EMPLOYMENT AGREEMENT
AGREEMENT dated April 1, 1998 between ACCESS
Pharmaceuticals, Inc. a Delaware corporation located at 0000
Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000-0000, (the
"Company"), and Xxxxx X. Xxxx, an individual residing at
0000 Xxxxxxxxx Xx., Xxxxxx, Xxxxx 00000, (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires that Executive serve as the
Company's Chief Executive Officer; and
WHEREAS, in order to induce Executive to agree to serve in
such capacity, the Company hereby offers Executive certain
compensation and benefits of employment, as described
herein.
WHEREAS, Executive is willing to serve in this position on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein, the Company and Executive
hereby agree as follows:
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1. Employment
The Company hereby agrees to employ Executive and Executive
hereby agrees to be employed upon the terms and conditions
hereinafter set forth. During the term of this Agreement,
Executive shall serve as the Chief Executive Officer of the
Company and as a member of the Company's Board of Directors
(the "Board").
Executive shall be responsible to the Board and to an
Executive Committee of the Board if one is so designated by
the Board of which Executive shall be a member, rendering
the services and performing the duties prescribed by the
Board.
The Executive agrees, while employed hereunder, to perform
his duties faithfully and to the best of his ability. The
Executive shall be employed at the Company's offices in
Dallas, Texas, and his principal duties shall be performed
primarily in Dallas, Texas, except for business trips
reasonable in number and duration.
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2. Term
The employment of the Executive hereunder shall begin on the
date hereof and shall continue in full force and effect for
a period of three (3) years, and thereafter shall be
automatically renewed for successive one-year periods unless
the Company gives the Executive written notice of
termination within six (6) months prior to the end of any
such period or until the occurrence of a Termination Date,
as defined in Section 5 (the "Term").
3. Compensation
3.1. As compensation for the Executive's services during
the Term, the Company shall pay the Executive an annual base
salary at the rate of $240,429, payable monthly on the last
day of each month during the Term. Prior to the end of each
year during the Term, the Compensation Committee of the
Company shall undertake an evaluation of the services of the
Executive during the year then ended in accordance with the
Company's compensation program at the date hereof (the
"Program"). The Company shall consider the performance of
the Executive, his contribution to the success of the
Company and entitles under common control with the Company
(collectively, "Affiliates"), and other factors and shall
fix an annual base salary to be paid to the Executive during
the ensuring year.
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3.2 Notwithstanding the foregoing, the Company may change
the Program from time to time or institute a successor to
the Program, but the Executive's annual base salary shall in
no event be less than his annual base salary in effect on
the date of change, adjusted regularly to reflect increases
in the cost of living and comparable compensation for like
positions.
3.3. The executive shall participate in the Company
incentive compensation programs in accordance with the
following subparagraphs (i) and (ii):
(i) Incentive Plan - The executive shall be covered by the
cash bonus plan currently maintained by the Company and
shall be afforded the opportunity thereunder to receive a
target award of 25% of annual base salary payable in cash
and 25% of annual base salary payable in Access Common
Stock, to be awarded upon the achievement of reasonable
performance goals; provided that the Company may from time
to time change the Program or institute a successor to the
Program, so long as the Executive continues to be eligible
to receive bonus awards of percentages of annual base salary
in amounts at least equal to those specified as in effect on
the date hereof.
(ii) Stock Option Plan - Executive shall be entitled to
participate in the Company's stock option plan. In
accordance with this plan the Board may from time to time,
but without any obligation to do so, grant additional stock
options to the executive upon such terms and conditions as
the Board shall determine in its sole discretion. If the
Company no longer has a class of stock publicly-traded by
reason of a Change in Control
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of the Company, as defined in Section 5.2, the Company's
obligation under this Section 3.3 will be satisfied through
options granted by the issuer with public stock then in
control of the Company.
