the Board of Directors of the Corporation for just
cause. Any of the following actions by the CEO shall constitute just cause:
(A) Material breach by the CEO of Section 5 or Section 6 of this
Agreement;
(B) Material breach by the CEO of any provision of this
Agreement other than Section 5 or Section 6 which is not
cured by the CEO within fifteen (15) days of notice thereof
from the Corporation; or
(C) Any action by the CEO to intentionally harm the Corporation.
(iii) Termination by the CEO for just cause. Any of the following actions
or omissions by the Corporation shall constitute just cause:
(A) Material breach by the Corporation of any provision of this
Agreement which is not cured by the Corporation within
fifteen (15) days of notice thereof from the CEO; or
(B) Any action by the Corporation to intentionally harm the CEO;
(iv) Termination by the Board of Directors of the Corporation without
just cause, or death provided that the Corporation continues to pay the CEO's
base salary, for a period of twelve (12) months, and also the CEO's bonus
described in Section 3(a)(iv) hereof or his estate.
(b) Upon termination pursuant to subparagraph (ii) of paragraph (a)
above, the CEO (or his estate in the event of termination pursuant to
subparagraph (i)), shall be entitled to receive the Base Salary accrued but
unpaid as of the date of termination.
8. NOTICES
Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given: when delivered personally against
receipt therefor; one (1) day after being sent by Federal Express or similar
overnight delivery; or three (3) days after being mailed registered or
certified mail, postage prepaid, return receipt requested, to either party at
the address set forth above, or to such other address as such party shall give
by notice hereunder to the other party.
9. RENEWAL OF AGREEMENT
Upon expiration of the term of this Agreement, this agreement may be renewed
for additional one (1) year periods by the parties by mutual written agreement.
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole
or in part, such provision shall be interpreted so as to remain enforceable to
the maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provision shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
11. ENTIRE AGREEMENT MODIFICATION
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Corporation, its successors and assigns,
and upon the CEO and is legal representatives. This Agreement constitutes a
personal service agreement, and the performance of the CEO's obligations
hereunder may not be transferred or assigned by the CEO.
13. NON-WAIVER
The failure of either party to insist upon the strict performance of any
of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and
said terms, conditions and provisions shall remain in full force and effect.
No waiver of any term or condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to
principles of conflict of laws.
15. HEADINGS
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DISCOVERY PHARMACEUTICAL, INC.
By: /s/ signature illegible
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Title: President
/s/ signature illegible
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