3.4 If the Executive is prevented by disability, for a
period of six consecutive months, from continuing fully to
perform his obligations hereunder, the Employee shall
perform his obligations hereunder to the extent he is able
and after six months the Company may reduce his annual base
salary to reflect the extent of the disability; provided
that in no event may such rate, when added to payments
received by him under any disability or qualified retirement
or pension plan to which the Company or an Affiliate
contributes or has contributed, be less than sixty percent
of the annual base salary in effect at the time that such
disability commenced. If there should be a dispute about
the Executive's disability, disability shall be determined
by the Board of Directors of the Company based upon a report
from a physician, reasonably acceptable to the Executive,
who shall have examined the Executive. If the Executive
claims disability, the Executive agrees to submit to a
physical examination at any reasonable time or times by a
qualified physician designated by the Chairman of the Board
and reasonably acceptable to the Executive. Notwithstanding
any provision in this Section, the Company shall not be
obligated to make any payments to Executive on account of
disability after the expiration of this Agreement.
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4. Executive Benefits
The Executive shall be entitled to participate in all
"employee pension benefit plans," all "employee welfare
benefit plans" (each as defined in the Employee Retirement
Income Security Act of 1974) and all pay practices and other
compensation arrangements maintained by the Company, on a
basis at least as advantageous to the Executive as the basis
on which other executive employees of the Company are
eligible to participate and on a basis at least as
advantageous to the Executive as the basis on which he
participates therein on the date hereof. Executive shall,
during the term of his employment hereunder, continue to be
provided with such benefits at a level at least equivalent
to the initial benefits provided or to be provided
hereunder. Without limiting the generality of the
foregoing, the Executive shall be entitled to the following
employee benefits (collectively, with the benefits
contemplated by this Section 4, the "Benefits"):
4.1 The Executive and the Executive's dependents shall be
covered by medical insurance comparable in scope to the
coverage afforded on the date hereof, with only such
contribution by the Executive toward the cost of such
insurance as may be required from time to time from other
executive officers of the Company. If a Change in Control
of the Company, as defined in Section 5.2, shall have
occurred, the Company may not change the carriers providing
medical insurance immediately before the change without the
consent of the Executive, which consent will not
unreasonably be withheld.
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4.2 Life Insurance. Executive shall be entitled to group
term life insurance coverage of $400,000, all premiums being
paid by the Company.
4.3 Long-Term Disability Insurance. The Company shall
maintain in effect long-term disability insurance providing
Executive in the event of his disability (as defined in
Section 3 hereof) with compensation annually equal to at
least sixty percent (60%) of his annual base salary in
effect at the time the disability occurs.
4.4 The Executive shall be entitled to legal holidays and
to annual paid vacation aggregating at least four-(4) weeks
during any calendar year.
4.5 The Company shall reimburse the Executive from time to
time for the reasonable expenses incurred by the Executive
in connection with the performance of his obligations
hereunder.
4.6 During such times as the Company is eligible and
financially qualified to obtain the same, the Company shall
maintain directors and officers liability insurance
applicable to the Executive in amounts established by the
Board of Directors.
Notwithstanding the foregoing, the Company may from time to
time change or substitute a plan or program under which one
or more of the Benefits are provided to the Executive,
provided that the Company first obtains the written consent
of the Executive,
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which the Executive agrees not unreasonably to withhold,
taking into account his personal situation.
5. Termination Date; Consequences for Compensation and
Benefits
5.1. Definition of Termination Date. The first to occur of
the following events shall be the Termination Date:
5.1.1 The date on which the Executive becomes entitled to
receive long-term disability payments by reason of total and
permanent disability;
5.1.2. The Executive's death;
5.1.3. Voluntary resignation after one of the following
events shall have occurred, which event shall be specified
to the Company by the Executive at the time of resignation:
material reduction in the responsibility, authority, power
or duty of the Executive or a material breach by the Company
of any provision of this Agreement, which breach continues
for 30 days following notice by the Executive to the Company
setting forth the nature of the breach ("Resignation with
Reason");
5.1.4. Voluntary resignation not accompanied by a notice of
reason described in Section 5.1.3 ("General Resignation");
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5.1.5 Discharge of the Executive by the Company after one of
the following events shall have occurred, which event shall
be specified in writing to the Executive by the Company at
the time of discharge:
(i) a felonious act committed by Executive during his
employment hereunder, (ii) any act or omission on the part
of Executive not requested or approved by the Company
constituting willful malfeasance or gross negligence in the
performance of his duties hereunder, (iii) conviction of
the Executive or the entry of a plea of guilty or nolo
contendere by the Executive to any crime involving moral
turpitude, (iv) any material breach of any term of this
Agreement by the Executive which is not cured within 30 days
after written notice from the Board of Directors of the
Company to the Employee setting forth the nature of the
breach ("Discharge for Cause");
For purposes of this subparagraph (5.1.5), no act or failure
to act on the Executive's part shall be considered "willful"
unless done or omitted to be done by Executive not in good
faith and without reasonable belief that Executive's action
or omission was in the best interest of the Company.
Notwithstanding the foregoing, Executive shall not be deemed
to have been Discharged for Cause unless and until there
shall have been delivered to Executive a copy of a Notice of
Termination (as defined below) from the Chairman of the
Audit and Finance Committee of the Board of Directors of the
Company stating that in his good faith opinion
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Executive was guilty of conduct set forth in clauses (i),
(ii), (iii) or (iv) above of this subparagraph (5.1.5) and
specifying the particulars thereof in detail.
5.1.6 Discharge of the Executive by the Company not
accompanied by a notice of cause described in Section 5.1.5
("General Discharge").
For purposes of this Agreement "Notice of Termination" shall
mean a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment
under the provision so indicated. Each Notice of
Termination shall be delivered at least sixty (60) days
prior to the effective date of termination.
5.2 Consequences for Compensation and Benefits
(a) If the Termination Date occurs by reason of disability,
death, General Resignation or Discharge for Cause, the
Company shall pay compensation to the Executive through the
Termination Date and shall pay to the Executive all Benefits
accrued through the Termination Date, payable in accordance
with the respective terms of the plans, practices and
arrangements under which the Benefits were accrued.
(b) If the Termination Date occurs by reason of General
Discharge or Resignation with Reason, (i) all stock options
held by the Executive shall become
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immediately exercisable and shall remain exercisable for 30
days after the Termination Date, (ii) the Company shall
continue the health coverage contemplated by Section 4.1 for
a period of one and a half (1.5) years thereafter, (iii) the
Company shall engage for the Executive, at the Company's
expense, outplacement services appropriate to the
Executive's position, for up to twelve months after the
Termination Date, and (iv) the Executive shall be entitled
to receive, within 60 days after the Termination Date, the
amount set forth in Section 5.2.1.
5.2.1 The Executive's annual base salary at the Termination
Date plus the target bonus for the year in which the
Termination Date occurs, multiplied by one and a half (1.5)
(i.e., 1.5 times base salary plus bonus).
5.3 Change in Control. In the event of the occurrence of
a Change in Control (as defined below), this Agreement may
be terminated by Executive upon the occurrence thereafter of
one or more of the following events:
1) Termination by Executive of his employment with the
Company may be made within (2) years after a Change in
Control and upon the occurrence of any of the following
events:
(a.) Failure to elect or re-elect Executive, or removal of
Executive, as a director of the Company (or any successor
thereto), if Executive shall have been a director of the
Company immediately
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prior to the Change in Control, or the office of the Company
which Executive held immediately prior to a Change in
Control; however, in a Change in Control as a result of
merger or acquisition, it is understood by the parties that
the entire Board of Directors of the Company may be
dissolved and this Paragraph 5.3(1)(a) will not apply in
such case.
(b.) A significant adverse change in the nature or scope of
the Executive's authorities, powers, functions,
responsibilities or duties as a result of the Change in
Control, a reduction in the aggregate of Executive's
existing Base Salary and existing Incentive Compensation
received from the Company, or termination of Executive's
rights to any existing Executive Benefit to which he was
entitled immediately prior to the Change in Control or a
reduction in scope or value thereof without the prior
written consent of Executive;
(c.) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or a
significant portion of its business and/or assets (by
liquidation, merger, consolidation, reorganization or
otherwise) unless the successor or successors to which all
or a significant portion of its business and/or assets have
been transferred (directly or by operation of law) shall
have assumed all duties and obligations of the Company under
this Agreement pursuant to Section 11.5 hereof; or
(d.) The Company shall relocate its principal executive
offices or require Executive to have as his principal
location of work any location which is in excess of 50 miles
from the location thereof immediately prior
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to the relocation date or to travel from his office in the
course of discharging his responsibilities or duties
hereunder more than thirty (30) consecutive calendar days or
an aggregate of more than ninety (90) calendar days in any
consecutive 365-calendar day period without in either case
his prior consent.
2) Subsequent to a Change in Control of the Company, the
failure by the Company to obtain the assumption of the
obligation to perform this Agreement by any successor as
contemplated in Section 11.5 hereof or otherwise; or
3) Subsequent to a Change in Control of the Company, any
purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the
requirement of Section 5.1.5 hereof.
5.3.1 A Change in Control of the Company shall occur upon
the first to occur of the date when (a) persons who were
Directors of the Company on April 1, 1998 no longer
constitute a majority of the Board of Directors of the
Company or (b) a person or group "beneficially owns" (as
defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) in the aggregate 50% or more of the
outstanding shares of capital stock entitled to vote
generally in the election of the Directors of the Company or
(c) there occurs a sale of all or substantially all of the
business and/or assets of the Company. If the payments
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made pursuant to this Section 5.3.1 give rise to an excise
tax under the Internal Revenue Code of 1986, the Company
shall also pay to the Executive or directly to the Internal
Revenue Service in a timely fashion an amount sufficient,
after federal and state income taxes, to pay the excise tax
so payable and all directly related interest and penalties
(whether reported initially or subsequently assessed). In
the event of a dispute between the Company and the Executive
with respect to the amount contemplated by the preceding
sentence, the matter shall be determined (at the Company's
expense) by an independent nationally-recognized accounting
firm reasonably acceptable to both parties; provided,
however, that the Executive shall cooperate with the Company
in his tax reporting position and any defense thereof (which
the Company shall control) in order to minimize the amount
of such payments to the extent the Company has a reasonable
legal basis therefore.
5.3.2 If a Change in Control of the Company shall have
occurred within six (6) months prior to the Termination Date
or the Executive terminates this Agreement under Section 5.3
the Executive will be entitled to receive, within 60 days
after the Termination Date, the Executive's annual base
salary at the Termination Date plus the target bonus for the
year in which the Termination Date occurs multiplied by two
(2) (i.e., two times base salary plus bonus), all stock
options held by the Executive shall become immediately
exercisable and shall remain exercisable for 30 days after
the Termination Date. The Company shall continue the health
coverage contemplated by Section 4.1 for a period of two (2)
years thereafter.
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5.4 Liquidated Damages: No Duty to Mitigate Damages The
amounts payable pursuant to Sections 5.2 and 5.3 shall be
deemed liquidated damages for the early termination of this
Agreement and shall be paid to the Executive regardless of
any income the Executive may receive from any other
employer, and the Executive shall have no duty of any kind
to seek employment from any other employer during the
balance of the Term.
6. Indemnification
To the fullest extent permitted by law, the Company shall
indemnify the Executive and hold him harmless from and
against all loss, cost, liability and expense (including
reasonable attorney's fees) arising from the Executive's
service to the Company or any Affiliate, whether as officer,
director, employee, fiduciary of any employee benefit plan
or otherwise.
7. Agreement Not to Compete
The Executive agrees that, while serving as an Executive of
the Company, he will not, without the written consent of the
Chairman of the Board of the Company, serve as an employee
or director of any business entity other than the Company
and its Affiliates, but may serve as a director of a
reasonable number of not-for-profit corporations and may
devote a reasonable amount of time to
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charitable and community service. For the period beginning
on the Termination Date and continuing for the number of
years specified below, the Executive shall not engage,
directly or indirectly in any business competitive with that
of the Company:
Termination Benefit Period
------------------- ------
Amount set forth in Section 5.2.1 1 year
Amount set forth in Section 5.3.2 1.5 years
Neither the amount set forth in Section 5.2.1 1 year
nor the amount set forth in Section 5.3.2
The Executive may hold stock or a limited partnership
interest of 5% or less in any publicly traded entity engaged
in such business without violating this Agreement.
8. Agreement Not to Solicit
For one year following any Termination Date, regardless of
the reason, the Executive shall not solicit any employee of
the Company or an Affiliate to leave such employment and to
provide services to the Executive or any business entity by
which the Executive is employed or in which the Executive
has a material financial interest. Soliciting a former
employee of the Company and its Affiliates to provide such
services shall not be a violation of this Agreement.
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9. Confidential Information
Unless the Executive shall first secure consent of the
Company, the Executive shall not disclose or use, either
during or after the Term for a period of five (5) years, any
secret or confidential information of the Company or any
Affiliate, whether or not developed by the Executive, except
as required by his duties to the Company or the Affiliate.
Executive will sign a Confidential Disclosure and Limited
Use Agreement, which shall control over this Agreement if
any conflict exists between it and this Agreement.
10. Arbitration
Any dispute or differences concerning any provision of this
Agreement which cannot be settled by mutual accord between
the parties shall be settled by arbitration in Dallas, Texas
in accordance with the rules then in effect of the American
Arbitration Association, except as otherwise provided
herein. The dispute or differences shall be referred to a
single arbitrator, if the parties agree upon one, or
otherwise to three arbitrators, one to be appointed by each
party and a third arbitrator to be appointed by the first
named arbitrators; and if either party shall refuse or
neglect to appoint an arbitrator within 30 days after the
other party shall have appointed an arbitrator and shall
have served a written notice upon the
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first mentioned party requiring such party to make such
appointment, then the arbitrator first appointed shall, at
the request of the party appointing him, proceed to hear and
determine the matters in difference as if he were a single
arbitrator appointed by both parties for the purposes, and
the award or determination which shall be made by the
arbitrator shall be final and binding upon the parties
hereto. The arbitrator or arbitrators shall each have not
less than five-(5) years experience in dealing with the
subject matter of the dispute or differences to be
arbitrated. Any award maybe enforced in any court of
competent jurisdiction. The expenses of any such
arbitration shall be paid by the non-prevailing party, as
determined by the final order of the arbitrators.
11. Miscellaneous
11.1 Notices
All notices in connection with this Agreement shall be in
writing and sent by postage prepaid first class mail,
courier, or telefax, and if relating to default or
termination, by certified mail, return receipt requested,
addressed to each party at the address indicated below:
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If to the Company:
Access Pharmaceuticals Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Copy To:
Xxxx X. Xxxxxxxxx III, Esq.,
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
If to the Executive:
Xxxxx X. Xxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Or to such other address as the addressee shall last have
designated by notice to the communicating party. The date
of giving of any notice shall be the date of actual receipt.
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11.2 Governing Law
This Agreement shall be deemed a contract made and performed
in the State of Texas, and shall be governed by the laws of
the State of Texas.
11.3 Severability
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or in
the interpretation in any other jurisdiction; however, such
provision shall be deemed amended to conform to applicable
laws and to accomplish the intentions of the parties.
11.4 Entire Agreement; Amendment
This Agreement constitutes the entire agreement of the
parties and may be altered or amended or any provision
hereof waived only by an agreement in writing signed by the
party against whom enforcement of any alteration, amendment,
or waiver is sought. No waiver by an party of any breach of
this Agreement shall be considered as a waiver of any
subsequent breach.
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11.5 Successors and Assigns
11.5.1 The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall
entitle Executive to compensation from the Company in the
same amount and on the same terms as Executive would be
entitled hereunder if Executive terminated his employment
for Change of Control. As used in this Section 11.5.1,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the Agreement provided for in
this Section 11.5.1 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of
law.
11.5.2 This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company,
and their respective successors and assigns, except that
Executive may not assign any of his rights or delegate any
of his duties without the prior written consent of the
Company.
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11.6 Assignability
Neither this Agreement nor any benefits payable to the
Executive hereunder shall be assigned, pledged, anticipated,
or otherwise alienated by the Executive, or subject to
attachment or other legal process by any creditor of the
Executive, and notwithstanding any attempted assignment,
pledge, anticipation, alienation, attachment, or other legal
process, any benefit payable to the Executive hereunder
shall be paid only to the Executive or his estate.
IN WITNESSES WHEREOF, the Company and its officers hereunto
duly authorized, and the Employee have signed and sealed
this Agreement as of the date first written above.
ACCESS PHARMACEUTICALS, INC.
BY: /s/ Xxxxx X. Xxxx BY:/s/ Xxx Xxxx
------------------ -----------------
Xxxxx X. Xxxx Xxx Xxxx, Ph.D.
Title: Executive Title: Chairman Compensation
Committee of the Board
of Directors
Date: July 14, 1998 Date: April 30, 1998
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